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tv   Bloomberg Markets Americas  Bloomberg  April 19, 2021 10:00am-11:00am EDT

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guy: monday the ninth of april. 3:00 p.m. in london, 10:00 a.m. in new york, 30 minutes into the trading session in the united states. welcome to "bloomberg markets." alix: how was the pub? guy: the pub was fantastic. the pub was critically open. alix: we definitely miss you. it was very active last week within the bond market, but even equities close to a record high on friday. it didn't feel like there was a lot of fanfare. we were talking about this earlier, when it comes to the deflated reflation trade. is that really it, or what was -- or was what we saw on the bond market really breaking
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down? you have ipo's, spac's, the best measure of liquidity and animal spirits in the market. what does that mean for the broader equity market? the 10 year yield up by about two basis points. the dollar is softer. goldman upgrading their euro-dollar call to $1.25. is the u.s. exceptionalism we saw dead? what is going on with it? guy: ecb thursday could be quite interesting from that central bank. are they going to be concerned again about a rising euro? i did pay a little bit of attention last week to what was going on. it did look really weird, really
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counterintuitive. we saw this move lower, basis points -- move lower, 50 basis points over the last 12 trading sessions. at the same time, we got upside surprises on the data. retail sales data. jan hatzius talked friday about how he expects the bid to come back as well. >> markets are now priced i think for much stronger near-term data. so it is actually harder to shock markets, to shock the bond market into a selloff, even with some extremely strong numbers. the numbers over the last couple of days really have been extremely strong. it just hasn't had that much of an impact. guy: let's carry on the conversation and figure out where we go from here. jay barry, j.p. morgan's head of dollar bond strategy, is joining us now. there's a disconnect with the
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data that is really quite extreme. alicia: good morning -- jay: good morning. if you look at it in the context of a 75 basis point move because of how we have repriced growth and inflation expectations, it is hard to expect that we continue to run at this rate. two extent, it doesn't line up with fundamentals, but the fundamentals were already in the price. i think there's a wide degree of concern that last week's auctions, which were in a condensed schedule monday on tuesday, were going to be more difficult to digest. we were concerned about that as well, but it seems like investors were already positioned for that because if we look at technicals, our latest treasury client survey is at the level it has been for the last several years. we have already repriced greatly this year, and it was sort of a confluence of those factors that drove rates lower last week to get us back to where we are right now. alix: so is it done?
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and what is the top of the new range? jay: we don't think the move is done, but we think the biggest part of the move is done. the fact that we move 70 to 75 basis point this -- the fact that we moved 70 to 75 basis points this year, we are going to meet a catalyst to get higher yields. in reality, we are only looking for long-term yields to move another 30 basis points. we have a year-end forecast of only about 35 basis points from here. guy: i am starting to see a number of calls talking about the bund going to zero. what impact would that have on the treasury market which we see this -- on the treasury market were we to see this selloff continuing in germany? jay: we forecast a -10 basis point bund by end of year, but we are looking for the moves because the recovery in the economy and the eu is going to
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be much more benign and a bit slower relative to what we are seeing in the u.s. but if we were to get higher german yields, that would ratify expectations that there's more room for u.s. yields to run from here because if anything, as of late, even though u.s. yields have moved back somewhat off their highs, german yields have been sitting at the upper end of their recent range, so that would add to our bearish bias to an extent. alix: with an ecb meeting coming in a few days, when will the fed start talking about papering, -- about tapering, and then will with a -- and then when will they taper? something that's happened in the market is that rate hikes have been priced out from the fed, and some say, like at citi, it has gone too far. you can see that with eurodollar futures and where we are in terms of market expecting a rate hike. what is your call, and how do you play it? guy: jp morgan -- jay: i j.p.
