1
00:00:03,200 --> 00:00:07,520
Speaker 1: Broadcasting live to New York Cloomberg eleventh, will Old to Washington,

2
00:00:07,600 --> 00:00:11,200
Speaker 1: d C Bloomberg Nang nine Mark to Boston, Bloomberg twelve

3
00:00:11,200 --> 00:00:14,840
Speaker 1: Money to San Francisco, Bloomberg nine sixty to the Country

4
00:00:15,000 --> 00:00:18,480
Speaker 1: Series Exam Channel one nineteen and around the blow to

5
00:00:18,520 --> 00:00:21,880
Speaker 1: the Bloomberg Radio across afend Bloomberg dot com. This is

6
00:00:21,920 --> 00:00:25,959
Speaker 1: Bloomberg Surveillance and good morning. I'm teren Moscow along with

7
00:00:26,000 --> 00:00:28,319
Speaker 1: Tom Keene and Michael McKee. The opening vale brought to

8
00:00:28,360 --> 00:00:31,920
Speaker 1: you by s E I imagine when investment operations predictively

9
00:00:31,960 --> 00:00:35,960
Speaker 1: respond to regulatory change. C S has global operating platform

10
00:00:36,000 --> 00:00:38,680
Speaker 1: can be your catalyst for a business transformation at s

11
00:00:38,680 --> 00:00:41,440
Speaker 1: C i C dot com slash imagine S and P

12
00:00:41,600 --> 00:00:43,880
Speaker 1: five hundred down four tenths percent at the open, down

13
00:00:43,960 --> 00:00:47,240
Speaker 1: seven points to twenty thirty nine down. Jones Industrial Average

14
00:00:47,240 --> 00:00:49,199
Speaker 1: down three tens per cent or fifty four points to

15
00:00:49,320 --> 00:00:52,720
Speaker 1: seventeen thousand, four hundred seventy one. The NASDAC down half

16
00:00:52,720 --> 00:00:55,320
Speaker 1: per cent or twenty two points to forty seven sixteen.

17
00:00:55,680 --> 00:00:58,080
Speaker 1: Ten year Treasury up one thirty second, the YELD one

18
00:00:58,080 --> 00:01:00,120
Speaker 1: point eight five percent yield on the two year are

19
00:01:00,200 --> 00:01:02,720
Speaker 1: point at eight percent. Now I mix screwde oil down

20
00:01:02,760 --> 00:01:05,559
Speaker 1: two point one percent or a dollar one to eighteen

21
00:01:05,600 --> 00:01:08,240
Speaker 1: a barrel comex goal down two point two percent or

22
00:01:08,560 --> 00:01:12,440
Speaker 1: seven dollar sixty cents at twelve announced the euro at

23
00:01:12,440 --> 00:01:14,680
Speaker 1: dollar twelve oh three. The end one oh nine point

24
00:01:14,760 --> 00:01:18,479
Speaker 1: nine for Tom and Mike Karen, thank you so much.

25
00:01:18,520 --> 00:01:21,120
Speaker 1: It is a perfect time to talk to Rocky Fishman.

26
00:01:21,600 --> 00:01:23,679
Speaker 1: With a name like that, you think he was outside

27
00:01:23,760 --> 00:01:27,039
Speaker 1: linebacker for Harvard football a few years ago. No, he

28
00:01:27,160 --> 00:01:31,039
Speaker 1: was buried in computer science in mathematics and then on

29
00:01:31,080 --> 00:01:35,759
Speaker 1: to Columbia and now joining enjoying the lack of volatility

30
00:01:35,800 --> 00:01:40,120
Speaker 1: at Deutsche Pink and equity derivatives UM Stanley Fisher in

31
00:01:40,160 --> 00:01:45,280
Speaker 1: an incredibly important species morning for Economics and Mathematics at

32
00:01:45,480 --> 00:01:50,200
Speaker 1: um at UH Columbia in honor of Michael Woodford. When

33
00:01:50,200 --> 00:01:52,800
Speaker 1: you were Columbia, NBA, did you have an opportunity to

34
00:01:53,240 --> 00:01:56,480
Speaker 1: sit in with any of Michael Woodford's lectures in economics? Now,

35
00:01:56,600 --> 00:02:00,560
Speaker 1: unfortunately I didn't. He's very math based, and it's it's

36
00:02:00,560 --> 00:02:04,880
Speaker 1: a lot of squashy stuff, oiler functions and multivariable dynamics

37
00:02:04,960 --> 00:02:08,799
Speaker 1: within a given equation in the trenches of Wall Street,

38
00:02:08,880 --> 00:02:12,720
Speaker 1: like Rocky Fisherman's working. Are you more confident in your

39
00:02:12,760 --> 00:02:17,679
Speaker 1: mathematics now post crash than you were before crash? Look,

40
00:02:17,720 --> 00:02:21,480
Speaker 1: I think that UM market analysis is really a combination

41
00:02:21,639 --> 00:02:25,400
Speaker 1: of math and analytics and also just understanding all of

42
00:02:25,400 --> 00:02:28,919
Speaker 1: the dynamics and investor flows, investor psychology. And I think

43
00:02:28,919 --> 00:02:32,280
Speaker 1: that there's a lot more to the markets than UM

44
00:02:32,320 --> 00:02:35,440
Speaker 1: just the analytics. UM So, it's really a combination of

45
00:02:35,720 --> 00:02:39,320
Speaker 1: understanding the views the investor types that are in the marketplace.

