Speaker 1: Scrap on your parachute. It's time for What Goes Up. Hello,
Speaker 1: and welcome to What Goes Up, a weekly markets podcast.
Speaker 1: I'm Mike Reagan, a senior editor at Bloomberg, and this
Speaker 1: week on the show, we'll talk about how everyone is
Speaker 1: expecting this year to be a blockbuster period for the economy,
Speaker 1: with the Federal Reserve expecting us GDP to grow by
Speaker 1: six point five. Our guest is optimistic about growth as well,
Speaker 1: but not quite as optimistic as the Fed. We'll discuss
Speaker 1: why and what it means for how you should allocate
Speaker 1: your investments this year. But first, let's let Charlie Pellett
Speaker 1: tell us who this week's mystery co host is. This
Speaker 1: week's mystery co host is Scarlet Food. Scarlett is an
Speaker 1: anchor for Bloomberg Quicktake and a veteran of Bloomberg Television
Speaker 1: and Bloomberg News. She's an avid mountain bike rider who
Speaker 1: actually taught Mike Reagan everything he knows about the Bloomberg Rominal.
Speaker 1: Of course, she's still way faster than Mike, both on
Speaker 1: a mountain bike and a terminal. You know, Scarlett, I'm
Speaker 1: gonna have to talk to Charlie about these introductions. He's
Speaker 1: getting some insults in on me there, but it is true.
Speaker 1: I assume you are still faster on than be on
Speaker 1: a terminal D bike. I'm faster when I'm typing and
Speaker 1: using shortcuts on Microsoft Word. I'm not sure about on
Speaker 1: a mountain bike, especially going downhill. I tend to be
Speaker 1: pretty cautious when going downhill and uphill. I'm I'm not
Speaker 1: I'm not too fast either, but we're working on that. Also,
Speaker 1: being introduced by Charlie Pellett is amazing, isn't that. It's
Speaker 1: a great pair of of doing this podcast, having Charlie
Speaker 1: do the intros and and a little insult comedy once
Speaker 1: in a while as well. But Scarlett talk to us
Speaker 1: about Quick Take. I'm very excited about all the all
Speaker 1: the plans in the work for for Quick Take is
Speaker 1: Chris Paul, NBA star. Chris Paul is going to be
Speaker 1: doing the show. I hope he doesn't mess up the
Speaker 1: groove in your seat though now I think, um, he's
Speaker 1: got his own seat, he's got his own table, he's
Speaker 1: got his room, he'll be doing his own thing. I'm
Speaker 1: not totally sure what it's going to be yet. And
Speaker 1: in fact, even if I did. I couldn't say anything
Speaker 1: because there's going to be a big release on April.
Speaker 1: But in the meantime, um we're doing a lot of
Speaker 1: good work just on covering the business news stories more
Speaker 1: from a consumer perspective rather than for the Bloomberg Terminal
Speaker 1: client and customer. So it's a really interesting time, obviously,
Speaker 1: given what's happening in the markets and the economy, and
Speaker 1: with all the different social justice movements as well, and
Speaker 1: this focus on equality, which is something that I've been
Speaker 1: doing a lot of work on over the last couple
Speaker 1: of years of Bloomberg Equality. It's excellent. I'm really looking
Speaker 1: forward to the launch of the new prime time lineup,
Speaker 1: and of course, as always, you can watch Scarlett anchor
Speaker 1: during the day. Scarlett really did teach me everything about
Speaker 1: the terminal. By the way, I don't want to data Scarlett,
Speaker 1: please go back in two and seven. What siety did?
Speaker 1: I think you're a little generous with the date there,
Speaker 1: But that's fine. I'll let you get away with that.
Speaker 1: Fair enough, fair enough to thousand and it was. But anyway,
Speaker 1: let's let's bring in our guest here. We're very excited
Speaker 1: to have him. He is the chief portfolio strategist at
Speaker 1: State Street Global Advisors, so he can talk about all
Speaker 1: manner of macro markets and the economic outlook and everything
Speaker 1: in between. His name is Garv Malick Garve. Welcome to
Speaker 1: the show. Nice to be here, Michael mused to be
Speaker 1: a scarlet. Well, thanks for thanks for your time. We
Speaker 1: really appreciate it. And let's start with that discussion about
Speaker 1: GDP this year. I know you guys are a little
Speaker 1: more conservative in your estimates, uh for GDP this year
Speaker 1: than say the fet Is. Walk us through about why
Speaker 1: that is. I mean, still I think regardless, we can
Speaker 1: expect a pretty much a blockbuster year for economic growth,
Speaker 1: especially compared to what we've seen, saying the post financial
Speaker 1: crisis era. But walk us through what you're thinking about
Speaker 1: growth this year and kind of how it will play
Speaker 1: into the markets. Sure, so we aren't expecting a little
Speaker 1: bit though, as you said, than the than the FED,
Speaker 1: I mean, I don't want to read too much into
Speaker 1: it as well. I think that our expectation is that
Speaker 1: both the pasage where things start opening, the pace set
Speaker 1: which consumers starts spending, business spending starts picking up, all
Speaker 1: that from a timing standpoint could be a little different
Speaker 1: than what the FED is assuming right now, So our
Speaker 1: expectations things are going to take a little bit longer
Speaker 1: to normalize. So from our perspective one, maybe a little
Speaker 1: bit behind the FED. But then if you start looking
Speaker 1: at two, perhaps even a little bit ahead of the
Speaker 1: FED at at at that point in time. So it's
Speaker 1: a bit about timing as to what's the path to normalization,
Speaker 1: and a bit about other factors. I mean, there are
Speaker 1: some odd things we're seeing in consumer behavior. The fact
Speaker 1: that you know, stimulus checks went out. People are of
Speaker 1: course spending a bit of it. People are indeed using
Speaker 1: it to pay down debt, some of it is going
Speaker 1: to savings. So all those factors keep us a little
Speaker 1: bit behind the FED as we look at one, and
Speaker 1: a little bit ahead perhaps as we look at two.
