WEBVTT - Surveillance: Eisman Talks Bitcoin, SPACs 0:00:09.880 --> 0:00:13.760 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Daily 0:00:13.960 --> 0:00:17.560 we bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.320 Bloomberg dot Com, and of course, on the Bloomberg I'm 0:00:27.320 --> 0:00:30.479 not an essential worker, folks. What I do know is 0:00:30.480 --> 0:00:33.200 they're out there in each city, each and every day. 0:00:33.720 --> 0:00:38.000 Patrick Foy writes her is CEO of the Metropolitan Transit Authority, 0:00:38.080 --> 0:00:42.840 over his brave essential workers, and he joins us right now, 0:00:43.280 --> 0:00:46.560 PET four. I thought it was wonderful that the young 0:00:46.680 --> 0:00:50.280 lad on his way to Rea just mentioned the West 0:00:50.400 --> 0:00:54.160 End Line, the Sea Beach Line, the subway of another 0:00:54.200 --> 0:00:57.560 time for Dr Fauci. What did he say to your 0:00:57.640 --> 0:01:03.400 employees yesterday? Well, Dr Fauci introduced himselves to our employees 0:01:03.440 --> 0:01:06.800 as Tony from Brooklyn UH and the most trusted person 0:01:06.880 --> 0:01:10.400 in America. Urged all transit workers, all empty employees for 0:01:10.520 --> 0:01:13.440 that matter, to get vaccinated. I thought it was a 0:01:13.520 --> 0:01:17.600 powerful message coming from him him. I I invited him 0:01:17.640 --> 0:01:21.399 when we talked UH in that in that in that call, 0:01:21.600 --> 0:01:24.160 he told me about his UH commute and the Sea 0:01:24.200 --> 0:01:26.480 Beach Line, which is a term that resonates with empty 0:01:26.560 --> 0:01:30.120 a Alzheimer's. But his messages for all empty employees and 0:01:30.200 --> 0:01:33.560 Todd frankly for all New Yorkers and Americans get get vaccinated. 0:01:33.959 --> 0:01:36.840 The issue now is a supply of vaccines. As Governor 0:01:36.880 --> 0:01:39.920 Como has made clear, a lot of reason to be 0:01:40.000 --> 0:01:43.119 optimistic with the new president in place from a vaccination 0:01:43.160 --> 0:01:46.520 point of view, and frankly optimism from a transportation point 0:01:46.560 --> 0:01:49.680 of view as well. Tom, do you have the resources 0:01:50.280 --> 0:01:56.720 translated money and funds to get vaccinated busy essential workers 0:01:56.760 --> 0:02:02.040 still doing their jobs through the day. The answer is yes. 0:02:02.200 --> 0:02:05.520 The The only limiting factor is not money. It's not time. 0:02:05.640 --> 0:02:10.160 It's availability of doses. Uh. The new administration is going 0:02:10.160 --> 0:02:13.880 to attack that aggressively. They talked about that yesterday. It's 0:02:13.880 --> 0:02:16.080 not a question of time, it's not a question of overtime. 0:02:16.080 --> 0:02:17.760 It's not a question of money. It's a question of 0:02:17.840 --> 0:02:20.840 doses the governor. The governor has made that clear. Meanwhile, 0:02:20.840 --> 0:02:22.799 when you talk about a question of money, the m 0:02:22.880 --> 0:02:25.920 t A did postpone a four percent fair hike that 0:02:26.040 --> 0:02:28.639 had been planned for at least four months in anticipation 0:02:28.720 --> 0:02:31.520 in getting more aid from Washington. D C is this 0:02:31.600 --> 0:02:34.720 postponed or is this off the table if the m 0:02:34.760 --> 0:02:39.200 t A does receive that money now, at least it 0:02:39.880 --> 0:02:42.480 is postponed. We've pushed it off for several months. Look, 0:02:42.960 --> 0:02:47.160 I'll quote the President's favorite, the poet uh Shamushini, when 0:02:47.160 --> 0:02:49.359 he talked about this being a moment where hope and 0:02:49.560 --> 0:02:53.920 history rhyme. I think the election of a transit friendly, 0:02:54.000 --> 0:02:58.200 actually transit heavy transit user president and Joe Biden, the 0:02:58.200 --> 0:03:01.720 ascension of Senator show Or to the Senate majority position 0:03:01.840 --> 0:03:04.560 first ever from New York, the passage of the four 0:03:04.560 --> 0:03:07.880 billion dollars for the m t A in December, and 0:03:07.919 --> 0:03:12.320 the administration's planned to fund public transit, including the mt A, 0:03:12.520 --> 0:03:15.960 lots of reason to be optimistic. I've been pretty grim 0:03:16.000 --> 0:03:19.080 in my prior appearances, and to be clear, the empty 0:03:19.160 --> 0:03:22.640 A still faces overwhelming challenges and we're going to need 0:03:22.680 --> 0:03:26.040 an additional eight billion dollars over the next three years. 