46
00:02:39,720 --> 00:02:42,400
Speaker 1: UM So, I'd say it's not just that you know,

47
00:02:42,400 --> 00:02:44,800
Speaker 1: analytics and math is part of the story, but really

48
00:02:44,840 --> 00:02:47,760
Speaker 1: it's it's about understanding investor types of this point. You know,

49
00:02:47,800 --> 00:02:51,120
Speaker 1: I I look at the mathematics and we work within

50
00:02:51,240 --> 00:02:54,000
Speaker 1: all of our derivatives, all of our Wall Street John

51
00:02:54,000 --> 00:02:57,880
Speaker 1: Tucker's too, oh one k, everything that's out there within

52
00:02:57,919 --> 00:03:00,360
Speaker 1: a Bell curve, within what's within black shows are the

53
00:03:00,360 --> 00:03:04,320
Speaker 1: probability distribution, a Gaussian distribution. You and I know and

54
00:03:04,360 --> 00:03:07,600
Speaker 1: our listeners know that's not the real world. How do

55
00:03:07,600 --> 00:03:11,120
Speaker 1: you take Michael Woodford, for that matter, Stanley Fisher or

56
00:03:11,200 --> 00:03:14,639
Speaker 1: Migrant Shoals models and drag them into your day to

57
00:03:14,720 --> 00:03:18,040
Speaker 1: day work. If we know the bell curves, not reality. Yeah,

58
00:03:18,040 --> 00:03:20,560
Speaker 1: I mean, derivatives models are really a language that people

59
00:03:20,600 --> 00:03:24,320
Speaker 1: are using to understand what the prices of derivatives are

60
00:03:24,320 --> 00:03:27,200
Speaker 1: telling us about potential ways that the markets could behave

61
00:03:27,200 --> 00:03:29,920
Speaker 1: in the future. So, one thing we've seen is that

62
00:03:30,000 --> 00:03:32,959
Speaker 1: skew and option markets has picked up. That's something that's

63
00:03:33,000 --> 00:03:36,240
Speaker 1: just a byproduct of option pricing formulas like black shoals.

64
00:03:36,480 --> 00:03:39,000
Speaker 1: But what it's really telling us is that there's fear

65
00:03:39,080 --> 00:03:41,600
Speaker 1: that there may be investor types that are more prone

66
00:03:41,640 --> 00:03:45,480
Speaker 1: to sell um when markets start to sell off. Um. Well,

67
00:03:45,520 --> 00:03:48,120
Speaker 1: maybe skew shows the emotion of the market. And folks,

68
00:03:48,160 --> 00:03:51,720
Speaker 1: this is a lot of fancy mumbo jumbo about variants,

69
00:03:51,760 --> 00:03:55,160
Speaker 1: about skew, about a thing called crotosis, and the rest

70
00:03:55,200 --> 00:03:57,800
Speaker 1: of it. But can you work within the rocky fisherman

71
00:03:57,840 --> 00:04:01,760
Speaker 1: world given the distortion of net rates, low rates, flat

72
00:04:01,800 --> 00:04:04,240
Speaker 1: flat flat curves and all or you walk in the

73
00:04:04,240 --> 00:04:08,200
Speaker 1: door every day and go, wait, this is totally artificial. Well,

74
00:04:08,240 --> 00:04:10,800
Speaker 1: it's a new world every day every year that we

75
00:04:10,880 --> 00:04:13,840
Speaker 1: have in the market. The drivers of what can cause

76
00:04:13,880 --> 00:04:17,120
Speaker 1: market volatility are changing, and all of the derivative pricing

77
00:04:17,160 --> 00:04:19,880
Speaker 1: models are telling us is that there are ways to

78
00:04:19,960 --> 00:04:23,159
Speaker 1: understand this. There there are patterns that we might expect

79
00:04:23,240 --> 00:04:26,160
Speaker 1: to see. Volatility itself has been moving faster this year

80
00:04:26,440 --> 00:04:28,160
Speaker 1: and in the last couple I mean it did it.

81
00:04:28,279 --> 00:04:30,640
Speaker 1: So the VIX was in the twenties for a good

82
00:04:30,680 --> 00:04:33,599
Speaker 1: chunk of this year. I mean, it was in got

83
00:04:33,600 --> 00:04:37,280
Speaker 1: below thirteen. Recently, it's been very range bound recently, and

84
00:04:37,920 --> 00:04:40,240
Speaker 1: we see from the prices of options on the VIX.

85
00:04:40,279 --> 00:04:42,600
Speaker 1: We see from the way that people are trading options

86
00:04:42,960 --> 00:04:46,240
Speaker 1: that that's not going to continue forever. There are periods

87
00:04:46,279 --> 00:04:49,120
Speaker 1: when volatility can get very high, periods when volatility can

88
00:04:49,120 --> 00:04:51,640
Speaker 1: get very low, and we're able to switch regimes faster. Now,

89
00:04:52,200 --> 00:04:54,960
Speaker 1: the group brilliantly said, but you know, we follow the

90
00:04:55,040 --> 00:04:57,800
Speaker 1: VIX like it's a litmus paper to understand its asymmetric.

91
00:04:57,880 --> 00:05:02,320
Speaker 1: And there's a huge to pay about the CBOE volatility

92
00:05:02,360 --> 00:05:07,760
Speaker 1: index within that is it acting in a normal way

93
00:05:07,960 --> 00:05:13,120
Speaker 1: or does it suggest instabilities or distortions within the equity

94
00:05:13,240 --> 00:05:19,080
Speaker 1: and the greater finance system. It's an impossible question to answer.

95
00:05:19,120 --> 00:05:22,000
Speaker 1: I mean, there are factors that are driving the system.

96
00:05:22,120 --> 00:05:25,960
Speaker 1: It's not that they're necessarily distortions more than there always are. Um.

