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Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox.

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Speaker 1: Along with my co host Lisa Bramowitz. Each day we

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Speaker 1: bring you the most important, noteworthy, and useful interviews for

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Speaker 1: you and your money, whether you're at the grocery store

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Speaker 1: or the trading floor. Find the Bloomberg p m L

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Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. A

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Speaker 1: lot of people have said that the past few years

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Speaker 1: have been a bad time to be a short seller.

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Speaker 1: But here's one who has managed to make money despite

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Speaker 1: the fact that fundamentals haven't always seemed to matter in

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Speaker 1: a central bank fueled bull run. Here joining us is

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Speaker 1: my pleasure to introduce Fammi Kadeer, founder and chief investment

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Speaker 1: officer of soft Cat Capital Management in New York. Fun me,

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Speaker 1: this uh, the fund that you run is a short

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Speaker 1: only fund. This is not paired with offsetting trades. So

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Speaker 1: where are the opportunities right now at a time when

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Speaker 1: central banks are still backing corporate America and corporations globally. Well,

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Speaker 1: I became a short seller in a QUEUEI driven market,

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Speaker 1: so I I and I've only made money doing so.

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Speaker 1: And the way you do it is it's it's the

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Speaker 1: fundamentals matter. But the surest way to understand when to

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Speaker 1: short company is you need to get the timing right.

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Speaker 1: And typically if a company whose fundamentals underlying fundamentals are

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Speaker 1: poor and the growth of the company is driven by

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Speaker 1: a potentially fraudulent scheme, you have to first understand the

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Speaker 1: fraudulent scheme because at some point they the company can't

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Speaker 1: perpetuate that scheme any longer. So what we've done is

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Speaker 1: try to pinpoint that timing because then, um, no matter

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Speaker 1: what happens, the fundamentals will will collapse. Because these are

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Speaker 1: you know, dirty businesses, businesses that perhaps don't really have

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Speaker 1: a purpose. Um. So when when the fraudulent scheme is

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Speaker 1: sort of at its at its end, um, that's where

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Speaker 1: we come in. You've been described as ruthless, cold blooded,

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Speaker 1: and dog it. This is Marco Hotas speaking. He's the

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Speaker 1: fellow who once were in the hedge fund. Well, i'm

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Speaker 1: you know, in the short seller market. That may be

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Speaker 1: the words of praise. He was a former hedge fund

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Speaker 1: manager of Copper River Management. He's now a private investor.

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Speaker 1: And the fund is your company's name, soft Cat, because

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Speaker 1: it's the ancient Egyptian goddess of accounting, math and knowledge. Right,

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Speaker 1: So if you can put together some of those concepts,

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Speaker 1: could you walk us through the technical aspects of being

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Speaker 1: a short seller. What are the challenges of trying to

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Speaker 1: borrow stock? Let's say, I mean, I just use example

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Speaker 1: of Tesla because I keep walking around and here people say, oh, well,

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Speaker 1: you know there are a lot of very strident voices,

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Speaker 1: both bulls and bears on Tesla, and then the next

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Speaker 1: line usually is, yeah, but it's so expensive to borrow that.

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Speaker 1: As you just described, getting your timing right is everything.

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Speaker 1: Tell us what the challenges are. Well, the challenges related

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Speaker 1: to timing means that I need to stay intellectually, honest

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Speaker 1: and objective. I can have conviction that any company, let's

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Speaker 1: use your example, that Tesla is a fraud, that the

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Speaker 1: red flags that are raised by their accounting financials as

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Speaker 1: well as their corporate governance are potentially fraudulent and give

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Speaker 1: me cause to short it. But just because I have

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Speaker 1: reason to believe it's a fraud doesn't mean I'll make

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Speaker 1: money shorting it. Um. So this isn't very technical. Um,

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Speaker 1: it's it's a very basic and this is coming from

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Speaker 1: the mouth of a mathematician. I don't short companies that

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Speaker 1: make people happy. I don't short products that are selling.

