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tv   Bloomberg Surveillance  Bloomberg  September 27, 2021 6:00am-7:00am EDT

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the fed is moving towards the exit. >> the 10 year treasury is where it should be based on where we are headed and has positioned itself behind the curve. >> i would say inflation is running at a serious clip. announcer: this is "bloomberg surveillance." jonathan: from new york city, for our audience worldwide, good morning, good morning. this is "bloomberg surveillance." your equity argot on the s&p -- putting market on the s&p, unchanged. it is a bond the -- it is about the bond markets. tom: it is absolutely fascinating. you mentioned bonds. i will let you talk about this with lisa. look at oil.
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jonathan: on fives, looking at 1%. lisa: this is a question of are we seeing the beginning or is this the end in terms of a response to a global withdraw of pandemic era stimulus. how much will this continue, with five-year notes in particular? jonathan: we have to talk about the german election. the euro weaker by .2%, a break at 117. here is the quote, europe needs a huge rebalancing between fiscal and monetary policy before the euro has any chance of moving sustainably above 122 and a broad-based coalition is unlikely to deliver it. tom: it is absolutely amazing. to the idea, these are markets recalibrating and some of it is
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the politics of germany, but it is the real yield market where you look at the litmus paper of the negative yields. it is not a breakout but a lesser negative yield pressure. jonathan: how this will any tightening be? tom: i would look at the belly of the curve as we did this weekend. i would suggest this is a way more interesting market monday. after what i went through yesterday, you are lucky i am here or unlucky i am here. my message is the markets are really interesting right now. jonathan: let's get to the markets. your equity market looks like this on the s&p 500. jurors unchanged, a bit softer. my attention drawn to the bond market. yields higher by three or four
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basis points. five years of gains for the 10 year treasury. it was all about last week. crude, five weeks of gains for crude. 74 .90, up by more than 1.2%. lisa: there is a sense that this could continue with the gas shortages that will bleed into other areas and a self-imposed energy crisis percolating in china. we get lots of fed speak and perhaps it can clarify if the tightening. we are going to get words from the new york fed president. i am curious to see how he dovetails the pressure in the supply 10 with fed policy considering the fact they have no effect on this particular aspect of inflation.
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i am watching this. tom i know doesn't care about treasury actions. this one is important. this happens as five year yield climbed to some of the highest levels since 2020. this matters. today, the policy uncertainty, house speaker nancy pelosi said she plans to bring the $550 billion i partisan infrastructure bill to the floor with the expectation -- $550 billion bipartisan if the structure bill to the floor. it is about the other $3.5 trillion plan which has a lot of controversy. jonathan: in 15 minutes, we will catch up with annmarie hordern. yields on a 10 year, right now, 149 on a 10 year, up four basis points and approaching 150 paid the perfect guest to start this week's coverage, jim caron.
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what are we doing near 150? jim: good morning. there are a couple things going on. one of the reasons why yields were so low was because the treasury general account had been drawn down. that is technical speak for saying there wasn't a lot of net issuance of treasury over the last couple of months. today, all of that is starting to change. a lot of things are changing leading to higher yields. we will start to get net positive supplies, more positive net supply coming to the markets. that and the fact that we are getting closer to a deal on the deficit. then the question becomes, -- i'm sorry a deal on the infrastructure bill and then the question becomes will it be deficit financed. that is another argument for
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higher debt into the future. the third point is tapering. the fed has announced aggressively at the fomc that by december they will probably start tapering. all of the factors that were keeping yields lower in the second quarter and part of the third quarter are starting to run in reverse and you are seeing yields moving higher, not to mention energy prices moving up and covid cases are on the decline. we can be setting ourselves up for a much stronger, much waited for fourth porter. all of this is pushing treasury yields higher. tom: when you are on the gulfstream flying at 32,000 feet looking at the yield markets, what is the 10 year yield where you signal shift or trip points ? jim: think we are past that.
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i think it is around 140. the fact that we are back above 140 is telling us the correction lower in yields is over with. we have to think about yields progressing back toward the march 31 highs come around 175, even up to 1.8%, and it's even possible you could pass to percent by the end of this year, beginning of next year. it will be hard to get above 2% and stay there, that is the trajectory we are on and the fact that many people have squared up most of their positions, i would say the market is not overly short and technicals suggesting you could get a push higher. i think we have tripped that switch and that we are in the mode to getting towards higher yield and all the supply coming. lisa: you talked a lot higher oil prices and supply chain disruptions. are these events inflationary or disinflationary? jim: it is a great point.