97
00:05:26,000 --> 00:05:28,359
Speaker 1: I think that the presence of the central banks is

98
00:05:28,600 --> 00:05:32,000
Speaker 1: very important, especially for fixed income markets. The impact of

99
00:05:32,000 --> 00:05:34,840
Speaker 1: interest rates and the equity markets is something that, um,

100
00:05:34,880 --> 00:05:36,760
Speaker 1: we're all waiting to see, I mean right now. As

101
00:05:36,839 --> 00:05:39,560
Speaker 1: much as we feel like interest rate markets, UM have

102
00:05:39,720 --> 00:05:42,080
Speaker 1: some players that are not typically present in them at

103
00:05:42,080 --> 00:05:44,560
Speaker 1: the size that they are right now, that impact on

104
00:05:44,680 --> 00:05:48,080
Speaker 1: equity markets hasn't really been pronounced, um. But you know,

105
00:05:48,160 --> 00:05:50,920
Speaker 1: once when you see moments like yesterday, when interest rates

106
00:05:50,960 --> 00:05:54,880
Speaker 1: are moving up quickly equity markets are dropping in unison

107
00:05:54,960 --> 00:05:57,279
Speaker 1: with it, that does say that there's the potential for

108
00:05:57,320 --> 00:06:01,680
Speaker 1: those types of factors to drive markets in unusual directions.

109
00:06:01,760 --> 00:06:06,680
Speaker 1: So you observed yesterday relatively normal correlations. I thought equities

110
00:06:06,720 --> 00:06:10,640
Speaker 1: would be down more frankly, yeah, I mean, the reality

111
00:06:10,720 --> 00:06:12,840
Speaker 1: is that most of the time when interest rates are

112
00:06:12,839 --> 00:06:16,599
Speaker 1: going up, equities are going up also, and when it's

113
00:06:16,640 --> 00:06:19,479
Speaker 1: the FED is on the headlines, that's when that correlation

114
00:06:19,600 --> 00:06:24,040
Speaker 1: reverses direction. So really, the just the sign of the correlation,

115
00:06:24,160 --> 00:06:27,000
Speaker 1: whether equities are going up or down when interest rates

116
00:06:27,080 --> 00:06:29,240
Speaker 1: are going up, is something that can change based on

117
00:06:29,279 --> 00:06:31,560
Speaker 1: the stories in the market. The negative seventies seven right

118
00:06:31,560 --> 00:06:33,800
Speaker 1: now in the Dallas seventeen thousand and four fifty one

119
00:06:34,160 --> 00:06:37,560
Speaker 1: Rockies looking at my Bloomberg terminal the vics sixteen point

120
00:06:37,640 --> 00:06:40,440
Speaker 1: six one. As a general statement, do you have an

121
00:06:40,520 --> 00:06:44,240
Speaker 1: enthusiasm about equities when you take fundamental research and drag

122
00:06:44,279 --> 00:06:47,240
Speaker 1: it into your derivatives and math world? I mean, I

123
00:06:47,279 --> 00:06:53,520
Speaker 1: think that the marketplace is consistently skeptical about Yeah, massive

124
00:06:53,560 --> 00:06:56,280
Speaker 1: a worry, right, and yet at the same time, equities

125
00:06:56,320 --> 00:06:58,240
Speaker 1: are not that far from their highs, and at least

126
00:06:58,279 --> 00:07:02,480
Speaker 1: in the US, other regions are different, and we've been

127
00:07:02,520 --> 00:07:05,080
Speaker 1: able to trade in a pretty contained range over the

128
00:07:05,120 --> 00:07:08,520
Speaker 1: last couple of months, despite news flow that might indicate

129
00:07:08,600 --> 00:07:12,000
Speaker 1: that people should be worried. I think that people have

130
00:07:12,080 --> 00:07:15,160
Speaker 1: to always be evaluating equities versus other asset classes, other

131
00:07:15,160 --> 00:07:19,560
Speaker 1: investment possibilities, and US equities have typically stacked up well recently.

132
00:07:20,560 --> 00:07:23,960
Speaker 1: Can you game when you leave a range? Can you

133
00:07:24,040 --> 00:07:26,000
Speaker 1: can you get out front of that or you just

134
00:07:26,080 --> 00:07:29,520
Speaker 1: have to wait to observe it expost. It's really hard

135
00:07:29,560 --> 00:07:32,280
Speaker 1: to know when we can exit these ranges. Last summer

136
00:07:32,320 --> 00:07:35,200
Speaker 1: we had the six month period when the SMP was

137
00:07:35,280 --> 00:07:37,320
Speaker 1: just about its range bound that it's had had ever been,

138
00:07:37,440 --> 00:07:40,080
Speaker 1: and there were really no indications that the break of

139
00:07:40,160 --> 00:07:43,000
Speaker 1: it was coming. It happened in August, during the quiet

140
00:07:43,000 --> 00:07:46,120
Speaker 1: time of the year. Yeah, why you can you make

141
00:07:46,120 --> 00:07:49,360
Speaker 1: a note that Mr Fishman can come back because he's

142
00:07:49,400 --> 00:07:52,600
Speaker 1: actually telling us the truth unlike a lot of people.

