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tv   Bloomberg Surveillance  Bloomberg  November 10, 2021 6:00am-7:00am EST

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just the vision story. >> there is a good alternative right now and that alternative is still equities. >> investors still seem to care. they are hooked on the iv of very low real interest rates. >> investors are really tired of crude good money after bad money. >> the fed really is your friend during this period. jon: inflation day in america. good morning, good morning. this is "bloomberg surveillance." your longest winning streak of the year is over. equity futures down again. tom: we open this hour, and i'm sorry, sarah is right, we are
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bedazzled right now with what to focus on to get 2022. the spread market is telling me something. i don't know what. jonathan: real yield is lower. let's focus on one thing right now, inflation data in america. look at j.p. morgan, morgan stanley, citi. can you imagine the sticker shock of a six handle in america? tom: that is a nice way to put it, and a sticker shock is not transitory. that is a word you may have remembered. i am going to link in what we see in the markets to this huge mystery about the level and movement of inflation. that is what i will be looking for. jonathan: lisa, this is been a big task over the past several weeks. lisa: especially without a clear answer to whether or not is transitory and is highly challenged whether they can rise
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in tandem with consumer price. these are broader-based inflationary pressures and i think that will be the most interesting thing to see in the cpi report that comes out soon. jonathan: is the point you are trying to make if it is getting broader, not narrower? lisa: i'm just saying it is broader. i mean, this is the idea, that it is harder to fix something that is multifaceted and coming from many parts of the economy with a one issue button. tom: who says they can fix it? i don't see that in the history books. lisa: that is the issue, it is how quickly can it abat do toe supply-demand pressures concentrated versus a change in the economy? jonathan: this is the most contentious debate in global economics right now, you're going to have it through the morning. down about a quarter of 1%, no drama here. bond market yields are higher for five basis points.
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tom, you keep bringing up the real yield. the real yield is negative further out the curve. tom: there is a big debate on this and i know you are going to go into that friday afternoon if we go into record level as well. this is the nominal yield minus whatever you believe inflation is, and that is the residual or inflation-adjusted yield. jonathan: at least you mentioned crude. 83.67. lisa: we didn't get that announcement yesterday that a lot of people were expecting. a key question of what the trigger will be and also the idea of intentionally supply overwhelming demand even or that people expected based on the u.s.'s own projections come next year. highly contentious, highly uncertain. the big number of the day, u.s. october consumer price index expected to rise 5.9% year-over-year inflation, that would be the fastest ace of
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consumer price rising going back to 1990. when we are getting data done today, initial jobless claims a post-pandemic low expected a people filing for benefits run having a job. we are still seeing negative real wages. how do we dovetail these two into a picture or lack thereof going forward? president biden is trying to sell his bipartisan infrastructure plan in baltimore, talking about how this could potentially affect longer-term supply chain disruptions. this doesn't necessarily address the shorter-term issues considering the fact that he called the ceos of several major
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companies to say what can i do to keep shelves stocked ahead of the holidays so people can get their presents and things like that. jonathan: before you go, i've been excited to get your reaction to the ipo. $11.9 billion ipo, guest of the year so far. $76 billion valuation on that company. lisa:lisa: throwing money at hope. that is what it seems like. it does seem like electric vehicles are the future, but why would this company have any kind of upperhand ford, general motors, let alone tesla in getting supplies, manufacturing, and being able to sell it at a imperative price. jonathan: tom, here is a company that only just started delivering vehicles a couple of months ago. it has a $76 billion valuation. tom: somebody had one of these spac deals which is frankly, not
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appropriate for family tv like this, but it is a silly season. every silly season is different, but they are all the same at the same time. it is this strange word, speculation. they are not investments. jonathan: amazon in the mix as well. are you willing to call this one silly? tom: you know, i don't want to cast dispersion on this. jonathan: i think you just did that. tom: i just think it is a silly thing. what i want to say is we are going to chronicle the story and, john, you go to the heart of the matter, which is you put a $70 billion price tag or value, i should say, on as, lisa correctly says, hope. jonathan: do you think it is part of a broader issue? just because you think we are at a casino does not mean we are in vegas. tom: some of our viewers and