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morgan, it is our view that the fed will announce tapering at the end of this year and the first rate hike will occur in early 2024. the fact that the market is pricing a full hike by late q1 of 2023 does seem overdone to us, but the fed doesn't seem to be pushing back on those expectations at all, so we think that gap between when we expect the first rate hike and when the fed will actually begin tightening will take some time to close from there. but with respect to your original question about tapering , we think it is probably going to show up in the june fomc meeting. next week is just going to be a bit too early. we will not have had another labor market report, and to the extent that even lately the tone from the leadership, including from chair powell and vice chair clarida, has said we have yet to make further progress tells us this is likely going to be a summer conversation more than anything else. guy: where is the sweet spot on the curve? where's the best value? jay: we are most concerned about
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the seven to 10 year sector of the curve. the way we have been positioned for higher yield is sort of soft bearish trade in these form of steepeners. if anything, we think the long end of the curve is much better anchored here. very long dated fed expectations are close to the fed's longer run fed funds rate d with the moveot. -- ed funds rate -- fed funds rate dot. that has brought e-cig in the amount of long-duration demand. there's been a record amount of activity in the first quarter, and we think if anything, that demand is going to remain pretty firm for this year, which means the move at the back end is going to be more parallel. with inc. it is the intermediate sector that is probably most vulnerable to a continue to move here. alix: thanks a lot. great to catch up with you. coming up, more and the insight for markets with alicia levine, bny mellon chief strategist.
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this is bloomberg. ♪
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ritika: let's check in on the bloomberg first word news. in minneapolis, lawyers are making closing arguments today in the murder trial of derek chauvin, the white former police officer who is accused of killing a black man, george floyd. the killing of another black man by minnesota police has increased anxiety over the potential for violent protests. a case of the u.s. supreme court today will pit the biden adminstration against democratic lawmakers and progressive allies. the administration will defend the government policy of
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blocking permanent residency applications from thousands of immigrants who have been living legally in the u.s. for years. it involves a temporary status program for residents from countries in crisis. the british bank was the lead underwriter of a municipal bond transaction that will build privately owned prisons, but abandoned the deal after being criticized by investors and activists. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ritika gupta. this is bloomberg. alix: thanks so much. i find that really fascinating, by the way. that is when esg can really move the needle. let's talk about bitcoin and what happened over the last 48 hours. the cryptocurrency fell by as much as 15% sunday. rival coins also plunged. no one really knows why. we are trying to find some stability today. mike mcglone of bloomberg intelligence joins us now.
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what do you make of it? was it a buy the coinbase rumors, sell the news? mike: i think that's what it is. we all know there is an institutional space rising below the market, and specs are getting ahead of that. the market got way too speculative long, and you saw it and things like dogecoin. but for people who can trade 24/7, that is a revolution. i'm hearing that everywhere area there's lots of speculation. but that bid below on bitcoin is different. it looks like it is going to be at a good resistance for a while. it should be a matter of time before it continues to creep higher. guy: how could this become institutionally acceptable and still be a speculative asset? once you become mainstream, the speculation presumably comes out of it. it has to, doesn't it? are we starting to reach that point? mike: i appreciate you going
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there. this is what is happening with bitcoin and the rest of the market. remember, there's 9300 bitcoin want to be -- 9300 bitcoin wan nabes and this space. i think you're just seeing your average person who says bitcoin at $60,000, i don't want to buy that, but i can buy dogecoin at $.38. you are seeing your average speculator getting involved and playing like they are at a casino. then you are seeing the more institutional bid in bitcoin. bitcoin thursday volatility has dropped to the lowest it was last year. alix: is that what you did at the pub? did you trade doge -- did you trade dogecoin with your mates? guy: no.
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[laughter] i was about as far away from that as i could possibly have been. alix: but the point is it is not guy doing this, mike, right? these retail traders who are like, 22? mike: there's one benefit of having kids who are millennials. they are daring each other on social media. but the great word you learn when you're 12, it is just happening globally and 24/7. you couldn't be at a party or bar and trade this. there's going to be a major flush out. it's probably going to happen to doge coin, may be getting to a dollar and then back to pennies, but bitcoin is going to give rising until we get past this period of etf's, unless they
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fail, which is unlikely. guy: it does make you wonder how good the party is, though, if that's what you're doing. alix: if you are double dog daring, it's a good party. guy: it does make me wonder. [laughter] mike, thank you very much indeed. let's move this into equities and take a look at whether or not they are overboard as well. you pay your money, you take your choice on whether or not you believe them. but certainly there are indications that stocks are beginning to fade a little bit this afternoon globally, but they have been punching higher. we have been above the 70 rsi. you could argue that stocks are a little bit overbought, maybe a lot overbought. alicia levine, ny mellon investment management chief strategist -- alicia levine, bny mellon investment management chief strategist -- [no audio] alix: i will pick up for guy.