0:03:26.080 --> 0:03:28.320 But the funding that we received at the end of 0:03:28.320 --> 0:03:32.440 December will cover almost all of our deficit. We're good 0:03:32.440 --> 0:03:36.160 for one. We won't need to reduce service we had 0:03:36.160 --> 0:03:39.200 discussed or layoff thousands of people. Uh, And I think 0:03:39.240 --> 0:03:41.240 this may be a moment or hope, hope, and history 0:03:41.280 --> 0:03:43.760 do rhyme. Well, there's a financial deficit that you're hoping 0:03:43.760 --> 0:03:46.960 to address. What about the reputational deficit? The idea that 0:03:46.960 --> 0:03:49.840 there are a lot of people concerned about the transmission 0:03:49.880 --> 0:03:53.400 of the virus. Unpacked trains, unpacked buses not so much 0:03:53.400 --> 0:03:56.160 a consideration right now because they're not that packed. What 0:03:56.280 --> 0:03:59.840 are you finding in studies about the transmission of COVID 0:04:00.200 --> 0:04:04.600 of other diseases on public transportation? So a great question. 0:04:04.720 --> 0:04:06.800 Let me approach it from two points of view. One 0:04:06.880 --> 0:04:10.920 is what our customers thinking. Of our customers, survey's say 0:04:10.960 --> 0:04:14.280 they've never seen subway stations or subway cars or buses 0:04:14.360 --> 0:04:18.120 as clean as they are now, disinfected multiple times a day. 0:04:18.920 --> 0:04:22.760 From a scientific point of view, uh, if mass compliance 0:04:22.880 --> 0:04:25.640 is high and on subways, buses, and the two commuter 0:04:25.720 --> 0:04:28.520 rails that we run, mass compliance player of customers is 0:04:28.720 --> 0:04:32.960 north of single most important thing any customer can do 0:04:33.040 --> 0:04:36.400 to protect him or herself, fellow commuters and our employees. 0:04:36.680 --> 0:04:40.240 And the research indicates that transit has nowhere in the world, 0:04:40.279 --> 0:04:43.800 been a vector of the of the virus, has not 0:04:43.880 --> 0:04:47.680 been a significant contributor. We're very focused on on mass 0:04:47.760 --> 0:04:50.800 compliance I and a lot of my colleagues are gonna 0:04:50.800 --> 0:04:53.960 be handing out masks again next next week. The mt 0:04:54.080 --> 0:04:56.880 A police and mt A staff have that. Uh and 0:04:57.160 --> 0:05:00.400 I took an early Long and One Railroad train. I 0:05:00.800 --> 0:05:03.800 arrived the subway. Every day people are wearing their masks 0:05:03.880 --> 0:05:06.960 on the trains and on platforms. Patrick Floyd Michael Kimmelman 0:05:07.000 --> 0:05:09.600 in The New York Times gave a Rave Rave, Rave 0:05:09.760 --> 0:05:13.080 Rave review to the Moynahan train hall. You mentioned the 0:05:13.240 --> 0:05:15.680 l I R R right now. What did you learn 0:05:15.760 --> 0:05:22.200 in the successful construction of Moynahan Well, a couple of things. First, 0:05:22.279 --> 0:05:27.440 under Governor Cuomo's leadership, big imaginative, old projects like this 0:05:27.480 --> 0:05:31.920 can get done. Moynahan Station is an incredible tribute first 0:05:31.960 --> 0:05:35.320 to the late Senator Daniel Patrick moynihan and and to 0:05:35.400 --> 0:05:39.360 the work of my colleagues that at the MTA Channel Leber, Uh, 0:05:39.480 --> 0:05:43.800 Michael Evans and others at Moynahan Station, Empire State Development. 