Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along
Speaker 1: with my co host of Bonnie Quinn. Every business day
Speaker 1: we bring you interviews from CEOs, market pros, and Bloomberg experts,
Speaker 1: along with essential market moving news. Trying the Bloomberg Markets
Speaker 1: Podcast on Apple podcast or wherever you listen to podcasts,
Speaker 1: and on Bloomberg dot com. Looking at games doot, Bonnie,
Speaker 1: I know you wanted an update. It's up a hundred
Speaker 1: seventeen percent today, up sixtcent year to date, up seventy
Speaker 1: four hundred percent. As for the Bloomberg terminal on a
Speaker 1: trailing twelve month basis, let's trying to put some of
Speaker 1: that into context. We can do that with John Authors.
Speaker 1: He's a senior editor for Bloomberg Markets. He's seen a
Speaker 1: thing or two. John, thanks so much for joining us here.
Speaker 1: What do you make of the game stops? So the
Speaker 1: world and there's a lot more besides game stop and
Speaker 1: you take a look at some of the other names
Speaker 1: like tuts, your role in AMC entertainment and others. Well,
Speaker 1: I guess my best take on this, which has provoked
Speaker 1: a lot of reaction, but that this is h This
Speaker 1: is obviously bubblished behavior, not necessarily a bubble for the
Speaker 1: entire market, but extremely frosty behavior at the margins and
Speaker 1: the very least, which is concerning. And what's really concerning
Speaker 1: is that it's not a classic bubble driven by greed.
Speaker 1: It seems to me to be driven by anger. People
Speaker 1: feel that the current situation is unfair and with all
Speaker 1: of those have got plenty of reasons to think that,
Speaker 1: and things like the attack on the shorts, the short
Speaker 1: squeezing GameStop are seen as a way. I've had feedback
Speaker 1: saying this is a way of earning back the money
Speaker 1: we paid for the top bailout twelve years ago. That
Speaker 1: this this is seen as writing a historical wrong, which
Speaker 1: is something that angle fueled by righteous anger rather than greed. Yeah,
Speaker 1: I mean, I find this a phenomenally interesting take, because
Speaker 1: you know, there are a lot of takes out there
Speaker 1: from the people who were shut themselves, to people like
Speaker 1: Anthony Scaramucci saying that this is positive for bitcoin if
Speaker 1: there's a lot of people just making hay from this phenomenon.
Speaker 1: But John, I think you've hit on something very interesting,
Speaker 1: which is, you know, are there now different strata of
Speaker 1: capitalists and are they partaking of the whole populism phenomenon
Speaker 1: only is sort of in a different world. Yes, that's
Speaker 1: the the kind of similarity to um what we saw
Speaker 1: at the Capital is quite concerning. Again, you're talking about
Speaker 1: social media coordinating angry people into making an attack on
Speaker 1: what they see as the establishments, and plainly the Capitol
Speaker 1: is the establishment with with a tradition and lead. The
Speaker 1: short sellers who have been attacking Game Stop are unpopular
Speaker 1: on Wall Street. They're seen as the good guys or
Speaker 1: the little guys trying to to keep all streets honest.
Speaker 1: But at this point they wear suits, and that means
Speaker 1: they're they're among the enemies. Now that there's obviously great
Speaker 1: differences in methods, but the motivations behind this are very
Speaker 1: similar to the motivations behind the various populist movements we
Speaker 1: know around the world. The the reasons for anger are
Speaker 1: very genuine. Again, as you might also say about, for example, Brexit.
Speaker 1: The question is whether this is a sensible way to
Speaker 1: channel that anger, whether this is a sensible response to
Speaker 1: the real unfairness that is out there. John, Is there
Speaker 1: a political element to this? I mean, is this occupy
Speaker 1: the stock market or is it something more akin to
Speaker 1: what we saw last week. As he said, I do
Speaker 1: think there's a political element to this, yes, um, whether
Speaker 1: it is um uh, I mean, it's not solely a
Speaker 1: political element. But in terms of when you're worried about
Speaker 1: a bubble, whether you're worried, when you're worried about the
Speaker 1: possibility of excess um, what matters then is sentiments, how
Speaker 1: what the psychology is that's driving people. Now. The problem
Speaker 1: with greed is that people will do a lot for
Speaker 1: greed naturally, and it needs to be balanced against fear.
