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Avian Flu Spreads, Remembering George Floyd · Bloomberg Intelligence

0:01
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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0:16
Speaker 2: Another headline that caught my eye, and it's a fun one.
0:19
Speaker 2: Avian flu oh yeah, spreads to second farm in Australia's
0:24
Speaker 2: Victoria State. So apparently, Mike, that's a fun one for you. No,
0:27
Speaker 2: it's not. Hundreds of thousands of egg laing chickens are
0:30
Speaker 2: reported to have been called in australia Southeast as quarantine
0:34
Speaker 2: measures are put in place to contain outbreaks of highly
0:36
Speaker 2: pathogenic avian influenza. And I feel like we've been hearing
0:39
Speaker 2: a lot about this too, China.
0:41
Speaker 3: Yeah, And I'm a hypochondriac, so I never like to
0:44
Speaker 3: hear about these things. You know, I'm gonna think I
0:47
Speaker 3: have it probably by the end of the weekend.
0:48
Speaker 2: So right, It just so was like, you know, I
0:50
Speaker 2: was emailing Sam Fazelli Boomberg Intelligence earlier and I'm like,
0:53
Speaker 2: do we have to worry about this yet? He's like
0:55
Speaker 2: not yet. It's like thanks especially a lot better anyway.
1:00
Speaker 2: I want to give some time to talk about this,
1:02
Speaker 2: like what is the bird flu? What is the avian flu?
1:04
Speaker 2: How do we get it? What does that look like?
1:06
Speaker 2: Lisa Jarvis is joining US Boomberg opinion columnists. She covers biotech, healthcare,
1:10
Speaker 2: and the pharmaceutical industry. She was previously executive editor of
1:13
Speaker 2: Chemical and Engineering News, and she joins US. Now, Lisa,
1:16
Speaker 2: can you give us like the four to one one
1:18
Speaker 2: on like what the avian flu is?
1:22
Speaker 4: Right?
1:22
Speaker 5: So thank you for having me. It's an infection that
1:27
Speaker 5: you know, you can tell by its name, primarily has
1:29
Speaker 5: been affecting wild birds and poultry up until now. You know,
1:34
Speaker 5: I think in recent years we've been seeing a lot
1:36
Speaker 5: more species with evidence that they can be infected. And
1:41
Speaker 5: in the US, the thing that's been alarming about this
1:44
Speaker 5: is that we've suddenly seen an outbreak in cows.
1:47
Speaker 6: That's new.
1:48
Speaker 5: We've never seen this species infected before. So for the
1:51
Speaker 5: last few months, increasingly we're seeing more herds with evidence
1:56
Speaker 5: that there's bird flu in their milk. And you know,
2:00
Speaker 5: the worry, of course, is that the more that the spreads,
2:03
Speaker 5: the more that this could cause infections in humans, which
2:07
Speaker 5: you know, we don't want another pandemic.
2:09
Speaker 6: At all.
2:10
Speaker 5: I'm sure all of us here.
2:11
Speaker 3: Yeah, I'll suck with that, Lisa. One thing that worries
2:15
Speaker 3: me about this story, Lisa, is, from what I've read,
2:18
Speaker 3: many farmers are very reluctant to agree to testing to
2:22
Speaker 3: see how prevalent it is. Is there anything that can
2:26
Speaker 3: be done to that? I mean, I suppose you can't
2:28
Speaker 3: really just force a farmer to take a test or
2:31
Speaker 3: have his animals tested. Is there is there any sort
2:34
Speaker 3: of workaround for that?
2:36
Speaker 7: You know?
2:36
Speaker 5: I think we've seen in each week a new set
2:40
Speaker 5: of incentives trying to get the farmers to buy into testing.
2:44
Speaker 5: Because you're right, it's very worrying because we don't actually
2:46
Speaker 5: know how widespread this outbreak is among dary hurds. We know,
2:50
Speaker 5: I think as of today you know that nine states
2:55
Speaker 5: have herds that have been infected, but it could be
2:58
Speaker 5: much more than that. Certainly, when we see the data
3:01
Speaker 5: showing that there's you know, bird flu, pieces of bird
3:07
Speaker 5: flu found in milk and states that don't have infections,
3:09
Speaker 5: it worries us. You know, I think USC has been
3:13
Speaker 5: a little slow in how they've rolled out some of
3:15
Speaker 5: the incentives. One of the things I think that could
3:17
Speaker 5: help is you know, just making sure that farmers understand
3:21
Speaker 5: very clearly what happens after one of their cows tests positive.
3:26
Speaker 5: One of their worries is they don't know when they
3:28
Speaker 5: can go back to normal operations. And then there's a
3:31
Speaker 5: lot of hesitancy on the part of farm workers, which
3:36
Speaker 5: is very understandable. A lot of them don't get sick time.
3:39
Speaker 5: This is a largely migrant population that may be distrustful.
3:43
Speaker 5: They don't have health insurance many of them, so there's
3:46
Speaker 5: a lot of challenges to overcome, and I think trying
3:48
Speaker 5: to find ways to draw people into this process is
3:52
Speaker 5: the only way that we're going to know have a
3:55
Speaker 5: good handle on in real time on what's happening.