Speaker 1: But all in I agree with you, this is going
Speaker 1: to be a blogbuster year, the best we've seen in decades. Okay,
Speaker 1: so maybe two or three years out it'll all even
Speaker 1: out with what the FET is projecting, With what you're projecting.
Speaker 1: I wonder, though, with the rest of the world opening
Speaker 1: up at a slower pace than the US, what does
Speaker 1: that mean in terms of consumption in the United States?
Speaker 1: Because a lot of the times people are spending their
Speaker 1: money and they're having these experiences traveling out of the country,
Speaker 1: spending their dollars outside the US. People aren't really leaving
Speaker 1: the country. Now, what does that mean for domestic demand
Speaker 1: and the kind of consumer spending we can expect over
Speaker 1: the next couple of years. So you're touching on a
Speaker 1: very pressing point, right. So one of the reasons why
Speaker 1: in some ways we say that, you know, as we
Speaker 1: think about not only just US GDP, but global GDP,
Speaker 1: even in global GDP numbers where perhaps a little bit
Speaker 1: behind consensus podcasts because exactly what you said, the fact
Speaker 1: that consumers are going to be spending a bit more domestic,
Speaker 1: but not as much as they would have spent what
Speaker 1: they're traveling to. Let's say you're up for or Asia,
Speaker 1: and we also think that the recovery is going to
Speaker 1: have a rolling Um, yeah, it's going to be in
Speaker 1: in wades or role. So right now US is taking
Speaker 1: the lead. I don't think that the current pace of vaccinations.
Speaker 1: Everybody knows it's been slow in Europe, but I don't
Speaker 1: think we should make consumption that will forever be slow
Speaker 1: in Europe or in Asia. I think they will pick up.
Speaker 1: So there's gonna be a bit of a baton handing
Speaker 1: that's going to occur from US to Eurozone, Eurozone to
Speaker 1: e M. So some dealers occurring as you think about
Speaker 1: that roll over occurring, but actually correct, the fact that
Speaker 1: consumers are going to be spending a bit more and
Speaker 1: domestically does lift up the US, but the fact that
Speaker 1: they will not be spending as much internationally means perhaps
Speaker 1: airlines we're not gonna be running as many routes as
Speaker 1: they do internationally revenue impact, So some of those dealers
Speaker 1: that might occur because of timing other reasons why you
Speaker 1: might see some differential behavior. Uh and uh, perhaps some
Speaker 1: better impact in the US immediately, but then um, you know,
Speaker 1: some store do as you think about the other parts
Speaker 1: of the of the globe. Yeah, I do think it's
Speaker 1: interesting to garb Uh you wrote a little bit about
Speaker 1: external leakage. Uh, and correct me if I'm misunderstanding that.
Speaker 1: But I I sort of picture that is, you know,
Speaker 1: stimulus money being spent by the US government kind of
Speaker 1: then in turn being spent on on imports and stuff
Speaker 1: like that. Walk us through how you're thinking about that
Speaker 1: and also how you're thinking about sort of the path
Speaker 1: going forward for fiscal spending. Um, are we really going
Speaker 1: to see this infrastructure package that is being discussed or
Speaker 1: is that is it gonna be you? My guess is
Speaker 1: we we might have kind of a rocky road to
Speaker 1: get to that, perhaps perhaps disappointing the markets a little bit.
Speaker 1: I don't know, but I'm curious how you're thinking about
Speaker 1: all those issues. Yeah, so I think that first on
Speaker 1: your on your interest question about leakage, Yes, absolutely, it's
Speaker 1: it's sort of you know, party to do with imports,
Speaker 1: party to do with savings, and I think one of
Speaker 1: the things that has definitely changed for for the U
Speaker 1: s consumer from a behavior standpoint. I mean, you guys
Speaker 1: know this right, Like I don't want to two or
Speaker 1: two if you were dating your your years or your
Speaker 1: age perhaps in this process, but clearly you know that
Speaker 1: two thousand's beginning two thousands of the US consumer was
Speaker 1: consistently in deficit. We were spending more that we were earning.