Speaker 1: In this case, it is righteous anger. And if there
Speaker 1: is any emotion that will make us throw caution to
Speaker 1: the winds even more than greed will, I would say,
Speaker 1: it's anger. Um. And it's very hard. Since I wrote
Speaker 1: my column last night, I've had some people suggesting that
Speaker 1: the Mississippi bubble, the French current of the South Sea
Speaker 1: bubble might have had some elements of this, that that
Speaker 1: people were angry with with life in France and sort
Speaker 1: of investing in in rather illusory prospects in the New
Speaker 1: World as as a way of getting back at them.
Speaker 1: But that's the best that's the only example anybody has
Speaker 1: come up with. Something like this, where there is this
Speaker 1: kind of speculative action and it's driven by anger, not greed.
Speaker 1: So so it's whenever we have a lack of precedent
Speaker 1: that's concerning you don't know what's coming. John. If this
Speaker 1: is indeed a bubble, does this bubble? Is there any
Speaker 1: reason to believe that this bubble doesn't end like other
Speaker 1: bubbles do and people get hurt and it just kind
Speaker 1: of pops. No, there's no reason to believe that. There's
Speaker 1: certainly a reason to believe that that this bubble could
Speaker 1: be far far bigger than it currently is. And there's
Speaker 1: um we can we can go back over the there
Speaker 1: are two sides to the argument of Both of them
Speaker 1: are completely valid as far as they go. Stop stocks
Speaker 1: are very expensive judged against their own history, but they're
Speaker 1: not expensive compared to two bond yields. And then it
Speaker 1: becomes an argument about where the bond yields stayed this
Speaker 1: low um. But in terms of is there any reason
Speaker 1: to believe this kind of a bubble wouldn't burst compared
Speaker 1: to other bubbles, there's there's no reason to believe that.
Speaker 1: I assume that it would, and I assume that the
Speaker 1: last people in who will be the little guys just
Speaker 1: as they are now, will, as in previous bubbles, be
Speaker 1: the ones who get hurt the most. I mean, is
Speaker 1: this one area we're seeing actual unity? John? Are these
Speaker 1: people on the right and on the left with the
Speaker 1: same argument. There's a great argument out there about how
Speaker 1: we don't fully recognize that cultural expressions of politics, like
Speaker 1: protest songs, for example, are just as popular on the
Speaker 1: right as they are on the left, and that just
Speaker 1: haven't given enough, you know, attention to both sides of
Speaker 1: that coin. It just seems to be something associated with
Speaker 1: the left. But is that what you know? We're seeing
Speaker 1: that here? Yes, I think that's a very good point.
Speaker 1: I think that it's it's one of the points we've
Speaker 1: seen in politics for some years now and again, if
Speaker 1: you want to go back to Brexit and and Trump
Speaker 1: or order of protectionism, that the in Britain it was
Speaker 1: very much the traditional right, but a lot of people
Speaker 1: on the traditional left wanted to Brexit, and it was
Speaker 1: a a an elite from the center left to the
Speaker 1: center right that wanted to stay with Europe. That there
Speaker 1: was this unholy alliance in many ways. If we go
Speaker 1: back to the financial crisis, of twelve years ago. There
Speaker 1: there was a very strange alliance in the in the
Speaker 1: the the people who really shared an analysis of what
Speaker 1: has gone wrong and who really disliked moral hazard way
Speaker 1: the FED behaved were either libertarians on the rights you
Speaker 1: think of libtic on meses, or outright socialists on the
Speaker 1: left like Hyman Minsky, and they had very different ideas
Speaker 1: for how to solve the problem, but they actually had
Speaker 1: almost exactly the same prescription, the same definition of what
Speaker 1: has gone wrong. And similarly, if you're a libertarian or
Speaker 1: an equal egalitarian socialist, you have equally strong good reasons
Speaker 1: to be angry at the moment, and you get this
Speaker 1: strange alliance. John author is fabulous conversation and the latest
Speaker 1: Bloomer opinion article from John on this particular subject is
Speaker 1: game stop is rage against the machine? Anger is an energy.
