WEBVTT - Bitcoin in Macro Land 0:00:12.760 --> 0:00:16.480 Hello, and welcome to What Goes Up, a weekly markets podcast. 0:00:16.600 --> 0:00:19.200 My name is Mike Reagan, and I'm a senior editor 0:00:19.239 --> 0:00:23.599 at Bloomberg and I'm Aldona Higher, across asset reporter at Bloomberg. 0:00:24.200 --> 0:00:26.160 This week on the show, it was a pretty interesting 0:00:26.200 --> 0:00:29.760 week in macro news. While Al Salvador is not exactly 0:00:29.800 --> 0:00:33.480 someplace that comes up in market conversations often, this week 0:00:33.520 --> 0:00:36.880 it became the first nation to adopt bitcoin as legal 0:00:36.920 --> 0:00:41.479 tender and didn't exactly go very smoothly. Also, another major 0:00:41.560 --> 0:00:44.360 central bank made it clear it's ready to start tapering 0:00:44.440 --> 0:00:47.879 bond purchases that it's been making to counteract the effects 0:00:47.880 --> 0:00:51.760 of the pandemic now that the recovery is picking up steam. 0:00:51.800 --> 0:00:53.840 What does it all mean. We'll get into it with 0:00:53.880 --> 0:00:57.800 a macro strategist at an investment advisory firm. But first, 0:00:58.000 --> 0:01:01.600 Bill Donna, I have to it's back to school week, 0:01:01.680 --> 0:01:03.800 which is means there's a lot of drama in the 0:01:03.800 --> 0:01:07.640 Regan household with you know, getting your books in the 0:01:07.680 --> 0:01:11.160 backpack and having the right outfit and everything. I was 0:01:11.200 --> 0:01:14.360 trying to figure out what Vill Donna, a young Vill Donna, 0:01:14.480 --> 0:01:16.600 was like back to school time. I'm guessing you were 0:01:16.640 --> 0:01:19.040 like gung ho to get back to school every septeme. Yeah, 0:01:19.120 --> 0:01:21.720 I loved back to school. It was so fun. All 0:01:21.720 --> 0:01:24.240 the new stuff, you know, all of your new notebooks 0:01:24.240 --> 0:01:28.800 and things, all the new grammar. Yes, oh gosh, don't 0:01:28.840 --> 0:01:32.240 get me excited. I figured I should have haven't had 0:01:32.240 --> 0:01:34.120 you give a pep talk to my daughters. I had 0:01:34.160 --> 0:01:36.840 a feeling you were enthusiastic back to How was back 0:01:36.880 --> 0:01:38.440 to school for you when when you were going to 0:01:38.480 --> 0:01:42.440 school in the eighteen eighties? Oh in the eighties, Oh 0:01:42.480 --> 0:01:46.360 my good? Did he It was well, you know, it 0:01:46.440 --> 0:01:48.320 was a one room school house and we had to 0:01:48.360 --> 0:01:51.160 walk both ways uphill in the snow and and that 0:01:51.240 --> 0:01:54.680 sort of thing. But you know, eighties bore. That hurts. 0:01:54.680 --> 0:01:59.360 I'm sorry, that hurts. I'm dealing with this. And I 0:01:59.400 --> 0:02:03.720 had a teenage Sun News so easy and so tenth 0:02:03.720 --> 0:02:07.920 grade now, so with all that stuff. Same thing. That voice, 0:02:07.920 --> 0:02:10.840 there's bed Emens. That's our guest. He's a macro strategist 0:02:10.880 --> 0:02:13.440 at Bedley Global Advisors. Bed House. Back to school going 0:02:13.600 --> 0:02:17.720 in your household? Well, it's actually schools just more. My 0:02:17.760 --> 0:02:19.480 wife's giving me a hard time, but I don't know. 0:02:20.400 --> 0:02:25.200 My son is actually following the instruction, so it's more 0:02:25.240 --> 0:02:27.400 than knuckle sandwich. It gets served every day, you know. 0:02:29.840 --> 0:02:31.520 But that I wanted to talk to you about what 0:02:31.560 --> 0:02:33.840 I mentioned at the opening, there's El Salvador. I know 0:02:33.919 --> 0:02:38.640 you've been watching the El Salvador situation. UM. Fascinating to 0:02:38.680 --> 0:02:42.359 me that we finally have a bitcoin as legal tender, 0:02:42.400 --> 0:02:46.720 albeit not in a major market economy. But I think 0:02:46.760 --> 0:02:49.359 you know it's it's breaking that seal of a government 0:02:49.360 --> 0:02:53.160 actually accepting bitcoin as legal tender. Walk us through sort 0:02:53.200 --> 0:02:55.720 of the implications of it in your view? I mean, 0:02:55.800 --> 0:02:58.240 is this a big deal in sort of the evolution 0:02:58.280 --> 0:03:00.840 of crypto? Um? And though there was