Thank you for being with us on this simulcast, Bloomberg Radio, Bloomberg Television worldwide. Tremendous news flow wrapped around the details of a worsening pandemic worldwide, and indeed across this nation. Also looking at markets off the faxing news, futures up 10, dow futures up the vaccine news, futures up 10, dow futures up. New low on the vix as well. Looking at the calendar, everybody is recalibrating. Weve got a major house recalibration of the equity markets out moment ago. Jonathan at Credit Suisse, Jonathan Golub, they have a forecast yearend on the s p for the end of 2021 with a 12 upside. The 2021 forecast is designed to answer what the future will look like in the future. He makes the point at the end of this paragraph that the rotation into the cyclicals will largely be behind us, and they stay overweight on tech, also overweight on the financials. That is just a flavor of where Credit Suisse are at this morning. Tom the conversation forward, and i cant say enough on radio and tv, how we will try to set you up in these Tumultuous Times for what the smartest people we talk to our thinking. I want to rush through this because strict because mr. Auths comments on the equity market are so important. What has your attention . Lisa the dissonance between the higher and higher future expectations for asset prices, particularly large cap equities, with what we are seeing for the bond market, which is very slow growth Going Forward and possibly slower even still as the reality continues to worsen in the here and now. How much of a divergence can there be with big tech in the large caps, with some of the Smaller Companies that are still susceptible to the here and now . Tom what is so important here on a wednesday, jon ferro knowing into planning meanings for the real yield on friday. You have been talking all morning about what is not happening with the yield curve. Jonathan if you are longer financials, you need the bond market to come with you. We havent seen this big move in the treasuries the way you might anticipate. We topped out at 97 basis points. Over since then, and for twostens, the difference between the twostens yield curve, rolled up, then flattened. Tom very good. Right now, steve auth with us with decades of experience on global wall street. Thrilled he could be with us this morning. You and i noted that the great Value Investor ted aronson stepped aside over the week. This is somebody who is in responsiblet value investing, and ted aronson has walked away after an esteemed career. What is the value pain out there right now that mr. Aronson and others have felt . Stephen it has just been a very long hole in the last five years for Value Investors. It has really actually been worse than the late 1990s. You have seen a lot of them throw in the towel. When i get back from my board meetings back in august, at the end of august, i asked my guys, where are we now on this value growth thing . Ofwere at 41 outperformance Growth Stocks versus value stocks in that one year. Outside of any kind of statistical variance. Theres a lot of stocks in that pile that are old economy names that maybe are heading the way of the dinosaur, but there are some pretty wellmanaged companies in there that are starting to take advantage of all of these trends in the new economy, and these stocks, i know lisa has set a few times the market is expensive. You can make that case, but there is an awful lot of very cheap stocks in that pile, and we have come through at historic long period of underperformance. All of the arguments for value in the last 12 months has been reversion to the mean, this cant go on, kind of what i just said. But this time around, youve got a cyclical backdrop here that is extremely powerful, almost historical. That is going to give you a tailwind that we think is going to last at least into next year. I hear golub saying beyond 2021, who knows, because we are not throwing up the Growth Stocks just yet. We hold them back to neutral. Way back in september, we did that. Tom i am trying to take the high road here, and there he is throwing golub under the bus. Steve no, jonathan. [laughter] jonathan lets be really clear what hes doing. Cyclical is neutral. That is the positioning for him going into next year. Cyclical is neutral, financials overweight. You keep the tech overweight. That is what he has been suggesting now, keep that overweight with tech. That is where the tailwind has been. That is where it will be. Walk me through what you have been doing. Then we can talk about why you are doing it. What have you been doing over the last month or so . Steve we scaled back our growth. We have been overweight growth for a long time. Back in september, we took it down to neutral. We have been telling our clients we wouldnt go less than neutral there. We are not that far on that point. These are good, longterm growth competitors. The problem with a lot of these stocks is the yearoveryear comparisons next year are going to be very difficult. They were the only game in town this spring and summer, and now there are other games in town. Thoseof the investors in stocks look to yearoveryear earnings that are going to be difficult. On the others had of the coin, youve got more cyclical tilted companies, i would say the financials, the energy companies, the material stocks, the industrials, even within technology, the chips sector, that are coming back to life in an economy that is yearoveryear just exploding. Lisa to the financials point, lets drill down there because jonathan has been mentioning this point all morning. Can you see financials rally without a commensurate steepening in the yield curve . The bond market is still