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i think we just lost him. let's start where guy was. are we overbought here? if so, how do you handle the market? alisha: good morning -- alicia: good morning. good to see you. i would not say we are overbought, but it is a healthy rally. it is in everything rally, and it is a rally brought about because we are having better-than-expected economic data, better-than-expected earnings, and of course, yields have surprisingly really come off that spiking this that we saw in february and march. the question is what do you do from here. being positive on the market is not the same as expecting it to go up in a straight line. when you have a bounce off the bottom, when you have a recovery after a recession, the 10 year to be a bit more tricky, and trickier because certain sectors win, certain sectors lose, and
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other sectors may have overrun their growth expectations. we think you should be invested particularly if you are holding stock for more than eur to. -- more than a year or two. we think ultimately, the kind of bullishness we have seen in the breadth of the market means six to 12 months returns from here will be higher. that is the case historically. but there are pitfalls along the way. we shouldn't be surprised to see it. it is entirely consistent with an upward moving market in the beginning stages of a recovery. guy: you like industrials, materials, energy, anything related to the housing market, and large cap tech. you even are starting to like europe. these are areas of the market that have done pretty well. i know large-cap tech has faded a little bit, but i am wondering how much juice is left in some of these trades. the housing market has been on fire. if people haven't noticed that by now, they have been missing
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something massive happening in the economy. why isn't all the good news already there? alicia: it is not already there because, looking at the bond market, the news in europe the past few weeks was part of the reason we saw a selloff in the cyclical sector here and in value in the u.s.. i think this is a great entry point to come back in because again, the earnings growth this year is driven by the cyclical sector. growth is not being driven by tech or growth stocks, but actually by cyclicals. that is going to be true for all four quarters. so given that, we think there is earnings upside more coming from the cyclical sector, and that is why we are positive on europe despite the headlines. the headlines in a funny way sometimes of the last thing to follow price into the market because ultimately, if you believe in growth, higher rates and higher inflation, then
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europe's market is less so tech, which is why it has underperformed since the global financial crisis. , then europe's marketso we think the'n interesting opportunity here, and it runs counter to what the general sense is out there. housing has moved. however, we are in the beginning of a secular uptrend, meaning we lost a generation of homebuyers after the global financial crisis. homeownership was actually the lowest it has been in the u.s. since the early 1970's, so we are beginning to correct that kind of extreme action. in a sense, you have two generations of homebuyers now. so we think this is sustainable. ultimately you are looking up for the balance, but the sustainability of sectors and of earnings. let's talk about inflation expectations for a second. if you go out 10 years, investor expectations, market expectations are for 2.4% inflation. think what happened with the global financial crisis, 1.8
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percent. that is a permanent change in forward inflation of patients. alix: in europe -- inflation expectations. alix: in europe, you are also going to have a stronger euro and higher yields. your cyclical trade -- does your cyclical trade hold if we see that stronger euro? alicia: you're already seeing it in german bunds. the german bund is moving faster and higher than the u.s. treasury. the spread is closing. very interesting. i expect the u.s. treasury yields to start moving higher, too. last week was a gut punch for those of us who just expect higher inflation and higher yield, but that is the market over correcting a crowded trade, which essentially is what we believe happened, along with some negative headlines. we think that yields are moving higher. it is a great entry point for that kind of trade, but let's talk about large-cap tech. the future is digital, end of sentence. it is happening in every single