3:58
Speaker 8: Just to be clear, it's zoonic. It can jump from
4:01
Speaker 8: animals to humans, and then can it go from human
4:05
Speaker 8: to human transmission.
4:06
Speaker 5: Well, right now we don't have any evidence that's happening,
4:10
Speaker 5: and in fact, the good news this is very good
4:12
Speaker 5: news and we should focus on that piece to feel better,
4:15
Speaker 5: is that the two cases in humans we've seen in
4:17
Speaker 5: the US, one in Texas and one in Michigan, are
4:20
Speaker 5: both in dairy farm workers too. Their only symptom is
4:23
Speaker 5: a conjunctivitis. So likely what's happening is a cow's not
4:28
Speaker 5: breathing on them. They're not being exposed to cows. Not
4:31
Speaker 5: cows are actually very snotty, I hear, But it's they're
4:35
Speaker 5: getting this through exposure, likely from the milking equipment, because
4:39
Speaker 5: there is so much bird flu in the milk of
4:41
Speaker 5: infected cows. But you know what, that's the thing we
4:45
Speaker 5: want to look for when it gets easier for a
4:48
Speaker 5: human to be infected from a cow, when it gets
4:51
Speaker 5: easier for a human to infect another human, And that's
4:54
Speaker 5: why it's so important to have a handle on the
4:56
Speaker 5: you know, breadth of the outbreak and in real time
5:00
Speaker 5: where infections are happening.
5:01
Speaker 3: This time of year, I'm pretty snotty myself, so I
5:03
Speaker 3: can I can sympathize with the calcy.
5:05
Speaker 2: I understand, Yeah, it's the allergy season. I was interested though.
5:10
Speaker 2: There was a piece on the Bloomberg this week that
5:13
Speaker 2: shares of vaccine stocks that we're moving on this apparently
5:17
Speaker 2: Maderna shares were up. Visor shares were up. There was
5:20
Speaker 2: a report that companies aren't talks with the US government
5:22
Speaker 2: about the development of vaccines for bird flu. Shares of
5:25
Speaker 2: cure vac for example, they have a bird flu vaccine
5:28
Speaker 2: in early stage testing. What did you Is this just
5:30
Speaker 2: like memestock hype or is this a real thing?
5:33
Speaker 5: You know, I think investors are getting a little ahead
5:35
Speaker 5: of themselves. However, you know, ASPER, which is the kind
5:40
Speaker 5: of part of AHHS that takes care of, you know,
5:43
Speaker 5: preparedness and manages our stockpiles, did say this week that
5:47
Speaker 5: they had moved the ingredients for making four point eight
5:52
Speaker 5: doses of vaccines to manufacture and to put those into
5:56
Speaker 5: viles so that we would have them just in case.
5:59
Speaker 5: I mean that doesn't mean that even the justin case
6:01
Speaker 5: would be everybody. Probably if a just in case happened,
6:03
Speaker 5: it would be farm workers. But they also said that
6:07
Speaker 5: they were in talks with Buyser and Maderna. Now, the
6:10
Speaker 5: good thing about mRNA is that if the virus changed
6:15
Speaker 5: to more easily infect humans, it might be that the
6:18
Speaker 5: vaccine we have in our stockpiles isn't quite the right
6:21
Speaker 5: match in mRNA, as we know from the pandemic, allows
6:24
Speaker 5: some flexibility there. But I do think folks are getting
6:27
Speaker 5: ahead of themselves and you know, maybe getting excited that
6:31
Speaker 5: there could be a way to fill some of that
6:32
Speaker 5: capacity that no longer is making COVID vaccines, you.
6:36
Speaker 3: Know, Lisa, I wonder obviously for financial markets, inflation is
6:40
Speaker 3: such a big issue still food inflation especially. Are we
6:44
Speaker 3: at risk of seeing a situation where massive amounts of
6:48
Speaker 3: cows or chickens are slaughtered just to stop the spread
6:52
Speaker 3: of this virus?
6:55
Speaker 5: I don't think so well, certainly with poultry. That's kind
6:58
Speaker 5: of the Darian poultry industries very differently, and poultry farmers
7:02
Speaker 5: are well, very familiar with bird flu, and they have
7:05
Speaker 5: a lot of biosecurity in place, and part of it,
7:08
Speaker 5: part of the reason they have biosecurity in places that
7:11
Speaker 5: USDA has put a lot of you know, kind of
7:15
Speaker 5: rules around how they can be reimbursed in order to
7:19
Speaker 5: contain a bird flu outbreak. When it comes to the cattle,
7:22
Speaker 5: you know, so far infections are mild, and so I
7:26
Speaker 5: think what we need to understand is how long an
7:30
Speaker 5: outbreak will be disruptive in a particular hurd. It's sort
7:34
Speaker 5: of amazing to think about how many different states cows
7:38
Speaker 5: travel to and dairy cows travel to in their lifetime,
7:42
Speaker 5: and so that I would the only worry I think,
7:45
Speaker 5: and this is part of the reason farmers that have
7:47
Speaker 5: not been participating in testing, to be honest with you,
7:49
Speaker 5: I think is that they can kind of create a backup.