suggesting growth will be very slow for a long time. Can financials still outperform in that environment . Steve first of all, jon is right. You need the yield curve to expand, and it has been doing so. I think it is very hard to make a daytoday comparison, so over the last week, we have had a pullback in this trade, but if you go all the with back to the beginning of september, you can see the yield curve has, even at this level, it is making lower lows, higher highs in my view. It doesnt move in a straight line. It is toppling moving forward as it digests news about is the economy for real or not in this recovery. People are very worried, for good reason, about the next six to eight weeks. It is going to be a tough time. We saw in the rito numbers yesterday. Nearterm markets reacted to that, nearterm treasury markets very liquid, but dollars to doughnuts, if you go out into the spring, the curve is going to be wider still. It will make another new high. We think the 10 year isnt going to explode to the upside on yield, but we are thinking 1. 20 . Jonathan lets talk about a six week time horizon. [laughter] michael i will try to get out my intertech trader my inner tech trader. Jonathan what would you do now between now and the end of the year . What would you do . Michael i would stick with the trade we have on, which is overweight value stocks, overweight the financials well, kind of neutral financials, but pull up your and istock weightings, think into year end. As you know, i dont know. The next six weeks, you could get some dicing us some diciness. Jonathan you think . Tom hes falling off his breakfast chair. I know steve is new in this business, but you cant ask a route question like that. Jonathan i am just saying, it sounds like a trade for the brave. Great to catch up, as always. Tom i dont know what has gotten into him. Uth ofan steve a federated investors, thank you. Lisa what do you do with that . Do you hold more cash . Do you wait . Do you rearrange things . These are questions that a lot of people are looking at. Tom what amazes me within this likeconversation, it looks a pbs telethon behind me. Youve got five interns right now trying to get a hold of golub to get him on the show. Thank you for that donation. Lisa wait, what . [laughter] jonathan lisa, just to explain, my team on my other property work very fast, so when they heard Jonathan Golub of Credit Suisse had a new price target, straight out on the phone. They are making it happen. Lisa are they the ones that also carry you . No, the people that carry him are fully benefited and all that. The people hes got calling our wonderful guests are just interns, paid of course by bloomberg, i should point out. Jonathan keep me out of trouble for just a moment. [laughter] my out is usually lets get to the price action, so lets do that. If you are tuning in worldwide, the good news this morning comes from pfizer. Final analysis of Clinical Trial data showing their vaccine 95 effective. A lift in the equity market, up eight on the s p. Lisa has been beating the drum hard on the last week or so on the bond market. Staye u. S. 10 year, you where you are, tom. [laughter] from london and new york this morning. This is bloomberg. Ritika with the first word news, im ritika gupta. Pfizer says a final analysis of Clinical Trial data showed its Coronavirus Vaccine was 95 effective. That cleared the way for the drugmaker to apply for the press regulatory authorization of the vaccine. Pfizer and its partner biontech say the shots protected people of all ages and deafness cities. President has fired a Homeland Security official who contradicted his unfounded claims about election fraud. He is a former Microsoft Official who the president named to a top cybersecurity job. Night, thelast president said his tweets about elections here eddie were highly and i gripped Election Security were highly inaccurate. Wayne countys election board causing national uproar when republican members block certification. State officials have been asked to conduct an audit of some of the countys precincts in michigan that were crucial to joe bidens victory. U. S. Regulators say the boeing 737 max can safely return to the sky. The plane will resume flight after a 20 month grounding sparked by two fatal crashes. It was ordered to make a series of fixes to its bestselling jetline. 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. Im ritika gupta. This is bloomberg. With the virus now spreading at a fast rate, the next few months may be very challenging. We are going back to a different economy. Jonathan fed chair Jerome Powell weighing in and the last 24 hours. I think lisa used the word sobering earlier this morning, and the word of the central bank is not just the fed, but Christine Lagarde very sobering, not getting carried away with the happy talk around the vaccine. It is real progress, but progress for 2021, not the here and now. Lets get to the price action now as we approach the market open. Pfizer, a 95 i is he right, good news. A 95 efficacy rate, good news. On u. S. Tenyear, yields unchanged at 0. 8537 . In crude, the lift continues, 42 a barrel, up 2 . Tom the 30 year bond to four digits, 1. 