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industry. you have to be levered to profitable tech because profitable tech is going to grow through all of this. higher yields won't bother it as much as higher yields will bother speculative tech. so go for the names which have a earnings come a businesses, and can letter their business models to the uptick in the economy. again, it is the everything rally. maybe not bonds. in terms of equities, we would use upswing, sustainability, and the beginning of the earnings cycle to invest here. earnings are going higher. they're going higher and higher, and i think that is the message here, including for 2022. guy: the u.s. appears to be winning its battle with the virus because of the vaccine. europe is starting to play catch-up. china is looking pretty good. the numbers are fantastic. the rest of the world isn't. are we missing something about the risks potentially to this rally, this recovery that seems
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to be isolated to the developed world right now? alicia: if the u.s. is recovering and china is recovering, than the rest of the globe will recover. however, i do think there's higher risk. we are not especially pushing on emerging markets simply because i think there's some political risks there. it is not just a slower rollout of the vaccine, but increasing rates of covid infections, and with that comes some of the normal risks that go along with emerging market investing. i think there just has to be some care there. but the overall picture is, if you have developed markets growing, and we do think europe is a bit of a postponement, but not a change in trend. then the rest of the world will grow. ultimately, being optimistic and being a forward-looking and singing about the best case scenario frankly has really been
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what has driven markets. let's face it, we are in a v-shaped recovery in markets and in the real economy. we are getting back to q4 29 gdp by the summer here in the u.s.:e it. thank you very much. as we had to break, you are looking at a live shot of the courthouse for closing arguments in the trial of derek chauvin, the former minneapolis police officer charged with killing george floyd. we will update you if any headlines cross. this is bloomberg. ♪
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guy: from london, i'm guy johnson. alix steel is over in new york. this is "bloomberg markets." jp morgan is bankrolling the biggest of people in stock since the 1950's, agreeing to underwrite $4.8 billion bet that
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has already drawn huge criticism from politicians, do must exceed ball leagues, basically anybody with a vested interest in the status quo continuing. alix: but they might apparently sell those two investors, so you could get in on an elite football league. i almost said soccer. i'm very sorry. [laughter] guy: i could see you correcting yourself. alix: but this is a big thing. guy: this is a huge sport globally. we will wait and see what word comes out of this. this could just be a massive negotiation. we will wait to see what happens. it is going to be interesting to see how this one works its way out. harley davidson out with strong numbers. we saw strong numbers from coke yesterday. we will look at the numbers next. this is bloomberg. ♪ this is bloomberg. ♪
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guy: it is monday. another busy week of earnings ahead of us. today we get ibm, united
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airlines. buzz of those two are out at the bell. tomorrow, j&j -- both of those two are out of the bell. tomorrow, j&j. netflix, coke, harley davidson upgrading their figures as well. leigh drogen, estimize founder and ceo, joining us now. i want to talk about perception of reality, where the market is in terms of price and where these earnings are going to come through. we know that these earnings are going to pick up. are they coming in in line with expectations relative to where the market is? the market looks pretty punchy, but so do the earnings. leigh: the market is expensive here, definitely extended from that 50 day moving average. but historically, if you put aside the earnings for a second, when we see valuations and price movement like this, although short-term this could get a little hairy, long-term we do see very positive performance from the market.
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markets tend to not crash from all-time highs, and they exhibit severe momentum characteristics. on that side it looks pretty good. on the valuation side, we are up above 23 times forward 12 months earnings, but what is going to happen here, and we are starting to see it already, is the banks absolutely demolish their numbers. the sell side is way behind on upward revisions here. the estimize consensus for the s&p 500 is looking for 35% year-over-year growth. the sell side is still at 28 -- sorry, lower than that, lower than 28 but now at 35. we are seeing massive upward revisions in a very short amount of time. the revenue growth is also going to be pretty good here. so some of those numbers are going to start to come down in terms of the multiples, but that short-term reversion of the market could get a little hairy lisa:. we've been -- a little hairy.