7:53
Speaker 5: But I don't think there's right now, there's no reason
7:56
Speaker 5: to think that there's a risk to the food supply.
7:59
Speaker 5: I think it's just more or just thinking about that
8:01
Speaker 5: movement of cows and how to make sure that we
8:03
Speaker 5: can ensure that that continues to happen.
8:05
Speaker 2: Lisa, fantastic. You are awesome, Lisa Jarvis, Bloomberg opinion columnist,
8:09
Speaker 2: joining us on the bird flu and giving us sort
8:12
Speaker 2: of the low down on the risks and the non risks.
8:14
Speaker 2: So do you feel better now, Mike or all?
8:17
Speaker 3: I think I have it.
8:18
Speaker 1: I think I have it.
8:19
Speaker 2: Okay, great. Definitely want to spread.
8:20
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8:40
Speaker 7: Hi.
8:40
Speaker 2: Eric Adelberg is chief mortgage backed securities strategist. There we
8:45
Speaker 2: go for Bloomberg Intelligence. Help us understand what's a mortgage
8:49
Speaker 2: backed security for those who are listening, and then sort
8:52
Speaker 2: of where are we right now? I mean, that's gonna
8:54
Speaker 2: be tied to the mortgage market. How's it going, hy, Alex.
8:56
Speaker 6: And Mike, thanks for having me, and happy Memorial Day
8:59
Speaker 6: weekend almost to everybody. So, mortgage backed security is a
9:03
Speaker 6: security that a bank or non bank lender creates out
9:07
Speaker 6: of the loans that they've lent to the homeowner. They
9:10
Speaker 6: pull up these mortgage loans into these massive securities. It's
9:14
Speaker 6: about almost a nine trillion dollar mortgage market for the
9:18
Speaker 6: agency MBS market, and much bigger if you include portfolio
9:22
Speaker 6: loans and non agencies, so it's a massive market. It
9:26
Speaker 6: really helps fuel the entire housing economy, which in turn
9:29
Speaker 6: helps fuel a lot of the economy. So it's a
9:32
Speaker 6: really important sector to keep an eye on, and it's
9:35
Speaker 6: been suffering a little bit recently because it's because it's
9:37
Speaker 6: so important to the economy. When the economy went into
9:40
Speaker 6: free fall both back in two thousand and eight and
9:42
Speaker 6: then various times since, including joining the pandemic, the Federal
9:45
Speaker 6: Reserve has purchased massive amounts of these mortgage backed securities,
9:49
Speaker 6: and with the inflation going rampant, and they fed actually
9:53
Speaker 6: trying to put the brakes a little bit on the economy.
9:55
Speaker 6: They've been letting that portfolio run off. So the mortgage
9:58
Speaker 6: backed securities has been really hurting as a result, because
10:02
Speaker 6: a lot of buyers have backed investors have backed away
10:05
Speaker 6: from that market. But at the same time, because the
10:08
Speaker 6: housing market has slowed down so much and so many
10:11
Speaker 6: people own rates so far above current market rates, there's
10:14
Speaker 6: not a lot of business for mortgage originators to do
10:17
Speaker 6: right now.
10:19
Speaker 2: So you know, I feel like I keep getting emails
10:20
Speaker 2: from like mortgage brokers being like, call me, we can
10:23
Speaker 2: do stuff, and I'm like, dude, I got two point
10:25
Speaker 2: seventy or fixed nothings, Eric, I.
10:27
Speaker 3: Wanted to ask you about that exact topic. They should
10:32
Speaker 3: Alex Refinance Now, that's that's not it.
10:34
Speaker 2: But it's never happened.
10:35
Speaker 3: It's not happening in this rate environment. But you write
10:38
Speaker 3: in a recent piece elevated mortgage rates and home prices
10:41
Speaker 3: have depressed housing turnover and mortgage lending, as Alex points out,
10:45
Speaker 3: and then you go on to say this has begun
10:48
Speaker 3: spurring quote innovations in mortgage lending.
10:52
Speaker 7: I get a.
10:52
Speaker 3: Little nervous when I hear about quote unquote innovations in
10:55
Speaker 3: mortgage lending. You know, thinking back to the financial crisis
10:59
Speaker 3: and what happened in the MBS market and the housing
11:03
Speaker 3: market unpacked for us a little bit what some of
11:06
Speaker 3: these innovations are and are they as risky as the
11:10
Speaker 3: innovations that brought us two thousand and eight.
11:13
Speaker 6: That's an excellent question. And I had the honor of
11:16
Speaker 6: attending the Mortgage Banker Association Secondary Market Conference this week
11:21
Speaker 6: where they touched on a lot of that exact topic.
