guy: thursday the 25th of february, 3:00 p.m. in london. 30 minutes in the united -- 30 minutes into a base -- a busy trading day in the united states. welcome to "bloomberg markets." some big events taking place. here in europe we are monitoring a virtual hearing being held by the european parliament on covid-19 vaccinations. the ceos of astrazeneca, moderna, pfizer, and cornavax. alix: it is interesting to see what astrazeneca has to say as vaccination shots are not getting out because people are scared to take them. in the u.s., this encompasses the frothy, the game stop -- stock theme in the market. on the flipside you have

gamestop up 30%. bitcoin up by 4%. we have a bitcoin consummate that we will be -- summit we will be bringing to you. all of that adding to the bitcoin optimism. dig into what is happening in the market and it is a tremendous rise that we are seeing. markets are relatively calm, but financials are at a record up .6% and it really is reflation. you get more business and you are making money more off of the loans because of the steeper yield court -- steeper year -- yield curve. guy: broadly, the data that we have been watching has been out of the united states stronger than anticipated. without getting a weakness coming through, it is a certain extent expected, although it is not surveyed in terms of the economists we have talked to. the housing market has been red-hot.

a huge spike up and then starting to fade. pending home sales down to -- 2.8%. the prior number actually revised higher taking the nonseasonally adjusted year on year number to 8.2%, which is a slowdown from the 22.8 that we had last month. after such a huge pickup, we were going to get a fade and we are starting to see evidence. alix: i feel like i did my part. guy: but, what is it. what is interesting is the kind of locked-in rates are nowhere near the lows. mortgage rates has risen dramatically and i wonder if that will show up. alix: i locked-in two point -- 2.7 five last november. you can talk about convexity hedging. we will look at that too. jobless claims falling more than expected, the lowest since november.

mike mckee is here with more. walk us through the numbers. mike: there is another piece of data which is the weekly mortgage rate from fannie may, it is the highest since august at 2.97 for a 30 year fixed average, and that is the have various -- hat -- the highest since august. i am just watching this moment smile, she is so happy. she got hers locked-in. jobless claims is a weird number. it falls by 111,000 730,000 last week from a revised 841,000, but, and this is a huge but, we had the presidents' day holiday, and then the midwest south under ice so people could not get out and file. even if these numbers are inaccurate, we are still above where the highest was in the great financial crisis, 665,000.

is it a real number or is it weather effects. california and ohio had the biggest drops and were not in the weather patterngh they were affected by prts' day. you can see the impact of the states in the mid southern area where we saw a lot of ice and snow. the other number that caught everybody's attention, durable goods orders. they were up 3.4%, but how much of that is real? we are looking at an increase of 389.9% in aircraft orders, which could reflect the return of the 737 for boring -- for boeing. transport at 1.4% and capital goods is up .5%. that is the one that goes into gdp. looking forward it is a little bit weaker. shipments were up big, but 21% increased and aircraft should -- increase in aircraft shipments

so you have to take that out. guy: it makes sense because we all the pictures of the maxes park nose to tail. and now, they are back. this is a different airplane to that one. it has been cleared for service again and they are clearing a lot, so there buying and shifting a lot of 737's. that is the 777 with the broken engine. let us get back to the markets. yields are shooting higher and let us get a reaction with abigail doolittle. abigail: that is the story. if you look at stocks you do not have much happening for the nasdaq 100. the nasdaq 100 down .4%. relative to all the moves, that feels. the bloomberg commodity index is at six point -- .6%. that is the down asset trade under a little as oil comes

under pressure. the real story is the 10 year yield backing up eight basis points around 1.45%. really incredible. that has been causing all sorts of jitters, even though it is for the right reasons. we do have the nasdaq 100 down seven out of the last eight days, and the high-growth momentum stocks come under pressure because higher rates because that repricing of risk and questions evaluation. there is the big slide for the nasdaq 100 down nearly 5% over the last eight days, flirting with a 50 day moving average suggesting more weaknesses to come. if we'll -- if we look at yields at the bigger picture, the two year yield is amazing, backing up four basis points. the 10 year yield up 50 basis points, the most since 2014. this matching that 2013 back. at that point it was the tantrum relative to the fed. the fed saying that they are all