kind of a 0:03:00.880 --> 0:03:05.640 glitchy uh introduction uh in El Salvador. How are you 0:03:05.639 --> 0:03:07.639 thinking about it all? You know? What what does this mean? 0:03:08.040 --> 0:03:12.639 We mean sort of from the evolution of bitcoin. It's 0:03:12.680 --> 0:03:15.880 definitely important, staff, Mike, because look, if if you have 0:03:15.919 --> 0:03:18.000 a country as small as l Salve that are is 0:03:18.560 --> 0:03:21.239 and although it doesn't have a major currency and occurrencies 0:03:21.280 --> 0:03:25.520 back to the dollar, it's in economy adopting adopting bitcoin 0:03:25.800 --> 0:03:28.800 in a wider way, like as in everything that you 0:03:28.880 --> 0:03:32.359 want to buy and transacting can be done there in bitcoin. 0:03:32.440 --> 0:03:36.400 To that Shivo wallets that they created where they purchase 0:03:36.640 --> 0:03:40.480 I believe something like forty million dollars of bitcoin in there, 0:03:40.600 --> 0:03:43.960 and so obviously there's a limited demand, but okay, it's 0:03:44.040 --> 0:03:47.240 it's it's enough for people to get really comfortable with 0:03:47.360 --> 0:03:51.000 transacting in something that allows them to be part of 0:03:51.000 --> 0:03:54.760 this digital revolution and not dealing with a black markets. 0:03:54.880 --> 0:03:56.600 Right like some of these countries, I go solve it 0:03:56.640 --> 0:03:59.160 over to or Argentina and Venezuela will probably go this 0:03:59.200 --> 0:04:02.120 way to Yeah, people transact more in the black markets, 0:04:02.160 --> 0:04:05.760 and and and and while they're having an official currency rate, 0:04:05.920 --> 0:04:09.480 that doesn't mean much. So I think the implication of 0:04:09.520 --> 0:04:11.840 it is is that other central banks are taking this 0:04:12.400 --> 0:04:15.200 also serious. And what I noted was just not that 0:04:15.280 --> 0:04:17.400 long ago. I think just a week or two weeks 0:04:17.440 --> 0:04:21.279 before El salvad or you know, launched this bitcoin law, 0:04:21.960 --> 0:04:25.839 the Central Bank of Australia launched a project with the 0:04:25.880 --> 0:04:29.560 Central Bank of South Africa Singapore, and I believe it 0:04:29.680 --> 0:04:34.160 was Korea to look at the way of using a 0:04:34.240 --> 0:04:40.159 digital currency central bank digital currency CBDC and allowed for 0:04:40.480 --> 0:04:46.240 international payments across boarder payments. Really more the institutional version 0:04:46.320 --> 0:04:50.000 of bitcoin and so as that happened as that project 0:04:50.000 --> 0:04:52.960 is under ways called Project Dunbar, and you have this 0:04:53.480 --> 0:04:56.840 l salved Or example. I think we're making a big 0:04:56.920 --> 0:05:00.120 leaps forward here or where ultimately going to be in 0:05:00.400 --> 0:05:03.520 is that although our currency system will not change because 0:05:03.560 --> 0:05:06.520 that would put an end to our conventional amount apolicies. 0:05:06.600 --> 0:05:08.560 It is right, you know that that will not happen. 0:05:09.120 --> 0:05:11.520 But the fact that you're going to transition to a 0:05:11.560 --> 0:05:15.280 digital world where you can settle everything digitally, you can 0:05:15.320 --> 0:05:18.920 transact everything digitally. Can you then imagine that we can 0:05:18.960 --> 0:05:22.320 actually open the stock market during the weekend. That could 0:05:22.360 --> 0:05:25.640 be an implication that sounds big, but it's actually the 0:05:25.640 --> 0:05:30.400 way because if you can instantly settle money and security 0:05:30.480 --> 0:05:33.560 is that fast because of the technology. Yeah, that's a 0:05:33.640 --> 0:05:37.640 huge lead forward right for man kinds. As famous estronaut 0:05:37.680 --> 0:05:41.599 set Vildana just got very excited when you mentioned the 0:05:41.600 --> 0:05:43.600 stock market open on the weekends. That means she'll get 0:05:43.640 --> 0:05:47.000 to work on the weekends, which I think you sometimes 0:05:47.040 --> 0:05:50.800 cover bitcoin whenever it's really volatile. We do tend to 0:05:50.839 --> 0:05:53.360 cover it over the weekends as well. But yeah, my 0:05:53.400 --> 0:05:57.200 