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Speaker 1: Um So, no matter how fraudulent I might believe Tesla is,

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Speaker 1: I don't believe there's a shot fire way to make

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Speaker 1: money shorting Tesla. Um We're a high conviction, an ultra

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Speaker 1: concentrated fund. So I need to take on positions that

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Speaker 1: are potentially of my assets. Um So, I need to

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Speaker 1: find names that are liquid enough, that are under the

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Speaker 1: radar enough. And that means I can't just go flip

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Speaker 1: through the newspaper and say, oh, people seem to be

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Speaker 1: shorting Tesla. I need to go out in the world

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Speaker 1: and find my own ideas. So yeah, I was just

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Speaker 1: gonna ask, how do you do that? How do you

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Speaker 1: find fraud? Well, it's a lot of reading and a

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Speaker 1: lot of traveling. Um So you have to be patient.

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Speaker 1: So over the past year I was. I launched my

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Speaker 1: fund back in January. Um So, between um when I

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Speaker 1: left my my old fund in April and January, I

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Speaker 1: spent that time just building up my little black book

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Speaker 1: of potential frauds and then digging as deep as I

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Speaker 1: could to find evidence potentially proving that fraud, and then

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Speaker 1: I'll also getting confidence around the timing of the opportunity.

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Speaker 1: Um So, an easy way to find potential short term

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Speaker 1: opportunities on the short side is to look at high

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Speaker 1: profile implosions. Um So. Last year there was Home Capital

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Speaker 1: Group um and the exposure of massive mortgage origination fraud.

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Speaker 1: Um so, that created an opportunity in Canada. But I

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Speaker 1: launched a fund in January. Um so, what happened in

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Speaker 1: December the implosion of Steinhoff, so that um you know,

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Speaker 1: since December, we spent time really trying to understand the

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Speaker 1: South African market um the culture there and understand is

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Speaker 1: there anyone doing what Steinhoff did? But worse that was

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Speaker 1: what I was going to ask, is there anywhere in

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Speaker 1: the world that you see a greater prevalence of fraud

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Speaker 1: where it also could be undermined by a market that

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Speaker 1: is somewhat free. You will always have humans who like

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Speaker 1: to conn other humans. So unfortunately, there isn't really a

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Speaker 1: geographic bias um so. The bias is only really related

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Speaker 1: to when I can make the money. So then following

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Speaker 1: these high profile implosions, it's it's it's an easier way

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Speaker 1: to make money because you're lifting the veil on the

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Speaker 1: investors who are now jittery because they were trusting this

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Speaker 1: company for so long, and wow, they were lying to

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Speaker 1: us this whole time. It um make sure that regulators

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Speaker 1: are no longer asleep at the wheel. UM. It also

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Speaker 1: means that auditors have to take a finer tooth comb

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Speaker 1: through financials of their clients because they're under a magnifying glass.

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Speaker 1: So all this, this sort of confluence of factors after

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Speaker 1: a high profile implosion provides a potential opportunity for us

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Speaker 1: to make money shorting frauds in a market that typically

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Speaker 1: is unrelenting. Now, you were previously an equity analyst that

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Speaker 1: Crenn Savage correct, What if you could tell us what

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Speaker 1: was it like trying to get Krens Savage to really

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Speaker 1: support the Valiant pharmaceuticals idea and to really stick with

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Speaker 1: that short position. I was in a very fortunate position

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Speaker 1: when I joined that fund, and that I had pretty

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Speaker 1: good autonomy as far as putting on short positions. And

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Speaker 1: he was himself cynical on Valiant for many years UM,

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Speaker 1: and I only saw the opportunity to make money shorting

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Speaker 1: Valiant after they had acquired salex UM. That was mar April,

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Speaker 1: because when you tap out the balance sheet and your

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Speaker 1: business model is buying growth, UM, and you now lose

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Speaker 1: access to capital, then it's kind of all over. The

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Speaker 1: unraveling of a roll up is never pretty. So UM,

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Speaker 1: that was a great time to get in. But you know,

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Speaker 1: I came from a corporate intelligence background, so I already

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Speaker 1: knew what value was up to UM, but it was

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Speaker 1: it was after that sale deal that we felt we

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Speaker 1: could make money. Do you have any really big companies

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Speaker 1: that you're targeting? Is a potential fraud at this point, UM,

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Speaker 1: I do. One of them is one of the biggest

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Speaker 1: by market cap companies in the world in the tech sector,

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Speaker 1: less than one percent short interests. But I can't tell

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Speaker 1: you what it is. You'd have to become an investor.

