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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along

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Speaker 1: with my co host of Bonnie Quinn. Every business day

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Speaker 1: we bring you interviews from CEOs, market pros, and Bloomberg experts,

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Speaker 1: along with essential market moving news. Trying the Bloomberg Markets

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Speaker 1: Podcast on Apple podcast or wherever you listen to podcasts,

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Speaker 1: and on Bloomberg dot com. Looking at games doot, Bonnie,

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Speaker 1: I know you wanted an update. It's up a hundred

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Speaker 1: seventeen percent today, up sixtcent year to date, up seventy

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Speaker 1: four hundred percent. As for the Bloomberg terminal on a

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Speaker 1: trailing twelve month basis, let's trying to put some of

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Speaker 1: that into context. We can do that with John Authors.

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Speaker 1: He's a senior editor for Bloomberg Markets. He's seen a

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Speaker 1: thing or two. John, thanks so much for joining us here.

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Speaker 1: What do you make of the game stops? So the

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Speaker 1: world and there's a lot more besides game stop and

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Speaker 1: you take a look at some of the other names

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Speaker 1: like tuts, your role in AMC entertainment and others. Well,

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Speaker 1: I guess my best take on this, which has provoked

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Speaker 1: a lot of reaction, but that this is h This

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Speaker 1: is obviously bubblished behavior, not necessarily a bubble for the

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Speaker 1: entire market, but extremely frosty behavior at the margins and

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Speaker 1: the very least, which is concerning. And what's really concerning

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Speaker 1: is that it's not a classic bubble driven by greed.

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Speaker 1: It seems to me to be driven by anger. People

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Speaker 1: feel that the current situation is unfair and with all

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Speaker 1: of those have got plenty of reasons to think that,

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Speaker 1: and things like the attack on the shorts, the short

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Speaker 1: squeezing GameStop are seen as a way. I've had feedback

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Speaker 1: saying this is a way of earning back the money

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Speaker 1: we paid for the top bailout twelve years ago. That

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Speaker 1: this this is seen as writing a historical wrong, which

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Speaker 1: is something that angle fueled by righteous anger rather than greed. Yeah,

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Speaker 1: I mean, I find this a phenomenally interesting take, because

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Speaker 1: you know, there are a lot of takes out there

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Speaker 1: from the people who were shut themselves, to people like

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Speaker 1: Anthony Scaramucci saying that this is positive for bitcoin if

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Speaker 1: there's a lot of people just making hay from this phenomenon.

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Speaker 1: But John, I think you've hit on something very interesting,

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Speaker 1: which is, you know, are there now different strata of

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Speaker 1: capitalists and are they partaking of the whole populism phenomenon

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Speaker 1: only is sort of in a different world. Yes, that's

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Speaker 1: the the kind of similarity to um what we saw

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Speaker 1: at the Capital is quite concerning. Again, you're talking about

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Speaker 1: social media coordinating angry people into making an attack on

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Speaker 1: what they see as the establishments, and plainly the Capitol

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Speaker 1: is the establishment with with a tradition and lead. The

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Speaker 1: short sellers who have been attacking Game Stop are unpopular

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Speaker 1: on Wall Street. They're seen as the good guys or

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Speaker 1: the little guys trying to to keep all streets honest.

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Speaker 1: But at this point they wear suits, and that means

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Speaker 1: they're they're among the enemies. Now that there's obviously great

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Speaker 1: differences in methods, but the motivations behind this are very

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Speaker 1: similar to the motivations behind the various populist movements we

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Speaker 1: know around the world. The the reasons for anger are

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Speaker 1: very genuine. Again, as you might also say about, for example, Brexit.

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Speaker 1: The question is whether this is a sensible way to

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Speaker 1: channel that anger, whether this is a sensible response to

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Speaker 1: the real unfairness that is out there. John, Is there

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Speaker 1: a political element to this? I mean, is this occupy

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Speaker 1: the stock market or is it something more akin to

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Speaker 1: what we saw last week. As he said, I do

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Speaker 1: think there's a political element to this, yes, um, whether

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Speaker 1: it is um uh, I mean, it's not solely a

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Speaker 1: political element. But in terms of when you're worried about

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Speaker 1: a bubble, whether you're worried, when you're worried about the

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Speaker 1: possibility of excess um, what matters then is sentiments, how

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Speaker 1: what the psychology is that's driving people. Now. The problem

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Speaker 1: with greed is that people will do a lot for

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Speaker 1: greed naturally, and it needs to be balanced against fear.

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Speaker 1: In this case, it is righteous anger. And if there

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Speaker 1: is any emotion that will make us throw caution to

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Speaker 1: the winds even more than greed will, I would say,

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Speaker 1: it's anger. Um. And it's very hard. Since I wrote

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Speaker 1: my column last night, I've had some people suggesting that

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Speaker 1: the Mississippi bubble, the French current of the South Sea

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Speaker 1: bubble might have had some elements of this, that that

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Speaker 1: people were angry with with life in France and sort

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Speaker 1: of investing in in rather illusory prospects in the New

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Speaker 1: World as as a way of getting back at them.