0:05:43.839 --> 0:05:47.080 These projects can get done. The other thing, Tom is 0:05:47.120 --> 0:05:50.240 there is a new entrance to the Long Island Railroad 0:05:50.400 --> 0:05:53.960 on Seventh Avenue and thirty third Streak, which is breathtaking 0:05:54.480 --> 0:05:56.520 as you go up the escalator. They are views in 0:05:56.560 --> 0:05:59.880 the Empire State Building, and you've got customers just pausing 0:06:00.120 --> 0:06:02.320 thinking selfies, which is not a great thing to do 0:06:02.360 --> 0:06:04.880 on an escalator by an escalator, by the way, but 0:06:04.960 --> 0:06:08.719 it's just a striking entrance directly from thirty third Street 0:06:08.760 --> 0:06:12.120 to the Long Island Railroad. Uh area. I love that. Tom. 0:06:12.160 --> 0:06:14.240 By the way, did you hear that that Patrick was 0:06:14.279 --> 0:06:16.200 talking about the beauty of it and that Yeah, you 0:06:16.360 --> 0:06:18.000 do want to take a picture, but don't take a 0:06:18.040 --> 0:06:24.280 picture on the escalator, not of Patrick Foyd. Congratulations and 0:06:24.360 --> 0:06:27.400 his Mr Foyd mentions with the m t A get 0:06:27.480 --> 0:06:34.839 vaccinated greatly appreciate your attendance. Catherine Hokel is a New 0:06:34.920 --> 0:06:39.039 York Lieutenant Governor of the Empire State in discons in Buffalo. 0:06:39.240 --> 0:06:42.040 We're going to take a moment to step away from 0:06:42.040 --> 0:06:46.080 his hoard to consider the most important athlete in America. 0:06:46.560 --> 0:06:50.680 If you are a parent appalled by the jackocracy of America, 0:06:50.800 --> 0:06:54.200 the machine that makes people one sport wonders whether they 0:06:54.240 --> 0:06:57.760 go on to acclaim or not. Josh Allen is the 0:06:57.800 --> 0:07:01.320 most important athlete in America, not because he's with Hocal's 0:07:01.320 --> 0:07:05.640 Buffalo Bills, but because he was undrafted unloved and because 0:07:05.640 --> 0:07:08.719 he had the courage to do three sports in high school. 0:07:09.000 --> 0:07:11.720 Kathy Hoko, what does Josh Allen mean? To hear? Buffalo? 0:07:12.080 --> 0:07:16.040 Josh Allen symbolizes all of all that is Buffalo, the underdog, 0:07:16.600 --> 0:07:20.400 the scrappy kid who never got respect. That's been the life. 0:07:20.480 --> 0:07:22.760 I grew up in an industrial area where a lot 0:07:22.800 --> 0:07:26.160 of people left town for decades, and we're the brunt 0:07:26.200 --> 0:07:29.200 of late night jokes because of our snow storms, and 0:07:29.440 --> 0:07:32.120 so I I really relate to Josh Allen. He's one 0:07:32.160 --> 0:07:35.600 of us. I can't tell you enough, folks, the path 0:07:35.800 --> 0:07:38.440 of Josh Allen and what a throwback it is to 0:07:38.520 --> 0:07:42.320 another time onto the serious task at and Lieutenant governor. 0:07:42.760 --> 0:07:46.040 Is pandemic is here and already I hear talk of 0:07:46.080 --> 0:07:50.480 Republicans in Washington attempting to diminish or zero state and 0:07:50.600 --> 0:07:55.440 local aid. Can you assume you'll get that aid from Washington? Well, 0:07:55.560 --> 0:07:57.880 shame on them, for gosh sakes. I mean, do they 0:07:57.920 --> 0:08:00.840 not realize that there's one reason why we're not able 0:08:00.880 --> 0:08:03.120 to get this vaccine out there is that there has 0:08:03.160 --> 0:08:06.480 been the Trump administration that was the barrier. We need 0:08:06.520 --> 0:08:08.040 the money to be able to get this out. We 0:08:08.080 --> 0:08:11.440 need to be compensated for the fifteen billion dollars that 0:08:11.520 --> 0:08:14.200 we've lost during this pandemic. We spoke about this a lot, 0:08:14.480 --> 0:08:16.960 and the Republicans cannot be in the way they should. 0:08:17.200 --> 0:08:20.280 They should start reading the teleas there's a reason why 0:08:20.320 --> 0:08:23.720 it's a Republican I'm sorry, it's a Democratic House, it's 0:08:23.760 --> 0:08:26.679 a Democratic Senate, and now it's a Democratic White House. 0:08:27.000 --> 0:08:30.080 So they ought to understand that America is not with them. 0:08:30.080 --> 0:08:34.520 America wants Washington to fight this pandemic with every resource 0:08:34.559 --> 0:08:37.760 it has, and that includes three and fifty billion dollars 0:08:37.840 --> 0:08:40.480 going to state and local government so we can start 0:08:40.559 --> 0:08:43.600 paying to get this vaccine out there and helping downtown 0:08:43.640 --> 0:08:47.880 places like Midtown Manhattany just mentioned start having a comeback. 