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Speaker 1: Uh fabulous. Well there you go, and congratulations and best

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Speaker 1: wishes on on your firm, Soft Capital Management. For me

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Speaker 1: a cader, the founder and the chief investment officer, giving

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Speaker 1: us a little look into the world of short seller.

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Speaker 1: If I told you I'd have to kill you, well,

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Speaker 1: let's thank thank you, all right, you can see me

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Speaker 1: move a little bit further away, all right. Last month,

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Speaker 1: when we got the January payrolls report, the markets freaked out. Well,

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Speaker 1: we are setting the stage for another payrolls of report,

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Speaker 1: the first after that rather interesting report. We're getting it tomorrow,

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Speaker 1: and here to talk about what we can expect is

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Speaker 1: Pria Misra ahead of Global interest rate strategy at t

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Speaker 1: D Securities really opprescient. She has been consistently on the

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Speaker 1: bond market. So what are you expecting for tomorrow. We're

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Speaker 1: gonna get another surprise like we did last month, so

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Speaker 1: thanks for having me on. We're actually looking for a

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Speaker 1: weeker than expected number, particularly on the wage front, because

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Speaker 1: I know the market really reacted like this is the

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Speaker 1: start of a big spurt in work in wage inflation,

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Speaker 1: which is going to make the FED hike much faster.

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Speaker 1: But if you look at last time's report, there was

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Speaker 1: some weird components of that report. Hours fell significantly, so

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Speaker 1: our thought was and the number of people who couldn't

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Speaker 1: make it to work because of the weather increased significantly.

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Speaker 1: So our thesis was, you had these significant storms in January,

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Speaker 1: maybe people couldn't show up to work, so the hours

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Speaker 1: component fell. And if you think about the way average

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Speaker 1: early learnings is computed, it's the wage built by hours,

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Speaker 1: so that skewed the number a lot higher. So now

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Speaker 1: that we're looking for a big miss, but we are

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Speaker 1: looking for a strong point one on month over month

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Speaker 1: average early learnings, which takes a year over year eight,

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Speaker 1: which is I think what the market focuses on two

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Speaker 1: or to seven. Now, remember it was running two six

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Speaker 1: to seven much of last year, so that does not

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Speaker 1: spook the market, should not spook the FED. But I

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Speaker 1: think if you do get a number, you know, from

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Speaker 1: to nine heading higher, I think that certainly has the

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Speaker 1: propensity to uh, you know, get the market extremely concerned

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Speaker 1: around pace of hikes. But we think it's too early

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Speaker 1: to get to be sure that inflation. Wage inflation is

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Speaker 1: absolutely in a higher trend. And just to be clear,

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Speaker 1: that is you're expecting two point increased year over year

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Speaker 1: an average hourly wages versus you know, potential upside surprice

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Speaker 1: to nine or higher. Do you think that the bonds,

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Speaker 1: particularly treasure bonds, are they overpriced? And I wonder if

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Speaker 1: you could tie in your thoughts about the dollar, do

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Speaker 1: you think it's going to strengthen or will continue this weekening? Sure?

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Speaker 1: So on interest rates, we think the front end is

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Speaker 1: actually very fairly priced. We're pricing in about three hikes

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Speaker 1: this year, which is very similar to the FEDS median forecast.