eyes did just for all the listeners sort of get 0:05:57.240 --> 0:05:59.760 really wide. But Ben, I do want to ask you. 0:05:59.839 --> 0:06:02.760 It used to be an argument that a lot of 0:06:02.760 --> 0:06:06.080 crypto people made about bitcoin that eventually you're going to 0:06:06.160 --> 0:06:10.120 start seeing it being used to purchase your morning coffee 0:06:10.200 --> 0:06:13.120 or your morning breakfast sandwich or whatever, which never really 0:06:13.360 --> 0:06:16.520 hand out, at least not in the US. It's really 0:06:16.680 --> 0:06:20.120 difficult to to to do something like that. Depending on 0:06:20.240 --> 0:06:24.279 how things play out in El Solvador. Does that mean 0:06:24.320 --> 0:06:26.760 potentially that that could be an argument again for why 0:06:26.880 --> 0:06:31.320 somebody might want to own bitcoin where you might be 0:06:31.360 --> 0:06:34.159 able to use it to transact with your you know, 0:06:34.240 --> 0:06:39.279 your everyday needs. Yeah, I think so, because if people 0:06:39.520 --> 0:06:45.640 get comfortable with this with a cryptocurrency which is volatile, 0:06:46.360 --> 0:06:49.360 and you know, the argument was made when Fel Salvador 0:06:49.800 --> 0:06:52.880 launched this that as as bitcoin sold off because of 0:06:52.920 --> 0:06:56.159 the glitch. Okay, so I'm buying. I just bought a 0:06:56.200 --> 0:07:00.919 pizza that was worth you know, fifty bitcoin dollars of 0:07:00.920 --> 0:07:04.240 bit coin nosworth tony tous. Let's say that's a that's 0:07:04.279 --> 0:07:07.720 pretty strange, right, It would not be uh, you know, 0:07:07.920 --> 0:07:11.000 very pleasant. But I think it's just like when you 0:07:11.320 --> 0:07:14.720 had in the past, how the banking systems so traditional 0:07:14.960 --> 0:07:19.000 of just cash going around that has become very digital. 0:07:19.040 --> 0:07:20.960 I mean, I do most of my payments through my 0:07:21.200 --> 0:07:23.960 through my iPhone or an app most of it. So 0:07:24.000 --> 0:07:26.120 I think that is the direction we're heading with this. 0:07:26.840 --> 0:07:30.360 As you mentioned, there's a fair bit of regulatory um 0:07:30.680 --> 0:07:34.240 oversight that's you needed, and it's not clear who's going 0:07:34.280 --> 0:07:39.040 to be the responsible agency to look after crypto. That's 0:07:39.080 --> 0:07:42.160 I think the big issue in the United States. Um, 0:07:42.200 --> 0:07:44.400 the SEC was regulated, but then you have the I R. 0:07:44.480 --> 0:07:46.320 S and then you have the Treasury Department, then you 0:07:46.320 --> 0:07:50.160 have maybe Department of Justice, and there's another agency. I 0:07:50.200 --> 0:07:52.640 do think that we're not that far away from that 0:07:53.040 --> 0:07:57.080 reality to have crypto being used for payment because last 0:07:57.160 --> 0:08:01.120 year and summer bit quietly, but the Office of Currency Controller, 0:08:01.240 --> 0:08:07.160 which is the regulator for commercial banks, did allow banks 0:08:07.200 --> 0:08:11.600 to accept crypto as a cortical deposit and so that 0:08:11.680 --> 0:08:16.480 people have purchase crypto they could actually deposited at their 0:08:16.560 --> 0:08:19.440 at their bank. And I don't know the exact technical 0:08:19.480 --> 0:08:23.120 specifics of it, but that new SIDEM always was in 0:08:23.160 --> 0:08:25.920 my mind like, okay, so if we're starting with making 0:08:26.000 --> 0:08:29.120 it possible to be a deposit, then it becomes an 0:08:29.160 --> 0:08:32.560 anchor right for for using it as a means of 0:08:32.559 --> 0:08:36.600 payment over time, even though it's still very subject to 0:08:37.080 --> 0:08:43.080 volatility markets, subject to technological challenges, and the concerns over 0:08:43.120 --> 0:08:47.560 the technological chances in frauds and criminal activity that that 0:08:47.720 --> 0:08:50.880 obviously here big concerns about Politically, they want to make 0:08:50.880 --> 0:08:54.000 sure that that obviously doesn't happen. So but I think 0:08:54.000 --> 0:08:55.840 I'll solve it, or a small country it is, it 0:08:55.960 --> 0:08:58.760 is one you know, wants to step forward of