in an market suggesting that they do not have as much confidence but the spread absolutely up 50 basis points and really explaining why tech is under pressure with energy and the bank, those are climbing. alix: abigail doolittle. in joining us is nathan, fixed economist and head of global macroeconomic research and treasury undersecretary for national affairs. always wonderful to see you. abigail pointed out a pretty severe moving yields. when do we see the disaster shakeout in the markets that everyone is anticipating? nathan: well, today that has been more i think reflation. we have been going up in the yields more or less in sync. this is what jay powell told us yesterday with an improving macroeconomic outcome -- outlook. we are expecting stronger growth

and some higher inflation. as long as the rate rise is moving in tandem with those underlying fundamentals, i think that the broader economy and the market should be able to absorb it. it means we will have faster growth and more profits, and stronger balance sheets in line with the stronger incontact economy. guy: good morning. when do you think the two year is going to move then? nathan: this is the other side of what the fed is doing. it is on the one hand the fed says to watch for reflation, but it is also saying that it is willing to hold short-term rates and -- until we are well into that reflationary cycle. when i talk about this, it is not only reflationary in terms of market expectations, the fed

wants inflation to overshoot. and i think that the markets by taking his commitment is incredible. and, markets are not expecting any rate rises over the next couple of years. so, all of this has been loaded into the back end of the curve. alix: it feels like there are technical reasons. we are one day from the end of february. the supplemental leverage ratio questions not come back, and if it does you will see selling from banks and convexity hedging when you stand near duration. how much credence do you play into all of those things. quants are being blamed. nathan: my sense is that those market microstructure -- mitral -- micro structure technical factors are on a day-to-day or week to week basis. when we look at the broad sweep of rates they really starts to

accelerate upward after the georgia runoff. and, what the markets were responding to there is underlying macro fundamentals. that is specifically a burst in expectation of a much larger stimulus. and, secondly the ongoing progress and apparent success of this vaccination campaign, and both of those are real fundamentals that are likely to drive growth. we have to be aware of those technical factors, but over time, i think this move has been largely explained by what is happening in the economy, and specifically what people expect. it is about expectations for economic performance. guy: how much time are you spending watching the data coming out from around the world in terms of the vaccination

news. we will talk about this later on. the data in terms of israel is absolutely respond -- astounding. the data out of scotland, absolutely positive. there are a number of different vaccinations. it has to be -- how much, you spending on that and how big a factor is it behind what we are seeing? nathan: we are following it as data very closely, and at the end of the day if you have to ask what is the number one determinant of where the economy will be, the global economy will be in six to 12 months, i think it is the success of the global vaccination campaign. and when i look at it as a u.s. citizen, i am very interested in how those vaccinations are going in the united states, but in addition, i think we have learned that as long as the coronavirus is present in -- and

multiplying in other parts of the world, we are all vulnerable to various mutations and so forth. that vaccination campaign is critical for global growth, and critical for every jurisdiction, and all jurisdictions must be successful in defeating it. alix: having the trade be that in the u.s., we might handle it because our growth could be huge. europe is different in terms of inflation and growth. they had some intervention from christine lagarde seemingly trying some verbal intervention to talk down a move in yields in europe, specifically the btp's and greek debt. are they going to have to start get in there -- getting in there and buying for real? nathan: the situation in europe is different than in the united states. at a minimum, i think christine

lagarde and her colleagues are hoping that this run-up in the united states, which is not to the quite the same -- same extent of the euro area, takes the heat off of the euro. the last thing that they need in this environment is a strengthening euro. where you end up, financial convictions what have been where they were and the weights are somewhat higher and the currencies are weaker than before. but, the ecb is a difficult place. that economy is softer than in the united states, and the difference in terms of inflation performance is even more profound. it does not surprise me that christine lagarde has been being more vocal about the rate hikes -- rate hikes then german powell. guy: i want to see -- turns the

u.k.. we have seen a huge selloff generated back to the vaccine story we were talking about a moment ago. do you think they are a buy at this stage? do you think some of these moves are running out of steam. nathan: the fundamentals there i think are a little bit more circuit -- certainty in a brexit deal and how all of the implications will play out which are in open issue. you also has -- have a very successful vaccination campaign ongoing. and i think that that has contributed to the rising rates. but what i look -- when i look at this move in rates in the u.k. or the u.s. treasury market, it is pretty clear we are at a place where the fundamentals are likely to continue to drive strong economic performance, and it would not surprise me at the end of six weeks that global rates