Speaker 1: And then post two thousand eight and g FC, we've
Speaker 1: seen a change in behavior where the US consumers actually
Speaker 1: beginning to stay more and that does indeed continue even
Speaker 1: as we look at the effects of the stimulus, most
Speaker 1: recently more money being used to pay down debts. But
Speaker 1: I think part of the behavior actually correct, is that
Speaker 1: the savings is driving some of that behavior, and some
Speaker 1: of it is also timing in how consumers choose to
Speaker 1: spend that money, um, you know, dealaying certain decisions two
Speaker 1: perhaps later in the year, and all those things do
Speaker 1: factor in as we as we think about that, the
Speaker 1: leakage that getting through, and I remembering what was the
Speaker 1: second question you had, what you think about this next
Speaker 1: phase of fiscal spending, the infrastructure package that we keep
Speaker 1: hearing about, is it you know? My guess is it's
Speaker 1: gonna be that's that's gonna be a tough negotiation, sort
Speaker 1: of a hard fought negotiation, and perhaps maybe the market
Speaker 1: might be disappointed. I'm curious what you think. Yeah, so
Speaker 1: I think there's two ways to think about it. As
Speaker 1: I agree with you that there is going to be
Speaker 1: some disappointment along the way, I think Biden is doing
Speaker 1: everything you can to make sure we get to some outcome.
Speaker 1: And everybody acknowledges that this type of spending has to
Speaker 1: occur for a variety of reasons. Um As you know,
Speaker 1: I mean you you you said in my Tattle of
Speaker 1: Chief portal A Strategies. But one of the things I
Speaker 1: do is I work with various institutions, from sovereign well
Speaker 1: funds to um pentioned puss across the board. They're hankering
Speaker 1: for assets that have long duration and give big dreams
Speaker 1: of income, you know, beyond thirty years. Even so there
Speaker 1: is a need for for the infrast spend that has
Speaker 1: demand on every side, it is going to be a
Speaker 1: little bit difficult. So you know, I agree with that aspect.
Speaker 1: I think the way we think about it in some
Speaker 1: ways from a market standpoint, our ship heres for a
Speaker 1: second here, So how do we play that to have
Speaker 1: the greatest chance of success in terms of getting the
Speaker 1: returns we expect from that from the Biden stimulus. And
Speaker 1: we think the highest beta for that is actually material
Speaker 1: It's a sector which has you know, blight constraints around it.
Speaker 1: It's a sector in which we don't see we see
Speaker 1: we see a lot of discipline in terms of ongoing investments.
Speaker 1: So when we think about playing out the Biden scenario
Speaker 1: versus what actually gets realized, we think materials is a
Speaker 1: good place to be. To some extent, industrials too, but
Speaker 1: Butterios is a nice place to be for for a
Speaker 1: reasonable length of time to to play the Biden in
Speaker 1: pron plan. I'm glad you bring up infrastructure, Mike, because
Speaker 1: my son is looking to be a structural engineer, because
Speaker 1: he is graduating from high school this year, and Mike
Speaker 1: and I talk a lot about this whole process of
Speaker 1: getting your kids to college, and hopefully there will be
Speaker 1: some bridges and tunnels for him to construct once he graduates.
Speaker 1: Um garlf, I want to at your thoughts on the
Speaker 1: labor market, in particular the labor shortage that we seem
Speaker 1: to see across so many different parts of the economy.
Speaker 1: Whether it's in the um seasonal hospitality industry or the
Speaker 1: trucking industry. Everyone's saying that they're going to have to
Speaker 1: start paying workers more to get more people into these
Speaker 1: kinds of jobs. How are you thinking about wage inflation
Speaker 1: and what that means for your investments? Yeah, so, I
Speaker 1: think that the way we think about BIGE infressution is
Speaker 1: what are the temporary pressures and then what are sustainable
Speaker 1: long term pressures. On a temporary basis, there is a
Speaker 1: lot of pressure on page right. So not only is
Speaker 1: it all the segments and sectors you spoke about where
Speaker 1: there is a shortage of labor. Also the ongoing pressures
Speaker 1: to raise the minimum page. Now, the question worth while
Speaker 1: asking is that is this something that it starts in
Speaker 1: one What is this something that results in a sustainable
Speaker 1: move where we can expect to see uh, some reasonable
Speaker 1: levels of aage growth the the next three to five years.
Speaker 1: And I think that's the place where we struggle. So
Speaker 1: we do think that temporary shortages are going to be there.
Speaker 1: But as things open, as we get closer to that
Speaker 1: full employment number, we're still faced with the sustain problem
Speaker 1: that we had in some ways in the Trump administration.
Speaker 1: Right that you had full employment, you had labor shortages.
Speaker 1: You did see some page growth, but nothing that leaked
Speaker 1: its way through for there to be inflation on our
Speaker 1: more sustained basis. So I would say temporary pressures. Definitely,
Speaker 1: it's going to play itself out, and do see a
Speaker 1: bit more of a ship that coming towards labor versus
Speaker 1: capital call it. However, for it to be sustained, I
Speaker 1: think there's more investments we need to make in in
Speaker 1: fine productivity, in tech, those things duty to continue fast
Speaker 1: rates so that workers indeed can have more sustained sources
Speaker 1: of earning those pages and for us to see a
Speaker 1: sustained growth in those So mich and are selfishly wondering here,
Speaker 1: um whether that means his daughter and my son will
Speaker 1: actually be able to make a living weight and not
Speaker 1: live in our homes. I mean, I think that you know,
Speaker 1: you've also think the trend right that college educated. I
Speaker 1: think that that's an area that continues to gunner and
Speaker 1: and continues to have some reasonable level of our gaining power.