this. Uh. 0:09:00.600 --> 0:09:03.680 I find it fascinating that no regulators can sort of 0:09:03.720 --> 0:09:05.439 decide who's in charge of this thing. But I think 0:09:05.440 --> 0:09:07.360 they should put the Space Force in charge of it. 0:09:07.440 --> 0:09:09.640 You know, the goal, the goal is always to send 0:09:09.679 --> 0:09:11.520 these things to the moon. So put the put the 0:09:11.520 --> 0:09:14.520 space to force in charge of regulating it. But but 0:09:14.679 --> 0:09:18.280 I know you've been doing a lot of analysis sort 0:09:18.320 --> 0:09:23.559 of looking at relationships between bitcoin and ethereum and crypto 0:09:23.600 --> 0:09:27.720 in general with the more traditional asset classes in the market, 0:09:28.080 --> 0:09:31.760 oil and stocks at meme stocks. I think you know 0:09:32.280 --> 0:09:36.160 you've noticed some kind of correlations and relationship. Walk us 0:09:36.200 --> 0:09:39.480 through what your analysis of that looks like. You know, 0:09:39.760 --> 0:09:43.600 how does bitcoin sort of fit into the traditional asset classes. 0:09:44.200 --> 0:09:47.040 Is it influencing the prices of I mean Obviously you've 0:09:47.040 --> 0:09:50.480 got your stocks that are exposed to crypto in some way, 0:09:50.480 --> 0:09:53.280 but is it influencing things on a macro level in 0:09:53.320 --> 0:09:56.520 your opinion, Well, you have to start with at last 0:09:56.520 --> 0:09:59.520 point as you're making so you know, the list of 0:09:59.600 --> 0:10:04.480 company needs that have using bitcoin or crypto or having 0:10:05.200 --> 0:10:09.360 a more digitalized business has just compounded as it's increased 0:10:09.440 --> 0:10:13.199 very rapidly, and you know that that does influence the 0:10:13.200 --> 0:10:15.480 stock market because if you take all those companies together 0:10:15.520 --> 0:10:18.760 as a market way, and it's direct or indirect exposure 0:10:18.800 --> 0:10:22.480 to crypto bitcoin, then the fluctuation of bitcoin has become 0:10:22.520 --> 0:10:25.079 more correlated with the changes in the S and P 0:10:25.200 --> 0:10:29.000 five that's particularly this year has been that's been the case. 0:10:29.280 --> 0:10:32.160 That's a big difference from the number of years before. 0:10:32.679 --> 0:10:37.439 Then obviously as we had the more wider adoption, if 0:10:37.440 --> 0:10:41.559 not recognition on institutional side to hit the people who 0:10:41.600 --> 0:10:46.000 manage money institutionally looking at crypto as this must be 0:10:46.040 --> 0:10:49.280 another alternative that plays a big role too, And that's 0:10:49.320 --> 0:10:52.400 where the regulatory parts of it comes come into play 0:10:52.480 --> 0:10:56.280 when it comes to the SEC and and the Treasury Department, 0:10:57.240 --> 0:10:59.880 and then you as you have this sort of correlate 0:11:00.000 --> 0:11:05.199 issue between bitcoin and broader markets. Positive, it's been a 0:11:05.240 --> 0:11:09.120 positive correlation this year. You may think about and that 0:11:09.240 --> 0:11:11.440 you can take the steps further of Okay, this could 0:11:11.520 --> 0:11:16.320 effect different assets, not just equities, but it could spill 0:11:16.400 --> 0:11:20.160 over to other assets. Now, what's interesting with with with 0:11:20.320 --> 0:11:24.760 crypto and an etherium for example? Two, it's obviously high 0:11:24.920 --> 0:11:27.720 energy uses right and one thing that has happened with 0:11:27.760 --> 0:11:30.760 the etherium as it got back in significant demand because 0:11:30.760 --> 0:11:33.240 of the upgrade London upgrades that happened a few weeks 0:11:33.240 --> 0:11:37.400 ago and the fact that that the non fungible tokens 0:11:37.920 --> 0:11:40.480 have exploded in trading, so people very excited about that. 0:11:40.600 --> 0:11:42.760 But you need etherium for that. Eterium is of course 0:11:42.760 --> 0:11:46.359 related to the big to the blockchain technology. The ethereum 0:11:46.480 --> 0:11:49.280 does require a fair bit of energy and so etherium 0:11:49.320 --> 0:11:51.720 gas prices as they say, which are you can find 0:11:51.720 --> 0:11:54.400 online I have jumped. So there's a bit of a 0:11:54.400 --> 0:11:59.040 relationship too of the physical markets with the space of crypto. 