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Speaker 1: But that's the best that's the only example anybody has

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Speaker 1: come up with. Something like this, where there is this

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Speaker 1: kind of speculative action and it's driven by anger, not greed.

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Speaker 1: So so it's whenever we have a lack of precedent

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Speaker 1: that's concerning you don't know what's coming. John. If this

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Speaker 1: is indeed a bubble, does this bubble? Is there any

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Speaker 1: reason to believe that this bubble doesn't end like other

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Speaker 1: bubbles do and people get hurt and it just kind

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Speaker 1: of pops. No, there's no reason to believe that. There's

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Speaker 1: certainly a reason to believe that that this bubble could

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Speaker 1: be far far bigger than it currently is. And there's

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Speaker 1: um we can we can go back over the there

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Speaker 1: are two sides to the argument of Both of them

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Speaker 1: are completely valid as far as they go. Stop stocks

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Speaker 1: are very expensive judged against their own history, but they're

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Speaker 1: not expensive compared to two bond yields. And then it

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Speaker 1: becomes an argument about where the bond yields stayed this

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Speaker 1: low um. But in terms of is there any reason

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Speaker 1: to believe this kind of a bubble wouldn't burst compared

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Speaker 1: to other bubbles, there's there's no reason to believe that.

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Speaker 1: I assume that it would, and I assume that the

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Speaker 1: last people in who will be the little guys just

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Speaker 1: as they are now, will, as in previous bubbles, be

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Speaker 1: the ones who get hurt the most. I mean, is

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Speaker 1: this one area we're seeing actual unity? John? Are these

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Speaker 1: people on the right and on the left with the

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Speaker 1: same argument. There's a great argument out there about how

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Speaker 1: we don't fully recognize that cultural expressions of politics, like

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Speaker 1: protest songs, for example, are just as popular on the

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Speaker 1: right as they are on the left, and that just

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Speaker 1: haven't given enough, you know, attention to both sides of

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Speaker 1: that coin. It just seems to be something associated with

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Speaker 1: the left. But is that what you know? We're seeing

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Speaker 1: that here? Yes, I think that's a very good point.

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Speaker 1: I think that it's it's one of the points we've

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Speaker 1: seen in politics for some years now and again, if

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Speaker 1: you want to go back to Brexit and and Trump

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Speaker 1: or order of protectionism, that the in Britain it was

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Speaker 1: very much the traditional right, but a lot of people

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Speaker 1: on the traditional left wanted to Brexit, and it was

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Speaker 1: a a an elite from the center left to the

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Speaker 1: center right that wanted to stay with Europe. That there

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Speaker 1: was this unholy alliance in many ways. If we go

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Speaker 1: back to the financial crisis, of twelve years ago. There

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Speaker 1: there was a very strange alliance in the in the

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Speaker 1: the the people who really shared an analysis of what

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Speaker 1: has gone wrong and who really disliked moral hazard way

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Speaker 1: the FED behaved were either libertarians on the rights you

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Speaker 1: think of libtic on meses, or outright socialists on the

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Speaker 1: left like Hyman Minsky, and they had very different ideas

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Speaker 1: for how to solve the problem, but they actually had

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Speaker 1: almost exactly the same prescription, the same definition of what

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Speaker 1: has gone wrong. And similarly, if you're a libertarian or

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Speaker 1: an equal egalitarian socialist, you have equally strong good reasons

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Speaker 1: to be angry at the moment, and you get this

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Speaker 1: strange alliance. John author is fabulous conversation and the latest

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Speaker 1: Bloomer opinion article from John on this particular subject is

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Speaker 1: game stop is rage against the machine? Anger is an energy.

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Speaker 1: Do have a read of it. It's a take that

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Speaker 1: we haven't heard enough about, to be honest, out there

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Speaker 1: and just really fascinating. Do stay tuned. We're going to

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Speaker 1: get a COVID nine teen White House Task Force briefing

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Speaker 1: at eleven am. We're going to dip into that and

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Speaker 1: see what exactly is going on. This is New York

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Speaker 1: City is to get seventeen thousand more doses next week.

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Speaker 1: Another treat for us. Now we get to talk FED

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Speaker 1: with Alan Blinder, Princeton University professor and of course, former

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Speaker 1: Federal Reserve Vice chair. He served with Janet Yellen on

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Speaker 1: the Fed's board in you know, recent decades, and is

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Speaker 1: also a co author of a book with Janet Yellen

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Speaker 1: called The Fabulous Decade Macroeconomic Lessons from the nineteen Nineties

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Speaker 1: that was published in two thousand one. Alan, thank you

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Speaker 1: so much for joining First your reaction to Joannet Yellen

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Speaker 1: as now Treasury Secretary, the first woman Treasury Secretary of

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Speaker 1: the United States of America, Well, I'm pleased as punch

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Speaker 1: as you can, well regarded, well understand. It is a

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Speaker 1: landmark to have the first woman sitting in the Secretary

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Speaker 1: of the Treasuries off us. She comes very well prepared.