Speaker 1: Do have a read of it. It's a take that
Speaker 1: we haven't heard enough about, to be honest, out there
Speaker 1: and just really fascinating. Do stay tuned. We're going to
Speaker 1: get a COVID nine teen White House Task Force briefing
Speaker 1: at eleven am. We're going to dip into that and
Speaker 1: see what exactly is going on. This is New York
Speaker 1: City is to get seventeen thousand more doses next week.
Speaker 1: Another treat for us. Now we get to talk FED
Speaker 1: with Alan Blinder, Princeton University professor and of course, former
Speaker 1: Federal Reserve Vice chair. He served with Janet Yellen on
Speaker 1: the Fed's board in you know, recent decades, and is
Speaker 1: also a co author of a book with Janet Yellen
Speaker 1: called The Fabulous Decade Macroeconomic Lessons from the nineteen Nineties
Speaker 1: that was published in two thousand one. Alan, thank you
Speaker 1: so much for joining First your reaction to Joannet Yellen
Speaker 1: as now Treasury Secretary, the first woman Treasury Secretary of
Speaker 1: the United States of America, Well, I'm pleased as punch
Speaker 1: as you can, well regarded, well understand. It is a
Speaker 1: landmark to have the first woman sitting in the Secretary
Speaker 1: of the Treasuries off us. She comes very well prepared.
Speaker 1: Not all Secretaries of the Treasury do, you may recall
Speaker 1: without naming names. Uh, some do, some don't. She comes
Speaker 1: very well prepared, both understanding markets and understanding Washington, and
Speaker 1: understanding the Treasuries business, and especially obviously understanding the Federal Reserve.
Speaker 1: When you're in a crisis, situation such as we've been
Speaker 1: in for a while. The Treasury and the Fed, regardless
Speaker 1: of who's sitting in those two chairs, have got to
Speaker 1: be in close collaboration early and often. And this is
Speaker 1: just going to be so easy with a Janet Yellen
Speaker 1: and J Powell. So, professor, how do you expect or
Speaker 1: what would you like to see in terms of fiscal
Speaker 1: policy and monetary policy? Here? Just where we are right now?
Speaker 1: It seems like we're gonna we can look to the
Speaker 1: other side of this pandemic, but there's still a long
Speaker 1: road ahead. What would you like to see? Yeah, I
Speaker 1: think monetary policy should be sitting right where it is,
Speaker 1: and that's of course what the Federal Reserve thinks. This
Speaker 1: is no news. And then but I just might say
Speaker 1: that's in a hyper expansionary stance. So it's not like
Speaker 1: they're sitting in neutral or something like that. Fig got
Speaker 1: the interest rate to the floor. They're buying securities may
Speaker 1: uh to increase the side of the balance sheet and
Speaker 1: so on. They should stay that way for a while. Uh.
Speaker 1: It's regretful and I'm not sure the legal status of
Speaker 1: some of these. Uh that Secretary minution saw fit in
Speaker 1: its closing days to cut cut them out the Fed's
Speaker 1: emergency UH lending facilities. I'd like to see Janet Yellen
Speaker 1: put them back to the extent that she can. Some
Speaker 1: that may need Congressional action, which is harder. Whatever can
Speaker 1: be done by Treasury action, I think should be done
Speaker 1: just because you want them. There is a backstop. The
Speaker 1: argument that minution made the row and not using let's
Speaker 1: throw them away is exactly the same as saying I
Speaker 1: haven't made a claim of my fire insurance policy from
Speaker 1: my home, so let me just cancel it. Yeah, for sure,
Speaker 1: if and when it does come up again, I imagine
Speaker 1: there'll be a different type of approach from the Treasury.