are higher than they are today. but, i also expect that over time this will be an exquisite round-trip where over the median term, the local economy wants to get on the other side of this boom in return. and the economy will feel like it did pre-pandemic, low rates and low inflation with moderate growth. guy: always great to catch up. nathan sheets of pgi and fixed income. i want to kind of direct you to a live shot of the bloomberg future of cryptocurrency summit. silver lake co-founder is speaking currently to eric. the headlines being made there. later we will bring you a panel with arc investor management kathy woods. you can follow the summit online . we will get some headlines out of glenn. we have in brussels a virtual

hearing being held by the european parliament. ceos of another -- on a number of lot -- of pharmaceutical companies discussing how to increase the protect -- capacity of vaccine production and improve delivery. we have novavax, j&j, and pfizer's ceo. she is commissioner -- is a commissioner and she has been in charge of this process. let us take a little listen as to what is being said. >> and cooperation across the e.u. between industry and the member states. we are determined to strengthen even further are cooperation between the commission and european parliament, which is why we have proposed to have a group that will be coordinated by the vice president. and this will allow the commission in the parliament to discuss the most pressing issues and work together in finding solutions.

we are all facing an unprecedented public health crisis, a global pandemic, and the only way we will get out of it is by working closely together. so, i look forward to hearing your insights. >> thank you very much. thank you very much commissioner. we directly move to the first panel, the ceo panel and we start with astrazeneca for six minutes. >> thank you for giving me the floor. thank you so much for the opportunity to discuss how we can work together to tackle this pandemic. we employ about 20,000 citizens

a year and we manufacture across 12 nations. we are proud and sweden is one of part of our research centers. we have 2.7 million dollars in research every year in europe. today i would like to make three points, first of all to outline our pledge with the access to up to $3 billion of our vaccine. second, to give some insight into the complexities of the vaccine, and ways that we can further accelerate production in the manufacturing. we will also deliver the product in the spring about the levels of the vaccine and we shared this to provide access to the vaccine during the pandemic. on the global scale for partnerships and organizations.

something like this and this magnitude and complexity took six months to collect samples and get the vaccine. we have 20 factories in over 50 countries cover the entire world. we have a vaccine that is safe and effective and we are supplying 100 million doses which will increase to 200 million doses. as you know, there are almost 8 billion people in the world and the needs are enormous. there is really good evidence from this week that shows that the vaccine is able to substantially reduce the rates of covid-19 by 94%. that is after the first dose. the vaccine presents against syria's covid-19 outcomes.

much like the permission, we recognize the need for this verbally. the covax allows for our global access strategy and it will be provided for access through the half of -- the first half of 2021. along with our partners, we supply over 300 million dozers for covax. the first statement that shipment started this week with the first landing in africa yesterday, actually in ghana. which brings me onto europe. like you, i am disappointed that lower-than-expected outcomes in of the supply chain have affected us. i want to assure you that we are ramping up production and doing everything that we can to get 40 million doses in the first quarter of 2021.

enabling the vaccination of over 10% of the e.u. population. it is somehow strange to go knowing literally nothing to having a safe vaccine and sending it to countries and accounting for more than 75% of the population. this brings me to my second point. the manufacturing of a safe and effective vaccine. we have undertaken a complex task. the manufacturing process is much more complicated that includes thousands of para-medicines that need to be fined tuned. the sites with the longest

experience have the highest productivity. we have experienced lower than expected yield at some production sites that we are learning quickly and i am confidence that the growing experience and confidence lead to a rise in the second quarter. first, we have given our word and it is our priorities to meet the highest expectations. third, we are resolved to working with the e.u. i want to thank the commissioners for our ongoing collaboration. let me now turn to how we can increase the capacity of covid-19 vaccine production and strengthen preparedness and management of the future pandemic. first, we must seize every option to increase manufacturing capacity. to do this, as a company we are