0:08:47.960 --> 0:08:50.720 And so we're focused on this and Republicans better not 0:08:50.760 --> 0:08:53.360 getting away. In the meantime, Cathy, The New York State 0:08:53.480 --> 0:08:56.360 and New York City regions are facing historic budget deficit 0:08:56.760 --> 0:09:00.640 uh and Governor Cuomo put out some new was this 0:09:00.679 --> 0:09:03.319 week saying that he was planning to raise the top 0:09:03.360 --> 0:09:07.240 tax rate in New York City to fourteen point seven 0:09:07.280 --> 0:09:10.080 percent state and local taxes. That would be the highest 0:09:10.160 --> 0:09:13.120 rate in the nation. How realistic is this, Kathy, mean, 0:09:13.200 --> 0:09:15.680 what's the potential consequence in terms of the tax base 0:09:15.960 --> 0:09:19.719 and wealthier individuals continuing to leave the area. Well, I 0:09:19.760 --> 0:09:22.400 think what you're talking about is what the governor laid 0:09:22.440 --> 0:09:25.160 out is the worst case scenario, and that's if we 0:09:25.200 --> 0:09:28.240 don't receive the fifteen billion dollars that we really think 0:09:28.320 --> 0:09:30.160 is legitimate. If you look at even a share of 0:09:30.160 --> 0:09:33.440 our population as share that our fate should be receiving 0:09:33.480 --> 0:09:36.680 of the three billion dollars, if that is the amount approved, 0:09:37.120 --> 0:09:40.199 we should be getting upwards of fifteen billion dollars. And 0:09:40.240 --> 0:09:42.640 if they get less, if they get a six billion, 0:09:43.080 --> 0:09:45.679 then only and then, and only then. The governor said, 0:09:45.880 --> 0:09:47.599 we're going to have to do things that none of 0:09:47.640 --> 0:09:50.360 us want to do, but we'd have to raise some 0:09:50.440 --> 0:09:54.640 of the taxes borrow have substantial cuts to be extremely 0:09:54.679 --> 0:09:57.280 painful during a pandemic. And I think he laid out 0:09:57.280 --> 0:10:00.440 that scenario just so you know, the people in Washington 0:10:00.520 --> 0:10:04.160 can understand that we can't have that as the plan A. 0:10:04.360 --> 0:10:06.439 That has to be something that we don't even get to. 0:10:06.559 --> 0:10:09.959 So our best option is to have a fifteen billion 0:10:09.960 --> 0:10:12.040 dollars share of that federal aid and then we would 0:10:12.080 --> 0:10:14.800 not have to raise taxes. We are a cognizant of 0:10:14.880 --> 0:10:17.920 the effect that that has on people's decisions to stay, 0:10:18.040 --> 0:10:21.439 especially the people who are supporting our economy financially, the 0:10:21.480 --> 0:10:24.240 business makers. We understand that, but we also have to 0:10:24.240 --> 0:10:26.840 deal in the reality we cannot sustain a budgets deposits 0:10:26.920 --> 0:10:30.760 that large lieutenant government just to finish on the issue 0:10:30.760 --> 0:10:33.880 of vaccinations in the vaccine rollout. What is the issue 0:10:33.960 --> 0:10:36.880 right now that slowing things down? From your side, what 0:10:36.920 --> 0:10:40.000 would you like to say, Oh, it's absolutely supplied. The 0:10:40.040 --> 0:10:43.840 Defense Production Act if it had been invoked by President 0:10:43.880 --> 0:10:47.600 Trump even six months ago to have the PPE. Remember, 0:10:47.640 --> 0:10:49.760 we were scouring the earth just to give masks and 0:10:49.800 --> 0:10:51.880 how to go to China and compete with other countries. 0:10:51.920 --> 0:10:54.880 That was disgusting. So now we have the same scenario, 0:10:54.920 --> 0:10:58.079 we could be ramping up vaccine production. So I was 0:10:58.160 --> 0:11:00.679 at two of our sites yesterday. I was at Jones Beach, 0:11:00.760 --> 0:11:03.439 I was at Aqueduct, and I opened up all the facilities. 0:11:03.440 --> 0:11:06.640 And upstate New York we have mass distribution sites. They're 0:11:06.640 --> 0:11:09.960 doing about five a day, sometimes a thousand. We could 0:11:10.000 --> 0:11:13.440 double triple that overnight. We have the capacity, We have 0:11:13.559 --> 0:11:16.760 the staff. We have everything in place. It is simply 0:11:17.040 --> 0:11:20.040 we need that spick it turned on to be able 0:11:20.080 --> 0:11:21.840 to give us the supply. We can get it out. 0:11:22.240 --> 0:11:24.880 We're ready for it. We've been waiting. Our residents are 0:11:24.960 --> 0:11:28.319 desperately waiting for this. But with and we've actually administered 0:11:28.480 --> 0:11:31.960 nine percent of