0:11:59.559 --> 0:12:02.120 So at think it all points to the same direction 0:12:02.160 --> 0:12:05.120 of as we were talking in the previous discussion, was 0:12:06.200 --> 0:12:10.120 you have crypto assets at becoming part of the investment universe. 0:12:11.120 --> 0:12:15.520 The transition from what it was like a very esoteric 0:12:15.200 --> 0:12:21.360 technology that was off exchange and very privately managed and 0:12:21.400 --> 0:12:24.920 traded becomes more wider adopters. And then what you're going 0:12:24.960 --> 0:12:28.560 to get now is crypto stock, scripto bounds, crypto features, 0:12:28.600 --> 0:12:32.160 which which exists Bitcoin features, and as we moved to 0:12:32.240 --> 0:12:34.760 that e t F, which is I think likely to 0:12:34.800 --> 0:12:38.280 happen at some point, you get the retail public even 0:12:38.280 --> 0:12:41.720 more involved, at different retail public than those meme traders 0:12:41.760 --> 0:12:44.280 that you talk about, which is the link. They've moved 0:12:44.280 --> 0:12:47.920 from memes stocks to non fungible tokens recently for some reason. 0:12:48.520 --> 0:12:50.320 But you know the fact that you get then Meme 0:12:50.360 --> 0:12:53.520 stucks with saying micro Strategy is a company that's considered 0:12:53.520 --> 0:12:55.800 to me, memes stuck. Yeah, that's all about bitcoin, right, 0:12:55.840 --> 0:13:00.000 micro Strategy. So there goes those linkages between meme stucks, 0:13:00.160 --> 0:13:03.520 non fungible tokens, and bitcoin right. So I think it's 0:13:03.320 --> 0:13:07.480 it's just morphing into this larger and larger universe of 0:13:08.000 --> 0:13:22.680 the relationships between bitcoin, crypto aspects, and financialists. And not 0:13:22.800 --> 0:13:25.840 to spend too much time on cryptocurrencies, although it is 0:13:25.920 --> 0:13:27.920 so fun to talk about, and I do have questions 0:13:27.960 --> 0:13:30.520 about um the broader market as well, but I want 0:13:30.520 --> 0:13:32.240 to ask you one more thing. I was looking at 0:13:32.280 --> 0:13:35.640 one of your notes and you wrote that bitcoin slide 0:13:35.760 --> 0:13:39.760 is that necessary means to achieve digitization of financial markets? 0:13:40.040 --> 0:13:41.719 And I wanted to ask you what you meant by that, 0:13:41.840 --> 0:13:44.680 and maybe in particular if you can focus on that 0:13:44.720 --> 0:13:49.160 bitcoin slide part of the question. So we had now 0:13:49.240 --> 0:13:52.560 three sell offs and called the slide, but the sell 0:13:52.600 --> 0:13:55.880 off in bitcoin, and there's all these particular reasons for 0:13:55.960 --> 0:13:59.000 why that happened. The last one this was more specifically 0:13:59.000 --> 0:14:02.320 ready to fitness realy. Uh just I guess a market 0:14:02.360 --> 0:14:07.680 reaction of people being overly excited along bitcoin and there's 0:14:07.679 --> 0:14:11.160 a glitch and people get a little scared and itself off. 0:14:11.600 --> 0:14:13.760 But the real the way I look at that is 0:14:13.800 --> 0:14:19.479 to say that volatility that we're experiencing is indeed maturing 0:14:19.520 --> 0:14:23.680 asset right of it should actually be very volatile as 0:14:23.680 --> 0:14:27.040 it becomes more matured, because there's more more people involved 0:14:27.320 --> 0:14:30.280 in that space, right, And there's no surprise that then 0:14:30.760 --> 0:14:32.680 if something like with this event's reel event would you 0:14:32.720 --> 0:14:36.440 would have not really mattered much at all, suddenly becomes 0:14:36.640 --> 0:14:39.640 very sought out on the web, and it leads to 0:14:39.680 --> 0:14:42.680 volatility of bitcoin even though it didn't need to be 0:14:42.840 --> 0:14:45.400 that way. It was just you know, a short glitch 0:14:45.880 --> 0:14:49.560 in the app chief of wallet as opposed to anything 0:14:50.080 --> 0:14:53.160 with where bitcoin was mind or traded on exchange or 0:14:53.160 --> 0:14:55.520 anything like that. Right, So, so I think it's a 0:14:55.520 --> 0:14:58.800 function of that that it becomes a it's maturing, and 0:14:58.840 --> 0:15:03.160 therefore the volatility isn't necessary means for us to make 0:15:03.200 --> 0:15:09.360 that further step to this completely digitalized financial markets. I 0:15:09.440 --> 0:15:12.920 find amazing that we already making steps that way. The 0:15:12.960 --> 0:15:17.040 central maker Thailand has issued the bonds over blockchain settled it, 0:15:17.280 --> 0:15:21.720 and the European Investment Bank, which is the agency Europe 0:15:21.760 --> 0:15:27.080 that looks after infrastructure investments, is issuing bonds over blockchain. 