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Speaker 1: Not all Secretaries of the Treasury do, you may recall

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Speaker 1: without naming names. Uh, some do, some don't. She comes

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Speaker 1: very well prepared, both understanding markets and understanding Washington, and

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Speaker 1: understanding the Treasuries business, and especially obviously understanding the Federal Reserve.

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Speaker 1: When you're in a crisis, situation such as we've been

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Speaker 1: in for a while. The Treasury and the Fed, regardless

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Speaker 1: of who's sitting in those two chairs, have got to

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Speaker 1: be in close collaboration early and often. And this is

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Speaker 1: just going to be so easy with a Janet Yellen

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Speaker 1: and J Powell. So, professor, how do you expect or

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Speaker 1: what would you like to see in terms of fiscal

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Speaker 1: policy and monetary policy? Here? Just where we are right now?

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Speaker 1: It seems like we're gonna we can look to the

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Speaker 1: other side of this pandemic, but there's still a long

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Speaker 1: road ahead. What would you like to see? Yeah, I

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Speaker 1: think monetary policy should be sitting right where it is,

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Speaker 1: and that's of course what the Federal Reserve thinks. This

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Speaker 1: is no news. And then but I just might say

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Speaker 1: that's in a hyper expansionary stance. So it's not like

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Speaker 1: they're sitting in neutral or something like that. Fig got

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Speaker 1: the interest rate to the floor. They're buying securities may

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Speaker 1: uh to increase the side of the balance sheet and

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Speaker 1: so on. They should stay that way for a while. Uh.

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Speaker 1: It's regretful and I'm not sure the legal status of

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Speaker 1: some of these. Uh that Secretary minution saw fit in

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Speaker 1: its closing days to cut cut them out the Fed's

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Speaker 1: emergency UH lending facilities. I'd like to see Janet Yellen

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Speaker 1: put them back to the extent that she can. Some

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Speaker 1: that may need Congressional action, which is harder. Whatever can

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Speaker 1: be done by Treasury action, I think should be done

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Speaker 1: just because you want them. There is a backstop. The

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Speaker 1: argument that minution made the row and not using let's

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Speaker 1: throw them away is exactly the same as saying I

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Speaker 1: haven't made a claim of my fire insurance policy from

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Speaker 1: my home, so let me just cancel it. Yeah, for sure,

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Speaker 1: if and when it does come up again, I imagine

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Speaker 1: there'll be a different type of approach from the Treasury.

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Speaker 1: So curious, Allen. You know, Jerome Powell has been a

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Speaker 1: FED board member since two thousand twelve. He became the

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Speaker 1: chair of the FMC in two eighteen. What happens next

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Speaker 1: with the FED chair position? Presumably Chair Powell stays as

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Speaker 1: long as he's welcome to stay, which presumably is the

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Speaker 1: rest of his term. And then does President Biden appoint

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Speaker 1: somebody else who might it be? Well, I think it's

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Speaker 1: very early to speculate on that, But look, I don't

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Speaker 1: think you should eliminate Jerome Powell. Prior to Donald Trump,

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Speaker 1: there were many instances of a new president coming in

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Speaker 1: with a FED chair appointed by president of the other

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Speaker 1: party and then um giving that person another term because

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Speaker 1: they were all he's then one of them was Janet Yellen.

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Speaker 1: She was the exception. Trump did not do that, but

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Speaker 1: many previous presidents looked at the FED chair said well,

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Speaker 1: he did a very good job. Let's keep him in position.

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Speaker 1: So you'd be fine with Ron Paul having a second

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Speaker 1: term as FED chair. I would be. Now, of course,

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Speaker 1: it's up to Joe Biden, not to me. All I'm

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Speaker 1: saying is that I wouldn't write him out. There's definitely

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Speaker 1: a live possibility that he could become get a second term.

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Speaker 1: Now if if that's not the case, an obvious kennidate

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Speaker 1: is Lele Brainerd, who's the Democrat sitting on the board

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Speaker 1: right now. And there may be other uh Biden appointments

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Speaker 1: before Powell's term ends to the board and those will

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Speaker 1: be live. Candidate said, then there are plenty of people

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Speaker 1: I don't want to thought speculating on names in the

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Speaker 1: financial world, UH, who are Democrats who could be attractive

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Speaker 1: to Biden as a replacement for power But the logic

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Speaker 1: here is going to be question A is for Biden

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Speaker 1: is do I keep power or replace him? That's question one.