11:24
Speaker 6: And you know, the good news is, even though memories
11:27
Speaker 6: tend to be short in the financial world, the memory
11:30
Speaker 6: is the scars from the two thousand and eight financial
11:32
Speaker 6: crisis cut very deep. So as a result, if you
11:35
Speaker 6: look at credit standards, for instance, they're still almost as
11:38
Speaker 6: high as they've ever been. You know, both banks and
11:41
Speaker 6: non banks really drew in their clause and the agencies Fanny,
11:46
Speaker 6: Freddie and Jenny may have all made a big effort
11:49
Speaker 6: to both expand perhaps the potential market for whom credit
11:54
Speaker 6: can be offered mortgage credit, that is, loans, but at
11:58
Speaker 6: the same time doing it ainable fashion. You know, their
12:01
Speaker 6: mantra is not only to make mortgages available to as
12:04
Speaker 6: many people as possible, but to keep as many people
12:06
Speaker 6: in their homes as possible. So it's become a dual
12:08
Speaker 6: mandate ever since two thousand and eight, and it really
12:10
Speaker 6: is the north star, I think for most of the
12:13
Speaker 6: people in the mortgage industry, because even non bank lenders,
12:16
Speaker 6: who theoretically have a little less skin in the game,
12:18
Speaker 6: they do have to repurchase mortgages if they violate repon
12:22
Speaker 6: warrants and you know, do other types of predatory lending practices.
12:25
Speaker 6: So on the good news, everybody's trying to work within
12:28
Speaker 6: those constraints to try to come up with new ideas.
12:32
Speaker 6: I mean, I will say that, for instance, fred one
12:36
Speaker 6: of the areas that is possible growth area is always
12:39
Speaker 6: first time borrowers, especially with millennials coming into that window
12:43
Speaker 6: for the first time, which is the largest demographic. So
12:46
Speaker 6: while they're having problems finding homes to buy, there are
12:49
Speaker 6: also sometimes having problems coming up with the down payments
12:51
Speaker 6: that maybe repeat borrower could come up with because they
12:54
Speaker 6: don't have home equity built up in the first place.
12:58
Speaker 6: So housing market is relatively on a four. So what
13:01
Speaker 6: a lot of different areas are doing. In particular, both
13:04
Speaker 6: the GCS and Ginny May is they are trying to
13:08
Speaker 6: improve access to down payment assistance, but it's for people
13:12
Speaker 6: with positive good credit scores, so that if that happen,
13:16
Speaker 6: like where do you get that? Well, there's actually a
13:19
Speaker 6: big educational program to try to tell people where this
13:22
Speaker 6: can come from. And usually that down payment assistance comes with,
13:27
Speaker 6: you know, a lot of insurance, extra insurance costs and
13:30
Speaker 6: things like that. But literally, I don't know the exact amount,
13:33
Speaker 6: but I think it's a twenty five thousand dollars credit
13:35
Speaker 6: towards down payments for instance, that Fanny and Freddie can
13:38
Speaker 6: tap into and Ginny May for instance, for FHA and
13:44
Speaker 6: VA both allow up to ninety five to one hundred
13:46
Speaker 6: percent of the loan to be financed. Again, that comes
13:49
Speaker 6: with extra mortgage insurance costs. But if getting your foot
13:52
Speaker 6: in the door is the difference between having a down
13:54
Speaker 6: payment or not, especially for first generation homeowners for instance,
13:57
Speaker 6: who don't have that generational wealth, then finding ways to
14:01
Speaker 6: get those people down payments is a is you know,
14:04
Speaker 6: is perhaps the game changer. The problem is, you know,
14:08
Speaker 6: if the homeowner therefore has no skin in the game
14:11
Speaker 6: because they haven't put down to down payment, are they
14:13
Speaker 6: more willing and likely to walk away, which is why
14:15
Speaker 6: they get charged extra insurance homeowner insurance costs to.
14:19
Speaker 5: Be in that.
14:20
Speaker 3: You know, with mortgage rates the way they are, my
14:22
Speaker 3: guess would be that it yields on MBS are looking
14:26
Speaker 3: pretty attractive. But I'm wondering what you're seeing as far
14:29
Speaker 3: as spreads, you know, is the lack of issuance sort
14:31
Speaker 3: of keeping those spreads down. How are you sort of
14:34
Speaker 3: sussing out the opportunities in the MBS market.
14:36
Speaker 6: Right, That's a very good question. And supply low supply
14:40
Speaker 6: has been a tailwind for the sector, but because volatility
14:43
Speaker 6: in the market has been so high, it's actually pressured
14:46
Speaker 6: mortgage spreads much wider than usual and you don't have
14:49
Speaker 6: somebody like the FED or even banks have been kind
14:51
Speaker 6: of stepping away as well recently coming in as the
14:54
Speaker 6: buyer last resort. You're relying on relative value investors who
14:57
Speaker 6: care a lot about risk return, they care a lot
14:59
Speaker 6: about he So as a result, spread's actually went all
15:03
Speaker 6: the way out to like one hundred and ninety basis
15:04
Speaker 6: points for the Kart coupon for new issue to treasuries
15:08
Speaker 6: back in October. They've since come in. They're around one
15:11
Speaker 6: hundred and forty basis points. But like when the FED
15:14
Speaker 6: was buying in twenty twenty one, there were was tit
15:16
Speaker 6: to seventy basis points for new issue. So there's still
15:19
Speaker 6: very wide relative to history, especially relative to the fifteen
15:23
Speaker 6: years since the FED started buying securities.