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this is inflationary. what we are going to see our rolling supply shortages. so one day it might be one thing and another day it could be natural gas and then another day it could be oil. you are going to see this on a rolling asis going forward as the supply chains get readjusted. and when the price gets too high, demand will fall and the asset price comes down. i think this is getting embedded importantly into the psychology of consumers that prices are going to stay perpetually high. that doesn't mean we have runaway inflation. it just means it will be harder to get below 2% inflation. people say the fed was hawkish. the median was at 1.75 for the fed funds rate. but inflation is supposed to be
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between two and 2.5% or is expected to be between 2% and 2.5%, which means the rate will be -20 52 -50 basis points. -- be -25 to 25 basis points. jonathan: explain why it is difficult to get above -- will be -25 to -50 basis points. jonathan: explain what it is difficult to get above to. jim: there is an interest rate differentials and it will come back down to the dollar and dollar appreciation. in the near term you can see dollar appreciation that would keep investors interested in the u.s. market.
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i am a long-term dollar bear. eventually the deficits will catch up and that will push it lower. foreign investors will require higher yields to entice foreign investors to come in and buy u.s. treasuries. jonathan: think you as always and have a good week jim caron -- week. here is a call from morgan stanley, amazon price target cuts from 4100 4300. the reason for the price -- 4100 to 4300. the reason for the price is higher wages for the online retailer. that could be the discussion we have through earnings season. tom: what will be interesting is they may have revenue from
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company to company to company but are overwhelmed by the costs we are feeling. dollar-yen with four days through, the rate of change we are are a scene and of these. -- the rate of change we are seeing in these. jonathan: bond market 149. that is what he wants. that might be the objective. tom: it look like us on friday. we were sleepwalking. jonathan: you were sleepwalking friday. lisa and i were at work. big week ahead. this is bloomberg. ♪ ritika: angela merkel
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conservative party defeated in a tight election. the spd 126% of the vote. christian democrats got 24% -- the spd won with 26 percent of the vote. christian democrats got 24%. the president's packages set to be lower than the 3.5 trillion dollars. a showdown for the economic agenda. the head of the cdc warns that part of the u.s. health system is in dire straits because the spread of the covid delta variant. it is forcing hospitals to begin to prioritize treatment.
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a supply chain crisis. some gasoline stations because of panic buying. questions and has allowed companies to get supplies. he has relaxed travel restrictions. global news 24 hours a day, online and at quicktake on bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. ♪
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>> let me just say we are going to pass the bill this week.
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i promised we would bring the bill to the floor, according to the language of those who wanted before tomorrow. we will bring the bill to the floor tomorrow for consideration. i'm never bringing a bill to the flow that doesn't have the votes. jonathan: speaker pelosi on the bill this week. the equity market up .4%. the nasdaq down. the bond market, high at the session 149.58. a big turnaround from where we were. into the fx market, break. down .2%. the german election inconclusive.
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this could take months to work out for the leadership and what the coalition looks like. tom: the definition of the left will define what we saw with a decade of angela merkel. in washington, many of you following and it comes down to it is time to play hardball like the st. louis cardinals or the new york yankees. wearing pinstripes on radio, annmarie hordern joins us in a celebration of her yankees. speaker pelosi has to go out and pay -- play hardball what did she give the liberals to get them to vote for the packages? annmarie: what she needs to do and the leadership needs to move further along on reconciliation so the progressives can go into the bipartisan infrastructure vote and vote yes.
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we heard from the chair of the caucus saying the speaker knows she doesn't have the votes. the vote was supposed to be today on bipartisan infrastructure. they said they are happy to start the debate but this really is a fast timetable for them to have the vote. tom: i don't understand what she gives up to get liberals/progressives to vote to save moderate democratic party. what do she give up? annmarie: they just don't want to lose their leverage, which means the reconciliation process has to be fast-forward and they have to be in a place where there is acknowledgment that they agree on what is going into the reconciliation package. we are waiting on the details, including salt deductions and the cap and the top line figure.