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listeners including our first guest are not in a casino, they are worried about "what am i going to do when i am a fossil?" i am years away from that, but speculation is not investment in that is what we are talking about . jonathan: can we just start with inflation in america? the range of estimates is pretty wide. we are looking for something in and around 5.9. what are you looking for at 8:30 eastern time? >> we think something in that range is probably appropriate and we do think that we will see inflation tapering down as we go through next year. we don't think the fed is too off-base and being a little optimistic about it lesion going down. that is going to limit the amount of inflation we could have. lisa:lisa: at what point do you readjust the feeling that perhaps the inflation we are seeing is something or persistent and will be the new reality going forward, affecting yields and, frankly, affecting
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tech valuations? >> i'm not sure how that can happen. that is what, classically, you think. when you have the fed being very successful in keeping interest rates very near zero, i think they will continue on that course and that is just going to distort the price of all other goods and services. i don't think it is going to a bank high-tech at all because people are still going to look at the growth rates, the margins, and interest rates is really going to be a sidebar issue for a lot of investors because it is all becoming under investable class. tom: if i am investing in retirement, long-term investment, how do i protect myself from timeless speculation? how do you strengthen yourself against the damages of speculation? >> i think you look for real
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companies that have a history of profitability and not buying into something very new and exciting because those are often where you have it back out of bubble --that speculative bub e le. jonathan: do you think there might be a bubble right now in inflation protection? >> i don't really look at inflation protection because i have never found that an effective way to make money. i have either been in parts of the bond market or the equity market. i think the measure of inflation really hasn't been very accurate, so again, i think that would be a grain of salt. i look at real companies. jonathan: provocative question, but after all, the demand, the hunger, the appetite has been absolutely phenomenal this year. lisa: this is part of the reason why a lot of bond strategists
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say we don't understand why yields are this negative on the real basis but it comes down trying to hedge in the same way, creating this distortion in markets. is this an accurate reflection of a longer-term inflation really is, or are we looking at a distortion? jonathan: the bigger risk going into next year, i think it is the biggest risk. for anyone who deeply cares about the labor market, there is a chance that you get unemployment dropping. if we have a three handle on unemployment and we have inflation that remains persistent around current levels, how patient will policymakers be about doing the hard work get the participation right up? will they throw in the towel on the average very early, perhaps prematurely? that is the risk around the labor market going to q1. tom: i think it is too complex to look out with an attempted crystal ball. what i would focus on is if we get 4%, 5%, 6% inflation which
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we haven't seen literally in decades. what does it mean for corporations, american finance? what does it mean for all the things that are listeners and viewers deal with everyday. jonathan: i don't think that is crystal ball-type stuff, tom. it is a scenario that could happen. you could have inflation with employment down to three in the federal reserve preaching patience. will they be able to maintain that if that is the story? lisa: one of the key elements i am looking at, rent. diskeeper rent -- does rent keep going up at the pace that it has? jonathan: the cpi data coming up a little bit later this morning. 8:30 eastern time, that is your main event. in the bond market, yields higher by four or five bases when. bloomberg tv and radio, this is "bloomberg surveillance." >> google has lost its appeal
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for antitrust filing. they should a warning today accused of thwarting smaller shopping services. $11.9 billion in the year's biggest ipo, the sixth-largest of all time. bloomberg has learned that president bynum -- president biden and xi jinping will have a virtual summit. no date has been set but they have quietly improved relations in recent months. still, the u.s. and china have sparred over taiwan and washington is can third about beijing's new their arsenal. in the u.k. will not join an alliance of companies fixing a date to say that oil and gas production area is expected to announce as many as 10-15 new members today.
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the u.k. says it isn't joining because it could cause a cliff edge in energy supply. elon musk is the biggest loser, the world's richest person has lost $50 billion this week after tesla shares plunged for the second day in a row, the biggest today decline in the history of the bloomberg index. he still tops the list to the tune of $280 billion. 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. this is bloomberg.
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♪ biden: this is going to change the mind of every american.
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we've got some help from republicans and in the house and now we need to do it again with my bill back better plan. and i'm confident we're going to get it done. jonathan: the president of the united states on the next effort. from new york city this morning, tom keene, lisa and jonathan. 8:30 eastern time, equity futures at 6:18. we are down by 12 points. yields are high by four basis points. china ppi, 26 year high. dpi in america just around the corner. euro-dollar negative here, one third of 1%.