making significant new investments to our recent partnership with a group in germany and we expanded with one of the largest capacities. we want to help europe become independent in its own manufacturing supply. we are also sharing our knowledge with new partners across our global network to learn and improve. finally, we are organizing manufacturing beyond the e.u. our countries are coming to test the vaccine against new variants. the second part that i want to mention is that the president can support on us to support him, which allows for the expansion of the manufacturing capacity. i would like to thank heaven for our leadership. and i would like to -- i would

like to mobilize and increase the capacity further. to achieve this we have to say that there is some decision-making to guide member states to know when manufacturing is needed. and make organizations to help the mobilization. alix: you have been listening to the astrazeneca ceo. the virtual hearing being held by the european parliament and how europe will have 40 million doses in the first quarter. staying with the vaccine, a study found that pfizer's vaccine was overwhelmingly effective against the virus. joining us is professor ron, a founding director of an institute. walk me through the significance of your findings. in all the headlines this morning, and having a lot of optimism within the african

markets. >> thank you. so this study was a real world effectiveness study of the vaccine, pfizer-biontech vaccine. you have your results from the clinical trials which are usually good because they allow the company to register the vaccine, but then when it comes to the real world the way that vaccines are being provided is not ideal. the chained is not -- the call chain is not in a dutch being handled in a ineffective way and you would affect -- think that the real world effectiveness is not as good. what we have done, and when i say we, it is the research institute that is the largest health institute in israel that cares for half the population and we have performed the study with our colleagues at harvard, and the boston children's hospital. together what we done is taken 600,000 people that got vaccinated and for each one we

matched individually a person that was similar to them in every other aspect in the demographics and geographics and general disease that they were suffering from and all of that together so we had those covax -- 2, 1 vaccinated and whatnot. what we saw was that the vaccinating part of the pair was protected from symptomatic illness of covid-19 by 94%, which is almost identical to what they found in the clinical trial of pfizer that was published in "the new england journal of medicine." when we are looking at severe illness, it was 92% perfection one week after the second dose. guy: what does this mean for herd immunity? >> it is too early to talk about it for two reasons. one is because one does not expect to see herd immunity when

one third of the population and israel cannot be vaccinated because they are children and children are not allowed to be vaccinated until they finish clinical trials. with a disease so infective as covid-19, especially with the u.k. variant which is the dominant strain in israel, you would not expect to see herd immunity until the kids are vaccinated. but, you have to say that it is over 50% of the israeli population and about 90% of those above the age of 60 have been vaccinated. we do expect to see what is called indirect effects, meaning that some of those who got vaccinated would become a barrier protecting -- preventing infection for some people who have not been vaccinated. our study, the big study published did not systematically -- ss infection. -- ss infection, so we cannot tell you the exact amounts. guy: we are going to leave it

there. thank you for updating us. a fascinating study. yields rising sharply in the world looking forward to reflation possibly caused by such effects. let us turn our attention to the bloomberg crypto summit, the future of cryptocurrencies event where kathy would and michael jon stein are speaking to mike malone. let us take a listen to what is being said. >> bitcoin is about -- down about 15%. i am a strategist and looking for things to kick in and make the market looked different, but one thing i look like -- look at is volatility which has dropped to the lowest ever versus tesla. looking 260 days or so, but you are an investor in both of those bases and that is what i want to start out. what are your thoughts about what i just said and if you think i am an idiot, say that.

looking forward what is your spot most noted for bitcoin and that relationship with the world's largest automaker. alix: sure. -- kathy: sure. we are optimistic on both. the biggest surprise in the last year, we expected institutional investors to start moving into bitcoin. on that score, massmutual was a positive surprise. think about all the hoops that they had to go through to put $100 million on its general account even though it is .001%. they had to go through a lot of regulatory hoops, and that was a big surprise. our positive surprise, even though we expected institutional investors to move in. what we did not expect was the diversification on their balance sheet and the diversification of their cash assets into bitcoin. and that has been a positive

surprise. we think it will continue. and, there is another thing that we think could come out of this related to it. when you think about 60-40 when you talk about announced accounts. 60% equity. look what is happening in bonds. talk about the need for diversification. if we are ending a 40 year secular decline in interest rates and/or even just flattening out or moving up slightly. that asset class has done its thing, what is next? we think crypto could be the solution. mike: i want to transition to michael. my key thing was if. why should we end a forty-year trend in lower rates when i look at it as one of the most significant deflationary pairings that i have seen? you pointed that the average cost will drop to $18,000 a