Speaker 1: So I think may the future that is the writer
Speaker 1: Scarlett's talk about dating us there with with our college
Speaker 1: bound that's really true. But I'm just impressed your son
Speaker 1: has a major picked out. My daughter's fluctuates depending on
Speaker 1: what show she has binge watching. So she's watching Gray's
Speaker 1: Anatomy for a while and wanted to be a pediatrician,
Speaker 1: and then uh moved on to something else, and I
Speaker 1: think it was FBI Agent for a while. So I
Speaker 1: gotta get her back. They need to add more seasons
Speaker 1: to Gray's Anatomy because I want to get her back
Speaker 1: back that focus. But but you know, the whole market
Speaker 1: until let's say about three weeks ago, a month ago
Speaker 1: was just entirely fixated by what we were seeing in
Speaker 1: the treasury market, and this sort of sudden jolt higher
Speaker 1: in yields fields have since cooled cooled off a little bit. Um.
Speaker 1: It kind of looks at least like a short term
Speaker 1: high possibly maybe perhaps is in um, but I wonder
Speaker 1: if that is really true. I mean, how are you
Speaker 1: thinking about yields? Um? Is this cooling off period that
Speaker 1: we're seeing here now doomed to fail or higher yields
Speaker 1: just inevitable given the the backdrop of GDP growth that
Speaker 1: we're seeing and at least a short term pickup of inflation.
Speaker 1: I mean, is this kind of a a bowl trap
Speaker 1: for for treasury fires right here? Well? I mean I
Speaker 1: think that some level of the yields going up I
Speaker 1: think has to happen with the amount of growth we're seeing.
Speaker 1: I mean, you know, on a long term basis, and
Speaker 1: your yells should be mirroring whatever is the GDP growth.
Speaker 1: The cut and pick up obviously five six for for
Speaker 1: US or six is obviously not sustainable. You start looking
Speaker 1: at for three years, you're looking again at the two
Speaker 1: two and a half percent number. So some move up
Speaker 1: definitely going to happen. The question is how much. I mean,
Speaker 1: you know, we don't see it going much beyond the
Speaker 1: at the two and a quarter or two and a half.
Speaker 1: Uh And if anything, if we saw yields broach past
Speaker 1: those levels, I actually we'll be thinking about saying, well,
Speaker 1: maybe we should extend duration and those situations. I mean,
Speaker 1: on a on a um broad basis, across the portfolios,
Speaker 1: we're under reponds, we're under a duration. But as it
Speaker 1: approaches us those levels, we think there may be room
Speaker 1: to think about buying treasuries. I mean, keep in mind
Speaker 1: that there are these long term pressures that the FED
Speaker 1: has to deal with, and some of these are political
Speaker 1: in nature too. Things. You know, we spoke about page
Speaker 1: growth the spook, but college educated um inequality continues to
Speaker 1: rise and impact through the pandemic. Some of these structural
Speaker 1: forces like inequality have increased over this period. That is
Speaker 1: going to put a lid on how much high rates
Speaker 1: the FED will tolerate. The language out of the Fed
Speaker 1: on extended stimulus and what they need to start breaking
Speaker 1: out suggest to us that you can see yields move up.
Speaker 1: There is definitely room to move up in such a
Speaker 1: robust growth environment. Not beyond certain high levels though, uh
Speaker 1: and for us that number is somewhere around you know,
Speaker 1: call it to one at quarter two and a half
Speaker 1: where we start seeing you know, the other way downward
Speaker 1: pressure occurring. The other thing to keep in mind is
Speaker 1: that much as we can have a long term various
Speaker 1: view on bonds, the fact that institutional investors on long
Speaker 1: term basis do need long duration assets just to meet
Speaker 1: their their their obligations, and the fact that still when
Speaker 1: you think about hedging against any shocks and the equity markets,
Speaker 1: the long duration treasuries are seriously your best bet. And
Speaker 1: and it's it's it's interesting that if you look at
Speaker 1: the fit of post GFC, even though we've seen all
Speaker 1: these forces play out in terms of globalization, taking a
Speaker 1: step back on a trade basis, financial globalization, the effect
Speaker 1: of the dollar has simply increased in markets. So even
Speaker 1: if you're sitting in in India today or China and
Speaker 1: you want to hedge some of these strop positions, well,
Speaker 1: US Freddy is still really good use to do that,
Speaker 1: So demand plust. The fact that that it is really
Speaker 1: one of your best diversifiers puts a lid on half
Speaker 1: far the the Treasury dells can go up. How do
Speaker 1: you see foreign demand for treasuries playing into this? I mean,
Speaker 1: I know a lot of it ties back to how
Speaker 1: different economies in the emerging markets are faring. But do
Speaker 1: you see demand from the likes of China, from Japan,
Speaker 1: from other countries around the world changing at all in
Speaker 1: the next forceable future in the next year. I know,
Speaker 1: I don't see that changing materially. I mean, I think
Speaker 1: that there is always competition as to which currency can
Speaker 1: be a strong substitute reserve to to the dollar, But
Speaker 1: really nothing has emerged in China's trying gets best to
Speaker 1: position the remember as a use of currency. We've seen
Speaker 1: the Euro do that and take away some market share,
Speaker 1: but I think still the main res of currency, the
Speaker 1: main buyer of things in the world. The fact that
Speaker 1: we still run a pretty heavy kind of down deficit
Speaker 1: here tells us that demand for US as that US
Speaker 1: treasuries is going to continue today and go fast. I
Speaker 1: think the other thing to keep in mind also is
Speaker 1: that right now, as we look from a market perspective,
Speaker 1: as we think about earnings growth, we think about growth.