the vaccines that we've been given. That's 0:11:31.960 --> 0:11:33.720 one of the highest in the nation. I think I 0:11:33.800 --> 0:11:37.680 heard today that Georgia had already administered about So we're 0:11:37.720 --> 0:11:39.920 getting it out there. We just need more of it. 0:11:43.240 --> 0:11:45.599 Of New York Kathy howk Cathy come back saying the 0:11:45.640 --> 0:11:52.040 conversation we need to continue on the vaccine rollout. John, 0:11:52.120 --> 0:11:54.559 what we're trying to do is get back on script 0:11:54.880 --> 0:11:58.199 with investment in finance. We can do that with this guest, 0:11:58.280 --> 0:12:02.920 Mike uh. John Wilson has just been really nuanced in 0:12:03.360 --> 0:12:07.800 supple from Morgan Stanley. It just fantastic. The whole same 0:12:07.920 --> 0:12:10.800 over at Morgan Stanley last year, coming out of this crisis, 0:12:10.800 --> 0:12:13.640 coming out of March into Spring and beyond, Mike Wilson 0:12:13.640 --> 0:12:16.280 on places side joined us. Now, Mike, you dusted off 0:12:16.320 --> 0:12:19.120 the old recession playbook, and many people didn't want to 0:12:19.120 --> 0:12:21.400 look at it. You pushed it and pushed it hard 0:12:21.800 --> 0:12:23.760 and put on risk when others were uncomfortable, and it 0:12:23.800 --> 0:12:25.760 was the right tray to make through to the end 0:12:25.960 --> 0:12:29.520 of twenty into twenty one. Mike, everyone's still looking for 0:12:29.520 --> 0:12:32.439 that historical parallel. Do you think that's how ful right now? 0:12:32.480 --> 0:12:37.160 And where do you find it? What do you lean into? Yeah, well, 0:12:37.160 --> 0:12:39.240 thanks you guys, thanks for having me on. Look, I 0:12:39.280 --> 0:12:44.200 think the recession playbook, recovery playbook is is right on track. Um, 0:12:44.360 --> 0:12:48.360 you know, every recession crisis is different, unique in its 0:12:48.360 --> 0:12:51.319 own way. But markets, you know, obviously look forward and 0:12:51.920 --> 0:12:54.400 you know, I think the markets are very clear right 0:12:54.400 --> 0:12:56.920 now in their view about two thousand twenty one it 0:12:57.040 --> 0:13:00.240 is going to be a boom in terms of economic growth. Yeah, 0:13:00.240 --> 0:13:02.280 we have to get through these hurdles of vaccination and 0:13:02.320 --> 0:13:05.680 all the hand ringing around politics and everything else, But 0:13:05.880 --> 0:13:09.920 ultimately the market is discounting a very powerful recovery. In fact, 0:13:10.160 --> 0:13:12.760 the move that we've seen more recently in things like 0:13:12.840 --> 0:13:15.080 small caps and the typical parts of the market that 0:13:15.120 --> 0:13:18.080 we've been preferring just you know, kind of confirms that 0:13:18.160 --> 0:13:20.120 even more for us. Here's where we think things are 0:13:20.160 --> 0:13:23.600 going next though. The next step in the procession playbook 0:13:23.960 --> 0:13:26.760 is a consolidation for a long period of time. You 0:13:26.840 --> 0:13:31.559 always get multiple expansion as earnings are normalizing out of 0:13:31.600 --> 0:13:34.280 the recession. That's what we've gotten. Then you go through 0:13:34.280 --> 0:13:37.800 a period, you get multiple contraction as people have understood 0:13:37.800 --> 0:13:39.760 that earnings are going up. And what that means is 0:13:39.800 --> 0:13:42.080 that earnings will continue to go up in terms of revision, 0:13:42.480 --> 0:13:45.400 but multiples will come down and the market just goes 0:13:45.440 --> 0:13:47.600 sideways for a period of six or seven months. When 0:13:47.600 --> 0:13:49.760 I say the market, I mean the SMP five hundreds. 