gallon at -- per unit, and i look at things like natural gas, the best indicator is down 80% and cannot go up. i will transition to michael with that in a second, but i look at as trend is your friend, but why should be end now? catherine: unless we are going to negative rates, the spreads have come down so low. treasury yields are so low because of quantitative easing -- easing. i do not think rates are going up. we are in a deflationary environment because of massive innovation which is technologically enabled and inflationary in nature. the second is creative destruction which is caused by disruptive innovation, forcing highly leveraged companies to cut prices to support their service. we see those two coming at us,

yes. but we know there is a concern giving all of the quantitative easing and the monetary policy. there is no big monetary policy out there except for bitcoin and crypto. we think diversification makes sense in terms of cash, but fixed income has really done 40 years of hard work and sure we will be in a deflationary department. but if bitcoin represents a new asset class, why not move into a? -- into it? mike: what about investment on a grand scale funds, which is where michael comes in. michael: if you boil down the commentary, if you are an investor, you are having to navigate an environment unlike we have ever seen before. also investment opportunities that are available.

it is rate to see forward thinking investors like kathy and her team embracing that. i think certainly thinking through the macroeconomic policy and see in the first week of covid has resonated very meaningfully with the institutional audience. thinking about that quality as compared to perpetual money printing is a very large adjusted position. when you have people like massmutual and corporate like square and microstrategy, and tesla. these are companies being led by ford thinking entrepreneurs and the country -- companies themselves are innovators and disruptors in their fields. we are not surprised to see companies allocating on their bat -- allocating on their assets sheet and the snowball effect that it has had providing

additional air cover for additional investor participation is not to be understated. over the course of 2021 we will see more corporate precipitation in this asset class because the career risk has gone from why to why not? and these are long-term strategic allocations for a lot of these types of disasters. mike: my colleague pointed out that the grayscale bitcoin trust, if it was an etf would be the top two in volume and asset flows. i think that is part of innovation. the key thing that i see is a major shift. i like to compare fund flows in that versus outflows and the total holdings of gold. and i see that trend like today, golds down almost 2% and grayscale trust up almost 2%. to me, this is a trend i am worried about accelerating.

it is certainly going that way. michael: there is little doubt in our mind that it is not any kind of coincidence that q4 of 2020 saw some of the largest outflows on record from gold investment product at a time when it coin really broke out and hit some of its new -- bitcoin broke out and hit some of its new prices. this narrative around bitcoin being a digital gold or digital store value is a pretty widely held narrative around the investment community. and so, thinking about the popularity of grayscale products, it is doing it to gain exposure to digital assets and form of a security. it represents how much market demand there is, because as we look at the pipes and the maturity of the digital asset ecosystem, i am sure that you and kathy would agree that this rally feels very different than

the one we experienced in 2017, but despite the price it is ripe for opportunity because crypto is still largely existing outside of the traditional channels where investors are making investments. mike: a question for both of you, and i hear it a lot in the chat, unless you want to comment on that? catherine: i was going to say what is striking is the dollar is down, which is normally a positive cue for gold. gold is down at the same time. bitcoin is up. that is interesting. i also think that the dollar having dropped on a trade-weighted basis by 7% and now resuming the downtrend is another stimulus. it should be a stimulus for gold too, but it is clear that bitcoin is getting the flow, the

incremental flow that normally might be going to gold. mike: to me that is a key point. i mentioned this on live tv and sometimes you get the push back. i see bitcoin certainly today potential he transitioning to the risk off asset. funds are flowing from equities, from bonds, and gold, and you look at days like today, bonds are down and bitcoin is up. are we looking into inflection where bitcoin is a risk off asset. there is no other alternative. catherine: i think we are in such early days when you look at the market cap or market value of bitcoin is roughly $950 billion, think about that in the context of an apple. it is less than half of apple's valuation and we are talking about the reserve currency of the crypto asset world. the first global digital