Speaker 1: So curious, Allen. You know, Jerome Powell has been a
Speaker 1: FED board member since two thousand twelve. He became the
Speaker 1: chair of the FMC in two eighteen. What happens next
Speaker 1: with the FED chair position? Presumably Chair Powell stays as
Speaker 1: long as he's welcome to stay, which presumably is the
Speaker 1: rest of his term. And then does President Biden appoint
Speaker 1: somebody else who might it be? Well, I think it's
Speaker 1: very early to speculate on that, But look, I don't
Speaker 1: think you should eliminate Jerome Powell. Prior to Donald Trump,
Speaker 1: there were many instances of a new president coming in
Speaker 1: with a FED chair appointed by president of the other
Speaker 1: party and then um giving that person another term because
Speaker 1: they were all he's then one of them was Janet Yellen.
Speaker 1: She was the exception. Trump did not do that, but
Speaker 1: many previous presidents looked at the FED chair said well,
Speaker 1: he did a very good job. Let's keep him in position.
Speaker 1: So you'd be fine with Ron Paul having a second
Speaker 1: term as FED chair. I would be. Now, of course,
Speaker 1: it's up to Joe Biden, not to me. All I'm
Speaker 1: saying is that I wouldn't write him out. There's definitely
Speaker 1: a live possibility that he could become get a second term.
Speaker 1: Now if if that's not the case, an obvious kennidate
Speaker 1: is Lele Brainerd, who's the Democrat sitting on the board
Speaker 1: right now. And there may be other uh Biden appointments
Speaker 1: before Powell's term ends to the board and those will
Speaker 1: be live. Candidate said, then there are plenty of people
Speaker 1: I don't want to thought speculating on names in the
Speaker 1: financial world, UH, who are Democrats who could be attractive
Speaker 1: to Biden as a replacement for power But the logic
Speaker 1: here is going to be question A is for Biden
Speaker 1: is do I keep power or replace him? That's question one.
Speaker 1: Then if you answer that in the negative, then a
Speaker 1: whole host of names UH start should start coming to
Speaker 1: your desk, Professor. Given what we know about fiscal policy,
Speaker 1: given what we know about UH fiscal stimulus and monetary policy,
Speaker 1: what is your economic outlook here? I mean, I think
Speaker 1: there's concern here that the improvement in the economy, the
Speaker 1: opening up of the economy, if you will, maybe take
Speaker 1: a little bit longer than people had initially thought. Yeah, Well,
Speaker 1: it depends on many things, in which two are completely obvious.
Speaker 1: One is the speed or or lack of speed with
Speaker 1: which we get this wave of the virus under control.
Speaker 1: That depends a lot on the vaccination rollout, which, as
Speaker 1: you know, has been disappointingly slow, in which President Biden
Speaker 1: has promised to accelerate, its taping steps to accelerate. And
Speaker 1: the other is the passage or non passage of another
Speaker 1: COVID relief package. So we did one in December. That
Speaker 1: was good. It's now to January. It is soon going
Speaker 1: to be February. In March, for example, things start running
Speaker 1: out such as the extra unemployment benefits. I be pleased
Speaker 1: but surprised if the economy is looking really healthy in March,
Speaker 1: that is to say, not no longer needing extra emergency support.
Speaker 1: So I hope the kind this is going to pass
Speaker 1: a bill. We don't need it this week, but we
Speaker 1: do need it, and the health of the economy in March, April, May, June,
Speaker 1: etcetera depends, among other things on that. Alan, what do
Speaker 1: you make of the data that actually shows improvement these days?
Speaker 1: I mean, yesterday we got the confidence data would showed
Speaker 1: that perhaps know in the future, but right now people
Speaker 1: are a little more confident. What's giving them that confidence
Speaker 1: if many of them have been out of work for
Speaker 1: nearly that's great. I'm glad you asked that. I was
Speaker 1: surprised at that, and I noted that the sentiment about
Speaker 1: the current economy had not improved, had deteriorated a little bit.
Speaker 1: But people are looking forward, and I think the answer
Speaker 1: is the light at the end of the tunnel. The
Speaker 1: vaccine um. It's not like this secret. Everybody in the
Speaker 1: country knows that vaccines. To hear people are starting to
Speaker 1: get vaccinated, and there's a lot of talk now, especially
Speaker 1: now about have everybody who wants a vaccine vaccinated by summer.