Speaker 1: Everything we've been discussing so far, you know, US exceptionalism
Speaker 1: continues across the board. That means that investor is outside
Speaker 1: the US certainly demand more and more US assets. So
Speaker 1: I don't see the demand situation changing that dramatic and
Speaker 1: dramatically because of course the unique status they're enjoys it.
Speaker 1: You know, Garv, I'm famous for asking like twelve part questions,
Speaker 1: but I'm gonna take it easy on you and don't
Speaker 1: only ask a two part question. And that is because
Speaker 1: I know you guys at State Street you know a
Speaker 1: thing or two about e t f s if I'm
Speaker 1: not mistaken, And we've just seen such a massive inflow
Speaker 1: into e t f s this year, mutual funds as well,
Speaker 1: but really I popping inflows in the in the e
Speaker 1: t f s. So so two parts to that, Um,
Speaker 1: I'm curious for the first part, where is that demand
Speaker 1: coming from? You know, is it the pensions and the
Speaker 1: institutions you talked about earlier, or is it the sort
Speaker 1: of reddit in Wall Street bets crowd or isn't even
Speaker 1: all of the above, I guess perhaps. And also you know,
Speaker 1: as as as at just such as yourself, Um, you
Speaker 1: know what you're you're thinking about how you should allocate
Speaker 1: your portfolios, and we can use, you know, hypothetically useing
Speaker 1: all et F portfolio how you would advise let's just say,
Speaker 1: hypothetically a middle aged guy who's got some kids head
Speaker 1: in the college and and it's, uh, it's kind of
Speaker 1: a scarity cat a little right. So I think we've
Speaker 1: definitely seen abidening of the use of e d S.
Speaker 1: I mean, e d S has served really very strongly,
Speaker 1: certainly through crisis periods like last year, in terms of
Speaker 1: providing investors with liquidity transparent pricing, which has meant that
Speaker 1: its role has certainly expanded. So it's not it's it's
Speaker 1: certainly used for increasingly for cash actualization. We saw it
Speaker 1: use a lot for rest transfer, you know, I want
Speaker 1: to shot something, I don't want to take an a
Speaker 1: beat in the marketplace, um or kind of classic swap
Speaker 1: type arrangements that have been restricted to derivatives increasingly being
Speaker 1: media being used for for that tactical positioning. I think
Speaker 1: that's probably been an area that's the immense growth as
Speaker 1: liquidity has increased within the e d F landscape that
Speaker 1: there is a lot more of that tactical views on
Speaker 1: either a specific sector, tob sector or or of course
Speaker 1: more broadly in in markets. So that's on the on
Speaker 1: the used side of the d F in terms of
Speaker 1: how you should think about your allocation again keeping your
Speaker 1: hypothetical person in mind, so um, so you know, it's
Speaker 1: it's clearly a trade off between how much you want
Speaker 1: to be in growth versus safety assets and what do
Speaker 1: you do about income. We are biased more towards risk assets.
Speaker 1: That means equities to some extent commodities, Um, we do
Speaker 1: like those. I think we keep a structural position in
Speaker 1: in both the long duation as I as I spoke
Speaker 1: to you about, and and we do like gold for
Speaker 1: its diversifying capabilities. All the incentives are going have come
Speaker 1: down with a with a pickup in in yields. I
Speaker 1: think want to also think about also in the ways
Speaker 1: of making your your income, So you know, should that
Speaker 1: mean playing more with dividends, looking at alternatives like convertible
Speaker 1: or senior loans, infrastructure, so things like that that gets
Speaker 1: you the income statement. Given that most investors and we
Speaker 1: do advocate in this environment in general to be underweight bonds,
Speaker 1: I think you're losing out that that income stream. To
Speaker 1: try and put some kind of a structuring place that
Speaker 1: gets you to the heart of that that income stream.