0:15:27.720 --> 0:15:32.920 When you gets institutions involved testing that that ours, this 0:15:33.040 --> 0:15:36.520 is going to become very quickly mainstream within I predict 0:15:36.840 --> 0:15:39.640 alms will predict within the next year. So we're going 0:15:39.680 --> 0:15:42.760 to have a lot of corporations doing this um same way, 0:15:42.800 --> 0:15:45.720 all adopting that technology. But it cannot come along with 0:15:45.920 --> 0:15:49.520 more volatility as more more people are getting involved in this, right, 0:15:49.560 --> 0:15:51.720 And that's I think where I'm coming from. But I 0:15:51.760 --> 0:15:54.480 wanted to switch gears a little bit, uh to another topic. 0:15:54.480 --> 0:15:57.360 I know you've been watching closely. That was Christine Laguard 0:15:57.440 --> 0:16:00.120 at the European Central Bank this week. I feel she 0:16:00.200 --> 0:16:03.280 pulled a bit of a Jedi mind trick by basically 0:16:03.320 --> 0:16:06.480 announcing tapering and then saying, no, I'm not tapering. You know, 0:16:07.440 --> 0:16:11.480 but you know, given the negative yields in Europe, and 0:16:11.520 --> 0:16:14.280 the case has always made whenever the question is well, 0:16:14.320 --> 0:16:18.200 who's buying US treasuries at these yields that the argument is, well, 0:16:18.240 --> 0:16:21.040 have you seen the yields in Europe? Um, you know, 0:16:21.560 --> 0:16:24.800 how big of a deal is DCB sort of taking 0:16:24.840 --> 0:16:27.200 the foot off the gas a little bit with their 0:16:27.240 --> 0:16:30.520 emergency pandemic program. I mean, is this It doesn't seem 0:16:30.560 --> 0:16:33.080 like it's caught anyone by surprise in the markets. You 0:16:33.120 --> 0:16:36.000 know that the euro was kind of mixed against most currencies. 0:16:36.040 --> 0:16:38.680 I didn't see any sort of dramatic moves. But how 0:16:38.720 --> 0:16:42.000 are you thinking about this announcement from Regard this week? 0:16:42.120 --> 0:16:45.680 Is it, you know, changed the calculus at all? Thinking 0:16:45.720 --> 0:16:48.240 about um, you know, bond markets going forward for the 0:16:48.320 --> 0:16:50.720 rest of the year. It could be mine because I 0:16:51.000 --> 0:16:53.240 think like so she says that you know, the lady 0:16:53.280 --> 0:16:57.160 can't can't taper, and it isn't tapering that that reference 0:16:57.240 --> 0:17:00.640 to market tenters speech. But in the in the yes, 0:17:00.720 --> 0:17:03.800 it's they are right whatever you call slowing down those 0:17:03.800 --> 0:17:07.960 purchases and any survey it ultimately is taper. But the market, 0:17:08.040 --> 0:17:10.440 you know, the bond marketing Europe rallies on this because 0:17:11.240 --> 0:17:13.480 you know, whatever they are slowing down the pace with, 0:17:13.880 --> 0:17:16.320 it still covers a fair bit of issuance well into 0:17:16.680 --> 0:17:18.880 next year. And that's just I think the reason why 0:17:18.920 --> 0:17:22.080 there was a bit of a relief, but almost all 0:17:22.119 --> 0:17:25.119 of it issuance, right, And yeah, fair fair bit of 0:17:25.359 --> 0:17:28.040 But here's the interesting change it's going to happen um 0:17:28.720 --> 0:17:31.280 is the e c p IS is very smart running 0:17:31.280 --> 0:17:33.560 two programs at the same time. Right, they have this 0:17:33.640 --> 0:17:37.760 emergency program called PEP, and they have this Q program. 0:17:38.400 --> 0:17:42.120 It's called a p P and a Q program will 0:17:42.160 --> 0:17:46.000 come back in a more meaningful way as the PET 0:17:46.040 --> 0:17:49.960 program buying sound and they she talked about that extensively. 