143
00:07:52,800 --> 00:07:54,880
Speaker 1: Oh yeah, we knew, we saw that coming answers, You

144
00:07:54,880 --> 00:07:57,040
Speaker 1: don't see it coming, right. I mean, the one thing

145
00:07:57,080 --> 00:07:59,440
Speaker 1: that we have seen more and more is that when

146
00:07:59,480 --> 00:08:01,440
Speaker 1: you do get out of a range, it can happen

147
00:08:01,560 --> 00:08:04,760
Speaker 1: surprisingly quickly. That's part of the story of being able

148
00:08:04,760 --> 00:08:07,680
Speaker 1: to shift market environments very quickly. Volatility. Do you see

149
00:08:07,680 --> 00:08:09,640
Speaker 1: that in the forward space or do you see that

150
00:08:09,720 --> 00:08:12,760
Speaker 1: in the spot space at the media quotes all the time. Well,

151
00:08:12,760 --> 00:08:16,000
Speaker 1: there are indications in the option markets that that might

152
00:08:16,040 --> 00:08:18,680
Speaker 1: continue to be the case. Um, the price of options

153
00:08:18,680 --> 00:08:22,240
Speaker 1: on the VIX itself, the skew, the difference between put

154
00:08:22,240 --> 00:08:26,320
Speaker 1: and call prices on the SNP, the term structure of volatility,

155
00:08:26,320 --> 00:08:28,840
Speaker 1: which is how much more people are willing to pay

156
00:08:28,920 --> 00:08:32,120
Speaker 1: the long data options versus short data options. What does

157
00:08:32,160 --> 00:08:34,080
Speaker 1: that say quickly? What does that say right now? What's

158
00:08:34,080 --> 00:08:36,200
Speaker 1: the forward market tell you in the VIX, Well, I

159
00:08:36,240 --> 00:08:40,680
Speaker 1: think it expresses further concerned that if volatility conditions change,

160
00:08:40,720 --> 00:08:44,240
Speaker 1: they can change quickly. Okay, Rocky Fisherman with us, a

161
00:08:44,280 --> 00:08:46,680
Speaker 1: bit confusing. We'll come back and translate this into the

162
00:08:46,679 --> 00:08:49,560
Speaker 1: Greek and after that we'll go to English. John Tucker

163
00:08:49,640 --> 00:08:53,319
Speaker 1: demands that we do that. Yeah, exactly, well we got

164
00:08:53,400 --> 00:08:56,760
Speaker 1: we got Rocky Fisherman, Rosetta Stone here to get through

165
00:08:56,760 --> 00:08:59,960
Speaker 1: the derivative where Key is with Deutsche Bank. Where thrilled

166
00:09:00,040 --> 00:09:02,680
Speaker 1: that he's with us today, of course, more importantly after

167
00:09:02,760 --> 00:09:06,480
Speaker 1: what we observed yesterday afternoon, which is Mr Fisherman said

168
00:09:06,559 --> 00:09:09,120
Speaker 1: was quite a pop in the bond market yield one

169
00:09:09,440 --> 00:09:16,240
Speaker 1: eight five, the market negative sixty seventeen thousand, four sixty.

170
00:09:17,720 --> 00:09:19,840
Speaker 1: And now to the news in New York with an

171
00:09:19,920 --> 00:09:22,960
Speaker 1: update on Egypt. Who's Michael bark Tom, Thank you very much.

172
00:09:23,040 --> 00:09:26,640
Speaker 1: Egypt Civil Aviation minister says his country is not ruling

173
00:09:26,640 --> 00:09:30,320
Speaker 1: out any possibilities in the overnight crash of an egypt

174
00:09:30,360 --> 00:09:34,440
Speaker 1: air plane into the Mediterranean. Jari Fati also says that

175
00:09:34,520 --> 00:09:38,280
Speaker 1: he will use the term missing plane until debris is found.

176
00:09:38,720 --> 00:09:41,240
Speaker 1: The sixty six people aboard the Airbus A three twenty

177
00:09:41,240 --> 00:09:44,440
Speaker 1: were flying from Paris to Cairo. Farting through a translator,

178
00:09:44,679 --> 00:09:48,000
Speaker 1: talked about the fifty six passengers on flight eight oh

179
00:09:48,000 --> 00:10:03,400
Speaker 1: four faty Egyptians, one British Iraqi, fifteen French with an infant,

180
00:10:04,760 --> 00:10:11,800
Speaker 1: one said, one Chatty, one Portuguese, one Algerian and one Canadian.

181
00:10:12,360 --> 00:10:15,640
Speaker 1: Greece's defense minister says the plane made abrupt turns and

182
00:10:15,720 --> 00:10:20,120
Speaker 1: suddenly lost altitude before entering Cairo's air traffic control space.

183
00:10:20,679 --> 00:10:24,120
Speaker 1: Heavy rains are continuing to pound central Sri Lanka, where

184
00:10:24,160 --> 00:10:27,880
Speaker 1: at least three villages already have been swallowed by the landslides.

185
00:10:28,240 --> 00:10:30,760
Speaker 1: At least eighteen people are known to have been killed,

186
00:10:31,080 --> 00:10:35,240
Speaker 1: and hundreds are reported missing. Global News twenty four hours

187
00:10:35,240 --> 00:10:38,320
Speaker 1: a day, powered by our twenty four hundred journalists more

188
00:10:38,360 --> 00:10:40,959
Speaker 1: than a hundred fifty news bureaus around the world. I'm

189
00:10:40,960 --> 00:10:43,960
Speaker 1: Michael bar Macha, Thanks so much. This is our Bloomberg

190
00:10:44,000 --> 00:10:47,880
Speaker 1: Surveillance brought you by Volvo Cars, White Planes. Visit Volver Cars,

191
00:10:47,920 --> 00:10:52,959
Speaker 1: White Planes dot Com. The down Negative fifty seventeen thousand,

192
00:10:53,480 --> 00:11:01,599
Speaker 1: four seventy one. This is Bloomberg Savellance Surveillance, brought to

193
00:11:01,600 --> 00:11:04,680
Speaker 1: you by Bank of America Mary Lynch's Global Cash Management Solutions,

194
00:11:04,720 --> 00:11:07,360
Speaker 1: helping you managed protected advant your global cash wherever the

195
00:11:07,440 --> 00:11:10,640
Speaker 1: road group to growth leaves. That's the power of global connections.