0:13:50.000 --> 0:13:52.440 That doesn't mean there's nothing to do right. There's going 0:13:52.480 --> 0:13:55.040 to be terrific rotation still and things to do within 0:13:55.080 --> 0:13:57.079 the equity market. That's where all the action is. It's 0:13:57.160 --> 0:14:01.600 underneath the surface. Mike Wilson, good morning. The her Fandel 0:14:01.679 --> 0:14:05.320 Herschman index is something we study in finance, and folks, 0:14:05.440 --> 0:14:09.120 it applies across all of the social sciences. And what 0:14:09.240 --> 0:14:12.120 this comes down to, Mike Wilson, is a measurement of 0:14:12.200 --> 0:14:14.840 the concentration in the market. I'm not going to go 0:14:14.880 --> 0:14:18.480 into the Newtonian math, but Mike Wilson, you observe we 0:14:18.559 --> 0:14:23.240 are less concentrated, absolutely, tom and that's part of the 0:14:23.320 --> 0:14:25.640 story as well as you come First of all, as 0:14:25.640 --> 0:14:27.680 you go into a recession, which you know, we were 0:14:27.720 --> 0:14:31.560 talking about an eighteen and nineteen, the market gets more concentrated, 0:14:31.600 --> 0:14:35.120 the returns become more narrow as the market gravitates to 0:14:35.200 --> 0:14:38.600 these larger cap companies that are somewhat defensive, and that 0:14:38.720 --> 0:14:41.280 was saying in the last cycle. Then as you come 0:14:41.280 --> 0:14:43.640 out of the recession, what happens is that money that's 0:14:43.640 --> 0:14:47.320 been concentrated decides, hey, there's other opportunities out there, and 0:14:47.320 --> 0:14:49.880 it broadens out. And that's exactly what's happened this time around. 0:14:49.920 --> 0:14:52.320 It's a very healthy development, that's what you want to see. 0:14:52.320 --> 0:14:54.920 It's a it's a it's actually a confirmation once again, 0:14:54.960 --> 0:14:56.960 and in fact that it's not just a new bowl market, 0:14:57.000 --> 0:14:59.160 it's a new economic cycle. All right. So given a 0:14:59.240 --> 0:15:01.880 fact that it's a positive, let's go to that negative 0:15:01.920 --> 0:15:04.000 that you were talking about, because that's what I do. 0:15:04.120 --> 0:15:06.600 The next step in the playbook is consolidation and talk 0:15:06.640 --> 0:15:11.080 about potential triggers, one of them being a potential taper tantrum. 0:15:11.080 --> 0:15:15.200 Should the Feds start talking about reducing their monthly bond purchases, 0:15:15.400 --> 0:15:19.720 how at risk our equity valuations In that case, yeah, 0:15:19.720 --> 0:15:21.560 at least. I mean it's you know that we've had 0:15:22.160 --> 0:15:26.080 a view that rates will ultimately adjust to uh, the 0:15:26.120 --> 0:15:28.960 economic developments the way equities have, even if the FED 0:15:29.080 --> 0:15:31.400 is on hold, because you know, markets are forward thinking. 0:15:31.440 --> 0:15:33.680 But you know, rates have been slow in that development. 0:15:33.680 --> 0:15:35.880 They've moved up, but they haven't moved up, you know, 0:15:35.920 --> 0:15:38.960 in a way that is really disruptive to valuations. Yet. 0:15:39.200 --> 0:15:43.200 So absolutely, as it becomes clear right now everybody's pessimistic 0:15:43.240 --> 0:15:45.720 on the vaccinations, right, my guest is in two months, 0:15:45.720 --> 0:15:47.720 people are going to be saying, Wow, what a great 0:15:47.800 --> 0:15:49.720 job we did. I mean, you know, we we spent 0:15:49.800 --> 0:15:52.880 more money, we got the vaccinations down, people got got vaccinated, 0:15:52.920 --> 0:15:54.560 and and and there's going to be a light switch 0:15:54.640 --> 0:15:56.320 at some point in the next two or three months 0:15:56.600 --> 0:15:59.160 where people realize, actually, we are going to make it. 0:15:59.400 --> 0:16:02.000 And that's people start booking travel and they start doing 0:16:02.000 --> 0:16:04.280 things they haven't been doing, and that's that's when the 0:16:04.280 --> 0:16:06.400 bond market will wake up. So that's a potential risk. 0:16:06.720 --> 0:16:08.240 I don't think it's a near term risk. I think 0:16:08.280 --> 0:16:09.960 the risk in the near term is more that things 0:16:10.000 --> 0:16:12.600 have gotten a little speculative. Um, we see it all 0:16:12.640 --> 0:16:14.920 over the market. Place, you know, penny stocks, you know 0:16:14.960 --> 0:16:18.200 some of the chat boards are going crazy now, cryptocurrencies, 0:16:18.280 --> 0:16:20.680 you name it, right, things are really going a little 0:16:20.680 --> 0:16:24.080 bit bonkers. And if that starts to fade, that could 0:16:24.080 --> 0:16:26.200 be another risk to where some of the you know, 0:16:26.280 --> 0:16:29.200 some of the new entrants to financial markets