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Speaker 1: We don't think that the dot plot is going to

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Speaker 1: suggest a faster piece of hikes this year. If you

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Speaker 1: look at what how many hikes you looking for? Three,

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Speaker 1: we're looking for three three this year. The markets pricing

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Speaker 1: in an end point of the hiking cycle at about

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Speaker 1: two point six percent. It's a little bit lower than

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Speaker 1: the FATS forecast of to seven five, but really, what's

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Speaker 1: fifteen basis points among friends? So I think the front

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Speaker 1: end is very well priced. Where I do think the

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Speaker 1: market may be a little overpriced is term premium or

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Speaker 1: longer end bond, where I don't think we're pricing in

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Speaker 1: enough of that supply. You know that's going to hit

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Speaker 1: the market over the course of this year and beyond.

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Speaker 1: And I think particularly if the CB is done at

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Speaker 1: some point this year, the FED is absolutely done with buying.

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Speaker 1: At some point investors will demand more rate. So I

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Speaker 1: think the long end has room to rise, but the

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Speaker 1: front end seems pretty well done. On the dollar, we're

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Speaker 1: generally negative, partly because global growth seems to be picking up.

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Speaker 1: I think the story over the last few years, which

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Speaker 1: was the US was strengthening while the rest of the

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Speaker 1: world was not. I think that's played out. And so

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Speaker 1: if global growth is researching, and certainly we're seeing the

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Speaker 1: strongest space of coordinated global growth, I think that the

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Speaker 1: dollar is somewhat going to struggle. I also think trade

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Speaker 1: protection is m it's in the air for this entire year,

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Speaker 1: and that's going to be a headwind for the dollar.

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Speaker 1: So I think the dollar certainly has room to decline

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Speaker 1: for So does that mean that you see inflation, that

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Speaker 1: the fear of inflation has been overplayed? I think so yes.

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Speaker 1: I mean the dollars should put some upper pressure on inflation,

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Speaker 1: but if you look at the past through from the

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Speaker 1: dollar to even import price, there's barely been an he

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Speaker 1: passed through into cp I. There's been no pass through.

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Speaker 1: So for some reason, the dollars not having an impact

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Speaker 1: on inflation. But generally when I look at wage inflation

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Speaker 1: or CPI, I think this fear that the FED is

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Speaker 1: behind the curve that's definitely overplayed. We're not seeing signs

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Speaker 1: of the FED being behind the curve on inflation. Even

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Speaker 1: the tips market doesn't seem to be suggesting any such fear.

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Speaker 1: So you said that you think that they're on the

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Speaker 1: longer end with say ten year and thirty year treasury yields,

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Speaker 1: UH Treasury is they're they're overpriced. I'm looking at yields

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Speaker 1: right now in a ten year two point eight six

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Speaker 1: percent on a thirty year three point one percent. Where

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Speaker 1: do you see them going by your end? So our

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Speaker 1: forecast is actually three percent, and that you know almost

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Speaker 1: seems like there is not a lot of room for

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Speaker 1: long end rates to rise. So we we're looking for

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Speaker 1: the ten to be a ten year rates to end

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Speaker 1: the year at three percent. But I have to say

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Speaker 1: I'm looking for a much more volatile path because what

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Speaker 1: can certainly happen is around auction points. You could have

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Speaker 1: a bigger sell off, but I think that is a

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Speaker 1: headwind for equities or risk assets, and I think that

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Speaker 1: will actually bring tense back down. But we're not looking

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Speaker 1: for a sustained rise and rates because of the impact

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Speaker 1: it will have on risk ASTs well. And to that point,

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Speaker 1: how important our next week's auctions. I believe that it

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Speaker 1: will be UH the first five I think that the U. S.