Speaker 1: I think alternative assets, as you think about dividends, as
Speaker 1: I said, as you think about senior loans, converts, those
Speaker 1: are all becoming more attractive to get to that that
Speaker 1: that income streams. How much are our hypothetical investor who's
Speaker 1: got a couple of kids heading to college put into
Speaker 1: the likes of bitcoin? I mean you mentioned e t
Speaker 1: F UM. I think there are at least eight e
Speaker 1: t F bitcoin e t F that have been filed
Speaker 1: and we have no idea when the SEC is actually
Speaker 1: going to green light any of these. Speaking scaredy cats,
Speaker 1: I mean there's one the SEC when it comes to
Speaker 1: bitcoin ETFs. Is bitcoin something that should be part of
Speaker 1: your portfolio? Are you looking to perhaps allocate some space
Speaker 1: to that? Well, I mean the bitcoin is a toughy right,
Speaker 1: I mean if you look at the long term behavior,
Speaker 1: I mean, you know, bit points move up has got
Speaker 1: to do with scarcity and it's got to do much
Speaker 1: like gold, and it's got to do it. Yeah, the
Speaker 1: fact that it's you know, it's it perceived to be
Speaker 1: a sort of sort of value. If you looked at
Speaker 1: the long term relationship between using bitcoint as a head
Speaker 1: in any way, UM on a longer basis doesn't do
Speaker 1: much better than than gold. In fact, it would say
Speaker 1: goal is way better than than bitcoin in that in
Speaker 1: that regard more recently, with all the moves that you've seen,
Speaker 1: it indeed does do a better job of providing some
Speaker 1: um some diversification benefit more than mind with with gold.
Speaker 1: But you do have to live with the fact that
Speaker 1: the volutarity is much higher. We do struggle to say
Speaker 1: what that is it a and assets, the part of
Speaker 1: a coal holding or not. I think it's a tough
Speaker 1: one to make a call around, but I think that
Speaker 1: investage need to pay attention to it because of just
Speaker 1: the fact that it is rising. There's a whole bunch
Speaker 1: of cryptocurrencies that are coming about, There's a desire for
Speaker 1: countries to be thinking about digitizing their currency. So given
Speaker 1: that whole complex nos evolving, h it does involve consideration
Speaker 1: actually adding it to a portfolio. If everybody did that,
Speaker 1: then of course demand for these things would spite up
Speaker 1: like no one's business. So that part needs to be
Speaker 1: needs to be kept in the background. Something worth looking
Speaker 1: at UM. I'm not sure it really to step out
Speaker 1: and say that it's something that's an essential part of
Speaker 1: investors portfolios, and if we were choosing, I would say
Speaker 1: still for that diversification benefit and the fact that you
Speaker 1: have so much monetary fiscal stimulus occurting on a double basis,
Speaker 1: gold does it have a role to play in your
Speaker 1: your holdings and in your in your broad acid Garth,
Speaker 1: I'm glad that you said gold is better than bitcoin
Speaker 1: on this podcast. This this is a safe space for
Speaker 1: ideas like that. If you if you had taken that
Speaker 1: take to Twitter, I would have feared for your your
Speaker 1: future mental health. Let's let's just say but one last
Speaker 1: thing before we get to the craziest things we saw
Speaker 1: in markets this week. UM. I know you've done a
Speaker 1: lot of work looking at liquidity, and obviously we saw
Speaker 1: major liquidity issues in the treasury market last year. Um,
Speaker 1: after that seven year note auction a few weeks ago,
Speaker 1: it almost looked like deja vu to that really sort
Speaker 1: of liquidity crisis we saw backter in the height of
Speaker 1: the pandemic. If you were if you were going to
Speaker 1: stay up at night worrying about liquidity in a certain market,
Speaker 1: is would it be the treasury market or is it
Speaker 1: the type of thing where a liquidity crisis. You don't
Speaker 1: really know where it's going to be until it happens.
Speaker 1: Oh yeah, I think that you do need to think
Speaker 1: about the treasy market, right because you think about the expectations, right.
Speaker 1: I mean, we do expect it to be an agent
Speaker 1: on extremes here, but we do expect that to be
Speaker 1: the liquidly as you move away from the dollar to
Speaker 1: following the other end to e M currencies, right. I
Speaker 1: mean we know liquiiti is a lot less in those
Speaker 1: markets versus here or treasuries as you devenment securities as
Speaker 1: you start going out from d M to EM and
Speaker 1: then e M two um smaller countries within that within
Speaker 1: that complex. So yes, it does one of some conservation
Speaker 1: because it challenges notions about as a market running smoothly
Speaker 1: or not running smoothly. And that's why doesn't need to
Speaker 1: pay attention to what is occurtting around that. Again, I
Speaker 1: don't want to sound alarm bells here. I think that
Speaker 1: what all we do think that would all the efforts
Speaker 1: the FED is taken. Broadly speaking, markets are reasonably well
Speaker 1: functioning and liquid in general. The quick conditions have been
Speaker 1: pretty reasonable. But again, something we think about we worry
Speaker 1: about it because any frees up on liquidity in federies
Speaker 1: has a ripple effect that goes through a range of markets. Absolutely,
Speaker 1: the contagion happens in stantaneously, I guess instantaneously. Yeah, exactly exactly.