15:25
Speaker 2: Erica really appreciate it, Thank you so very much. I
15:27
Speaker 2: learned a ton. Eric Adelberg, Bloomberg Intelligence, Cheap Mortgage Backed
15:31
Speaker 2: Securities strategist, on mortgage lending, on the market and all
15:34
Speaker 2: the new rules and everything going into it, and how
15:36
Speaker 2: to make a good investment out of it.
15:40
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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15:58
Speaker 2: Let's get more insight here, Ben a senior portfolio manager,
16:01
Speaker 2: head of fixed Income at New Edge. Well, but what's
16:03
Speaker 2: so great about Ben? It's his daily notes he does
16:06
Speaker 2: to today are so helpful in connecting different trends to
16:09
Speaker 2: the market. It's not just a fixed income thing. It's
16:11
Speaker 2: more like here's a trend, here's how it plays in
16:13
Speaker 2: today's market action, which is so valuable to someone like me. Ben,
16:17
Speaker 2: thanks so much for joining us.
16:18
Speaker 8: Great to be here, Alex, Mike, good to see you again.
16:21
Speaker 2: Do you have your white pants and suit ready for
16:23
Speaker 2: post Memorial Day?
16:24
Speaker 8: I'm a Miami vice guy this Friday night, eight thirty
16:28
Speaker 8: crocoded top. So I got your flannel shirt, all that
16:32
Speaker 8: my mom made for me. I can say, shoes without socks,
16:36
Speaker 8: and yeah, let's go.
16:37
Speaker 2: We're good wicker shoes. They're important, all right, Ben, I
16:40
Speaker 2: we just sort of set this up. Vince was saying
16:42
Speaker 2: no cut this year. Apoulo says the same thing. Goldman
16:45
Speaker 2: socks pushing back their cut. Where are you on this?
16:48
Speaker 8: So I was on that for some time of Like,
16:50
Speaker 8: you know, I think many people realized that seven cuts
16:52
Speaker 8: was just a really I think esoteric type of pricing
16:55
Speaker 8: in the markets. You know, people very quickly rushing on
16:58
Speaker 8: the FETs language that they are ready to move sooner,
17:02
Speaker 8: and then realizing that, you know, we do have an
17:04
Speaker 8: economy that stays above the trend and is really slowing
17:07
Speaker 8: down to that trend, and as a result, you're getting
17:09
Speaker 8: price pressures and so yes, it that be my data.
17:12
Speaker 8: For example, if you get prices paid start to move
17:15
Speaker 8: up even further, there's not much room for the FED
17:18
Speaker 8: to do anything really, And that I think is the
17:20
Speaker 8: process we're going through, which is pushing a very cut
17:22
Speaker 8: further out in the future. Whatever become a RAID hike,
17:25
Speaker 8: that is to be seen. I think I'm not sure
17:28
Speaker 8: when that camp yet, but I think that with this year,
17:30
Speaker 8: we're just going to be unchanged on the FED flows rate,
17:33
Speaker 8: you know.
17:34
Speaker 3: But I want to shift gears a little bit because
17:36
Speaker 3: I know you've been thinking and writing a lot recently
17:38
Speaker 3: about artificial intelligence, you know, obviously in videos the big
17:43
Speaker 3: market story of the year. I'm curious how you're thinking
17:47
Speaker 3: about AI from a macro perspective. I mean, obviously there
17:50
Speaker 3: is the potential for vast improvements in productivity, but a
17:55
Speaker 3: lot of that type of technology driven productivity gains can
17:59
Speaker 3: be a little weird when they happen. You know, it
18:02
Speaker 3: could wake up some morning to read about a lot
18:05
Speaker 3: of job cuts because of AI is what I keep
18:07
Speaker 3: raising for. So how are you thinking about this transition
18:10
Speaker 3: into sort of a really AI driven economy from a
18:13
Speaker 3: macro level.
18:14
Speaker 8: Yeah, let's start with investment First, you know, I did
18:16
Speaker 8: some research on the data centers that are being built
18:20
Speaker 8: across the United States. Virginia obviously is the hotbed right now,
18:24
Speaker 8: but it's moving to other states. It's enormous. It's like,
18:27
Speaker 8: there's an estimated two on a fifty to four and
18:29
Speaker 8: a billion of investment planned into twenty twenty five. There's
18:34
Speaker 8: a resulting group out there that attracts the exactly square
18:36
Speaker 8: meters you talk about millions and milliones of square meters
18:39
Speaker 8: of data centers develops or in the planning. That's I
18:44
Speaker 8: think the productivity aspect of AI, Curry, it's about investment.