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Speaker 1: Then if you answer that in the negative, then a

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Speaker 1: whole host of names UH start should start coming to

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Speaker 1: your desk, Professor. Given what we know about fiscal policy,

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Speaker 1: given what we know about UH fiscal stimulus and monetary policy,

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Speaker 1: what is your economic outlook here? I mean, I think

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Speaker 1: there's concern here that the improvement in the economy, the

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Speaker 1: opening up of the economy, if you will, maybe take

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Speaker 1: a little bit longer than people had initially thought. Yeah, Well,

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Speaker 1: it depends on many things, in which two are completely obvious.

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Speaker 1: One is the speed or or lack of speed with

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Speaker 1: which we get this wave of the virus under control.

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Speaker 1: That depends a lot on the vaccination rollout, which, as

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Speaker 1: you know, has been disappointingly slow, in which President Biden

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Speaker 1: has promised to accelerate, its taping steps to accelerate. And

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Speaker 1: the other is the passage or non passage of another

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Speaker 1: COVID relief package. So we did one in December. That

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Speaker 1: was good. It's now to January. It is soon going

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Speaker 1: to be February. In March, for example, things start running

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Speaker 1: out such as the extra unemployment benefits. I be pleased

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Speaker 1: but surprised if the economy is looking really healthy in March,

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Speaker 1: that is to say, not no longer needing extra emergency support.

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Speaker 1: So I hope the kind this is going to pass

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Speaker 1: a bill. We don't need it this week, but we

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Speaker 1: do need it, and the health of the economy in March, April, May, June,

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Speaker 1: etcetera depends, among other things on that. Alan, what do

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Speaker 1: you make of the data that actually shows improvement these days?

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Speaker 1: I mean, yesterday we got the confidence data would showed

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Speaker 1: that perhaps know in the future, but right now people

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Speaker 1: are a little more confident. What's giving them that confidence

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Speaker 1: if many of them have been out of work for

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Speaker 1: nearly that's great. I'm glad you asked that. I was

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Speaker 1: surprised at that, and I noted that the sentiment about

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Speaker 1: the current economy had not improved, had deteriorated a little bit.

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Speaker 1: But people are looking forward, and I think the answer

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Speaker 1: is the light at the end of the tunnel. The

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Speaker 1: vaccine um. It's not like this secret. Everybody in the

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Speaker 1: country knows that vaccines. To hear people are starting to

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Speaker 1: get vaccinated, and there's a lot of talk now, especially

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Speaker 1: now about have everybody who wants a vaccine vaccinated by summer.

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Speaker 1: That's a big change from the way the world looked

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Speaker 1: three six months ago. So when we think about that,

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Speaker 1: to let at the end of the tunnel, professor, the

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Speaker 1: number of folks that are out of work and out

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Speaker 1: of work for a long period of time is increasingly troubling.

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Speaker 1: I think to a lot of folks here, how do

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Speaker 1: you think the the labor economy is going to recover?

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Speaker 1: You know again at the other side of this, well,

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Speaker 1: I'm gonna sound like a broken record, but it depends

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Speaker 1: on those two things as we get rid of the

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Speaker 1: scourge of the coronavirus. Let me back up a step.

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Speaker 1: A lot of those jobs you're talking about are in

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Speaker 1: the service industries, restaurants, theaters, entertainment venues of all uh sorts.

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Speaker 1: It's not people like me and people like you who

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Speaker 1: are working electronically. And those jobs will come back, at

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Speaker 1: least most of them, I think will come back as

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Speaker 1: and when the virus fades into insignificance. You know, I

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Speaker 1: should emphasize we have seasonal flu every year. It kills

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Speaker 1: ten thirty thou people every year. But that's a long

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Speaker 1: way from four hundred, five hundred thousand. You know, the

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Speaker 1: thought we should have is to get the coronavirus down

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Speaker 1: to the level of the flu or something like that,

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Speaker 1: and then the country can go back to normal. So

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Speaker 1: there's that, and then the second thing is the COVID

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Speaker 1: relief package, which has benefits for unemployed. So if you

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Speaker 1: if you don't have your job back, you can continue

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Speaker 1: on on unemployment benefit. It will probably have relief checks

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Speaker 1: which I hope are better targeted than they've been uh

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Speaker 1: in the past, and those things will help the labor market.

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Speaker 1: Alan Blinder, thank you so much for joining us. We

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Speaker 1: always appreciate get your thoughts on the economy here. Alan Blinder,

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Speaker 1: he's professor of economics at Princeton University and former FED

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Speaker 1: vice chairman. We appreciate his thoughts and now we want

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Speaker 1: to get to our next guest, Brian Whyle and his

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Speaker 1: group Managing director for ctc w's fixed income group. Brian,

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Speaker 1: the obvious question, were below one percent once again on

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Speaker 1: the ten year. We waited a long time to get

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Speaker 1: back above the one percent, and actually in the in

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Speaker 1: the immediate moment we're back above it, but we did

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Speaker 1: get below it. What took us there and what happens

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Speaker 1: post f O mc sure, um Funnie, thanks for having me. Um.