Speaker 1: And and you know, just to re attrade the effect
Speaker 1: of US dollar, U S fasuries and US extertionalism across
Speaker 1: global markets on a financial basis, I want to be clear,
Speaker 1: I said that financial basis, not not paid basis. We've
Speaker 1: seen every country getting a bit more domestic um on
Speaker 1: a on a globle basis, has just increased cross post GFC.
Speaker 1: Is there any risk to get back to that dollar
Speaker 1: as the reserve currency? Any risk to that status in
Speaker 1: your mind? I think that's what the the bitcoin people
Speaker 1: would would tell you on Twitter. But I'm curious what
Speaker 1: you think. I mean. You know, we as we started
Speaker 1: putting out our outlook last year, so sort of October,
Speaker 1: and when we sit down and think about what what
Speaker 1: is it we expect to look at a market, we
Speaker 1: definitely advocated the investors need to pay attention to China
Speaker 1: for a variety of reasons. Right, you know, I'm I'm
Speaker 1: not going to take a political stance here what my
Speaker 1: views maybe on one versus the other it but I
Speaker 1: do think that as you look at the efforts the
Speaker 1: country is putting in place in Chinese economy, is putting
Speaker 1: in place videos he's putting in place too. UM call
Speaker 1: it make it a more global currency with an eye
Speaker 1: on it having reserved status. I think it's It's definitely
Speaker 1: something that investors should pay attention to. Investors should pay
Speaker 1: attention to the fact that it's now the second largest economy,
Speaker 1: and then you can look at your forecasts. People are
Speaker 1: more optimistic pessimistic, but somewhere you're looking in the next
Speaker 1: pack to ten years, it's likely to be bigger than
Speaker 1: the US. In that environment, it can be a competitor.
Speaker 1: So it's something that investors should keep and keep an
Speaker 1: eye out for. Scarlett I will often compare the podcast
Speaker 1: to like a good four course meal. We just had
Speaker 1: a very nutritious discussion there about markets. Now it's time
Speaker 1: for the dessert. It's that time tiden up your straight jackets.
Speaker 1: It's time for the craziest things we saw in markets
Speaker 1: this week, Scarlett, I have a lot of faith in
Speaker 1: you to provide us with something good in the crazyest
Speaker 1: things category. For this week, What do you have for us? Okay,
Speaker 1: so we remember you and I definitely because we've got
Speaker 1: kids heading to college. Can you tell that this is
Speaker 1: an obsession of mine? UM. The whole operation Varsity blues
Speaker 1: from a couple of years ago where parents who are
Speaker 1: paying schools. Uh No, not schools directly, but they're paying
Speaker 1: Rick Singer for a side door entrance into elite universities. UM.
Speaker 1: There's a good story on the Bloomberg News terminal today
Speaker 1: that uh I was talking about Chinese students paying agents,
Speaker 1: these consulting firms up to twelve THO dollars first shot
Speaker 1: at an entry level job at investment banks. Michael Sacks,
Speaker 1: like JP Morgan, I don't know that these are side doors.
Speaker 1: It's not quite a side door, and it's not clear
Speaker 1: that this is there's anything wrong with this, but these
Speaker 1: programs offer an inside track to students. They pair them
Speaker 1: with bankers to help with strategy, networking, drafting letters, internal referrals,
Speaker 1: touting success in landing these jobs anywhere from Shanghai to
Speaker 1: New York. They target all the big major firms, they
Speaker 1: target Citadel, hedge funds, consultants. It's just an interesting UM
Speaker 1: story to keep in mind, Mike, as you and I
Speaker 1: prepared to, yeah, spend lots of money on schools, and
Speaker 1: then in the years to come, lots of money to
Speaker 1: help them potentially get jobs in Wall Street. So you're
Speaker 1: saying I should reserve a spare twelve thousand per per kid.
Speaker 1: I guess all all for the right. I should point
Speaker 1: out to go work what twenty three and a half
Speaker 1: hours stay, that's right, not get enough sleep and work
Speaker 1: all through Saturday. Even though Goldman Sacks and the other
Speaker 1: firms say that they should get their free saturdays they
Speaker 1: I guess it all. It would all pay off in
Speaker 1: the long run. I wonder if they get or they
Speaker 1: guaranteed a job, is it a money back guarantee if
Speaker 1: they can't place your kid in a bank? I wonder.
Speaker 1: I did not see any of that. There's no money
Speaker 1: back guarantee noted here. But there are a bunch of
Speaker 1: different websites, a bunch of different firms, so they all
Speaker 1: have to offer some competitive advantage. That's that's pretty interesting. Hey, Garth,
Speaker 1: what's your what's your offer for getting my kid a
Speaker 1: an internship with you? And what we're talking after the podcast?
Speaker 1: So I have, like you know, I mean, I'll give you,
Speaker 1: I'll give you two things to think about it. I
Speaker 1: think that one thing market space for a second, right,
Speaker 1: I mean weeks is bill, it's long term averages. I
Speaker 1: mean you know, that thing just blows my mind out.