196
00:11:10,720 --> 00:11:17,760
Speaker 1: Bank of America North America member fd I C Global

197
00:11:17,800 --> 00:11:20,920
Speaker 1: Business News twenty four hours a day. If Bloomberg dot

198
00:11:20,920 --> 00:11:23,800
Speaker 1: Com the radio plus mobile app and on your radio,

199
00:11:24,080 --> 00:11:28,600
Speaker 1: this is a Bloomberg Business Flash and I'm Karen Moscow.

200
00:11:28,760 --> 00:11:32,000
Speaker 1: Federal Reserve Bank of Richmond President Jeffrey Lackers at a

201
00:11:32,080 --> 00:11:35,080
Speaker 1: June interest rate increase by the US Central Bank is

202
00:11:35,200 --> 00:11:39,480
Speaker 1: in order, with global risks having entirely dissipated. If we

203
00:11:39,559 --> 00:11:43,040
Speaker 1: did come in with data that along lines were expecting

204
00:11:43,040 --> 00:11:46,960
Speaker 1: to pick up growth in the second quarter, inflation kind

205
00:11:47,000 --> 00:11:49,559
Speaker 1: of remaining where it is now and maybe advancing further

206
00:11:49,600 --> 00:11:53,480
Speaker 1: towards two percent unimasured by the PC index, UM I

207
00:11:53,520 --> 00:11:55,560
Speaker 1: think that um I think the case would be very

208
00:11:55,600 --> 00:11:57,640
Speaker 1: strong for raising rates in June as well. And as

209
00:11:57,679 --> 00:12:01,080
Speaker 1: Blacker speaking in an interview heard on bloom Surveillance, and

210
00:12:01,200 --> 00:12:05,400
Speaker 1: US stocks meanwhile are slipping, with energy producers following oil

211
00:12:05,440 --> 00:12:08,480
Speaker 1: and other commodity prices lower as investors race for a

212
00:12:08,559 --> 00:12:12,080
Speaker 1: possible Federal Reserve interest rate increase as early as next month.

213
00:12:12,240 --> 00:12:14,640
Speaker 1: We checked the markets every fifteen minutes throughout the trading

214
00:12:14,720 --> 00:12:17,680
Speaker 1: day on the Bloomberg SNP five hundred down three tenths

215
00:12:17,679 --> 00:12:20,600
Speaker 1: per cent or six points at forty one down. Jones

216
00:12:20,640 --> 00:12:23,520
Speaker 1: Industrial Average down three tenths percent or fifty six points

217
00:12:23,520 --> 00:12:26,160
Speaker 1: to seventeen thousand, four hundred sixty eight, then asked to

218
00:12:26,200 --> 00:12:28,480
Speaker 1: act down a quarter percent or eleven points to forty

219
00:12:28,480 --> 00:12:31,600
Speaker 1: seven twenty seven ten year Treasury up three thirty seconds,

220
00:12:31,600 --> 00:12:33,559
Speaker 1: the yield one point eight four percent, the yield on

221
00:12:33,640 --> 00:12:36,679
Speaker 1: the two year point eight seven percent. Niemex screwed oil

222
00:12:36,720 --> 00:12:38,640
Speaker 1: down two point one percent or a dollar two to

223
00:12:38,720 --> 00:12:41,800
Speaker 1: forty seven seventeen a barrel comex goll down two point

224
00:12:41,800 --> 00:12:44,240
Speaker 1: one percent or twenty six dollars sixty cents to twelve

225
00:12:44,240 --> 00:12:47,600
Speaker 1: forty seven eighty announced the euro a dollar twelve oh

226
00:12:47,640 --> 00:12:50,120
Speaker 1: three the N one oh nine point nine zero. We're

227
00:12:50,120 --> 00:12:53,120
Speaker 1: watching shares of Walmart up nine per cent after its

228
00:12:53,120 --> 00:12:56,400
Speaker 1: first quarter results, beat outalysts, estimates, tepping down fears the

229
00:12:56,400 --> 00:12:58,679
Speaker 1: retail industry is mired in a slump and that's a

230
00:12:58,679 --> 00:13:01,920
Speaker 1: bloomberg business flesh. Karen A, thanks so much. I know

231
00:13:02,040 --> 00:13:06,760
Speaker 1: gold really moving negative twelve forty eight the ounce some

232
00:13:07,040 --> 00:13:12,240
Speaker 1: form of a technical point maybe below that announced on

233
00:13:12,320 --> 00:13:16,360
Speaker 1: twenty six dollars on gold. Bloomer surveillance This morning brought

234
00:13:16,400 --> 00:13:21,880
Speaker 1: you by Interactive Brokers Traders University. Even experienced traders need

235
00:13:21,920 --> 00:13:24,400
Speaker 1: to keep learning. Traders University will get you up to

236
00:13:24,440 --> 00:13:28,680
Speaker 1: speed quickly with short videos, webinars and courses and more.

237
00:13:28,840 --> 00:13:33,400
Speaker 1: Visit I b k R beat dot com slash stay

238
00:13:33,440 --> 00:13:37,199
Speaker 1: ahead again in New York Today the celebration of Vice

239
00:13:37,280 --> 00:13:41,119
Speaker 1: Chairman of the Feed Stanley Fisher in honor of Michael Woodford.

