When we first asked you to do this keynote
the world looked a little bit different.
We had not heard yet who was going
to be the president of the United States,
and we also had not had the announcement
about the vaccine, which has clearly
got markets very excited.
So we're keen to know how you were positioned going into that
- obviously, markets reacted pretty well to both -
and what you think it means long term?
Sure.
So look, I think, you know, this has been one of the few years
in my career, right, I think we've
had pretty good visibility on what was to come
and I think it continues.
I think the next several months will probably be the most
challenging for the virus in terms of...
and I think yesterday's news is actually
bearish for the next few months.
Because I think, if anything, it's going to make people
think of less of a threat.
I think people going to take mask wearing less seriously
and I think it's...
more people will die in the next few months,
unfortunately, than in the previous period.
So I think it is a...
you know, it's to be a depressing, challenging time.
On the other hand, I do think, you know,
the progress of technology and biology
and biochemistry and so on will get us out of the mess.
But I think, you know, the timing is off.
I think we have a vaccine that's come, you know,
very, very quickly.
We've got a, you know, very nice announcement from Pfizer.
I assume we'll see others.
But in terms of a deployable vaccine that is...
creates herd immunity, I think we're... you know,
it's next summer when we can start to feel good and safe.
You know, it's middle...
you know, mid-next year time frame.
So I think the challenge is the next sort
of period just for living.
In terms of markets, you know, I share
the view that I had really in March
is that once we know that we can put the virus behind us, when
you think about the value of a business,
it's the present value of the cash the business generates
over its lifetime.
And usually that, you know, hopefully that's 30,
40, 50 years if you're buying the right kind of business.
And the strong dominant companies have done,
you know, managed through this period generally pretty well
and will come out of it even stronger,
and so I think that's good for markets.
And so we've been positioned basically
to benefit by the market's recovery.
So we're not expecting another like hedge announcement
from you?
Actually, we have put in place...
Oh, good.
just yesterday we put back on a very, an investment grade
credit hedge.
Not of the scale that we had in March, but you know,
at 49 basis points, you know, the market
is saying that the world is incredibly safe, good place,
and everything expected to go right will go right.
And it's just I feel I'm sort of long equities and still
short investment grade credit, and I feel very comfortable
in that position.
So but fair to say that the bet was made because you're
anticipating that there would be global
lockdowns and coronavirus was spreading.
Yes.
Is that same premise for the current hedge that you have on?
Do you anticipate, for example, you know,
England has gone back into lockdown.
Do you anticipate that the US might also
have to go back into lockdown at some point, given the rates
that cases are increasing at?
Yeah.
Look, I think what I'm saying is I hope we don't make...
I hope we lose money on this latest hedge, right?
It will mean that we've managed through the next period
in a very, very effective way that, you know,
the Senate stays Republican controlled.
There isn't... you know, President Trump leaves
the White House in a limousine or helicopter without
an insurrection.
You know, hopefully we get more aggressive about using masks
and social distancing and we stop
the - you know, we're in the middle
of a massive exponential growth in the spread of the virus
right now, which can have - you know, overwhelm
the hospitals throughout the world, let alone
in major American cities.
And you know, we're in a pretty treacherous time generally.
And what's fascinating is the same bet we put on call it
eight months ago is available on the same terms as if there had
never been a fire and the probability that the world is
going to be...
you know, everything's going to be fine.
And I hope that's the case.
And I think there's a reasonably high expectation that
we're going to have a distributable vaccine,
widely distributed by sometime in the first half of next year
that we're going to...
you know, the number of people dying
is going to start declining at some point relatively soon.
Businesses are going to recover, people
are going to go back to their normal lives.
So I think, you know, this is different from the hedge
we put on last March.
We thought it was a near certainty that things
would get really, really ugly.
We put it on in February, actually.
And now, it's just... you know, it still offers the same
asymmetry and for an investor is 100 per cent long equities,
you know, it's a nice insurance policy.
I still buy insurance policies on my house
even though we think the probability of fire is low.
So I think about it that way.