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she said in the interview with abc that it is known that it is not going to be $3.5 trillion. what is the top line figure? that is what the negotiations will be about. we know it is very strategic of her to hold a vote on thursday. this is where transportation funding expires. this is when the next morning at 12:01 a.m. friday morning, the government technically shuts down. it would put the progressives and a hard place to vote no. lisa: how high are the stakes for democrats? annmarie: they are incredibly high as you have a ton of in voting in the party -- you have a ton of infighting and the party to get the vote done. the democrats know this is their moment. unlike what many people like to think about them, they will not potentially squander it and they don't want to come back in the
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midterms and say we have a chance to do something that we campaigned on in the last election and we didn't do it. there is a sense that they will not squander this moment, but it is going to be difficult. lisa: we have nancy pelosi saying it is self-evident it will not be $3.5 trillion. do we have a sense of what it will be? lisa: we don't yet in terms of black-and-white. we have heard from moderate democrats signaling they would be more comfortable with something around to $20. president biden when he -- something around $2 trillion. president biden when he is folks -- when he spoke was asking what they would be comfortable with. we know that senator schumer, janet yellen, nancy pelosi had a
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meeting and got to the "framework" of what the taxes are going to be but we do not know the details. tom: so we get to thursday, then what? annmarie: get to thursday, we have this vote on bipartisan infrastructure. but for that vote to go through, they need to be in a very good place in regards to reconciliation. the other thing to remember is we need to stop gap funding measure to go through because the government runs out of cash. the senate will be voting on that that is linked with the debt ceiling. amongst all this debate and negotiations to move the president's economic agenda, congress needs to keep the government funded pest september 30 and avoid a technical default. tom: are these late-night
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discussions? have we devolved to greece where we will be here at 3:00 a.m. q mark -- rick locke and? -- here at 3:00 a.m.? lisa: the house budget committee -- annmarie: the house budget committee met this weekend and it is rare. i wouldn't be surprised if things went late into the evening. jonathan: thank you. i brought this up with investor after investor. i am really struggling to get anybody interested in it. they are shrugging their shoulders saying this will get done. tom: i agree with that. 80 it is a new form of gridlock, whatever you want to call it. it is off the radar for most -- maybe it is a new form of
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gridlock, whatever you want to call it. where is the 10 year yield and jim caron says we are here. lisa: people don't care as long as the taxes and corporations don't go high enough to put a bite into equity valuations. that seems to be people's' main concern -- peoples'main concern. jonathan: i think they don't care about the debt ceiling debate. lisa: i hate discussing this and i find it irritating. but she said we have to care because the u.s. government has never actually defaulted and they very well could fault this time around. i said do i have to care? and she said i had to. jonathan: i don't think anyone in the bond market is inking that way.
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yields are high. equity markets slightly positive. secretary allen and chairman powell testifying on capitol hill tomorrow. from new york city, this is "bloomberg surveillance." ♪
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jonathan: three days of gains for the s&p 500. what a week we had last week. finished in positive territory, something i have been asking, an example of a complacent market or a resilient one. equity features by up .1%. the nasdaq the other way. down 46. is this because of the bond market? pushing 1% on fives. the belly of the curve. we need to be asking a very simple question -- if we get a tightening cycle at some point starting next year, how loose will that tightening cycle be?
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that is the bond market. to the euro-dollar, the german election in a paragraph, inconclusive. a break at 117. we need to go from monetary policy to fiscal and germany you need a conclusive swing to the left paid we did not get that. because we did not get that, the euro-dollar and the euro has the blues. tom: the recent bond dynamics very different from the fed and central-bank watching and has more to do with the sum of all the parts september and october. maria tadeo on the watch in berlin joins us right now. maria, what happens today in terms of forming coalitions? maria: the result was very tight and we are going to see both parties moving quickly to form a
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coalition. both of them say they have a mandate and they want to keep the momentum going. this is going to be a long negotiation, perhaps into next year. there was the impression that this was a messy election. with that, you have to almost take a step back and look at what is happening. you have two very simple parties that are pro-european but have a common agenda and any transition will always be difficult, especially after 16 years of angela merkel. we see the risk of the left-wing coalition will manifest and when you look at the details, both and spd and cdu coalition would not lead to a lot of change in the country. lisa: the messiness and lack of coalition was said to lead to a stalling out of fiscal spending
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plans that had been proposed. do you think that is true, or is there more impetus to push food spending? maria -- to push through spending? maria: they argue clearly that they want to modernize the country and that will cost money. when you look at the liberal democrats, they said we are not caught up but want to see the money being used. we will have to see compromise across the board and we will not see major spending happening in germany. this is a country very traditional in its thinking. germany very centered, sticking with what it knows. it has gone for two centrist parties that have similar politics. when it comes to europe, we are probably not going to see a lot of change from what we have seen. no one promising a big break
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with it -- with major spending. jonathan: maria tadeo there in berlin. the euro-dollar south of 117. a basic question for investors outside of germany looking in. will we see mark spending? is that going to be a change but the answer is probably not. tom: from the outside looking in, getting back to where the bond market, turmoil as may be from central-bank analysis and more to a berlin or washington political moment. that doesn't speak to the chaos in london over energy and shipping. scott brown our chief economist is with us. have you adjusted your gdp view for this q3, the next few for,
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or into 2022? scott: not really. we have two big issues, one is getting an actual budget. it is easy enough to do with continuing resolution. even if we get a shut down, it is been there, done that. the bigger concern is the debt ceiling. that has to be raised. then you start to flirt with default. we have then there before and 2011. -- before in 2011. in terms of the outlook on the economy, there may be short-term disruptions. the infrastructure spending will be spread out over many years. it may be a few tenths of a percent of gdp in the next couple of years. the social stuff is childcare issues, childhood education.