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crude, down about half of 1%. tom: i do want to take a moment to say e.m. is exceptionally fragile. turkey revisited some real angst this morning. is just one statistic in the blinking red and green and amber. the argentinian peso, 100 to the dollar. reuters has the black market quartered out near 200 pesos per dollar. jonathan: that is an ugly round number. 26 year high. how does that bleed out to the rest of the world? tom: exactly, that is really important. it is not just within china, it has extended out including two at washington. emily, i want to get right to the timeline here. we need to revisit and recalibrate the timeline to a biden-fdr-like program. what is that timeline right now? >> the big holdup right now, the legislation, that social welfare
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tax bill, it is in the house. a lot of democrats say they are supportive of the bill, they want to vote for it. a small number have set holdup, we need the congressional budget office to tell us how much to spend and how much it is going to raise. remember, lawmakers are not in d.c. this week, they will be coming out next week and they are hoping that at week, the week of november 15, the house will be able to vote on the bill sent to the senate. the hope is that this can wrap up before the end of the year. tom: give us an idea on the recalculation, the scope and scale you see. maybe two months ago, we had some retail that was a truly enlarged. on a given statistic right now, is cbo just barely looking out of, or are they looking at a possible total real job and cost? >> that is the big question right now. when we saw the house initially take up the bill, even though
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there were discussions about bringing it down, there were a number of programs that were going to cost a little bit more than that, so there is a large question mark about exactly what the congressional budget office is going to be finding. remember, we did see some scores earlier showing that the bill would be able to raise well beyond the 1.75 trillion dollars needed from the taxes as well as provisions related to drug pricing. there is a chance that these numbers could come out and house democrats would say this looks to go, but that is not necessarily a guarantee of what we are going to see next week. lisa: emily, the bill might have some influence over remedying some long-term supply chain issues. short-term, very much at issue for president biden, certainly with his calls listed ahead of major companies. how much can the u.s. government actually do at this moment to ease some supply chain constraints versus just trying to message that things will get
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better into the holidays and it becomes a campaign issue? >> that is a major question right now for the biden administration. you've seen president biden try to address this via messaging. today, he will be in the port of baltimore, really emphasizing both the infrastructure bill passage as well as for the white house is trying to do to make sure that some of these supply chain blockages don't wind up disrupting christmas, that they can figure out ways to ease a little bit of the inflation while looking at different things when it comes to oil and gas prices. but you are right, these are global issues caused in part by the covid-19 problem. there is really only so much that president biden is going to be able to do. that makes an even more critical that he really be able to focus and message on that infrastructure bill that was just past because that is a clear example of democrats being able to actually get something done and focus on the issues here in the u.s.
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lisa: in a little more than two hours, we are going to get the cpi print. how much does this actually go against any additional stimulus, any additional spending? a lot of people said this has been fueled by all the spending earlier this year and last year. emily: democrats, to a certain extent, don't necessarily agree with that analysis. they look at the midterms and they look on a delivering promises that they feel they made to voters in the past elections. such as expanding health care, helping with childcare, eldercare, addressing climate change. free democrats, they're looking at a much wider playing field than simply inflation. they are also hoping that they will be in a better place at this time next year when elections are rolling around. jonathan: a 6% handle is possible, a six handle on
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inflation. can you help us understand what the messaging will sound like from both sides down in d.c. if that is the data point we get? >> you can expect democrats to probably pivot and continue to talk about the infrastructure bill they are trying to do, but you can expect republicans to hit democrats very hard on this issue. to a certain extent, republicans are reflecting a lot of concerns with americans as they are seeing these prices go up. republicans understand that there is a lot of frustration out there along the average working lass americans and they are really making sure to tap into that showing that continuing -- inflation is continuing to rise. jonathan: the data coming out at 8:30 eastern time. we can have a sensible conversation about the economics and we can deal with the blunt politics of it all. this data point has become a stick to hit the administration. rightly or wrongly, we can talk to economists and many of them will tell you wrongly.