240
00:13:41,520 --> 00:13:43,840
Speaker 1: He has been on the show before his Professor Woodward

241
00:13:44,400 --> 00:13:48,160
Speaker 1: with his classic interest in prices and in the wonderful

242
00:13:48,240 --> 00:13:50,640
Speaker 1: Fisher speech which I put out on Twitter a bit ago.

243
00:13:51,440 --> 00:13:54,880
Speaker 1: Are the three equation foundations of Professor Woodward's work. I'm

244
00:13:54,880 --> 00:13:58,560
Speaker 1: not gonna bore you with oiler functions in the dynamics here,

245
00:13:59,000 --> 00:14:03,400
Speaker 1: other than to say the simplest equation is inflation is

246
00:14:03,440 --> 00:14:08,400
Speaker 1: basically where inflation is now plus the expectation of where

247
00:14:08,440 --> 00:14:12,199
Speaker 1: inflation will be, which leads us to Rocky Fisherman's world

248
00:14:12,200 --> 00:14:15,760
Speaker 1: of mathematics at Deutsche Bank, where he works in equity strategy.

249
00:14:16,760 --> 00:14:19,320
Speaker 1: Do we have the same confidence looking out into the

250
00:14:19,360 --> 00:14:22,560
Speaker 1: future that we did in two thousand and six? Is

251
00:14:22,560 --> 00:14:25,600
Speaker 1: there a new humility in your world? I mean when

252
00:14:25,640 --> 00:14:29,400
Speaker 1: Michael Woodford wrote that equation, there was an expectation with

253
00:14:29,480 --> 00:14:33,120
Speaker 1: sort of a certitude we know what we're doing. We

254
00:14:33,280 --> 00:14:35,800
Speaker 1: were more humble. Now, how far out do you look

255
00:14:36,480 --> 00:14:39,080
Speaker 1: in you're modeling. I mean, we look at the equity

256
00:14:39,080 --> 00:14:44,640
Speaker 1: derivatives markets and very short dated options you can have

257
00:14:44,680 --> 00:14:47,040
Speaker 1: a better sense of what's on the horizon. And then

258
00:14:47,040 --> 00:14:50,000
Speaker 1: the options market starts to just assume a just a

259
00:14:50,040 --> 00:14:53,920
Speaker 1: general level of uncertainty that becomes greater as time goes on.

260
00:14:54,000 --> 00:14:56,760
Speaker 1: It's a reason why option prices start to price in

261
00:14:56,840 --> 00:14:59,880
Speaker 1: more risk as the options become longer and longer data,

262
00:15:00,240 --> 00:15:03,160
Speaker 1: and not because of a specific risk. Right now, in

263
00:15:03,200 --> 00:15:06,480
Speaker 1: the short dated options market, there are specific events in

264
00:15:06,600 --> 00:15:09,760
Speaker 1: June that investors have become very interested in. But as

265
00:15:09,880 --> 00:15:13,880
Speaker 1: option expirations get longer and longer dated, it just becomes

266
00:15:13,880 --> 00:15:18,560
Speaker 1: a general uncertainty. Options have an advantage, which is you

267
00:15:18,600 --> 00:15:21,239
Speaker 1: know what your downside is. You have a limited, defined

268
00:15:22,000 --> 00:15:24,720
Speaker 1: negative cost of the option, and there's some of the

269
00:15:24,800 --> 00:15:29,440
Speaker 1: themes off that futures. That's not the case in days

270
00:15:29,480 --> 00:15:32,360
Speaker 1: long agne you paid a premium for that option because

271
00:15:32,360 --> 00:15:35,640
Speaker 1: it would tell you what your downside was. Is that

272
00:15:35,720 --> 00:15:38,880
Speaker 1: premium still there? I mean, the options markets become so

273
00:15:38,960 --> 00:15:44,880
Speaker 1: big is it? Is it equivalent to future dynamics in price? Well, yeah,

274
00:15:44,920 --> 00:15:47,680
Speaker 1: I mean option markets allow you to focus on a

275
00:15:47,720 --> 00:15:50,640
Speaker 1: specific date in the future and you're paying a bit

276
00:15:50,640 --> 00:15:54,360
Speaker 1: of extra premium for an option. Yeah, it's there. And

277
00:15:54,480 --> 00:15:57,600
Speaker 1: the more longer dated you go, the more that premium

278
00:15:57,640 --> 00:16:00,720
Speaker 1: tends to be out there. So very long dated options

279
00:16:01,160 --> 00:16:03,200
Speaker 1: price and of a lot of risk that you could

280
00:16:03,240 --> 00:16:05,880
Speaker 1: have a very significant change in the environment over at

281
00:16:05,920 --> 00:16:07,880
Speaker 1: the neat let's say two years. Did you ever read

282
00:16:07,880 --> 00:16:10,600
Speaker 1: Fulled by Randomness? Tell up, um, I haven't read it.