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Speaker 1: Treasury Department is gonna be selling five tens and thirty

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Speaker 1: years right three stents and bonds, Yes, it is a

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Speaker 1: lot of supply. I think. I'm looking at these auctions,

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Speaker 1: I guess with a little more interest just given that

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Speaker 1: the last set of these auctions, I think so a

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Speaker 1: little less demand from the end investor community. We saw

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Speaker 1: a bigger primary dealer takedown, and that, in my mind

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Speaker 1: is not good for interest rates or TWOM premium because

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Speaker 1: dealers ultimately will buy bonds at a discount if you may,

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Speaker 1: or at higher yields, and then we'll ultimately have to

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Speaker 1: redistribute it. So was last month's auctions of one off

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Speaker 1: or are we going to see more auction related volatility

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Speaker 1: going forward? As we realized that the treasury deficit, which

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Speaker 1: you know or if you think of never issuance of

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Speaker 1: treasuries last year was about six fifty billion, we're expecting

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Speaker 1: about a trillion, and it was already a high number,

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Speaker 1: and then we've got the budget deal which added another

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Speaker 1: four billion to the deficit. So there's a lot of supply.

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Speaker 1: I think that end invested demand for treasuries is going

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Speaker 1: to be absolutely critical for how these auctions go and

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Speaker 1: for the overall level of interest rates. Thank you very

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Speaker 1: much for being with us. Mistra is the head of

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Speaker 1: Global Interest rates, a strategy for t D securities. Talking

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Speaker 1: about global interest rates right now, I want to bring

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Speaker 1: an Irene Finel Hanigman, Adjunct Professor of International Affairs at

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Speaker 1: Columbia University in New York. Irene, thank you so much

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Speaker 1: for being with us. I wanted to start by asking

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Speaker 1: what historical precedents should we go to to sort of

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Speaker 1: frame the trade scuffles and the tariffs that we hear

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Speaker 1: about today. Um, first of all, thank you for having

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Speaker 1: me on again. I think one of the important issues

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Speaker 1: is that throughout history, tarrats have been seen as being

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Speaker 1: very positive, very short term when geared thought of getting

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Speaker 1: a boost to specific industrial sectors, but they very quickly

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Speaker 1: deteriorate into potential even trade wars, going all the way

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Speaker 1: back to the origin of some of these issues between

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Speaker 1: the French and the Dutch in the sixteen sixties, certainly

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Speaker 1: through the nineteenth century in the US, and then if

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Speaker 1: we look at much closer precedents in nineteen eighty four,

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Speaker 1: the Reagan steel tariffs to protect the car industry in

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Speaker 1: Harley Davidson. By nineteen eighty seven were dropped as actually

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Speaker 1: having proven useless and of relatively little help. But this

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Speaker 1: was against Japan in a totally different, clearly bilateral world

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Speaker 1: was a totally different geo political and it's an economic

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Speaker 1: structure uh by nine. Under the GAT negotiations, the holy

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Speaker 1: it was the US versus a new European Union represented

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Speaker 1: at that time largely by President to Hall of France,

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Speaker 1: an agricultural, intellectual property, financial services. The whole purpose was

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Speaker 1: in a new regionalism and a world where Asia was

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Speaker 1: coming into its own to begin to eliminate tariff and

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Speaker 1: non tariff barriers. I was with the Clinton administration at

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Speaker 1: that time and involved in some of the meetings on

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Speaker 1: these issues. So the whole purpose after the fall of

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Speaker 1: the USSR was to look at a multilateral world. Today,

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Speaker 1: with globalization and technology, tariffs become even more irrelevant and

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Speaker 1: almost immediately adversarial. As your former speaker said, the EU

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Speaker 1: is already setting out retaliation measures. The other thing I

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Speaker 1: find almost amusing about four, which for this time has

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Speaker 1: absolutely no literary or cultural references, but rather refers very

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Speaker 1: specifically to a period and which President Trump seems to

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Speaker 1: almost have a regressive nostalgia for looking at a world

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Speaker 1: which is really no longer in place, but traditionally tariffs

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Speaker 1: often have immediate impact. They seem often to be a

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Speaker 1: political boost to specific sectors in an economy, but they

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Speaker 1: have never been proven to have any type of long

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Speaker 1: term advantages. I mean, then maybe you could describe from

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Speaker 1: the the other perspective, which is, let's say, are trading partners,

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Speaker 1: they are not going to wait to see what the

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Speaker 1: United States does. They are going to move ahead with

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Speaker 1: whatever their particular agendas are. What do you believe they're

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Speaker 1: going to do well? I think certainly the European Union