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many of them will tell you that is the issue at the moment for the white house. tom: we got so comfortable and used two disinflation and the threat of deflation and all that, the move here that we have seen from 2% inflation up to a model 6% for whatever reason is so abrupt and such a shock and i agree strongly, lisa, yes. it is a lightning rod and it is political and all that. this is basic stuff. it is about red, it is about top tickets. the serious things in life matter. jonathan: when it came out that morning in the washington post, when i first read it, there was no way that i thought it would end up eating this thing that would grow into something that a lot of people would do to go after the administration with. it is almost weaponizing the cpi print in a political fashion that we haven't seen for a long time.
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i tom: clearly remember when it was fully weaponized. it is not unusual that this is weaponized. jonathan: tom, lise and jonathan on cpi morning in america. trying to make it like payroll, tom. this is bloomberg.
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♪ jonathan: live from new york city this morning, good morning on radio and on tv. this is bloomberg surveillance. we are down 11. on the nasdaq, negative about for tens of 1%. we add to those losses this morning just a little bit after and eight a winning streak, the longest of the year so far replaced by a bit of weakness. pti yesterday, firm overnight. ppi in china, the hot, 26 year high. how does that bleed out to the rest of the world? here is the story for bonds. nominal yields yields higher by war or five basis points. the attention has been unreal yields. let's look at what a real yield,
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erica looks like on that 30 year and it is that drop off recently that gets your attention. -56 and rolling over, touching the lows of the year. tom: for those of you on radio, the chart going back to 2020. it is absolutely original where we are now. you have got to see it in european rates as well. i know this was 20 year, my benchmark the begins to refer. jonathan: we can talk to morgan stanley about this put a question for a lot of people is why it is so far out on the curb, all the way out in the areas now. that move recently got a lot of attention. tom: absolutely, no question about it. this is extremely port in conversation for global wall street.
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far more with academics and real commitment to an understanding of japanese banking and japanese finance. i want to talk about the power reprimand we saw within the press conference and how he and others today are colored by the bank of japan experience a good 50 years ago. the bank of japan tried to be proactive and went down in lames. what does that for powell, brainerd, in modern central banking? >> i think what this means is that the fed isn't going to make any presumptions about how the future turns out. they actually want to see it play out in real time they want to give it time to play out. that is why they set the tapering program up to last about six months, which is the length of time that the fed believes needs to get data that
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will make it more certain about. the future is very uncertain today and i think the mistakes that central banks may have made 20 or 30 years ago is they may have presumed to know what the future looks like. tom: part of this is this dangerous word, asymmetric. let's take the econo babble and bring it over to a 6% inflation rate. what are the asymmetries of action off of a 1970's-like statistic? >> this is a great question because those starting points for policies today is at the most accommodative level that we have ever seen. and the two largest central banks by gdp in the g10, the fed and the ecb, of course, are still using monetary policy. so forget about the fact that
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the level of policy today is most accommodative ever. what that means it's about where we go from here and as long as inflation continues to rise in the labor market in the u.s. continues to improve, the asymmetries more and more toward policy which will become less accommodative in the trip. you talk -- in the future. lisa: you talked about how things are still accommodative. when we feel the taper? will there come a point where we feel the withdrawal of liquidity, or a lack of it in a way that more meeting the effects bond yield? >> when i look at the liquidity picture today, liquidity is coming into the markets ill and making its way around to a wide variety of asset classes. once the liquidity stops to
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flow, we are still going to be left with a low liquidity filled to the brim. it is not as at the water is going to start training. pool is filled to the brim and therefore it becomes much more about sort of a relative value decision. it is not as if it will be immediately obvious that liquidity is no longer being added to the system, because you might still have certain asset prices going up. that is where i think the distinction will be. it is when the fed starts to drain the pool, when the ecb starts to take water out of that pool that has been filled to the brim is when you start to see more obvious signs that liquidity is no longer supporting asset prices. tom: -- lisa: do you think that could happen as early as next year if we continue to get through the inflation -- employment and inflation we have seen? >> i do think it's possible.