take a 0:16:29.200 --> 0:16:31.920 little paint things going a little bit bonkers. That cf 0:16:32.000 --> 0:16:34.120 A talk. I love it, Mike, when you talk though 0:16:34.160 --> 0:16:37.920 about a lightbulb going off and the bond market kind 0:16:37.920 --> 0:16:40.120 of getting switched on here a little bit. When you 0:16:40.120 --> 0:16:43.720 see yields rise, what kind of increase could you see 0:16:43.760 --> 0:16:48.640 making a material dent and equity valuations. Yeah, I mean 0:16:48.640 --> 0:16:51.080 obviously nobody knows, but I would suggest that if you 0:16:51.120 --> 0:16:54.320 start to break through the levels we saw in in 0:16:54.480 --> 0:16:57.560 March of last year when it was risk off even 0:16:57.640 --> 0:17:01.000 for treasuries, that technically that open us up to some 0:17:01.080 --> 0:17:04.240 much higher levels. Meaning if you get through and a 0:17:04.320 --> 0:17:06.199 ten year it opens you up to sort of the 0:17:06.240 --> 0:17:09.440 old support which is one fifty and then and then 0:17:09.480 --> 0:17:11.399 you can even move higher than that. So you know, 0:17:11.480 --> 0:17:13.480 my experience in doing this for a long time is 0:17:13.480 --> 0:17:17.280 that markets move in a nonlinear fashion, right, they kind 0:17:17.280 --> 0:17:18.800 of consolid They can tell an all of a sudden 0:17:18.800 --> 0:17:20.600 they wake up one day and if that's you know, 0:17:20.680 --> 0:17:22.679 that's not what's price. What's price right now is just 0:17:22.720 --> 0:17:25.720 this very beautiful, gradual sort of rise and race that's 0:17:25.760 --> 0:17:28.200 offset by earnings. That's possible, just not the way you 0:17:28.240 --> 0:17:32.440 usually happen, you think, Mike, well, part of it, John, 0:17:32.480 --> 0:17:34.040 I mean, you know, it's a little different. Like I 0:17:34.040 --> 0:17:35.760 do not something to make it clear, I do not 0:17:35.840 --> 0:17:38.439 expect the FED to come out tomorrow and say we're tapering, right. 0:17:38.440 --> 0:17:40.760 They've been very adamant about that. The FED is committed 0:17:40.800 --> 0:17:45.200 to keeping front end rates lower, doing their quantitative easing purchases, 0:17:45.320 --> 0:17:47.520 you know, probably longer than they did even in the 0:17:47.600 --> 0:17:51.320 last cycle. But once again, remember markets will move ahead 0:17:51.680 --> 0:17:54.280 the old bond vigilante. Remember the old bond vigilanti, Well, 0:17:54.359 --> 0:17:56.359 right now it's the equity vigilante, because they mean, the 0:17:56.359 --> 0:17:59.280 equity markets aren't as as pen, and the equity markets 0:17:59.280 --> 0:18:02.400 are telling you in no uncertain terms as our commodities 0:18:02.760 --> 0:18:05.480 that inflation and growth are going to be better of 0:18:05.560 --> 0:18:07.919 the next six or nine months. At some point, I 0:18:07.960 --> 0:18:11.400 do believe the bombmarket will move ahead of the fet Mike, 0:18:11.480 --> 0:18:13.520 looking forward to stand on the journey with you through 0:18:13.520 --> 0:18:15.520 the year ahead. Mike Wilson there of Morgan Staney my 0:18:15.680 --> 0:18:22.560 thank you and Steve Weisen winners from Newberger Berman Steve. 0:18:23.000 --> 0:18:25.560 It's maybe not evident on TV or radio, but I 0:18:25.600 --> 0:18:30.440 have been a harsh critic of people shopping short ideas. 0:18:31.040 --> 0:18:34.480 You and forget about the movie acclaim have always been 0:18:34.520 --> 0:18:40.520 incredibly graceful of setting up why you are shorting a position. 0:18:41.080 --> 0:18:47.080 Describe a present short position with the iceman grace. No, 0:18:47.160 --> 0:18:50.159 I tho't be so graceful on this one. So this 0:18:50.240 --> 0:18:53.960 is my largest short. It's a company called Credit Acceptance 0:18:54.080 --> 0:18:56.920 c A c C is the symbol. It's probably the 0:18:57.040 --> 0:19:01.360 largest subprime auto lender in the United States. UM, let 0:19:01.359 --> 0:19:03.320 me make it very clear, this is not a short. 