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Speaker 1: You know, I think the run from the ten year

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Speaker 1: up about basis points on the year when it got

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Speaker 1: up as close to about one was a lot about

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Speaker 1: the blue wave and um, the you know, the hope

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Speaker 1: that there would be, you know, a tremendous amount of

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Speaker 1: fiscal stimulus. And I think that you know, the run

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Speaker 1: back towards one percent or maybe dipping right below it

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Speaker 1: is is kind of maybe a recognition that you know,

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Speaker 1: the the administration, while they may have these these goals

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Speaker 1: and they'll put out these stimulus packages, it may not

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Speaker 1: be as easy to implement uh as originally thought. Uh

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Speaker 1: and it certainly might take a little bit longer than

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Speaker 1: originally thought. So, Brian, where do you think just we'll

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Speaker 1: focus on the tenure here? How do you what's your

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Speaker 1: outlook here for rates? Because you know, we had been

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Speaker 1: in that trading range stream we're still in there obviously

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Speaker 1: kind of rates smack in the middle of some type

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Speaker 1: of training range here. But what's your outlook? Yeah, you

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Speaker 1: know it's um. First, I think we talk about out look,

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Speaker 1: you gotta kind of forget, you know, what you'll what

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Speaker 1: you learned back in school, and you know how the

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Speaker 1: nominal rates should move relative to growth, because you know,

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Speaker 1: we're in this world where you know, rates are clearly

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Speaker 1: controlled by by the Fed, you know, and what they

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Speaker 1: do with their balance sheet. Uh. And so I think

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Speaker 1: you just gotta you gotta take them out their word,

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Speaker 1: you know, which is that you know they're going to

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Speaker 1: continue with this policy. You know they're not gonna you know,

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Speaker 1: lift off the zero bounds not going to happen until

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Speaker 1: at least three um. You know, a reduction in the

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Speaker 1: pace of the growth of the balance sheet that's not

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Speaker 1: going to happen until next year. UM. So it's hard

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Speaker 1: to see rates going much, you know, significantly higher from

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Speaker 1: where they are now because you know, also in addition,

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Speaker 1: not only the economy fragile, but I think you know,

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Speaker 1: the markets would react negatively to to attend your rates

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Speaker 1: significantly higher. So you know, we hate to put you know,

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Speaker 1: numbers and bands on rates because you know, you never know.

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Speaker 1: But you know, it's kind of hard to see the

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Speaker 1: ten year certainly not getting to a you know, a

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Speaker 1: two point something yield this year. And personally, I think

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Speaker 1: we'd be surprised if you know, we've got much above

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Speaker 1: a one point five. So what do you do? Because

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Speaker 1: we were just talking yesterday about the record amount of

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Speaker 1: junk issuance, there's also huge you know, investment grade issuance.

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Speaker 1: There's there's lots to buy out there. But none of

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Speaker 1: it is all that attractive, is it. It's a it's

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Speaker 1: a bond party. Um. You know, I think that the

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Speaker 1: Fed has uh successfully repressed everyone. Um. And you know

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Speaker 1: we're I mean just you know, for for your for

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Speaker 1: your your listeners. I mean, you know, we are while

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Speaker 1: we're much lower in interest rates you know, um today

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Speaker 1: than we were a year ago, when you look at

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Speaker 1: other things like credit spreads and where high old bonds

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Speaker 1: are trading, and leverage loans and of the securitized market,

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Speaker 1: the mortgage backed securities, when you talk about like the

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Speaker 1: spread of how they trade relative to the treasuries, we're

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Speaker 1: right back where we were last year. So, you know,

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Speaker 1: from just from a kind of the narrow world of

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Speaker 1: the bond world, at least on on the credit side,

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Speaker 1: everything non treasury related, you know, it looks exactly like

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Speaker 1: it did before the pandemic. So we've unwound, um, you know,

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Speaker 1: the entire pandemic period, even though you know, we're clearly

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Speaker 1: not out of the pandemic. So so the markets that

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Speaker 1: I've heard some of, you know, Alan Blinder said, you know,

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Speaker 1: the markets are definitely forward looking, um, and I think

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Speaker 1: they're they're priced not necessarily for even like the middle

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Speaker 1: of markets, particularly on the credit side, are priced for

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Speaker 1: you know, the end of one, if not two. Alright,

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Speaker 1: So Brian, let's talk about credit quality. How are you

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Speaker 1: viewing it? What are you seeing in your portfolio in

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Speaker 1: terms of credit quality? Here we're, you know, almost twelve

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Speaker 1: months into this pandemic and economic disruption. Yeah, I think

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Speaker 1: I think that the theme we you know, we're running

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Speaker 1: with here is that let's just let's try to justify

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Speaker 1: today's prices and today spreads from a credit perspective, like, uh,

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Speaker 1: clearly the market is looking towards, like I said, the

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Speaker 1: end of the year, and let's just say and this

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Speaker 1: kind of consensus that by the end of this year,