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again, you can have a broad set of financial conditions ease, which is what i think the fed and the ecb want to see happen over the next six months, but not every asset price within the constellation of financial conditions needs to ease. equity prices can go up, but real yield can also push back again. tom: help me again with where we are unreal yields in the spread market as well. a new low, low level and negative real yield. do you just presume when it finally gets righted and we go back to normal quickly, or do we sustain here or grind back to some normality? >> i think a lot of this comes down to central-bank communications. this is one of the reasons why powell and the rest of the fed
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leadership-so clear early in their communications with the markets. if you go back to the time when real interest rates reset aggressively higher, maybe 2013, those instances occurred on the back of ultimately central-bank munication mistakes. that is why i think there is so much care being put into communication today. tom: again, i look at the communication here. do you see a difference in communication between chair brainerd and chairman powell? >> oh, tom. tom: he's not watching, let's go. >> i think the communication style coming from fed leadership, including every member of the board, is going to be very consistent independent of who is chairing the board next year.
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i would expect pretty consistent communication from every member of the board. jonathan: is it easiest to guess the data, or gas had they will react to it? >> i think it is easier to guess how they will react to it. quite frankly that is why i spend so much time trying to figure out as central-bank communication and policy maneuvering with adopt the new reality. because that is something that does have some momentum. jonathan: let's build on that. if you have a deeper understanding of the circle reaction function, i am trying to understand what we look like in q1. in q1, if we had unemployment, then we have cpi if the
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participation rate isn't picking up, how do they respond to that? >> i think we will end up seeing there is you will end up seeing the dot plot, which is not a perfect forward guidance device, but you have ultimately the one the market will pay attention to. you will start to see that shift toward height 2022. in september, there was an even split between hiking in at the end of 19 -- 2022 or early 2023. i think you end up seeing those dots drift further into 2022 in that particular scenario. i had a very good speech very recently right talked about the importance of the labor market and his thinking and he flagged the kansas city fed labor market conditions index. he flagged the high correlation between that metric and the unemployment rate. he is very clearly focused on the labor market and it is point
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because to him, at least, the inflation side of the mandate has been met. jonathan: and we've got no idea if he is going to be there for much of next year. thank you, sir. the reason to wait has diminished over the last several months. this is where it gets a bit uncomfortable. even if you believe deeply that inflation paid through next year, when you set things up with the idea that you could happen asian in the fives one and unemployment very low, wage growth pretty nice, and participation isn't picking up, at some point you start to have this conversation with yourself: will it ever? lisa: and what is the consequence if they do wait. in other words, is the symmetry of risks getting much more skewed to inflation running way too hot for them having to take to the gland perhaps being worst to enter a policy era.
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tom: you might bring it right over to the macroeconomics of the moment. you get the scenarios where you laid out there, you get a better nominal gdp and at the minimum, you get another quarter. that is jonathan: good news for the equity markets. doesn't make it harder for the federal reserve to sit things out, to say yes, it is our great ? tom: greenspan one-on-one. -- q0q -- 101. coming up later, it is cpi in america. that is the focus this morning, if you haven't heard.
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this is bloomberg. >> the question of whether bidens tax package will pay for sounds complicated. but the agent has said a better-funded irs could bring $400 billion over the next decade for more corporations like the wealthy but government analysts can't count money that would be spent as increasing revenue. moderates have been asking for analysis. former president trump has failed to block the release of documents sought by the congressional committee investigating the capital riot. a federal judge in washington denied rest to keep the records confidential for injunction. the former president to heal. inflation risks are building up in china, 30.5% from a year ago.
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producer prices in china have been rising rapidly. the biggest purchase ever valued at $8.1 billion. news came as doordash focused on increasing revenue. 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. this is bloomberg.