Speaker 1: I think when we look at it, we do recognize
Speaker 1: that is a lot of good things to look at
Speaker 1: on the economic environment. But we're sitting on spid is
Speaker 1: above it two one a day, moving average above it's
Speaker 1: ninety average, bixet extreme THO levels of complacency. That's something
Speaker 1: that that we spent a lot of time thinking about
Speaker 1: and care about. Uh. And then the other thing that
Speaker 1: keeps my attention is what's it getting with the oscar
Speaker 1: so um as you know there is there is a
Speaker 1: lot of heat in that category. This year with Chadwick Boseman,
Speaker 1: I was looking to see the odds would have shifted
Speaker 1: between Anthony Hopkins and muh As was the first Muslim
Speaker 1: of cost to be nominated for the oscars, and have
Speaker 1: seen some shifts occurred in that regard. My money is
Speaker 1: still on Chadwick Boseman, but I'm looking to see if
Speaker 1: Riz gives him, gives him a bit of proun for
Speaker 1: his money. Garbs. Scarlett is perking up here, and she's
Speaker 1: like our resident gossip columnist at Bloomberg. If you if
Speaker 1: you ever want to catch the latest gossip, check out
Speaker 1: and you're on the terminal, check out Scarlet's message nine.
Speaker 1: She'll give you the latest. I'll make sure what's the latest? Scarlett?
Speaker 1: Oh my gosh, I have not updated that in a
Speaker 1: while because I cannot get into the whole influencer economy
Speaker 1: and the whole um reality show economy. Like I still
Speaker 1: like celebrities, you know, minted the old fashioned way making movies.
Speaker 1: So I'm a little out of step here. I'm this
Speaker 1: podcast is all about showing our age. Mike, what happened?
Speaker 1: How did you run into this? We can't we can't
Speaker 1: hide anymore, we can't hide. Well, I'll show you how
Speaker 1: out of touch I am with the influencers of the
Speaker 1: world with my craziest thing. I'm going all the way
Speaker 1: back to one of my favorite influencers of all time,
Speaker 1: and that's Guy Fiery. You remember him, the restaurant owner. Yeah,
Speaker 1: the the diners, drive ins and dives he cut. Yeah,
Speaker 1: it's great. I could watch that. It's almost like I
Speaker 1: ate a meal after watching it. So satisfying the stuff,
Speaker 1: stuff I would never really eat in real life, but I,
Speaker 1: you know, vicariously live live through Guy Fierry. This relates
Speaker 1: back to the crypto conversation. Because Bitcoin is just not
Speaker 1: crazy enough to make it into the craziest things. We've
Speaker 1: got to go and move on to the new crypto
Speaker 1: sensation doge coin, as Katie Gray felt like to call
Speaker 1: it doggy coin, and it jumped from eight cents to
Speaker 1: fourteen cents on I think there's between Tuesday and Wednesday
Speaker 1: and he can laugh, ha ha. Eight cents to fourteen
Speaker 1: cents whatever. That's a seventy game for anyone who's who's
Speaker 1: holding this thing. And it was all because none other
Speaker 1: than Guy Fiery tweeted out a picture of him in
Speaker 1: a space suit with the doge coin uh mascots. His
Speaker 1: picture was in the space suit helmet and it said
Speaker 1: doge coin to the moon or something to that extent.
Speaker 1: So Guy Fierry of Diners, Drive Ins and Dives fare
Speaker 1: is now pumping doge coin on Twitter and it seems
Speaker 1: to be working a good four cent pop for six
Speaker 1: cents pop in doge coin, all thanks to the Diners,
Speaker 1: Drive Ins, and and Dives host Guy Ferry. So I
Speaker 1: don't know how this happens where all of a sudden,
Speaker 1: guy like that is uh, it's pumping doge point if
Speaker 1: someone got to home and and offered some monetary compensation
Speaker 1: for that tweet, I don't know. I hate to impugne
Speaker 1: Guy Fierry's character in the in the crypto markets, but
Speaker 1: all at all, pretty good offering of crazy things this
Speaker 1: week from from you two, and I really appreciate your time.
Speaker 1: Scarlet Foo and Garth Malick, thank you so much for
Speaker 1: your time this week. Enjoyed every minute of it. Same yeah,
Speaker 1: thank you so much for the game of time O great. Well,
Speaker 1: hopefully we can have you both back again someday and
Speaker 1: find even crazier things that talk about what goes up.
Speaker 1: We'll be back next week. Until then, you can find
Speaker 1: us on the Bloomberg Terminal website and app or wherever
Speaker 1: you get your podcasts. We'd love it if you took
Speaker 1: the time to rate and review the show on Apple
Speaker 1: Podcasts so more listeners can find us. And you can
Speaker 1: find us on Twitter follow me at reag Anonymous. Our
Speaker 1: guest host, Scarlett is at Scarlet Foo. You can also
Speaker 1: follow Bloomberg Podcast at at Podcasts, and thank you to
Speaker 1: Charlie Pellett of Bloomberg Radio and the voice of the
Speaker 1: New York City subway system. What Goes Up is produced
Speaker 1: by Laura Carlson. The head of Bloomberg Podcasts is Francesco Levy.
Speaker 1: Thanks for listening. To see you next time.