283
00:16:10,800 --> 00:16:12,680
Speaker 1: You have to read it, my word, it's the only

284
00:16:13,000 --> 00:16:15,760
Speaker 1: I've only forced my kids to read two books. One

285
00:16:15,840 --> 00:16:18,440
Speaker 1: was Fooled by Randomness by Tellub I said, it's it'll

286
00:16:18,440 --> 00:16:20,960
Speaker 1: explain why your father is a nutcase, and and the

287
00:16:21,080 --> 00:16:23,440
Speaker 1: other is Henry because of his world order, which is

288
00:16:23,440 --> 00:16:28,120
Speaker 1: really sobering, uh in a very controversial way. In Full

289
00:16:28,200 --> 00:16:30,360
Speaker 1: by Randomness, which he is writing about guys like you

290
00:16:30,400 --> 00:16:36,040
Speaker 1: want a desk, he pays homage to making small bets

291
00:16:36,080 --> 00:16:38,800
Speaker 1: out into the future. What I call it is the

292
00:16:38,920 --> 00:16:42,520
Speaker 1: sizing of the trade. And what amateurs always do is

293
00:16:42,520 --> 00:16:45,400
Speaker 1: they make too big of a bet. As a general statement,

294
00:16:45,520 --> 00:16:48,960
Speaker 1: how do you respond to Tullub's idea of making your

295
00:16:48,960 --> 00:16:54,960
Speaker 1: belief but taking many small bets out into the future. Well,

296
00:16:55,040 --> 00:16:58,240
Speaker 1: investors have to really focus on what their needs are

297
00:16:58,280 --> 00:17:01,000
Speaker 1: when they're making option bets. I mean, any investors will

298
00:17:01,040 --> 00:17:04,320
Speaker 1: look at a core position that will, let's say, protect

299
00:17:04,359 --> 00:17:07,960
Speaker 1: them in most types of bad scenarios, but then look

300
00:17:07,960 --> 00:17:09,920
Speaker 1: at the types of things that could happen, and the

301
00:17:10,440 --> 00:17:15,879
Speaker 1: markets allow for very tailored UM positions based on specific macroeconomics.

302
00:17:15,920 --> 00:17:17,840
Speaker 1: I'm like a lawyer. I knew what your answer would be,

303
00:17:17,840 --> 00:17:19,639
Speaker 1: which would get me to what I really want to know,

304
00:17:20,119 --> 00:17:23,919
Speaker 1: which is UM defendant. Let me let me explain this

305
00:17:23,960 --> 00:17:26,840
Speaker 1: as best as I can. If that's what you're doing

306
00:17:27,000 --> 00:17:30,120
Speaker 1: tailoring bets, are you now in a position where there's

307
00:17:30,119 --> 00:17:32,960
Speaker 1: too many exogenous shocks and too much noise out there,

308
00:17:33,480 --> 00:17:37,040
Speaker 1: or it's harder to make your future bets. Well, there

309
00:17:37,040 --> 00:17:40,720
Speaker 1: are generic future bets that will cover most types of scenarios.

310
00:17:40,760 --> 00:17:44,920
Speaker 1: I mean, the SMP is a very broad based equity market. UM,

311
00:17:45,119 --> 00:17:48,560
Speaker 1: that's something that if you're protecting against an SMP decline,

312
00:17:48,600 --> 00:17:52,280
Speaker 1: or if you're protecting against global equities, those become very

313
00:17:52,320 --> 00:17:56,120
Speaker 1: broad based bets. If you're looking at specific strike levels

314
00:17:56,160 --> 00:18:00,800
Speaker 1: if you're looking at specific interplace of currencies and can

315
00:18:00,880 --> 00:18:04,240
Speaker 1: be much more. Rocky, put your headphones on back with us.

316
00:18:04,280 --> 00:18:07,960
Speaker 1: Michael McKee after his interview with Jeffrey Lacker this morning. Michael,

317
00:18:07,960 --> 00:18:11,440
Speaker 1: we're with Rocky Fishman of Deutsche Bank and equity derivatives.

318
00:18:11,840 --> 00:18:17,240
Speaker 1: We've been talking Gaussian mode and skewness. Is that okay, Mike? Yeah,

319
00:18:17,280 --> 00:18:19,840
Speaker 1: that's fine. Um. I don't know whether he has a

320
00:18:19,920 --> 00:18:23,800
Speaker 1: view on the penguins lightning, but we could do that.

321
00:18:24,000 --> 00:18:25,600
Speaker 1: I don't know if you can take out a derivative

322
00:18:25,640 --> 00:18:27,600
Speaker 1: on that one. You can't take out a derivati on

323
00:18:27,640 --> 00:18:31,560
Speaker 1: that one. Everyone's got too many injuries, Michael, question please

324
00:18:31,560 --> 00:18:36,760
Speaker 1: for Well, I'm just wondering what people think these days,

325
00:18:37,320 --> 00:18:40,640
Speaker 1: if if the options market is telling it a different

326
00:18:40,720 --> 00:18:45,000
Speaker 1: story than what the Fed and the bond market are

327
00:18:45,320 --> 00:18:49,760
Speaker 1: suggesting about global risks, about the risks of interest rates,

328
00:18:49,920 --> 00:18:54,760
Speaker 1: whether we're seeing investors who are looking for protection, looking

329
00:18:54,760 --> 00:18:58,920
Speaker 1: for something uh different than than what we're hearing from

330
00:18:58,920 --> 00:19:03,639
Speaker 1: the Central Bank. Now, Well, we do see interests and

331
00:19:03,720 --> 00:19:08,920
Speaker 1: products that have a specific relationship between equities and interest rates,

332
00:19:09,240 --> 00:19:11,760
Speaker 1: and typically there tends to be more interest in the

333
00:19:12,400 --> 00:19:14,919
Speaker 1: scenario in which interest rates are falling and equities are

334
00:19:14,960 --> 00:19:18,480
Speaker 1: falling also. But there is also the story that maybe,

335
00:19:18,560 --> 00:19:21,120
Speaker 1: like we saw yesterday, if the FED becomes more hawkish,

336
00:19:21,119 --> 00:19:23,280
Speaker 1: that could be negative for equities um and that's a

337
00:19:23,320 --> 00:19:25,640
Speaker 1: story that we feel like is not a price sufficiently