18:48
Speaker 8: Then you have, of course technology companies are spending on AI,
18:52
Speaker 8: so I think that's fueling the investment and then leading
18:55
Speaker 8: to productivity. Well, your point is about, you know, once
18:58
Speaker 8: we get this productivity research, we're going to get automation,
19:02
Speaker 8: We're going to get other things developing that maybe certain
19:05
Speaker 8: parts of labor become obsolete so to speak, they're not
19:09
Speaker 8: you know, being used, and that could effect productivity. I
19:11
Speaker 8: would say though that if you go back in the
19:13
Speaker 8: nineties when I started working, they're just as rolled out
19:16
Speaker 8: of Microsoft in a new sort of like Office version
19:20
Speaker 8: and the Bloomberg terminal, by the way, at the time
19:22
Speaker 8: was upgraded, and I was sitting there as a young
19:24
Speaker 8: kid like, wow, okay, I was able to navigate much
19:27
Speaker 8: faster than my older colleague. But yet you know what
19:30
Speaker 8: did that lead to a productivity search? Apparently the search
19:33
Speaker 8: happened the years before. Of all the investment that was
19:36
Speaker 8: put into this to get to that point of Microsoft
19:38
Speaker 8: rolling out and Bloomberg upgrading is terminal. I think that's
19:41
Speaker 8: what we're in right now. We're in the in the
19:43
Speaker 8: initial stage of investing. I think this is part of
19:46
Speaker 8: what the economy is currently reacting to. If you look
19:49
Speaker 8: at Durbal Good State again today, all the elements about
19:52
Speaker 8: computer chips and computers and all this type of equipment
19:55
Speaker 8: that's all up in new orders. I think that's what's
19:57
Speaker 8: going on it.
19:57
Speaker 2: Which I really appreciated your note on when when day
20:00
Speaker 2: when Nvidia did come out, because you talked about how
20:02
Speaker 2: to relate that to say the neutral rate. And then
20:04
Speaker 2: if you wind up having all this investment, does that
20:07
Speaker 2: raise the neutral rate? And does it make it harder
20:09
Speaker 2: for the bed to cut it had to keep because
20:11
Speaker 2: it just raises all that growth potential. Can you talk
20:14
Speaker 2: me a little bit more about that thinking, Yeah, there's
20:17
Speaker 2: a question is to like when that money is really
20:18
Speaker 2: going to materialize with like shovels in the ground kind
20:21
Speaker 2: of thing.
20:21
Speaker 8: Yeah, exactly, because you know, the shovels in the ground
20:24
Speaker 8: are ultimately I think, in fact the economy really significantly
20:27
Speaker 8: and that's obviously to an extent happening. So you know,
20:31
Speaker 8: wal Art has dropped speech this morning about the r
20:33
Speaker 8: star discussion, and I think about it this way, right,
20:36
Speaker 8: like the idea of that the economy is at a
20:39
Speaker 8: certain level cur and they say four percent, and the
20:42
Speaker 8: trend says it two percent. So if potential to say
20:45
Speaker 8: it two percent, this is what they say neutral rate
20:48
Speaker 8: should be around that number. In real terms, add on
20:51
Speaker 8: what we're just seeing with inflation expectations, you actually talk
20:54
Speaker 8: about a nominal neutral rate is maybe higher, right, maybe
20:57
Speaker 8: to four to five percent range. And if we're then
21:01
Speaker 8: looking at where the fete is journey, then we're not
21:03
Speaker 8: as restrictive if you compare it to the fat funds rate.
21:06
Speaker 8: Where that estimated neutral rate is. Now where the company
21:09
Speaker 8: comes into play, or actually the AI really because it's
21:12
Speaker 8: really not so much the company, it's more the effect
21:14
Speaker 8: that it has an AI investment. One key factor obviously
21:18
Speaker 8: we talked about is that if the investment in the
21:19
Speaker 8: economy picks up so substantially, the productivity gains that you
21:23
Speaker 8: get from that, Yeah, it does lift potential outputs. And
21:27
Speaker 8: I think this is the link between something of the
21:30
Speaker 8: AI development that we're seeing to this idea of neutral rates,
21:33
Speaker 8: and I think the fetters start to acknowledge it because
21:35
Speaker 8: I noticed in the minutes there are different snippets in
21:37
Speaker 8: there where the FAT members are talking about, like the
21:40
Speaker 8: enhancements of technology and the productivity efficiencies lead them to
21:44
Speaker 8: think that the economy could accelerate, could improve. And now
21:46
Speaker 8: that's where that neutralis discussion comes in.
21:48
Speaker 1: Yeah.
21:49
Speaker 3: Bet, I'm smiling reading your interview notes here because it
21:52
Speaker 3: says Ben does not opine on crypto cannabis, which is
21:56
Speaker 3: kind of refreshing because I feel like I've heard enough
21:57
Speaker 3: takes on both. But without opening crypto though, I would say,
22:02
Speaker 3: let's instead of talk about meme stocks kind of the
22:05
Speaker 3: same issue as crypto. This exuberant risk appetites. Right now,
22:10
Speaker 3: we used to think this was a low interest rate
22:12
Speaker 3: excess savings phenomenon, appears not to be the case this time.