monetary system. it is a very big idea, and now we have institutions moving and embracing the idea, or at least using it as a hedge against what could go wrong. as you say, there is a risk. when you think about it, cash is supposed to be the ultimate risk off asset of choice, and here we have bitcoin serving that role. it is very interesting. michael: i think it might be early to say that it is risk off. what i would say and what we are seeing and experiencing from investors is that it is not necessarily only going to be those momentum traders or folks that only invest in technology or technology related investments that have become excited about allocating to crypto. thinking about our investor base we are starting to see

allocations across investor mandates, and not just global macro folks who are doing crypto and could be considered to be part of the ways in which they invest and their investment, but it is really moving towards value investors, risk investors and it runs through the entire gambit. the reason they might be early to call it risk off is now it is generally going to be accepted as something that everyone can evaluate as an investment option but something that will not be appropriate for every investor out there. mike: go ahead, sorry. catherine: i agree with michael on this. we are so early that 900 -- $950 billion market cap gives you a sense of how early we are. and the various use cases that we have written about, you know

our crypto analyst, we have the white papers on our website, this has delineated as institutions move in where appropriate asset allocations will be given risks and return riprap -- parameters. and, we also have dimensions that are use cases, the insurance policy this represents not only unhinged monetary policy but outright confiscation of wealth in other countries, the monetization, -- de monetization. if you assume a conservative allocation, let us say in the terms of cash or insurance policies, you do get into the trillions of dollars of market cap potential out there. it is very early days. mike: i think that is a keyword.

it is early. i appreciate that you say it is early to say it is going risk off. it is my job to see the fund flows and i need pushback. when everybody agrees with you, you are usually wrong. i want to bring in a key point, he's dangling carrots at that keep me very bullish, which is etf's in the u.s.. i did not say singular, it was clara. this was -- it was plural. this is a question for both of you in this comes up in the chat about this grayscale premium. here is the 200 day moving average and it is going down with maturity and everything. what has happened in canada with the advent of the etf's is at the other trusts have gone into a discount. you michael and kathy, is that a potential risk, which is one of the most widely tape just traded exchange traded products compared to an etf. michael: it certainly a risk, no

question about it, ultimately price discoveries is driven entirely by market forces. you know, to directly answer your question. an etf in the u.s. is something that we have long believed is a matter of when, not a matter of if. as you know we spent the better part of 2017 looking to register it on the nys -- nys the as an etf and the commission has done a fantastic job engaging with us and other folks, but they have still cited some different dynamics within the digital asset market and bitcoin that have not yet matured. that they would want to see in place before they can get comfortable with an etf. while we are definitely encouraged by the adoption and the development of derivatives and a much healthier two sided

market and a lot more participation, those assets still remain largely unfulfilled . over time we have to remind ourselves that this asset only came about 12 or so years ago so we are still back to our last comment, it is early days for it. catherine: i think it will be very interesting with -- when gary comes in as chair of the sec. he spent the last few years at m.i.t., he is a student and a teacher around bitcoin and blockchain technology. and, the director of research for crypto at sec has been promoted to report directly to the chairman. so, i think we will see a lot of attention on it and the people who are focus on it really know what they are talking about.

in the early days of the sec, there was we are not quite sure what animal this is, now they are sure, and that is healthy. i think it is positive ultimately for approval of an exchange traded product and the most important thing is think about what we are saying. the risk everyone used to bring up to us when we first started getting involved with grayscale and still very much involved with grayscale, the risk we always heard, the pushback was that the government would shut this down. i think we have moved far away from that and we are putting into place a chairman of the sec who is very familiar with bitcoin and understands its value and a research director on crypto whose background is more technology than finance.

that is a terrific combination. mike: thoughts on that one? michael: i am sorry? mike: any thoughts on that. my sense is i am too much an optimist, what i really hope and think that the u.s. will embrace this like we did with the internet regulator. the potential risks to me is completely tilted the other way. if the u.s. is my it will do the opposite of what china is doing. any thoughts on embracing the space. this is a decentralized, organically developed organic conserved -- organic asset. unlike the others that are other people's liability. michael: i think given where we are in the life cycle, the fact that we have tangible commentary or policy related to this asset class from the sec, the irs, the

treasury, it does definitely add some validation to the asset classes' staying power, and i think that all of the folks at each of those respective organizations certainly recognize the role that the regulatory regime in the u.s. plays on a global level. to your point about it being global in nature, and decentralized protocols that are gaining adoption on the global level, certainly the u.s.' stance is going to be paramount, and i know that they appreciate that the world is watching. the happiest point, having regulators taking on new seats who are familiar with the technology, we are totally hopeful that they will broaden their engagement with the industry. mike: go ahead. catherine: one comment on your focus on china which i believe is apt.