Speaker 1: That's a big change from the way the world looked
Speaker 1: three six months ago. So when we think about that,
Speaker 1: to let at the end of the tunnel, professor, the
Speaker 1: number of folks that are out of work and out
Speaker 1: of work for a long period of time is increasingly troubling.
Speaker 1: I think to a lot of folks here, how do
Speaker 1: you think the the labor economy is going to recover?
Speaker 1: You know again at the other side of this, well,
Speaker 1: I'm gonna sound like a broken record, but it depends
Speaker 1: on those two things as we get rid of the
Speaker 1: scourge of the coronavirus. Let me back up a step.
Speaker 1: A lot of those jobs you're talking about are in
Speaker 1: the service industries, restaurants, theaters, entertainment venues of all uh sorts.
Speaker 1: It's not people like me and people like you who
Speaker 1: are working electronically. And those jobs will come back, at
Speaker 1: least most of them, I think will come back as
Speaker 1: and when the virus fades into insignificance. You know, I
Speaker 1: should emphasize we have seasonal flu every year. It kills
Speaker 1: ten thirty thou people every year. But that's a long
Speaker 1: way from four hundred, five hundred thousand. You know, the
Speaker 1: thought we should have is to get the coronavirus down
Speaker 1: to the level of the flu or something like that,
Speaker 1: and then the country can go back to normal. So
Speaker 1: there's that, and then the second thing is the COVID
Speaker 1: relief package, which has benefits for unemployed. So if you
Speaker 1: if you don't have your job back, you can continue
Speaker 1: on on unemployment benefit. It will probably have relief checks
Speaker 1: which I hope are better targeted than they've been uh
Speaker 1: in the past, and those things will help the labor market.
Speaker 1: Alan Blinder, thank you so much for joining us. We
Speaker 1: always appreciate get your thoughts on the economy here. Alan Blinder,
Speaker 1: he's professor of economics at Princeton University and former FED
Speaker 1: vice chairman. We appreciate his thoughts and now we want
Speaker 1: to get to our next guest, Brian Whyle and his
Speaker 1: group Managing director for ctc w's fixed income group. Brian,
Speaker 1: the obvious question, were below one percent once again on
Speaker 1: the ten year. We waited a long time to get
Speaker 1: back above the one percent, and actually in the in
Speaker 1: the immediate moment we're back above it, but we did
Speaker 1: get below it. What took us there and what happens
Speaker 1: post f O mc sure, um Funnie, thanks for having me. Um.
Speaker 1: You know, I think the run from the ten year
Speaker 1: up about basis points on the year when it got
Speaker 1: up as close to about one was a lot about
Speaker 1: the blue wave and um, the you know, the hope
Speaker 1: that there would be, you know, a tremendous amount of
Speaker 1: fiscal stimulus. And I think that you know, the run
Speaker 1: back towards one percent or maybe dipping right below it
Speaker 1: is is kind of maybe a recognition that you know,
Speaker 1: the the administration, while they may have these these goals
Speaker 1: and they'll put out these stimulus packages, it may not
Speaker 1: be as easy to implement uh as originally thought. Uh
Speaker 1: and it certainly might take a little bit longer than
Speaker 1: originally thought. So, Brian, where do you think just we'll
Speaker 1: focus on the tenure here? How do you what's your
Speaker 1: outlook here for rates? Because you know, we had been
Speaker 1: in that trading range stream we're still in there obviously
Speaker 1: kind of rates smack in the middle of some type
Speaker 1: of training range here. But what's your outlook? Yeah, you
Speaker 1: know it's um. First, I think we talk about out look,
Speaker 1: you gotta kind of forget, you know, what you'll what
Speaker 1: you learned back in school, and you know how the
Speaker 1: nominal rates should move relative to growth, because you know,
Speaker 1: we're in this world where you know, rates are clearly
Speaker 1: controlled by by the Fed, you know, and what they
Speaker 1: do with their balance sheet. Uh. And so I think
Speaker 1: you just gotta you gotta take them out their word,
Speaker 1: you know, which is that you know they're going to
Speaker 1: continue with this policy. You know they're not gonna you know,
Speaker 1: lift off the zero bounds not going to happen until
Speaker 1: at least three um. You know, a reduction in the
Speaker 1: pace of the growth of the balance sheet that's not
Speaker 1: going to happen until next year. UM. So it's hard
Speaker 1: to see rates going much, you know, significantly higher from
Speaker 1: where they are now because you know, also in addition,
Speaker 1: not only the economy fragile, but I think you know,
Speaker 1: the markets would react negatively to to attend your rates
Speaker 1: significantly higher. So you know, we hate to put you know,
Speaker 1: numbers and bands on rates because you know, you never know.