22:16
Speaker 3: What do you think is going on with all this?
22:18
Speaker 8: Yeah, I mean so in twenty twenty one, we had
22:20
Speaker 8: just simply a massive search of money coming in and
22:23
Speaker 8: people were training and doing it all right, and and
22:26
Speaker 8: in fact that a lot of different parts of the market.
22:28
Speaker 8: Why the same phenomenon comes back is not one hundred
22:32
Speaker 8: percent clear, but I do think it's as part of
22:34
Speaker 8: the environment we have the VIX being really low. We
22:38
Speaker 8: are again maybe in a period where we experienced twenty
22:42
Speaker 8: six or twenty seventeen, where we had a I would
22:44
Speaker 8: call it a dry spell of the vix. It doesn't
22:47
Speaker 8: move a whole lot, even if the market sells off
22:49
Speaker 8: one day but two three percent, And I think that
22:52
Speaker 8: has to do with that. The market, I think, is
22:55
Speaker 8: very clear on where the economy currently is. There's not
22:58
Speaker 8: much uncertainty about that. And second, that also ties int
23:02
Speaker 8: that there's probably not much concerned to anymore about the
23:04
Speaker 8: fat itself. They can just stay on hold, they don't
23:06
Speaker 8: have to do anything. And lastly, any type of geopolitical
23:10
Speaker 8: tension or political tension that's out there is being viewed
23:13
Speaker 8: as okay, that could derail this scenario, but it isn't
23:17
Speaker 8: really doing that. So therefore there's no reason to have
23:20
Speaker 8: any volativity. So I think this is what it's say.
23:22
Speaker 2: All right, Ben, we appreciate you. Thank you so much
23:24
Speaker 2: for coming. Ben Emmons, Senior portfolio manager, head of fixed
23:27
Speaker 2: Income at New Edge. Welcome.
23:29
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
23:33
Speaker 1: weekdays at ten am Eastern on Apple card Playing and
23:36
Speaker 1: broud Otto with the Bloomberg Business app. Listen on demand
23:39
Speaker 1: wherever you get your podcasts, or watch us live on YouTube.
23:44
Speaker 2: So as of tomorrow, it will mark the fourth year
23:47
Speaker 2: anniversary of George Floyd's death, a forty six year old
23:51
Speaker 2: Black American man that was murdered in Minneapolis by Derek Chauvin,
23:54
Speaker 2: a forty four year old white police officer. Just to
23:57
Speaker 2: remind you, Flord had been arrested after a store clerk
23:59
Speaker 2: a left that he made a purchase using a counterfeit
24:01
Speaker 2: twenty dollars bill. In His death sparked numerous protests across
24:05
Speaker 2: the country on race relations between African American community and
24:09
Speaker 2: law enforcement and the excessive use of force by the police.
24:13
Speaker 2: And soon after George Floyd's murder, Minneapolis declared several changes
24:17
Speaker 2: like bands on choke hold neck restraints and other requirements
24:20
Speaker 2: that police tried to de escalate and avoid using improper force.
24:25
Speaker 2: It's worth taking a moment to check in then on
24:27
Speaker 2: where we are four years later. Mark Murrial is CEO
24:31
Speaker 2: of National Urban League. National Urban League is a non partisan,
24:35
Speaker 2: historic civil rights organization based in New York City that
24:38
Speaker 2: advocates on behalf of economic and social justice for African
24:42
Speaker 2: Americans and against racial discrimination in the United States. Mark,
24:46
Speaker 2: it's a true pleasure. Thank you for joining us on
24:48
Speaker 2: this Friday. What we saw four years ago was a
24:53
Speaker 2: true awakening in the United States on race relations. Where
24:57
Speaker 2: is that awakening now?
25:00
Speaker 7: So thanks for having me. So a couple of quick
25:02
Speaker 7: things we saw in the wake of George Floyd's tragic murder,
25:08
Speaker 7: an uprising, an awakening, a consciousness in this nation.
25:12
Speaker 4: And I believe that that consciousness is still strong.
25:16
Speaker 7: I believe that the intentionality of many to overcome the
25:20
Speaker 7: legacy of racial justice and build in America for everyone
25:23
Speaker 7: in the future is still strong. But I would be
25:27
Speaker 7: less than candid if I did not say that now.
25:30
Speaker 7: What has emerged is an orchestrated backlash movement. It manifests
25:37
Speaker 7: itself in attacks on voting through voter suppression. It manifests
25:41
Speaker 7: itself in attacks on African American in LGBTQ history, through
25:47
Speaker 7: book bands and alterations of curriculum, politicians interfering in what takes.
25:52
Speaker 4: Place in schools.