so, that coin blockchain is an open-source technology. and china mostly for capital control reasons really wants to limit its exposure. it wants it all currency. i think this is a really important point because open-source technology, if you are going to isolate your country from all of this innovation, that is a problem and i have been thinking about that quite a bit. our competitive dynamics relative to china. i also agree that the regulators in the u.s., while they have been really not forceful in any way. they have basically sat back and said that they do not want to be blade for -- blamed for finding the next big thing and i see

there is a question about the technology. is this going to be all tech. i think the beauty of the bitcoin blockchain is that it is -- it speed and cost are not bugs. they are features. this is the most secure blockchain out there. and so the idea of digital gold in the most secure network in the world is really an important concept. no, it is not all technology. there will be other blockchain for other use cases that will not serve the same purpose, but i do not think that they will obviate. michael: can i hop on the question. as we think about the role that

bitcoin plays as well as the adoption -- guy: we are going to wrap up listening in on that amazingly fascinating conversation. kathy would and michael speaking to bloomberg intelligence. if you want to carry on watching that you can do so. you can watch us, but if you want to watch that, watch live on your terminal and that will carry on. a couple of things that i took away from that. the main one is that there is a lot of talk about store of value. there was not a lot of talk about the use case. it is interesting to see that bitcoin does seem to be going down the store of value rather than use case at this point in time. alix: this dovetails with what j.p. morgan said that cryptocurrencies are investment vehicles not funding currencies and everyone should have 1% of

their allocation to get some efficiency gains and overall rich -- risk adjustments. it is more like you have to have the portfolio allocation and i found the comments as related to gold interesting. is money for going -- going from golden to bitcoin, i found that interesting as well. guy: it will be interesting to see that transition. maybe some of the regulatory risk is starting to disappear, and it does level the playing field. this is not going to get blown up by regulators as a result by which you can compare apples with apples rather than apples with oranges. that is certainly something that will tilt things in favor with bitcoin. alix: you know what happens when you start asking for regulation. big oil is doing that as well. this chart is fascinating. bloomberg commodity indexes seeing a powerful rally. that is seeing that aren't ash that is that orange line.

big oil has been confusing, production companies in the u.s. has been playing catch-up on a normalized basis and underperforming. one of the best and most comprehensive companies that comes from the permian -- permian base is pioneer natural resources. that is trying to play catch-up not having the same rally as the spot index. they reported earnings yesterday and i want to break it down with shut -- scott chef yield. -- chef yield, it is always good to catch up with you. how exposed to you are these high prices, how much money are you making with the brand at 65? scott: we had a great quarter yesterday and we do have some hedges that we are not getting the full benefit, but going into the second half of 2021 and 2022 we get almost full benefit.

we are excited about it and we announced our verbal dividend policy. the most important part is the fact that we will give back 75% of our free cash flow, about $16 billion over the next year back to the investor. alix: in terms of hedging, you think we will stay where prices today are much more expensive than prices later? and if so how do you think about hedging in that environment? scott: i think it is opec's intent to keep the price higher. i am a firm believer that it is a great policy, drives down inventories, keeps the front higher, so i anticipate this thing going forward. we will be very opportunistic about hedging in the future, and we are only spending about 50% of our cash flow on drilling. a typical independent like pioneer used to spend 100% and now we are only spending 50%.