0:17:50.600 --> 0:17:53.359 But the importance for the bond market is that under 0:17:53.359 --> 0:17:56.560 that PET program, we really are addressing the pandemic and 0:17:56.600 --> 0:17:58.840 we're going to buy large volumes as much we can 0:17:59.160 --> 0:18:03.760 to keep market really really loose influential conditions and everything 0:18:03.800 --> 0:18:07.600 functioning well till the pandemic video is weighing off is 0:18:07.640 --> 0:18:09.679 the first step for the easy B to acknowledge that 0:18:09.720 --> 0:18:13.640 the pandemic is in their minds slowly changing, but it 0:18:13.680 --> 0:18:16.199 is waning. And they made the point about that they 0:18:16.280 --> 0:18:20.240 hit the vaccination, which is a key metric to the ECB. 0:18:20.880 --> 0:18:24.440 So this that change happening. Plus they're going to make 0:18:25.080 --> 0:18:28.000 the app the normal keyv program a more important part 0:18:28.040 --> 0:18:31.560 of their their two kit. And the reason why that 0:18:31.600 --> 0:18:35.040 matters is because that program is designed to bring inflation 0:18:35.080 --> 0:18:37.600 back to the target and keep it to the target. 0:18:38.440 --> 0:18:41.880 And that program is really the guidance on that is 0:18:41.920 --> 0:18:45.160 about interest rate hikes in the future once you succeed 0:18:45.160 --> 0:18:48.040 by bringing inflation back to the target. So my view, Illness, 0:18:48.080 --> 0:18:50.600 is that yes, we've got this nice rally on this bat, 0:18:51.240 --> 0:18:55.119 you know, okay, slowly adjusting issues still covered, But on 0:18:55.160 --> 0:18:57.679 the app, the issues and issues or bond is not 0:18:57.800 --> 0:19:01.320 much covered. It doesn't need to be an eight billion program, 0:19:01.359 --> 0:19:04.840 probably much smaller, maybe forty maybe thirty billion. Do you 0:19:04.840 --> 0:19:08.000 ever put pressure on yields in the future. Plus it's 0:19:08.000 --> 0:19:10.800 really designed to bring inflation back, which the marketable does know, 0:19:10.920 --> 0:19:14.440 like once you get there the rate hig so to speak, 0:19:14.480 --> 0:19:18.960 will be coming into the horizon, and and that's that's 0:19:19.080 --> 0:19:20.760 I think what's going to play from here now. Now, 0:19:20.800 --> 0:19:24.680 why does this matter even further is that year Zone 0:19:24.800 --> 0:19:27.919 government bonds, as you say, are negative yielding majority of it. 0:19:28.440 --> 0:19:30.840 So you have this negative yielding bond indecks that you 0:19:30.880 --> 0:19:34.119 can look up on Bloomberg. That was something like I 0:19:34.160 --> 0:19:36.800 think sixteen seventeen trilling recently, and it has fallen by 0:19:37.080 --> 0:19:40.000 a few trilling because yes, boond deals and French governmentent 0:19:40.080 --> 0:19:41.680 deals and all those have all moved up a little 0:19:41.680 --> 0:19:45.160 bit higher. I think it's going to continue that way, 0:19:45.280 --> 0:19:49.120 which means that the deflationary expectations in those bond prices 0:19:49.160 --> 0:19:54.159 in Europe are really moving away. As the ECB is 0:19:54.200 --> 0:19:57.680 succeeding with the strategy of managing the pandemic then bringing 0:19:57.720 --> 0:20:01.160 that new that old TV program back to life again 0:20:01.200 --> 0:20:04.840 inflation to the target. Some people may be sounding like, wow, 0:20:04.920 --> 0:20:07.760 this that's a pretty ambitious man, because that's never gonna 0:20:07.760 --> 0:20:10.040 happen Europe. But I think that they have some window 0:20:10.080 --> 0:20:13.359 here to succeed with that. So I think negative feels 0:20:13.440 --> 0:20:18.400 your will somewhat disappear entirely, but will someone even though 0:20:18.440 --> 0:20:37.160 the e C you will keep buying bosh. I appreciate that. Then, 0:20:37.200 --> 0:20:40.679 you know, Bildna gets bored with the ECB talk. She 0:20:40.800 --> 0:20:44.720 wants to talk about stunks with with an end stuns 0:20:44.880 --> 0:20:47.280 right right, I'm not going to use that word. But 0:20:47.320 --> 0:20:50.320 I did want to bring us back to the domestic, 0:20:50.880 --> 0:20:53.919 the U S stock market, because something that we were 0:20:54.000 --> 0:20:57.840 looking at this week is strength in tech, in particular 0:20:58.080 --> 0:21:01.520 the big cap text talks, and we found that about 0:21:01.640 --> 0:21:05.359 fifty of SMP five hundred stocks are down ten percent 0:21:05.440 --> 0:21:10.040 since May, and that's true of of Russell two thousand stocks. 