338
00:19:25,680 --> 00:19:29,640
Speaker 1: in the equity markets? Has has it changed? Has what

339
00:19:29,680 --> 00:19:33,000
Speaker 1: people are buying changed? In other words, can the derivatives

340
00:19:33,040 --> 00:19:36,000
Speaker 1: market give us any kind of pointer as to the

341
00:19:36,040 --> 00:19:39,840
Speaker 1: direction that investors I think our investors getting a hand

342
00:19:39,840 --> 00:19:43,440
Speaker 1: of the FED or are they behind this now? I'd

343
00:19:43,480 --> 00:19:46,119
Speaker 1: say that right now, investors who are looking at true

344
00:19:46,200 --> 00:19:50,000
Speaker 1: cross ass at trades are not focused signific a lot

345
00:19:50,119 --> 00:19:53,080
Speaker 1: on the scenario that hawkish FED could be very negative

346
00:19:53,080 --> 00:19:55,520
Speaker 1: for equities. So I would say that that's a story

347
00:19:55,600 --> 00:19:59,399
Speaker 1: that's an opportunity for investors who really do believe that

348
00:19:59,440 --> 00:20:02,400
Speaker 1: the FED could to hawkeys. Maybe that says people don't

349
00:20:02,680 --> 00:20:05,680
Speaker 1: expect that to be that impactful on equities. Rocky, thank

350
00:20:05,720 --> 00:20:07,800
Speaker 1: you so much, Rocky Fisherman with us. I love when

351
00:20:07,800 --> 00:20:10,400
Speaker 1: you show up. We get a little Matthew here. Mr

352
00:20:10,440 --> 00:20:14,800
Speaker 1: Fisherman is with Deutsche Bank working in derivatives and particularly

353
00:20:14,800 --> 00:20:17,520
Speaker 1: in the equity market. MICA a headline coming out, which

354
00:20:17,520 --> 00:20:19,960
Speaker 1: I'll be honest, I don't know how to translate, but

355
00:20:20,080 --> 00:20:23,320
Speaker 1: I think it's so interesting and important that I'm gonna

356
00:20:23,320 --> 00:20:27,679
Speaker 1: go with it. Are Liz Kischer reporting the SEC is

357
00:20:27,800 --> 00:20:33,560
Speaker 1: named Philip Michelson a relief defendant in a trading case.

358
00:20:34,840 --> 00:20:38,760
Speaker 1: That's all I have. I believe this is Phil Michelson,

359
00:20:39,440 --> 00:20:43,600
Speaker 1: the golfer in a rich Phil Bicholson, the golfer. He's

360
00:20:43,640 --> 00:20:47,240
Speaker 1: been involved in an insider trading case against the former

361
00:20:47,320 --> 00:20:52,800
Speaker 1: chairman of Dean Foods, the gambler with whom Phil Micholson

362
00:20:53,600 --> 00:20:57,600
Speaker 1: is a friend of this gambler who in theory passed

363
00:20:57,600 --> 00:21:05,200
Speaker 1: along information insider information to Phil Nicholson. Just breaking. Here's

364
00:21:05,240 --> 00:21:08,720
Speaker 1: the text completely and you have a correct Mike Michelson

365
00:21:08,840 --> 00:21:12,280
Speaker 1: cited in regulators insider trading case against Dean Foods ex

366
00:21:12,320 --> 00:21:17,520
Speaker 1: chairman Tom C. Davis and gambler William Walters as well. So,

367
00:21:17,920 --> 00:21:20,879
Speaker 1: Mr Michelson, it's been in the news, but there it is.

368
00:21:20,920 --> 00:21:25,240
Speaker 1: It's a sobering headline. SEC names Philip Michelson relief defendant

369
00:21:25,240 --> 00:21:29,719
Speaker 1: in trading case. McKee driving equities lower with his lacquer

370
00:21:29,720 --> 00:21:34,480
Speaker 1: interview UH negative one twenty on the Dows seventeen thousand,

371
00:21:34,480 --> 00:21:37,280
Speaker 1: four h six of vis elevated by a full one

372
00:21:37,320 --> 00:21:42,480
Speaker 1: point one three point seventeen point zero eight yields coming

373
00:21:42,520 --> 00:21:45,840
Speaker 1: back in after higher yields this morning one point eight

374
00:21:45,880 --> 00:21:48,080
Speaker 1: three now on the tenure in a full two basis

375
00:21:48,080 --> 00:21:52,480
Speaker 1: points as well, most interesting dollars stronger, yain UH and

376
00:21:52,560 --> 00:21:55,520
Speaker 1: Euro churning weaker. I will call it um a turn

377
00:21:55,560 --> 00:21:57,200
Speaker 1: of the market, but really a focal point now and

378
00:21:57,320 --> 00:22:00,240
Speaker 1: equities down a hundred and twenty six point seven teen

379
00:22:00,320 --> 00:22:05,359
Speaker 1: thousand four under Michael's safe travels. Please from Washington in

380
00:22:05,440 --> 00:22:09,680
Speaker 1: your interview with President uh Lacquer will have much much

381
00:22:09,680 --> 00:22:11,600
Speaker 1: more through the day, and of course stay with US

382
00:22:12,119 --> 00:22:17,320
Speaker 1: worldwide on Bloomberg Radio for further news is France and Egypt.

383
00:22:17,800 --> 00:22:21,560
Speaker 1: Consider the plane crash of Egypt. Are north of Egypt

384
00:22:21,600 --> 00:22:24,760
Speaker 1: and south of the Greek Islands from New York. This

385
00:22:24,840 --> 00:22:26,000
Speaker 1: is Bloomberg Surveillance