there is not as much reason to hedge in the future. alix: what is interesting is that many ceos are talking like you. but, private producers they not be following your roadmap, so i am wondering, does that put you at a disadvantage? they will not follow the rules, but you cannot take advantage of it. guy: companies have several choices what to do with their free cash flow. most of them have too much debt and will have to repair the balance sheet. some companies will have to build up their inventory, because their inventory is only five years or last. pioneer, devon announced dividends. pioneer is the second company to announce that policy. we are going to probably distribute more cash flow back to the investor than any other company because we have a great balance sheet. we do not have to build up

inventory, we have the greatest inventory in the u.s.. each company will be different. some will buy back stock. a couple of the larger independents have said they will buy back stock. they question buying back stock at the top of the market. our industry has done a very poor job of buying back stock. guy: good morning. just to pick up on that last point. the top of the market. could you give me a sense of the timing here? scott: when i say top of the market, we are not at the top, but as you know energy stocks are the best performers in the s&p 500 this year already. they have already rallied and there is some more room to go, because most investors are not pricing the stocks on $65 brent or wti. so there's probably some more room for the stocks to run. the question is are we going to

move away from the old trading multiples of trading the stocks and start trading off of free cash flow yields? as we develop this track records. i think oil will be in the 55 to $70 range over the next several years. 55 to 70 for brent, so take three dollars off or wti. guy: euro cents is the bulk in gains have been made at this point. scott: i think there is another 20 to 30% to run, but the run from the lows of last year, most of it has occurred, so you have another 20 to 30%. alix: there is a lot of conversations about super cycle time. does this feel like a super cycle? scott: it is really tough to tell. i have been on record stating last year was the worst

downturn, i am surprised how fast it has come back. opec needs to manage it. if we see too much above 70, do we know what happens. more people will invest in alternative energy and it will hurt demand. we have to have a lid to where prices are going, and that is why i hope we keep it in the 55 to $70 investment. the unknown factor, we are all investing 30% less, the entire world is investing 30% less. what will happen to the supply over the next five years? and that is something unknown and disputed among our industry and we will lead into a super cycle. but as we know, a super cycle leads to an alternative -- two alternative energy investments and reduce demand. guy: i hope you've warmed up because it looked pretty chilly where you were. has what you experienced changed the way you will invest in your

company. clearly, having access to electricity became a major problem. getting access became a major problem. is that going to change the way you think about how you run the business in terms of the redundancy that you need? scott: no. we evaluated. the first issue was a safety of our families. we had over 300 families out of 2000 that had no power or water and we did everything we could to get them housing. we opened our office buildings in midland and dallas for them and distributed 600 cases, but in regard to winterization. our permian basin production will make a few -- will only make few investments. it was a 100 year storm. it was more the length of the storm. we have had a lot of polar vortexes, 2000 11, 1983, and we survived those in this happen to be five or six days. hopefully the vortex next year

will only be a two day storm. alix: hope is good, but there seems to be -- it feels like it will be difficult for the grid to escape sums -- some kind of oversight or regulation and i wonder if you are expecting something coming down from the state or federal government in terms of more transparency and resiliency? scott: i think governor abbott and ercot will make changes. we have to have reliability and we cannot afford to pass on the bills coming to consumers. consumers are going to be paying very large utility bills so, they are appealing -- paying huge utility bills over the next month at the same time they received no power. so, something has to change. alix: it is always good to catch up with you, we appreciate you taking the time. pioneer natural resources ceo. stay with me for more

commodities stuff. amount of these edges at 1:00 p.m. i will be speaking with david powell. it is a small company that is working in argentina and it is the area that is sort of the next solution to u.s. shale, but he will want it at the end of the day if you do not have a lot of oil demand. so stay with us for that and the european close is up next. the yield is really on a huge move. this is bloomberg. guy: absolutely. this is a huge story because we had the chief economist with the ecb pushing back on that. the market has done the opposite and sent yields higher. we will be talking about that over the next hour. this is bloomberg. ♪

guy: let us reset, live from london, guy johnson. you're counting you down to the european close on bloomberg markets. what do you need to know out of europe. within the last hour astrazeneca's ceo said his firm will deliver 40 million doses in q1. moderna saying that his firm will start human trials for the south african variant. e.u. leaders discussing how to get the urine -- union out of the pandemic. pressure to speed up the delivery of shots and to escape -- except vaccine passport. angela merkel saying that that could be possible. the ecb's chief economist attempting to push eurozone yields lower. philip said that the central bank will buy bonds to prevent undue tightening. let me tell you what has happened around that. we have seen yieldson