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alix: we've been talking about peak margins for year. when you have the nfib with concerns about rising prices, some ability to pass that on to consumers, but not a whole lot, plus hiring is becoming a bigger and bigger issue, how do we read the margin story? leigh: in the short term, as the fed kind of has been very direct about we are going to see a transitory amount of inflation, that is going to be passed along -- that is not going to be passed along as much as you might think it will be to consumers. i think companies will take the hit on the margin a little bit here, but i don't think the market is really going to care because it is going to look through that, and the fed has really been trying to get everybody to look through that short-term. i think they will be pretty successful with that. the other thing that is happening that i continue to believe not enough attention is
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being paid to is technology is biting into that inflation really hard in basically every sector now. that will continue to have a dampening effect on price rises. it will be interesting to see just what happens with retail prices for labor. that is where it can get a little weird. my friends and colleagues have a very wide dispersion of views here on what is going to happen. some kind of believing we could see 20% to 30% upticks in cost for labor on the low end of the scale, and some believing but there's just going to be non-because automation is going -- going to be none because automation is going to replace them. that is one variable that i think the market does have a consensus on. guy: i agree, and you have so
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many different conversations on this subject. i want to take you back to what you said about sell side for a moment. are they just looking at the wrong data? what things do i need to look at to get a real idea of what is happening with some of these earnings? coke out today. harley davidson, much smaller, but blasting past expectations in terms of the outlook, significantly upgrading its numbers. why is the sell side coming up short? leigh: this happens in every cycle kind of right at the beginning of the uptick, where there's just not a lot of incentive for the sell side to get too aggressive with those numbers. they want companies to be able to do well. they want to be able to raise more capital. a want to be earnings. this is why estimize exists, to have the buy side set the market with more modest expectations. the other thing we are seeing here which reads into that is in
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2020, up until q4, our post earnings alpha factor model was terrible. it had a huge draw down in its alpha. that is the model for systematic hedge funds. in q4 and q1, it had two of its best quarters ever. that tells us that earnings matter again. they didn't for a while, and they definitely do now. we have seen at the beginning of this quarter that model is also performing incredibly well. we expect that to continue through the quarter, and part of the reason why that is the case is because the sell side just hasn't caught up. as that happens, you are going to see multiples come down, and you should see the market in the medium to long-term behave pretty well. alix: usually you talk about the reopening trade versus stay-at-home. you used docusign, and what was the other stock you used to compare? leigh: shopify. alix: so what are they telling you right now?
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leigh: this is going to be the last quarter of really easy comps for shopify. they will do something like 90% year-over-year revenue growth. so by next quarter the comps are going to get really tough for them. we are seeing some significant upward revisions right now for this quarter, and we continue for the future quarters, but we are back down into that 50% range going forward after this quarter as the comps get really tough. so i think we've got one more quarter. williams-sonoma is another that i think has a really good quarter coming before the comps get tougher, and all of the trends are still with them. so one more quarter to ride those, and then i think another look. alix: good to catch uleigh drogk you. coming up, the decision on how to resume j&j shots by friday.
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we will review that next. this is bloomberg. ♪
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ritika: this is "bloomberg markets." coming up, tina chen, times up president and ceo. this is bloomberg. ♪ >> my estimate is that we will continue to use it in some form. i doubt very seriously if they just cancel it. . i don't think that is going to happen. alix: that was dr. anthony fauci speaking about the j and j vaccine over the weekend. at least half of all u.s. does have received at least one vaccine dose. there's been a lot of disagreement about when we are going to see that j&j vaccine. what is the process that needs to happen for that to get back on the market? reporter: this is just a pause right now, and they are waiting
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on the cdc advisory committee on immunization practices that met last week to consider the pause, and it postponed any decision on what recommendations to make. they are supposed to meet this friday to take up what to do next. last week when they met, they just basically want more data. they want to find out a little more about what was going on with this vaccine, how rare where these potential blood clot side effects, and who they were occurring in. hopefully we should have more information by friday, when the committee meets. there's a strong sense that they are going to come to some sort of decision. no one knows what they will do, but the likely scenario is that they will return it to be used again, with some restrictions, or strong warnings or recommendations. guy: the u.k. health secretary
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matt hancock is speaking now, talking about plans being ramped up for a booster, which will probably come in the autumn. do you think by then, we will be moving away from the adenovirus shots, the astra, j&j, and focusing more on the rna shots? reporter: basically, if you look on a worldwide basis, the worldwide vaccination campaign has barely begun, essentially. bloomberg's vaccine tracker has a little over five doses of it -- doses given out to only about 5% of the world population. so i think we need all of these vaccines, and if there are groups that can understand the side effects well enough so they know who best to target these vaccines for, we need to see as many as possible because the race between the vaccines -- the race is between the vaccines and the variants.