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Speaker 1: the economy is the same size as it was, you know,

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Speaker 1: in let's say February, so before the pandemic. So so

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Speaker 1: we've kind of we've kind of gone we've gone through

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Speaker 1: the dark ravine of the the economic contraction and we've

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Speaker 1: got the same size economy. The point we like to

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Speaker 1: emphasize is that while the size of the economy may

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Speaker 1: be the same, by the end of the year, it's

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Speaker 1: going to have a different shape. And when an economy

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Speaker 1: has a different shape, and that may be a good

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Speaker 1: thing long term, but when an economy has a different shape,

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Speaker 1: there's gonna be winners and losers. So we're gonna kind

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Speaker 1: of fall outside of of of of the economy and

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Speaker 1: maybe not relevant anymore. So our thoughts, particularly when when

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Speaker 1: spreads are tight and there's not a lot of value.

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Speaker 1: Is Vanni indicated, You're gonna have have and have nots,

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Speaker 1: And so as an investor, you want to think. You

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Speaker 1: can't just think from a macro perspective. You know, the

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Speaker 1: economy back where it was by the end of the year.

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Speaker 1: No, no no, no, You've got to think about what the

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Speaker 1: economy gonna look like. You know, how do we eat,

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Speaker 1: how do we entertain ourselves, how do how do we work?

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Speaker 1: Where do we work, how do we travel? All these

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Speaker 1: things and who are going to be the winners and

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Speaker 1: who are going to be the losers? And then kind

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Speaker 1: of reconstruct your bond or even your equity portfolio to

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Speaker 1: succeed in that new world, don't you know again, not

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Speaker 1: not just focusing on on on the size or the

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Speaker 1: growth of that new world, but what does it look like?

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Speaker 1: Brian Willen, thank you so much for joining us. We

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Speaker 1: appreciate that. Brian Whaling, he's a group managing director for

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Speaker 1: TCWS Fixed Income Group. They're based out on the West Coast.

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Speaker 1: They have a couple of dollars under management, so we

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Speaker 1: always pay attention to what they're saying on the fixed

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Speaker 1: income side. Game stop a MC entertainment. What are these

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Speaker 1: three names all have in common besides trading higher high

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Speaker 1: short interest and they are getting moved higher in a

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Speaker 1: significant short squeeze that we haven't seen in some time.

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Speaker 1: Somebody's gotta been losing the money on the other end

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Speaker 1: of that trade. And turns out some of the big

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Speaker 1: hedge funds on Wall Street are in that camp. To

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Speaker 1: bring us a story, Kathy Burton, hedge fund reporter for

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Speaker 1: Bloomberg News, joins us here. Kathy, who is Melvin Capital?

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Speaker 1: What is Melvin Capital and what's their role and what's

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Speaker 1: happening in some of these names? Uh So, Melvin Capital

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Speaker 1: is a firm run by Gabe Plotkin, He was a

430
00:25:28,480 --> 00:25:31,800
Speaker 1: very very successful trader who came out of I worked

431
00:25:31,840 --> 00:25:37,240
Speaker 1: with Steve Cohen for almost a decade, and he has

432
00:25:37,280 --> 00:25:41,040
Speaker 1: been sort of the center of, uh, the whole battle

433
00:25:41,080 --> 00:25:44,680
Speaker 1: between what we call the reddit bros and the professionals.

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00:25:45,600 --> 00:25:48,320
Speaker 1: For some reason, about a few months ago, they started

435
00:25:48,320 --> 00:25:53,440
Speaker 1: targeting gabe portfolio and they were short. They were going

436
00:25:53,480 --> 00:25:56,119
Speaker 1: along a lot of the stocks he was shorting, including uh,

437
00:25:56,640 --> 00:26:00,000
Speaker 1: game Chop. Yeah, I mean, Cathy, Why Gabe in particular,

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00:26:00,000 --> 00:26:02,760
Speaker 1: You know, he's he's a he's a young guy. He's

439
00:26:02,840 --> 00:26:05,840
Speaker 1: very successful. There are many people out there that have

440
00:26:05,960 --> 00:26:07,840
Speaker 1: had a lot more attention in the media and other

441
00:26:08,160 --> 00:26:11,760
Speaker 1: places that might have drawn the ire of Redder Bros

442
00:26:11,800 --> 00:26:14,639
Speaker 1: sort of more obviously, and yet didn't. They might have

443
00:26:14,720 --> 00:26:17,320
Speaker 1: drawne the ire of other market participants, but not the

444
00:26:17,320 --> 00:26:20,480
Speaker 1: redder Bros. What gives with Gabe? I mean, he was

445
00:26:20,720 --> 00:26:24,200
Speaker 1: very successful and he had the backing of as you say,

446
00:26:24,280 --> 00:26:27,880
Speaker 1: as I see capital. He even got people to help

447
00:26:27,960 --> 00:26:30,320
Speaker 1: shore up the hedge fund most recently when it was