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Speaker 1: has already made it clear that there are a number

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Speaker 1: of products from to certain agricultural products. These are relatively minor,

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Speaker 1: but in principle it's already making it clear that they're

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Speaker 1: actually setting up, if necessary, to take the U S

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Speaker 1: to the w t O. UH. So, evidently this is

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Speaker 1: the worst case scenario which every country starts to fall

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Speaker 1: back on protecting its own interests versus the fact that

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Speaker 1: we desperately now need more global cooperation on so many

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Speaker 1: of the issues. And if you begin to see your

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Speaker 1: allies as adversarial trade partners, uh, what does that mean

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Speaker 1: for all the other aspects geopolitical, political, military, strategic aspects

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Speaker 1: where you need them as allots The thing also I

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Speaker 1: find right now very odd is we are completely unsure

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Speaker 1: will Canada and Mexico be exempted, will certain members of

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Speaker 1: NATO be exempted? So will we have a sort of

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Speaker 1: mini version of these tariffs with more exemptions. This is

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Speaker 1: all extremely confusing, and I think just adds to this

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Speaker 1: general lack of confidence and lack of clarity. And in

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Speaker 1: many ways we've been seeing this in part since Brexit

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Speaker 1: and certainly since UH November two thousand sixteen, since the

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Speaker 1: Trump elections. You know, I mean a lot of times

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Speaker 1: and people think of tariffs and protectionism, uh, they refer

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Speaker 1: to the pop list movement. I mean, if you think about,

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Speaker 1: for example, what just happened in Italy, where a number

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Speaker 1: of candidates who have anti UH shared currency types of views,

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Speaker 1: anti Euro views were elected. I'm just wondering, what does

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Speaker 1: populism mean in tw eighteen, given that it seems to

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Speaker 1: infer something slightly different than it used to. Yeah, well,

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Speaker 1: I think we have to be very careful to make

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Speaker 1: a very clear distinction between populism and nationalism. And I

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Speaker 1: think populism almost does go back to the sense of

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Speaker 1: representing the disenfranchised members of your society, but very much

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Speaker 1: within your own group, uh those that basically feel that

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Speaker 1: they're no longer being respected, being involved, that are not

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Speaker 1: part of the elite. Uh So this is really sort

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Speaker 1: of the Italian version of populism. Now, I think the

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Speaker 1: situation in Italy is a little bit unique because when

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Speaker 1: Italy goes very heavily anti immigrant, which unfortunately are the

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Speaker 1: xenophobic part of the xenophobic platform of the Five Star

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Speaker 1: Party in the south, they have been severely impacted by

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Speaker 1: the migrant crisis at a time when they were still

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Speaker 1: basically in recession. So this is where we have populism,

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Speaker 1: which is not always necessarily a negative and has to

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Speaker 1: often be taken into account why are these voices of discontent. Nationalism,

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Speaker 1: on the other hand, is very dangerous because nationalism, as

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Speaker 1: is the case now certainly acrourse uh forma Soviet Union

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Speaker 1: Eastern and Central your specifically in Poland, is very much

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Speaker 1: part of a mythologized past, looking at ethnic purity, looking

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Speaker 1: at walls, looking at the dictates of a strong by

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Speaker 1: the church state ruler, and very sadly nationalism, no matter

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Speaker 1: how you put it, becomes a gateway to fascism. We

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Speaker 1: see the certainly in Poland, which as you know, Article seven,

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Speaker 1: which is basically sanctions possible sanctions may already be invoked

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Speaker 1: against Poland for violating freedom of the judiciary, for historical

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Speaker 1: religionism and basically historical denial, which has just been codified

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Speaker 1: into law. Hungary close behind, and a sort of what

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Speaker 1: I call a prettier and younger neo fascist PM Prime

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Speaker 1: Minister in Austria. Then we got we gotta leave it there.

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Speaker 1: Professor Irene Finolhanagmen, Adjunct Professor International Affairs at Columbia University.