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alix: the director of the cdc is now saying that even if vaccinations increase, we remain at a complicated stage in covid. the seven-day stage is now at about 67,000. do we have an idea of what happens if we get dj and jay, and you have these steers coming out? what do we know -- if we get j&j, and you have these boosters coming out? what do we know. can you mix them? reporter: it is unclear what kind of boosters will be needed when. i talked to one researcher who estimated there was about a 50/50 chance we will need some kind of booster shot, but that doesn't mean that we will need continual booster shots forever. one scenario is you could just need one booster shot for the virus mutation to slow down. so there's lots of scenarios. no one really knows for sure. we are preparing for that situation that we will need booster shots. guy: it feels like the u.s. and
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europe to a certain extent, the u.k. certainly feel like there's light at the end of the tunnel. i'm hearing that phrase a lot at the moment. boris johnson has just canceled a trip to india. the case counter there is accelerating massively. they've got variants starting to emerge, a series of them. in terms of your assessment of where we are and the perception in the united states and the u.k. that there is light at the end of the tunnel, are we getting ahead of ourselves? robert: i think it is tricky and relentless, and it is a fast mutating virus, and there's been a tendency to want to's kind of -- want to kinda declare that we are at some kind of magic moment where it is almost over. i think the better way to think about it is that we are in a much better position then we
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were a few months ago with these powerful vaccines. but this is going to be a long and complicated road of gradual improvement. that is probably the better way to think about it. if you look at past major viruses, smallpox is one of the only ones that has been eradicated. polio is still around in some places, and even measles, that took a while to fully subdue in the u.s., even with effective vaccines. so it is going to be a gradual process. that is probably be more realistic way to think about it. we are in a better place, but rolling out vaccines worldwide to everyone, as the virus does not pay any attention to international borders, that is a complex undertaking. alix: do we know where the virus in the u.s. is spreading the most, considering that we are ramping up vaccine? robert: certainly michigan right now has a very bad outbreak. that is one of the worst hotspots in the u.s.
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we are seeing these more highly infectious variance, seeing more moderate to severe cases in younger people now. it is not that they are necessarily dying at high rates, but they are more likely to end up in the hospital with an infection that lasts three or four weeks. that is kind of what you are seeing, and michigan perhaps is the worst spot in the country right now. guy: thanks for the update. useful. robert langreth reporting on where we are in terms of the situation that the cdc says is very complicated. we are getting the news that i thing a lot of people in the u.k. anticipated. this is a really big deal. the u.k. as very close links to india. matt hancock, the health secretary, within the last couple of minutes saying that india has been added to the red list. that means if you want to return from india to the u.k., you've got to spend time in a hotel quarantine situation, which is
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going to put a lot of people off . relations between the two countries will certainly be affected by this, but india, as we have already talked about, has discussed getting new variants of the case counts, absolutely exploding in terms of the numbers they are seeing. i spoke to the air france klm ceo this morning. john plueger is going to be joining us for mayor lee's. they've got a huge amount of visibility on what is happening in this market. we will get his take on that next. this is bloomberg. ♪
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>> we are hoping that border restrictions will be open -- [indiscernible] -- where a vaccine could be in place. it would be much easier to
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travel. i'm hoping that by the summer, that should be possible. guy: that was the air france kaelin ceo speaking a little earlier today -- air france klm ceo speaking a little earlier today. going us now is the air lease ceo john plueger. 10 years since it became a public company. congratulations on that milestone. carriers in the u.s., carriers in europe starting to sound a little more optimistic. we are still trying to figure out what happens next with the virus. do we get variants? will we be able to reopen borders? what kind of demand are you seeing? john: certainly in the u.s., i think we are going to have a fairly strong summer. you have seen for example delta late last week signaling that the worst of the pandemic they