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those are very important and they will increase the labor supply over the next decade if those get enacted and that would help the economy grow. tom: speaking of labor supply, fedex talked about wages. morgan stanley with a markdown with overweight on amazon because of wages. do you subscribe to wage inflation and dare i say the real wage increase? scott: i think that is likely. you are seeing higher wage increases but a lot of it is getting enough by inflation. theoretically, if you have a lot of wage pressure you will get reallocations of labor to its highest and best use. that could lead to productivity growth in the u.s., but it is a very transformative process. we are seeing huge differences between where the jobs are and where the unemployed workers
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are, mismanagement of skills and so on. it is going to be a rough transition. jonathan: we have seen the labor issues appear in the u.k. in a massive way. i want to build on the power issues. some reports out of asia said some facilities have stopped production due to a power crunch. looking at the cost in demand, production, output. scott: it is not just production, it is consumption. we hear people complaining about higher natural gas prices in the u.s., but if you look at europe, they are paying substantially higher, asia the same thing. energy is a big factor in production costs. not only will these things take care of themselves, you will get increased production.
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we are seeing a lot of supply constraints and these will stay with us for a while. we are surprised they have lasted this long and have been as strong as they are. it looks like it will continue into next year. it does add concern for inflation. we would like to see efforts made to reduce these pressures going forward. jonathan: what do those efforts look like? scott: you want to encourage supply and find out where the bottlenecks are and ease that. there are manpower shortages. we were getting reports from manufacturing and construction before the pandemic they were having difficulty finding skilled workers. these autumns are going to be more intense, because -- these problems are going to be more intense, because the pandemic is still going on. lisa: how concerned are you about the supply chain problems
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and slowing growth? we downgraded expectations for china as a result of the power crunch that seems to be escalating. how much is disinflationary? scott: a big issue where industries reporting they were increasing output and didn't have the capacity, whether it was workers or whatever. that will not put downward pressure on inflation. in fact, it will add to inflation pressure in the near term. the logistical issues, supply chain issues, again, a key story over the next several months. ultimately, they are likely to be resolved. one of the big issues is during the pandemic we had a shift from consumer services to goods, where people couldn't spend money on services. the demand for goods is extraordinary high and
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long-lasting. we have seen a drop in motor vehicle purchases, but that is a production issue because of the semiconductors. looking at retail sales and the previous pre-pandemic trend, we are 12% above where we were from the previous trend. these are some long-lasting changes into what people by. if they are buying more goods, getting the supply chain adjusted to that and then throw the pandemic on top of that, these are going to be significant issues. we are looking for a new normal but we will not be sure what that will be. jonathan: scott brown, raymond james chief economist. the full-service sector recovery delayed, not derailed. that is the consensus of most who come on the program. lisa: richard scheer months ago said if the jobs are not filled for long enough, how long do we see them disappear?
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i wonder about that as people tried to get things automated and perhaps close down completely as a result of not having enough workers. tom: scott brown, there is always good but he was brilliant. the recovery in certain subsets of the american economy to the level before the pandemic or exceeding the pandemic is incredible. to say we are 12% shows the rebound we have had with all of the stimulus. jonathan: for goods, but not services. some numbers remarkable. good morning. getting your week started with equity futures due in. nasdaq 100, futures down about what 3%. 10 year approaching 150. on radio and tv, this is bloomberg. ♪ jonathan: and -- ritika: in
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germany, there may be a well to determine the election. both parties say they plan to have the next government as they discuss the next steps. china will take steps to curb the expansion of capital our priorities, online health care and delivery as areas of concern. economists warning of slow growth in china because of shortages. a lower fourth-quarter output. power shortages forcing chinese businesses to cut back on production. a big decline amongst 29 nations
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in a study of pandemic deaths. death from men contribute it the most in the u.s. tesla shareholders urging rejection of two members regarding the compensation to executive offices and nonexecutive directors. global news 24 hours a day, online and at quicktake on bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. ♪
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>> the critical thing to get the pandemic under control is to get
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unvaccinated people vaccinated people boosters -- vaccinated. boosters and the discussion is taking away from the critical point of controlling the pandemic on the witches unvaccinated people. jonathan: from the bloomberg school of public health. from new york city this morning, the morning. alongside tom keene and lisa abramowicz. bond market approaching 150 on tens. yields higher by four basis points. you could go to the euro, negative or the commodity market pushing 75. it is five weeks of gains. up 1.16%. tom: i look at brent moving higher than wti.