Speaker 1: But you know, it's kind of hard to see the
Speaker 1: ten year certainly not getting to a you know, a
Speaker 1: two point something yield this year. And personally, I think
Speaker 1: we'd be surprised if you know, we've got much above
Speaker 1: a one point five. So what do you do? Because
Speaker 1: we were just talking yesterday about the record amount of
Speaker 1: junk issuance, there's also huge you know, investment grade issuance.
Speaker 1: There's there's lots to buy out there. But none of
Speaker 1: it is all that attractive, is it. It's a it's
Speaker 1: a bond party. Um. You know, I think that the
Speaker 1: Fed has uh successfully repressed everyone. Um. And you know
Speaker 1: we're I mean just you know, for for your for
Speaker 1: your your listeners. I mean, you know, we are while
Speaker 1: we're much lower in interest rates you know, um today
Speaker 1: than we were a year ago, when you look at
Speaker 1: other things like credit spreads and where high old bonds
Speaker 1: are trading, and leverage loans and of the securitized market,
Speaker 1: the mortgage backed securities, when you talk about like the
Speaker 1: spread of how they trade relative to the treasuries, we're
Speaker 1: right back where we were last year. So, you know,
Speaker 1: from just from a kind of the narrow world of
Speaker 1: the bond world, at least on on the credit side,
Speaker 1: everything non treasury related, you know, it looks exactly like
Speaker 1: it did before the pandemic. So we've unwound, um, you know,
Speaker 1: the entire pandemic period, even though you know, we're clearly
Speaker 1: not out of the pandemic. So so the markets that
Speaker 1: I've heard some of, you know, Alan Blinder said, you know,
Speaker 1: the markets are definitely forward looking, um, and I think
Speaker 1: they're they're priced not necessarily for even like the middle
Speaker 1: of markets, particularly on the credit side, are priced for
Speaker 1: you know, the end of one, if not two. Alright,
Speaker 1: So Brian, let's talk about credit quality. How are you
Speaker 1: viewing it? What are you seeing in your portfolio in
Speaker 1: terms of credit quality? Here we're, you know, almost twelve
Speaker 1: months into this pandemic and economic disruption. Yeah, I think
Speaker 1: I think that the theme we you know, we're running
Speaker 1: with here is that let's just let's try to justify
Speaker 1: today's prices and today spreads from a credit perspective, like, uh,
Speaker 1: clearly the market is looking towards, like I said, the
Speaker 1: end of the year, and let's just say and this
Speaker 1: kind of consensus that by the end of this year,
Speaker 1: the economy is the same size as it was, you know,
Speaker 1: in let's say February, so before the pandemic. So so
Speaker 1: we've kind of we've kind of gone we've gone through
Speaker 1: the dark ravine of the the economic contraction and we've
Speaker 1: got the same size economy. The point we like to
Speaker 1: emphasize is that while the size of the economy may
Speaker 1: be the same, by the end of the year, it's
Speaker 1: going to have a different shape. And when an economy
Speaker 1: has a different shape, and that may be a good
Speaker 1: thing long term, but when an economy has a different shape,
Speaker 1: there's gonna be winners and losers. So we're gonna kind
Speaker 1: of fall outside of of of of the economy and
Speaker 1: maybe not relevant anymore. So our thoughts, particularly when when
Speaker 1: spreads are tight and there's not a lot of value.
Speaker 1: Is Vanni indicated, You're gonna have have and have nots,
Speaker 1: And so as an investor, you want to think. You
Speaker 1: can't just think from a macro perspective. You know, the
Speaker 1: economy back where it was by the end of the year.