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Speaker 1: I want to bring in Laura ram Are, the chief

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Speaker 1: US economist for FS Investments, helping to manage approximately twenty

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Speaker 1: billion dollars based in Philadelphia. Laura, thanks very much. I

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Speaker 1: just want to start off by understanding where we are

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Speaker 1: in the business cycle. We got the initial jobs claims report,

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Speaker 1: and um, it seems that the labor pool is pretty tight,

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Speaker 1: and this is just one of the elements that you

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Speaker 1: say indicates that we are at a mature phase of

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Speaker 1: the cycle. Tell us about the other indicators and what

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Speaker 1: this means for investors. That's right. You know, we focus

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Speaker 1: so much on forecasts of GDP quarter to quarter, but

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Speaker 1: to me, that's really missing the point when I look

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Speaker 1: at the overall arc of the business cycle. In addition

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Speaker 1: to that tight labor market, you're seeing expensive asset prices.

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Speaker 1: You're starting to see the consumer looking over leverage again,

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Speaker 1: not so much in mortgages, but in consumer debt. Uh

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Speaker 1: close to levels that we saw on the savings rate

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Speaker 1: low low enough, close to levels that we saw towards

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Speaker 1: the end of the last expansion. So the one critical

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Speaker 1: piece that we're missing is inflation. Um Normally, in the

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Speaker 1: late stages of a business cycle, we see inflation starting

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Speaker 1: to rise, and that has been something that markets are

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Speaker 1: now really on edge about. I think we all remember

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Speaker 1: what happened last one when the employment numbers came up. Boy,

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Speaker 1: that's really put a focus I think for everybody on

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Speaker 1: tomorrow morning numbers. Laura, you know, you talk about consumer

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Speaker 1: debt reaching levels similar to where it was ahead of

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Speaker 1: the last crisis. A lot of people dismiss this, and

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Speaker 1: if you look at it on a per capita basis

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Speaker 1: or on a debt to household wealth basis, it doesn't

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Speaker 1: look that bad. Do you think it is more concerning

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Speaker 1: than people are letting on? You know, I do. And

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Speaker 1: there are two reasons for that. One, our economy is

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Speaker 1: still so reliant on the consumer. So we really, given

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Speaker 1: our heavy, heavy reliance on the consumer, we need the

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Speaker 1: consumer to really continue to add momentum if we want

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Speaker 1: to keep this really you know what is actually a

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Speaker 1: very robust pace of growth going forward. And the second

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Speaker 1: reason is that we're just not seeing the labor gate,

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Speaker 1: the wage gains, um a lot of the I think

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Speaker 1: increase in spending that we've seen as driven by wealth gains,

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Speaker 1: and that's levely, don't get me wrong. But should we

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Speaker 1: see any correction in stock markets, I think all of

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Speaker 1: a sudden, the consumer starts to feel the pinch and

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Speaker 1: could pull back pretty quickly. Um. That kind of uncertainty

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Speaker 1: gives me pause, and I think, um, you know, we

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Speaker 1: all need to be mindful of the fact that high

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Speaker 1: levels of leverage naturally lead to higher levels of volatility,

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Speaker 1: both in the economic reaction and on the part of

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Speaker 1: fantial markets. Laura, I don't know whether you've had the

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Speaker 1: chance to look into the new Amazon store and see

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Speaker 1: attle where there are no cashiers, You just pick up

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Speaker 1: your items, you go and it is instantly debited to

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Speaker 1: your account, where whichever prime account you might have at Amazon,

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Speaker 1: it's automated. Do we have the same kind of automation

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Speaker 1: that exists when it comes to the investment world, and

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00:24:49,160 --> 00:24:53,200
Speaker 1: people really don't know what is behind their activity because

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Speaker 1: if you pick up something and you don't know how

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Speaker 1: much it costs, you don't know until you go home

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Speaker 1: that it really might have broken the bank. You know,

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Speaker 1: I think, I think that's a great analogy. I think,

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00:25:03,160 --> 00:25:06,480
Speaker 1: you know, it's it's incredible how there are so many

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00:25:06,600 --> 00:25:11,400
Speaker 1: unknowns right now that really put us in unchartered waters, um.