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jonathan: triple digit crude by next summer it was being talked about. here we are at 75. tom: on the pandemic with the death count above 2000, just was sharfstein -- sharfstein joins us. a 96% of schools restarting. but on the debate of a mask, where do we stand? >> there is more and more data of kids wearing masks in schools prevent the spread of covid. the cdc studied in arizona the
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districts that have mask mandates and those who didn't, there were more outbreaks. i think there are ways to safely open schools to reduce the risk of outbreaks, and it makes sense to take them. they don't have to be continued forever, but right now where there is a fair amount of transmission in the community, it is appropriate to protect kids has you are moving forward with school. tom: does the end of september and october it look like for the five to 11-year-olds. joshua: pfizer says they have the data to support emergency authorization for five to 11-year-olds. they will present it to the fda and they will give the agency view of whether it is strong enough. if that all works out, it is
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quite possible that in october we will see emergency youth -- use authorization. at that time, a few thousand younger kids will have had the vaccine. it is not a discussion for immediate mandates. it will be parents eager to get the vaccine will get it and there will be more experience guiding the country. lisa: a lot of people hope that october is realistic. oxford university put out a study show that american men lost 2.2 years of life as a result of covid. is that due to comorbidities or a health care response that was insufficient? joshua: i would say it is probably neither of those two. i think we had such a severe covid problem in this country because we were unable to prevent cases. our health care response, everybody did everything they possibly could, when there are so many cases of the disease
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that can be fatal, people are going to die. the key would have been to prevent cases and be more effective with testing and contact tracing and vaccination. if we can't do that, we are going to have a lot of deaths no matter how many hospitals and icus we have. in that 2.2 years, eight tremendous racial disparity which we have to understand that are because our systems, including public health systems, failed to prevent a profound problem with equity. lisa: how much of this is in the rearview mirror or how much are we seeing the same crisis unfold in pockets in the united states where the health system is becoming strained as a result of the load of cases? joshua: it is horrible what is happening. you can follow what is going on in idaho with the extra morgues that they need. i do think it will get better. the modelers at john's hopkins
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are saying they're just getting swept through with the delta very to because they have low vaccination rates, that will pass get past in india -- passed in india. we will be in a better position assuming we don't have more variance,. i do think -- variants come. i do not think we are stuck but the more people get vaccinated, we will be in a better place. tom: how does a viral pandemic stop? how did they end in venice in the 15th century or america in the 21st century? joshua: there is a theory that one of the pandemics in the 19th century was caused by a coronavirus that it is not just one of the common cold viruses, and basically humans and the
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virus learned to live together. that happened maybe over a fairly long period of time. for us, we are going to build up immunity through vaccines and having been infected and we are just going to see that covid becomes less and less of an urgent concern. jonathan: four you go, a lot of people watching and listening -- before you go, a lot of people listening and watching the program don't know if they are eligible for a booster or can you say is available for a booster in the united states of america? joshua: people over 65, people who are 50 and over with conditions that predispose them to severe covid, and people with potential occupational risk. people can talk to their doctors if they have any question about it.
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the booster shots are likely to reduce the chance of a mild to infection, but the good news is, people who have gotten fully vaccinated are maintaining a very high degree of protection against hospitalization and death. you can walk to get your booster shot even if you ran to get your first shot. the first and second shots are incredibly important. jonathan: thanks for the clarification. i have to say, a ton of confusion around that last week. noticed how joshua said to fully vaccinated. i wonder if that fully vaccinated will include a booster shot going into the year. that is up for debate. tom: the booster she's to hurt more and that is what i remember. lisa will go and hold my hand. jonathan: what is it like to
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have seen so many centuries that you forget a century? lisa: i like it. jonathan: from new york, good morning to you all. equities unchanged. this is bloomberg. ♪
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>> the great exit from these emergency policy settings has begun. tiziana -- >> the fed is moving toward exit. >> the 10 year treasury is right about where it should be based on where we are headed. >> already positioned behind the curve. >> i would say inflation is running up at a pretty furious clip. >> this is bloomberg surveillance. jonathan: the bond market making some noise. from york city to our audience worldwide, this is bloomberg surveillance live on tv and radio. i am jonathan ferro. your equity markets down a 10th on the s&p. your bond market yields approaching 150. tom:

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