Speaker 1: No, no no, no, You've got to think about what the
Speaker 1: economy gonna look like. You know, how do we eat,
Speaker 1: how do we entertain ourselves, how do how do we work?
Speaker 1: Where do we work, how do we travel? All these
Speaker 1: things and who are going to be the winners and
Speaker 1: who are going to be the losers? And then kind
Speaker 1: of reconstruct your bond or even your equity portfolio to
Speaker 1: succeed in that new world, don't you know again, not
Speaker 1: not just focusing on on on the size or the
Speaker 1: growth of that new world, but what does it look like?
Speaker 1: Brian Willen, thank you so much for joining us. We
Speaker 1: appreciate that. Brian Whaling, he's a group managing director for
Speaker 1: TCWS Fixed Income Group. They're based out on the West Coast.
Speaker 1: They have a couple of dollars under management, so we
Speaker 1: always pay attention to what they're saying on the fixed
Speaker 1: income side. Game stop a MC entertainment. What are these
Speaker 1: three names all have in common besides trading higher high
Speaker 1: short interest and they are getting moved higher in a
Speaker 1: significant short squeeze that we haven't seen in some time.
Speaker 1: Somebody's gotta been losing the money on the other end
Speaker 1: of that trade. And turns out some of the big
Speaker 1: hedge funds on Wall Street are in that camp. To
Speaker 1: bring us a story, Kathy Burton, hedge fund reporter for
Speaker 1: Bloomberg News, joins us here. Kathy, who is Melvin Capital?
Speaker 1: What is Melvin Capital and what's their role and what's
Speaker 1: happening in some of these names? Uh So, Melvin Capital
Speaker 1: is a firm run by Gabe Plotkin, He was a
Speaker 1: very very successful trader who came out of I worked
Speaker 1: with Steve Cohen for almost a decade, and he has
Speaker 1: been sort of the center of, uh, the whole battle
Speaker 1: between what we call the reddit bros and the professionals.
Speaker 1: For some reason, about a few months ago, they started
Speaker 1: targeting gabe portfolio and they were short. They were going
Speaker 1: along a lot of the stocks he was shorting, including uh,
Speaker 1: game Chop. Yeah, I mean, Cathy, Why Gabe in particular,
Speaker 1: You know, he's he's a he's a young guy. He's
Speaker 1: very successful. There are many people out there that have
Speaker 1: had a lot more attention in the media and other
Speaker 1: places that might have drawn the ire of Redder Bros
Speaker 1: sort of more obviously, and yet didn't. They might have
Speaker 1: drawne the ire of other market participants, but not the
Speaker 1: redder Bros. What gives with Gabe? I mean, he was
Speaker 1: very successful and he had the backing of as you say,
Speaker 1: as I see capital. He even got people to help
Speaker 1: shore up the hedge fund most recently when it was
Speaker 1: under attack. Yes, so no one really knows for sure,
Speaker 1: but it seems that, unlike a lot of hedge funds,
Speaker 1: Gabe didn't use over the counter puts when he was
Speaker 1: shorting some stocks, and so if you looked in his
Speaker 1: regulatory filings, you could see that he had put on
Speaker 1: certain companies and so it was in the republic what
Speaker 1: he was doing. And so that's the only explanation that
Speaker 1: anyone can really come up with for why he became target.
Speaker 1: And also because he's pretty known to be a pretty
Speaker 1: aggressive short seller. So um, he had some pretty chunky positions.
Speaker 1: What's the status of Melvin Capital right now, Kathy, Um.