448
00:26:30,480 --> 00:26:35,280
Speaker 1: under attack. Yes, so no one really knows for sure,

449
00:26:35,359 --> 00:26:38,480
Speaker 1: but it seems that, unlike a lot of hedge funds,

450
00:26:39,480 --> 00:26:43,480
Speaker 1: Gabe didn't use over the counter puts when he was

451
00:26:43,560 --> 00:26:46,560
Speaker 1: shorting some stocks, and so if you looked in his

452
00:26:46,760 --> 00:26:49,440
Speaker 1: regulatory filings, you could see that he had put on

453
00:26:49,560 --> 00:26:53,840
Speaker 1: certain companies and so it was in the republic what

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00:26:54,080 --> 00:26:57,240
Speaker 1: he was doing. And so that's the only explanation that

455
00:26:57,320 --> 00:27:00,399
Speaker 1: anyone can really come up with for why he became target.

456
00:27:00,480 --> 00:27:02,600
Speaker 1: And also because he's pretty known to be a pretty

457
00:27:03,400 --> 00:27:08,000
Speaker 1: aggressive short seller. So um, he had some pretty chunky positions.

458
00:27:08,600 --> 00:27:13,200
Speaker 1: What's the status of Melvin Capital right now, Kathy, Um.

459
00:27:13,320 --> 00:27:16,720
Speaker 1: I think that the infusion of capital from UM Steve

460
00:27:16,840 --> 00:27:20,960
Speaker 1: Cohen's point co two and from Ken Griffin's citadel has

461
00:27:21,040 --> 00:27:24,600
Speaker 1: helped the firm. Uh has really shorted up. It seems

462
00:27:24,640 --> 00:27:28,200
Speaker 1: that they've covered we know they've covered M Game Shop,

463
00:27:28,400 --> 00:27:33,920
Speaker 1: and they've rejigged the portfolio a bunch. So uh, it

464
00:27:34,040 --> 00:27:36,920
Speaker 1: seems like they're they're in an okay position, although we

465
00:27:37,000 --> 00:27:40,760
Speaker 1: did here that through yesterday they had their losses had

466
00:27:40,800 --> 00:27:46,480
Speaker 1: increased that we reported. Yeah, I mean three Friday, difficult

467
00:27:46,520 --> 00:27:49,600
Speaker 1: couple of quarters for Melvin Capital. Any idea what his

468
00:27:49,680 --> 00:27:53,960
Speaker 1: other positions are, what as lungs might be. Um, No,

469
00:27:54,240 --> 00:27:58,800
Speaker 1: we don't really have a lot of insight fo the

470
00:27:58,960 --> 00:28:03,600
Speaker 1: last filing Hunt Um, it's from the third quarter, so

471
00:28:03,720 --> 00:28:06,040
Speaker 1: that's quite a little while ago, and these guys tend

472
00:28:06,119 --> 00:28:10,360
Speaker 1: to change around. Their portfolio is pretty spificantly. Canty, any

473
00:28:10,400 --> 00:28:13,800
Speaker 1: other hedge funds that have been kind of targeted or

474
00:28:14,080 --> 00:28:17,159
Speaker 1: do we know that maybe have had some you know,

475
00:28:17,560 --> 00:28:19,639
Speaker 1: poor performance as a result of kind of what we're

476
00:28:19,640 --> 00:28:23,920
Speaker 1: seeing in some of these names. Uh No, We're were

477
00:28:24,040 --> 00:28:27,359
Speaker 1: hunting around from that right now. UM, we haven't heard

478
00:28:27,840 --> 00:28:31,879
Speaker 1: um a lot of names, although we suspect that they

479
00:28:31,880 --> 00:28:33,879
Speaker 1: will definitely be people that at the end of the

480
00:28:33,920 --> 00:28:38,960
Speaker 1: month got got hurt. Any I mean, I'm just throwing

481
00:28:39,000 --> 00:28:41,360
Speaker 1: out this, and you know, I don't want to be

482
00:28:42,920 --> 00:28:46,960
Speaker 1: wild in my theorizing, but is there any um, anyone

483
00:28:47,040 --> 00:28:49,160
Speaker 1: out there is saying that perhaps there's an army of

484
00:28:49,280 --> 00:28:54,040
Speaker 1: redditors that are actually sort of market participants, that are

485
00:28:54,200 --> 00:28:56,760
Speaker 1: regular market participants, but that are sort of stoking the

486
00:28:57,000 --> 00:29:02,680
Speaker 1: fires and the flames in Reddit itself. Um, No one

487
00:29:02,760 --> 00:29:05,640
Speaker 1: knows for sure, although it does sort of make sense

488
00:29:05,720 --> 00:29:08,840
Speaker 1: that there could people out there who are who are

489
00:29:08,920 --> 00:29:12,160
Speaker 1: doing that. UM. I think it's something that the regulators

490
00:29:12,200 --> 00:29:17,880
Speaker 1: will definitely be looking into. So, Kathy, when you talk