0:21:10.200 --> 0:21:13.680 So what does that tell us about tech strength and 0:21:13.840 --> 0:21:17.520 why investors might be treating big tech as safe havens 0:21:17.600 --> 0:21:20.760 right now? And is it at all tied to some 0:21:20.800 --> 0:21:23.639 of the worries that people have about COVID and the 0:21:23.760 --> 0:21:28.600 delta variant. It's certainly with that IKS so there's uncertainty 0:21:28.600 --> 0:21:32.600 about delta variant. And really because of the delay of 0:21:32.680 --> 0:21:35.000 going back to office, is made to stay at home 0:21:35.119 --> 0:21:39.040 trade so to speak. You know again you know flaring 0:21:39.119 --> 0:21:41.520 up in in in in value right, the meaning it's 0:21:41.560 --> 0:21:44.480 it's becoming populican at tech plays a big role in it. 0:21:44.600 --> 0:21:47.680 But I think it's also to do with that this 0:21:47.840 --> 0:21:52.720 defensive nature of the market goes further than tech. And 0:21:52.760 --> 0:21:55.520 that's that's fifty fifty portfolio. I'm jumping maybe to the 0:21:55.560 --> 0:21:57.640 topics if you wanted to discuss, but it's fifty fifty. 0:21:57.720 --> 0:22:02.520 Idea that I was looking at was you have industrial staples, 0:22:02.920 --> 0:22:06.440 and you know this type of even utilities, and that 0:22:06.560 --> 0:22:11.320 includes TACK considerably defensive. Some of those have actually lacked 0:22:11.400 --> 0:22:15.040 TACH even though the defensive sectors. And at the same 0:22:15.040 --> 0:22:17.960 time you have the offensive side of the market, retail, 0:22:19.000 --> 0:22:21.800 some of the reopening sectors that are still much value 0:22:21.840 --> 0:22:25.040 in there, let's say airlines as an example. And so 0:22:25.080 --> 0:22:29.119 I thought about this fifty fifty portfolio of those combined 0:22:29.720 --> 0:22:32.520 and tracking that against the tech sector. And it actually, 0:22:32.760 --> 0:22:36.240 interestingly how the fifty fifty portfolio is performing better now 0:22:36.440 --> 0:22:39.639 than tech. And you can also see this from the 0:22:39.760 --> 0:22:44.720 relative value between tech and say industrials. So industrials have 0:22:44.840 --> 0:22:47.480 been really strong because of the pandemic and all the 0:22:47.480 --> 0:22:51.080 production is needed, all the pipeline pressures a sorry supply 0:22:51.160 --> 0:22:54.439 chain supply chain pressures that we have. But if you 0:22:54.480 --> 0:22:58.719 take the relative ratio between tech and industrials, that's now 0:22:58.760 --> 0:23:01.359 a lot lower than it was during the major disruption 0:23:01.400 --> 0:23:05.320 phases in January or last year when really attack was 0:23:05.440 --> 0:23:10.160 huge the outperforming. So there is strengthen tech, but it's 0:23:10.200 --> 0:23:12.359 not as strong anymore, I think if you compared to 0:23:12.400 --> 0:23:15.159 industrials that has been before. At the same time, the 0:23:15.200 --> 0:23:19.280 market to your point is defensive or getting more defensive, 0:23:19.960 --> 0:23:21.840 which is I think also now the debate in the 0:23:21.920 --> 0:23:25.440 market you had Interestingly b of Ay were really barished 0:23:25.440 --> 0:23:28.399 on the market, upgraded there and here in target, but 0:23:28.440 --> 0:23:31.600 I still buries. You have another more Stanley who are 0:23:31.640 --> 0:23:34.160 much more bullish and they have kind of become more cautious. 0:23:34.600 --> 0:23:36.879 I think that speaks to this market ready to have 0:23:37.000 --> 0:23:40.159 some sort of correction again and tack therefore place this 0:23:40.280 --> 0:23:43.720 defensive role. You know, it is an easy position to 0:23:43.800 --> 0:23:46.800 be in if you do get this draw down so 0:23:46.920 --> 0:23:49.520