Speaker 1: I think that the infusion of capital from UM Steve
Speaker 1: Cohen's point co two and from Ken Griffin's citadel has
Speaker 1: helped the firm. Uh has really shorted up. It seems
Speaker 1: that they've covered we know they've covered M Game Shop,
Speaker 1: and they've rejigged the portfolio a bunch. So uh, it
Speaker 1: seems like they're they're in an okay position, although we
Speaker 1: did here that through yesterday they had their losses had
Speaker 1: increased that we reported. Yeah, I mean three Friday, difficult
Speaker 1: couple of quarters for Melvin Capital. Any idea what his
Speaker 1: other positions are, what as lungs might be. Um, No,
Speaker 1: we don't really have a lot of insight fo the
Speaker 1: last filing Hunt Um, it's from the third quarter, so
Speaker 1: that's quite a little while ago, and these guys tend
Speaker 1: to change around. Their portfolio is pretty spificantly. Canty, any
Speaker 1: other hedge funds that have been kind of targeted or
Speaker 1: do we know that maybe have had some you know,
Speaker 1: poor performance as a result of kind of what we're
Speaker 1: seeing in some of these names. Uh No, We're were
Speaker 1: hunting around from that right now. UM, we haven't heard
Speaker 1: um a lot of names, although we suspect that they
Speaker 1: will definitely be people that at the end of the
Speaker 1: month got got hurt. Any I mean, I'm just throwing
Speaker 1: out this, and you know, I don't want to be
Speaker 1: wild in my theorizing, but is there any um, anyone
Speaker 1: out there is saying that perhaps there's an army of
Speaker 1: redditors that are actually sort of market participants, that are
Speaker 1: regular market participants, but that are sort of stoking the
Speaker 1: fires and the flames in Reddit itself. Um, No one
Speaker 1: knows for sure, although it does sort of make sense
Speaker 1: that there could people out there who are who are
Speaker 1: doing that. UM. I think it's something that the regulators
Speaker 1: will definitely be looking into. So, Kathy, when you talk
Speaker 1: to the hedge funds, did they feel like this is
Speaker 1: just a short term phenomena in the market, or is
Speaker 1: this perhaps something larger and it might be a part
Speaker 1: of markets going forward. UM. I think that that people
Speaker 1: are they don't really know for sure, but they're certainly
Speaker 1: afraid that it could be and we're we are definitely
Speaker 1: trying to figure out if people are changing the way
Speaker 1: that they're short or do different things to to mitigate
Speaker 1: this if it really does become more of a phenomenon
Speaker 1: going forward. Cathy, have one more question to ask you,
Speaker 1: because I noticed this a couple of months ago in December,
Speaker 1: that Plankin was revealed, as they say, to be the
Speaker 1: buyer of a forty four million dollar property own in Florida,
Speaker 1: and it sort of reminded me of the Billions plotline
Speaker 1: about how you know, the guy is advised not to
Speaker 1: be very ostentatious and he goes ahead with it anyway. UM.
Speaker 1: Is this something that maybe you know, brought gay plot
Speaker 1: into the attention of people who wouldn't have liked that.
Speaker 1: I mean, it could, but I really don't think so.
Speaker 1: It really seems that, UM, because the first message that
Speaker 1: was on this reddit um for him was maybe three
Speaker 1: months and I think that UM, even the moderator of
Speaker 1: the message board says that people don't really know anything.
Speaker 1: They just kind of follow a momentum. So someone picked
Speaker 1: up and then someone else. We're all pretty much obsessed
Speaker 1: with game shop. Um, it just had a life of
Speaker 1: its own. So I don't really think that they were
Speaker 1: targeting him because he was gay, but I think it
Speaker 1: was just because they found someone he does actually short
Speaker 1: they went out, Kathy, thank you. It's a it's a
Speaker 1: phenomenal story. Kathie always does phenomenal stories on hedge funders
Speaker 1: and hedge funds. She has our hedge fund reporter and
Speaker 1: her one today is redit Trator's Bloodgeon. Melvin Capital in
Speaker 1: warning to Wall Street and I don't know when the
Speaker 1: last time I walked into a game stop was, but
Speaker 1: I know it's a long time ago. They're still out
Speaker 1: there though. Thanks for listening to Bloomberg Markets podcast. You
Speaker 1: can subscribe and listen to interviews at Apple Podcasts or
Speaker 1: whatever a podcast platform you prefer. I'm Bonnie Quinn, I'm
Speaker 1: on Twitter at Bonnie Quinn. And Paul Sweeney I'm on
Speaker 1: Twitter at pt Sweeney. Before the podcast, you can always
Speaker 1: catch us worldwide at Bloomberg Radio