5 967 . I will cut to the chase. If you are in a city anywhere in this nation, and indeed worldwide, they are empty. At least, the business parts are empty. After decades, like 60 years or something with pwc, he is with macro trend advisors, and this is the interview of the day on empty real estate in those cities. Mitch, i cant get a straight answer. What is the timeline on commercial real estate failure in the spend of . In this pandemic . If you are talking about cities, lets talk about office space, and then retail. I think that office space, and jon mentioned timing for the vaccine, i thing it is all vaccine dependent. By the latter have to the middle of 2021, i think you will see people back in offices. Every person in Office Management i speak to say it all hinges on a vaccine, so that is the timeline. The challenge is the retail is also dependent on foot traffic, people being in the city and in the offices. Retailers cannot wait any longer, so i think we will see ,ore and more for rent signs with no one picking up the number and culling, so i think retail settings have a very big challenge. Lisa especially because people are going to eventually go back to the office, but perhaps not as much, perhaps not at all in some cases. Bill gates yesterday was saying he expects after the pandemic only 30 excuse me, 30 of office space to just disappear. What longterm effect will that have on the value of office . Mitch i am not totally buying into the notion that people are not going to return to the office because i think if you look at our economy, it is a Service Economy largely done in office environments. Obviously it is a big part of our job growth. They need to communicate persontoperson has been nonexistent for a year now, and i think companies have been suffering for it. It may not be politically correct to say it out loud, but i think Companies Really want their people back in the offices. The other thing that is going to happen is when people start coming back to the office, albeit may be voluntarily, it is going to be a political stigma associated with those people who arent coming back. I think you are going to see people back in the offices, but it is a year from now before we see anything that resembles the way it used to be. But i think you will see people back in the Office Despite what some ceos are saying in public. Jonathan do using residential is in time with that timeline you spelled out for commercial, or it is a layer or is it a little bit newer term . Mitch we will pick on new york, for example. Clearly you have seen vacancy levels we havent seen in a decade and a half. 14 ink manhattan was down the last time i looked. It depends on people coming back to work. When the new crop of college kids graduates this spring and start their jobs, assuming those are in the cities where they were, that they interviewed virtually for, or they are going to be working back in the office, or some days in the office, those kids are going to respect to the cities. The reason is because they got a lot cheaper than they were a year ago or a year before that. I think you are going to see a wave of demand that is going to apartments in cities like new york, but longterm, there was a price reaction, and it is going to take maybe five years to get back to where it was. Tom if theyre going to be a refinancing of commercial real estate . Is it an easy process to restructure a given skyscraper, or is there going to be a value reduction in that skyscraper . Mitch i have been through enough cycles and seen enough bankruptcies. If the revenue isnt there, and there is a need for restructuring, there will be whoever is at the bottom of the Capital Stack who feels the pain, it is likely going to happen if we see rent not being paid. We are seeing that in the retail sector, not necessarily in the Office Sector because even though the space is vacant, they tend to still pay rent. It would really have to be driven by Office Tenants being unable to pay their rents before we would see it. Tom what are the flavors of Real Estate Investment trust is a broad category . How do they favor through all of this . Is it opportunistic, or are they scared stiff . Mitch if we leave out the cannabis ones, which are different from the others, i think the challenge is they are often bought by investors as a fixed income alternative, so they behave like bonds in some respects. But right now, they are all being thrown in the same basket and saying real estate bad. I do think there are some opportunities in that space, especially in warehouses. In retail reads, not the place to be. Some of the ones that were banged up pretty bad but have a great portfolio is tenants underlying it. But i would look at the warehouse ones and the apartment ones because i think they have been oversold. The longterm fundamentals are there and the cash flow is there. Jonathan great sound quality, mitch, with his own radio microphone. [laughter] mitch Everybody Loves my microphone. Yeti. 35, it is the blue it is not blue. Funny story, i sent my son to staples to go get it, and he called me from staples because i told him to get the blue yeti, and he was looking for a colder. [laughter] at least he knew what i yeti was. He wasnt looking for the abominable snowman. But it is awesome. Every sound tech always come womans me on my sound. I strive for always compliment me on my sound. I strive for perfection. Rishel, mitch roschelle, thank you. I might move back into your building, tom. I would move into the floor above you or something. There,mean, in a walk up we are like, seventh floor, so you may want to go up higher. Lisa did you take up tap dancing, too . Jonathan i think it is a good idea. Or drumming. Tom for everybody worldwide who doesnt see it, jon is beloved within the keene manse. Every day, the people are like, wheres jon . Jonathan im loved in that building. I might becoming back to the building. You would like that, wouldnt you . Tom i will say hello to my wife. 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Finaluity rate in the trial coming from pfizer. A bit about performance on the small caps. Lisa has been talking about this through the week, lets talk again.