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Speaker 1: And the big one is this passive versus active investment.

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00:25:15,720 --> 00:25:20,280
Speaker 1: There are so many robo advisors, algorithmic trading programs, um,

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00:25:20,320 --> 00:25:23,679
Speaker 1: you know, ets based investments, and I think it just

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00:25:23,840 --> 00:25:27,919
Speaker 1: reinforces this complacency. These products were developed to give us

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Speaker 1: by versification, but if everybody is in the same trade

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00:25:31,000 --> 00:25:33,880
Speaker 1: to diversify, it actually has the opposite effect. And that's

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Speaker 1: what we've seen so UM. You know, when we had

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Speaker 1: I think the really big spike in volatility about a

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Speaker 1: month ago, that giant gap down. You know, the optics

447
00:25:43,520 --> 00:25:47,240
Speaker 1: on these moves are number one, really shocking, just given

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Speaker 1: the high levels of the index values in and of themselves,

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Speaker 1: and second of all, because we just don't know where

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Speaker 1: a lot of these moves and trades are coming from.

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Speaker 1: But I really want one of those stores to open

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Speaker 1: near my house because I think that makes it Mike

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Speaker 1: shopping stun a lot easier. Laura. You know, there are

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Speaker 1: a lot of risks, and we're outlining some of them

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Speaker 1: right now. We heard from JP Morgan's Dan Pinto earlier

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Speaker 1: today and he was saying that he could foresee a

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Speaker 1: scenario where in the next two to three years at

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Speaker 1: US stocks sell off. By can you envision a scenario

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Speaker 1: in which that would happen? I mean, does that seem

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Speaker 1: likely to you? Well? And I think you know, you

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00:26:27,840 --> 00:26:29,879
Speaker 1: know who knows. I don't have a crystal ball and

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Speaker 1: to you know, any kind of fell off or timing

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Speaker 1: or anything. If I did, I would be speaking to

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Speaker 1: you from my yacht in the south of France. But

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Speaker 1: I think, UM that when we look ahead, we know

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Speaker 1: from history that UM that the economy tops out, that

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Speaker 1: stocks tend to peak much earlier than the economic cycle does.

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00:26:51,280 --> 00:26:55,160
Speaker 1: So UM we often see UM by the time sort

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Speaker 1: of a you know, the economic expansion wind down. UM,

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Speaker 1: by the time that your cycle turns into and ends

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Speaker 1: in some kind of break or recession that the markets

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00:27:06,320 --> 00:27:10,159
Speaker 1: have usually signaled that foreign advance and have made the

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00:27:10,200 --> 00:27:12,719
Speaker 1: corrective move far in advance. So I think you know

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00:27:12,800 --> 00:27:16,920
Speaker 1: that's where you need to almost remember that markets are

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00:27:17,080 --> 00:27:20,359
Speaker 1: so forward looking. Um and I think we've seen a

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Speaker 1: lot of the positive news on the economy already priced in.

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Speaker 1: I just don't know where you get more positive surprises

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Speaker 1: on the economy from here. Laura Raym, thank you so

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Speaker 1: much for joining us, and Happy International Women's Day. Laura Raym,

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Speaker 1: chief US economist at FS Investments, which overseas about twenty

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Speaker 1: and a half billion dollars based in Philadelphia. Thanks for

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Speaker 1: listening to the Bloomberg p m L podcast. You can

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Speaker 1: subscribe and listen to interviews at Apple Podcasts, SoundCloud, or

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00:27:50,760 --> 00:27:54,239
Speaker 1: whatever podcast platform you prefer. I'm pim Fox. I'm on

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00:27:54,280 --> 00:27:58,160
Speaker 1: Twitter at pim Fox. I'm on Twitter at Lisa Abramo.

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Speaker 1: It's one before the podcast. You can always catch us

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00:28:00,880 --> 00:28:02,480
Speaker 1: worldwide on Bloomberg Radio.