25:53
Speaker 7: It manifests itself in the new attack on corporate and
25:57
Speaker 7: university d E and I I have to tell you
26:00
Speaker 7: the will, the determination, the fight by many of us,
26:05
Speaker 7: and I think, I say for the majority of the
26:07
Speaker 7: American people to continue to push towards a more just
26:12
Speaker 7: future remains extremely strong. The only other point I would
26:16
Speaker 7: add is that in the case of George Floyd, the
26:20
Speaker 7: offending officer, the accused officer who is now a convicted felon,
26:25
Speaker 7: Derek Chauvan was convicted in both the state and federal courts,
26:30
Speaker 7: and in that case, justice was done and someone was
26:34
Speaker 7: held accountable. But George Floyd's murder, but the need in
26:39
Speaker 7: this country for a national police accountability measure, we called
26:44
Speaker 7: it the George Floyd Justice and Policing Measure, is still elusive.
26:49
Speaker 7: It didn't get through the Congress because of the filibuster
26:53
Speaker 7: in the Senate, but the will and the support and
26:56
Speaker 7: the intention and the work that we're going to do
26:59
Speaker 7: it was re entered was yesterday in the House.
27:02
Speaker 4: Remains strong. We will not give up, you know.
27:06
Speaker 3: Mark, speaking of that backlash that you're talking about. Obviously,
27:10
Speaker 3: it's campaign season in the US right now. Donald Trump
27:14
Speaker 3: gave a rally in the Bronx s Burrow of New
27:18
Speaker 3: York last night and he said, quote, I'm going to
27:21
Speaker 3: indemnify all police officers and law enforcement officials throughout the
27:25
Speaker 3: US to protect them from being destroyed by the radical
27:29
Speaker 3: left for taking strong actions on crime.
27:31
Speaker 7: Now, I don't.
27:34
Speaker 3: Can't quite wrap my head around whether he'd be able
27:37
Speaker 3: to actually do that or what that would look like.
27:39
Speaker 3: But I'm curious if you heard those remarks, what you
27:41
Speaker 3: think of them and what you think his chances of
27:44
Speaker 3: being able to do that.
27:46
Speaker 7: Say, they're reprehendson, No America, no public employee should be
27:53
Speaker 7: indemnified and.
27:54
Speaker 4: Not be accountable or wrongdoing. What will you do next?
27:58
Speaker 7: Indemnify all in indemnify all murderers, indemnify all sexual offenders.
28:08
Speaker 7: This is Donald Trump making extreme promises. But what Americans
28:16
Speaker 7: should be aware of is that he has the if
28:22
Speaker 7: you will, gall to say these sorts of things in
28:27
Speaker 7: an effort to animate voting, in an effort to appeal
28:32
Speaker 7: to his base. It this America is not. No one
28:37
Speaker 7: is above the law. So now he's saying, let's place
28:41
Speaker 7: law enforcement above the law, even when they indiscriminately take
28:47
Speaker 7: the life of an innocent American. No, the badge and
28:52
Speaker 7: basically a certificate to be a police officer should not
28:57
Speaker 7: place you above accountability, because no one should be placed
29:01
Speaker 7: above accountability. And I hope Americans recognize that what he
29:07
Speaker 7: said is offensive. It certainly would be resisted. But I
29:12
Speaker 7: do not nothing. Mister Trump does no extreme statements. He
29:20
Speaker 7: does surprises me anymore. Yeah, and Americans should be very
29:25
Speaker 7: aware of what that statement really means.
29:29
Speaker 2: Mark, when you talk about D and I, particularly in
29:32
Speaker 2: the workplace here, what it seems like is that you
29:35
Speaker 2: said the backlash and a calculated backlash. What I've anecdotally
29:39
Speaker 2: noticed is you wind up promoting people or hiring them,
29:42
Speaker 2: but then the voice isn't heard. And I'm wondering how
29:44
Speaker 2: we solve for that problem. Sorry, we have about a
29:47
Speaker 2: minute left, and that's a big ask about a mission.
29:51
Speaker 7: Leadership and companies have to work on including people ensuring
29:56
Speaker 7: that their voices is heard. This is how people get
30:00
Speaker 7: if you will assignments, how they get appointed to internal
30:06
Speaker 7: committees within the workplace. Look, leadership can make a difference.
30:10
Speaker 7: I've been I've led organizations now for most of my life.
30:14
Speaker 7: I lead a large institution today nationally, we have almost
30:19
Speaker 7: three thousand employees.
30:20
Speaker 4: I ran a city that had some fifteen thousand employees.
30:24
Speaker 7: This is leadership can set a tone that when I
30:28
Speaker 7: bring people in, I'm going to make sure they're included.
30:30
Speaker 7: I'm going to make sure their voices are heard and
30:33
Speaker 7: create that kind of tone and atmosphere. And there are
30:36
Speaker 7: companies that are bucking those sorts of trends, but you're
30:40
Speaker 7: right to point it out as one of what I call.
30:44
Speaker 4: The continuing challenges. This is ongoing work.
30:49
Speaker 7: Mark.
30:50
Speaker 2: We really appreciate it. It's an important message and it's
30:52
Speaker 2: important work, as you state, and we appreciate you checking
30:55
Speaker 2: in with us four years on Mark Merrill, a CEO
30:58
Speaker 2: of National Urban, on the fourth anniversary of George Floyd's
31:02
Speaker 2: death that is coming tomorrow on May twenty fifth.
31:07
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