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♪ >> we are on a downward trend. we are going to keep going on a downward trend. we will not have to wear masks
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forever, but for now, the cdc still recommends appropriately that we wear masks. jonathan: dr. fauci there. for new york city this morning, jonathan ferro, tom keene and lisa abramowicz. yields are higher by four or five basis points. cpi wednesday. cpi in america coming out 8:30 eastern time. here is a stat for you that i was not aware of until i read this block on the white house -- blog on the white house website. over 7 million loaded containers were imported, 18% higher than over the same time in 2018, which had been the previous record. it doesn't get talked about enough. there has been a record volume going through these ports. tom: by comparison, this is a demand surge, there is -- that
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is all there is to it. clearly i am on the side that we should celebrate the demand surge. tom: -- jonathan: it is the mix of the market, leaning away from services. a conversation we have every single morning around this time. tom: it is cpi. jonathan: wednesday cpi, you know it. but that in a promo. tom: the associate professor of emergency medicine at johns hopkins look at the e.m. in our financial space, it is having a tough go. last we talked to you, we talked about some of the global ramifications. let's go over to long island city, new york, where yesterday new york city school shutdown. ps-166. some 900 students, 62 teachers, they are out of it. we will be talking about two other schools under review. i thought we were all clear, we
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are not. >> we are getting there. this has been a great week. hundreds and thousands of children are about to get vaccinated. the least likely to tolerate masks, the youngest. children need two doses and two weeks after that is where you fully are able to say you're immunized. tom: what have you learned in the first few days? vaccines? what is the professional observation you had about this process? >> i've learned more from the clinical trials which have shown there is a side effect profile that is appropriate for this age group. from the last couple of days, we know that cvs, walgreens called hospitals, pediatricians offices
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are ready and excited to be vaccinating i've been seeing a lot of buzz on social media, two. lisa: we are also looking at potential boosters and it is unclear whether the u.s. boosters for the regular population in addition to just those over a certain age and with compromised immune systems. do we have a sense of how much greater someone's immunity is with a booster than just two shots? >> it is complicated by the fact that it depends what your booster is. you could have vaccine a and vaccine b as your booster and the immunity is greater, lasts longer, and is more sustained. it really depends on when that booster is given and which mr. you receive. we do believe that a booster will be effective in providing sustained immunity. lisa: for the focus be on
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rolling out boosters for all adults, or should it be distributing the vaccine, the first initial doses, to the rest of the world or quickly so that we can get the rest of the world up and running in tandem with some of the developed markets? >> i think it is a question about economics and public health ethics. the point of the booster is to prevent hospitalization. another effect is outward transmission. if the goal is to prevent hospitalization, getting vaccines to countries where there is no adequate coverage of vaccination programs and hospitalizations makes a lot of sense. i just don't think the global supply chain works that way. tom: well then, how do we do that?
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how do we actually, as in elites, rich people, affect the process to help, as you say, northern africa? >> i'm really fortunate right now to be on a couple of projects that are supporting vaccine programs and we do that by helping misinformation for vaccine uptake. we advocate to improve global supply chain for vaccines, and then we support pricing of those vaccines so they are affordable to even the poorest countries. and i think is a country, the u.s. has definitely been a leader in this space, and advocating for unit -- advocating for universal coverage of vaccination. jonathan: can you believe we are still talking about this, november 2021? >> i can't. i was going to ask you, can we talk about something else?
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but there is always something to talk about. we still have the same conversations about misinformation. i do think it is coming to an end. jonathan: i hope it is. we will talk about something different next time. thank you very much. news you wanted to talk about, lisa? lisa: when you talk about the global distributional vaccines, we are talking about things that hit home also. and i think of adidas shares lower after they say there were huge disruptions in their vietnamese factories due to covid-19 shutdowns you see a disproportionate effect on the supply chains of retailers depending on where their factories are, how badly they have been affected by the pandemic. i think that is really telling about how disparate the recovery has been. jonathan:jonathan: trying to understand where the supply problems are the likes of nike, adidas.
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whether it is the poor, elsewhere, but if you look at the demand, two aspects to that the deepest story. that is what we want to see. we want to see these factories back at full capacity and the companies still plan to grow at least 8-10% in 2022. that is high single digits, into the double digits. that is pretty decent. tom: adidas has really had a tough go of it. they are up 20.2% per year over the last 10 years. granted, they got some challenges here, but somehow adidas and houma -- jonathan: as a kid we used to call them nike "nyke" tom: i find it charming when you
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say "adeedas." i will call it tomato. let's call the whole thing off. lisa: aluminum cars. aluminum shoes. jonathan: i just don't care. whatever. it is cpi wednesday. this is bloomberg.
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♪ >> there is bigger going on the bond market than just the inflation story. >> there is a good alternative right now, and that alternative is still equities. >> investors don't seem to care. they are hooked on the iv a very low interest rates. >> investors are tired of throwing good money after bad money. >> the fed is your friend during this period. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: it is cpi wednesday. good morning. this is "bloomberg surveillance ," live on tv and radio. alongside tom keene and lisa abramowicz, i'm jonathan ferro. your equity market a little softer, -15 on the s&p, down 0.3%. the data 90 minutes away. tom: equities finally reacting to what we see on fixed income.


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