0:19:04.440 --> 0:19:06.920 Thinking that the company is going to suffer credit losses 0:19:07.000 --> 0:19:09.200 has nothing to do with it. This is a pure 0:19:09.280 --> 0:19:14.800 regulatory story for anyone was interested. Company was sued by 0:19:14.800 --> 0:19:18.760 the Massachusetts Attorney General in the summer of two thousand 0:19:18.800 --> 0:19:22.800 and twenty for predatory lending practices. The point is an 0:19:22.880 --> 0:19:30.520 unbelievable document um incredibly details detailed, providing a litany of 0:19:31.560 --> 0:19:35.159 predatory lending practices that are the only way to describe it. 0:19:35.280 --> 0:19:40.640 Is disgusting, and with a new head of Consumer Financial 0:19:40.640 --> 0:19:44.359 Protection Bureau going to take charge soon, I think this 0:19:44.520 --> 0:19:47.800 is there's a potential here for this company to be 0:19:48.000 --> 0:19:51.400 regulated to a much, much lower level of profitability at 0:19:51.400 --> 0:19:55.200 the very least. When when you look Steve Iceman at 0:19:55.280 --> 0:19:58.159 c A c C and you know what they're doing, 0:19:58.240 --> 0:20:02.560 we say good morning to them and Southfield, Michigan Brett Robertson, 0:20:02.680 --> 0:20:07.160 Kenneth Booth. Do you speak to the company about your criticisms? 0:20:07.200 --> 0:20:10.960 Do you communicate with the company in this case? I 0:20:11.000 --> 0:20:14.120 have no interest in talking to the company. Um. Yeah, 0:20:14.119 --> 0:20:19.560 I simply look at the complaint by the Massachusetts Attorney General. Um. 0:20:19.640 --> 0:20:26.000 Under the assumption that the complaint is accurate. Um, this 0:20:26.119 --> 0:20:28.840 company is going to suffer a lot of regulatory changes. 0:20:28.920 --> 0:20:31.360 That's my simple thesis. And I don't see any point 0:20:31.400 --> 0:20:33.680 in this case talking to the company about it because 0:20:33.720 --> 0:20:38.520 they'll just deny it. So there's nothing to discussed. Um, Stephen. 0:20:38.640 --> 0:20:40.920 Is there a part to the market. So we talked 0:20:40.920 --> 0:20:43.080 about US banks? You like US Banks? You just talked 0:20:43.119 --> 0:20:45.880 about a company that you're shorting. Is there another more 0:20:45.880 --> 0:20:48.200 of an industry or an asset class that you think 0:20:49.359 --> 0:20:54.600 is just running too hot right now. I mean, we 0:20:54.640 --> 0:20:58.840 could have an academic discussion about you know, stocks that 0:20:59.240 --> 0:21:04.400 I think are overvalued. Um, But you know the problem 0:21:04.560 --> 0:21:07.480 is that as long as the Fed keeps rates at 0:21:07.560 --> 0:21:10.520 zero and money is free, I think that that discussion 0:21:10.600 --> 0:21:15.359 is academic. Um. I'm never sure to stock just because 0:21:15.400 --> 0:21:17.960 I think it's overvalued, you know, in an age of disruption, 0:21:18.040 --> 0:21:22.560 I think that's a recipe for SASTA. Yeah. I know, 0:21:22.640 --> 0:21:24.760 Steve that Tom wants talk about bitcoin, but you did 0:21:24.760 --> 0:21:27.760 write a essay in the New York Times saying that 0:21:27.800 --> 0:21:31.360 actually income inequality is the big problem of our times. 0:21:31.800 --> 0:21:37.560 How does it factor into your thinking? I mean, look, 0:21:37.560 --> 0:21:43.080 that's my personal political view. It doesn't really impact my 0:21:43.240 --> 0:21:48.919 view of investing unless something happens politically that changes policy. Um, 0:21:49.560 --> 0:21:53.800 we'll see if if this administration does anything aggressively about it. 0:21:53.840 --> 0:21:56.360 But you know, my feeling is that what this administration 0:21:56.440 --> 0:21:59.080 is going to do first is do a lot of 0:21:59.119 --> 0:22:02.520 fiscal stimulat US, a lot of infrastructure spending, and only 0:22:02.600 --> 0:22:04.680 later will they start to deal with the tax coats. 0:22:04.680 --> 0:22:07.960 So I think that's tomorrow's business, Steve. I was reading Variety. 0:22:08.000 --> 0:22:10.560 They were flogging the Queen's gambut on the cover, and 0:22:10.680 --> 0:22:12.399 you know they're talking up the next movie is going 0:22:12.480 --> 0:22:15.359 to be The Big Bitcoin. Your thoughts on bitcoin, the 0:22:15.400 --> 0:22:19.720 Economist is a general rule are scathing about how governments 0:22:19.720 --> 0:22:23.399