491
00:29:17,920 --> 00:29:19,320
Speaker 1: to the hedge funds, did they feel like this is

492
00:29:19,360 --> 00:29:21,760
Speaker 1: just a short term phenomena in the market, or is

493
00:29:21,800 --> 00:29:25,560
Speaker 1: this perhaps something larger and it might be a part

494
00:29:25,680 --> 00:29:30,360
Speaker 1: of markets going forward. UM. I think that that people

495
00:29:30,560 --> 00:29:32,760
Speaker 1: are they don't really know for sure, but they're certainly

496
00:29:32,840 --> 00:29:36,840
Speaker 1: afraid that it could be and we're we are definitely

497
00:29:36,920 --> 00:29:41,000
Speaker 1: trying to figure out if people are changing the way

498
00:29:41,080 --> 00:29:45,200
Speaker 1: that they're short or do different things to to mitigate

499
00:29:45,320 --> 00:29:48,440
Speaker 1: this if it really does become more of a phenomenon

500
00:29:48,560 --> 00:29:50,880
Speaker 1: going forward. Cathy, have one more question to ask you,

501
00:29:50,960 --> 00:29:54,320
Speaker 1: because I noticed this a couple of months ago in December,

502
00:29:55,120 --> 00:29:57,520
Speaker 1: that Plankin was revealed, as they say, to be the

503
00:29:57,560 --> 00:30:01,440
Speaker 1: buyer of a forty four million dollar property own in Florida,

504
00:30:01,920 --> 00:30:04,240
Speaker 1: and it sort of reminded me of the Billions plotline

505
00:30:04,240 --> 00:30:07,080
Speaker 1: about how you know, the guy is advised not to

506
00:30:07,320 --> 00:30:11,400
Speaker 1: be very ostentatious and he goes ahead with it anyway. UM.

507
00:30:12,080 --> 00:30:15,080
Speaker 1: Is this something that maybe you know, brought gay plot

508
00:30:15,200 --> 00:30:17,760
Speaker 1: into the attention of people who wouldn't have liked that.

509
00:30:19,720 --> 00:30:22,120
Speaker 1: I mean, it could, but I really don't think so.

510
00:30:22,560 --> 00:30:28,360
Speaker 1: It really seems that, UM, because the first message that

511
00:30:28,560 --> 00:30:33,200
Speaker 1: was on this reddit um for him was maybe three

512
00:30:33,280 --> 00:30:37,400
Speaker 1: months and I think that UM, even the moderator of

513
00:30:37,560 --> 00:30:41,800
Speaker 1: the message board says that people don't really know anything.

514
00:30:41,920 --> 00:30:45,280
Speaker 1: They just kind of follow a momentum. So someone picked

515
00:30:45,440 --> 00:30:50,120
Speaker 1: up and then someone else. We're all pretty much obsessed

516
00:30:50,240 --> 00:30:53,200
Speaker 1: with game shop. Um, it just had a life of

517
00:30:53,280 --> 00:30:55,840
Speaker 1: its own. So I don't really think that they were

518
00:30:55,960 --> 00:30:58,840
Speaker 1: targeting him because he was gay, but I think it

519
00:30:58,920 --> 00:31:01,720
Speaker 1: was just because they found someone he does actually short

520
00:31:02,080 --> 00:31:04,680
Speaker 1: they went out, Kathy, thank you. It's a it's a

521
00:31:04,720 --> 00:31:07,720
Speaker 1: phenomenal story. Kathie always does phenomenal stories on hedge funders

522
00:31:07,760 --> 00:31:10,160
Speaker 1: and hedge funds. She has our hedge fund reporter and

523
00:31:10,240 --> 00:31:13,680
Speaker 1: her one today is redit Trator's Bloodgeon. Melvin Capital in

524
00:31:13,800 --> 00:31:17,480
Speaker 1: warning to Wall Street and I don't know when the

525
00:31:17,560 --> 00:31:19,440
Speaker 1: last time I walked into a game stop was, but

526
00:31:19,480 --> 00:31:21,080
Speaker 1: I know it's a long time ago. They're still out

527
00:31:21,080 --> 00:31:25,240
Speaker 1: there though. Thanks for listening to Bloomberg Markets podcast. You

528
00:31:25,280 --> 00:31:28,720
Speaker 1: can subscribe and listen to interviews at Apple Podcasts or

529
00:31:28,880 --> 00:31:32,200
Speaker 1: whatever a podcast platform you prefer. I'm Bonnie Quinn, I'm

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00:31:32,280 --> 00:31:34,920
Speaker 1: on Twitter at Bonnie Quinn. And Paul Sweeney I'm on

531
00:31:34,960 --> 00:31:37,880
Speaker 1: Twitter at pt Sweeney. Before the podcast, you can always

532
00:31:37,960 --> 00:31:39,760
Speaker 1: catch us worldwide at Bloomberg Radio