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think is over. you have seen american airlines increasing its flight frequencies and the size of aircraft to certain destinations. so certainly i think we are looking to have a fairly robust recovery over the summer season. europe is a little more questionable this time. there has been a resurgence there. there's still issues on border restrictions and that kind of thing. but we do think over time and over the course of the summer, we will see an improving situation in europe as well, starting with the premier early low-cost domestic carriers. china is about 100% domestically in their traffic growth. russia is also very strong. so certain parts of the world are challenged, but just recently in new zealand and australia, they opened up a vaccine air bridge between those two countries, and i think we will be seeing more of that. this notion of a vaccine passport is going to get some traction. alix: you left out latin america and what is happening with india and pakistan. i wonder if you could help me
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understand, are there other types of airlines that still have to go bankrupt or that still need state aid, that still need to do something during the pandemic versus the ones in the u.s., which are healthier? john: the answer is all of the above. a number of airlines are asking for more state aid. you just quoted ben smith a little while ago. certainly air france is looking for a bit more. klm, and globally that will still be the case. we probably will see more bankruptcies of airlines, but what has been amazing is how resilient they have been, the capital support they have been able to achieve not only from governments, but their own shareholders, was a huge -- their own shareholders, with a huge improvement in air travel. it is just the way the world is connected. yes, there will be casualties. but i think the real story is one other industry that has been -- is name one other industry
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that has been able to have this reduction in cash flows for a prolonged period of time and still be here. we in the leasing community have played a significant and providing some of that capital. although it has been extreme lead difficult, and we are not out of the woods by any means, the resilience of the airline industry really has been phenomenal. guy: one of the ways that resilience has existed is through freight. are you seeing demand for conversions? are you going to convert any of your aircraft to the freighters? because certainly, that is when the -- that is where the cash flow has been coming from. john: absolutely true, certainly in asia. we are seeing a lot more aircraft being converted into freighter. our fleet is a very young fleet.
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we buy new airliners from boeing and airbus and take delivery of them. generally speaking, it is the older aircraft that tend to get converted, so we don't have a lot of that on the horizon, but certainly as aircraft may age in our fleet, that is a possibility , but that has become a very strong pathway now for a lot of the older wide bodies and even some of the older aircraft. alix: competition was superhot before the pandemic. when we emerge, what is it going to look like? john: competition with the airlines, or amongst the lessors? alix: among the lessors. john: we have a lot of leasing companies in the world. however, the top seven or eight players have remained relatively consistent. so the airlines will still have a lot of good choice. there will be a lot of competition still remaining going forward in the leasing space. one of the reasons the leasing space has grown so much is that
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aircraft have proven to be over many years, in fact decades, a very good, sound investment. even in difficult times returning positive returns and good levels of returns for the investor. so that has returned a lot of capital to our space, and i think it will continue to attract that capital. guy: one final question. there's a lot of cheap capital in asia. we are seeing yields start to climb in the united states. is that going to put you at a disadvantage? john: i don't think so. this is an industry that takes a lot of very specific knowledge. it requires a deep relationship and only with our airline customers all over the world, but with manufacturers and airbus -- our manufacturers in airbus and engine manufacturers. the low cost of capital from buying huge amount of aircraft at a large quantity to get
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discounts, there's a lot of tricks to the trade, and just having capital doesn't cut it. guy: ok. i've got 30 seconds left. our people -- do you think there will be smaller aircraft being ordered? john: clearly the wide-body space has transitioned from the largest mega aircraft in the 747s and now to the smaller wide bodies. because there's less passengers and more point-to-point travel. guy: thank you very much for your time. the european close is coming up next. this is bloomberg. ♪
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guy: from london, i'm guy johnson. alix steel is over in new york. we are counting you down to the rpn close on "bloomberg markets -- to the european close on "bloomberg markets." football seeing its biggest split in decades as the world's richest clubs, including manchester united and real madrid, breakaway from the ua for champions league to form a super league -- the uefa champions league to form a super league backed by jp morgan. india's covid rates surged to the highest in the world. london says it will intervene in the acquisition of arm on national security grounds. european stocks a bit like they are in the united states, kind of going nowhere. a little bit of a drift lower

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