Speaker 1: Hello, and welcome to What Goes Up, a weekly markets podcast.
Speaker 1: My name is Mike Reagan, and I'm a senior editor
Speaker 1: at Bloomberg and I'm Aldona Higher, across asset reporter at Bloomberg.
Speaker 1: This week on the show, it was a pretty interesting
Speaker 1: week in macro news. While Al Salvador is not exactly
Speaker 1: someplace that comes up in market conversations often, this week
Speaker 1: it became the first nation to adopt bitcoin as legal
Speaker 1: tender and didn't exactly go very smoothly. Also, another major
Speaker 1: central bank made it clear it's ready to start tapering
Speaker 1: bond purchases that it's been making to counteract the effects
Speaker 1: of the pandemic now that the recovery is picking up steam.
Speaker 1: What does it all mean. We'll get into it with
Speaker 1: a macro strategist at an investment advisory firm. But first,
Speaker 1: Bill Donna, I have to it's back to school week,
Speaker 1: which is means there's a lot of drama in the
Speaker 1: Regan household with you know, getting your books in the
Speaker 1: backpack and having the right outfit and everything. I was
Speaker 1: trying to figure out what Vill Donna, a young Vill Donna,
Speaker 1: was like back to school time. I'm guessing you were
Speaker 1: like gung ho to get back to school every septeme. Yeah,
Speaker 1: I loved back to school. It was so fun. All
Speaker 1: the new stuff, you know, all of your new notebooks
Speaker 1: and things, all the new grammar. Yes, oh gosh, don't
Speaker 1: get me excited. I figured I should have haven't had
Speaker 1: you give a pep talk to my daughters. I had
Speaker 1: a feeling you were enthusiastic back to How was back
Speaker 1: to school for you when when you were going to
Speaker 1: school in the eighteen eighties? Oh in the eighties, Oh
Speaker 1: my good? Did he It was well, you know, it
Speaker 1: was a one room school house and we had to
Speaker 1: walk both ways uphill in the snow and and that
Speaker 1: sort of thing. But you know, eighties bore. That hurts.
Speaker 1: I'm sorry, that hurts. I'm dealing with this. And I
Speaker 1: had a teenage Sun News so easy and so tenth
Speaker 1: grade now, so with all that stuff. Same thing. That voice,
Speaker 1: there's bed Emens. That's our guest. He's a macro strategist
Speaker 1: at Bedley Global Advisors. Bed House. Back to school going
Speaker 1: in your household? Well, it's actually schools just more. My
Speaker 1: wife's giving me a hard time, but I don't know.
Speaker 1: My son is actually following the instruction, so it's more
Speaker 1: than knuckle sandwich. It gets served every day, you know.
Speaker 1: But that I wanted to talk to you about what
Speaker 1: I mentioned at the opening, there's El Salvador. I know
Speaker 1: you've been watching the El Salvador situation. UM. Fascinating to
Speaker 1: me that we finally have a bitcoin as legal tender,
Speaker 1: albeit not in a major market economy. But I think
Speaker 1: you know it's it's breaking that seal of a government
Speaker 1: actually accepting bitcoin as legal tender. Walk us through sort
Speaker 1: of the implications of it in your view? I mean,
Speaker 1: is this a big deal in sort of the evolution
Speaker 1: of crypto? Um? And though there was kind of a
Speaker 1: glitchy uh introduction uh in El Salvador. How are you
Speaker 1: thinking about it all? You know? What what does this mean?
Speaker 1: We mean sort of from the evolution of bitcoin. It's
Speaker 1: definitely important, staff, Mike, because look, if if you have
Speaker 1: a country as small as l Salve that are is
Speaker 1: and although it doesn't have a major currency and occurrencies
Speaker 1: back to the dollar, it's in economy adopting adopting bitcoin
Speaker 1: in a wider way, like as in everything that you
Speaker 1: want to buy and transacting can be done there in bitcoin.
Speaker 1: To that Shivo wallets that they created where they purchase
Speaker 1: I believe something like forty million dollars of bitcoin in there,
Speaker 1: and so obviously there's a limited demand, but okay, it's
Speaker 1: it's it's enough for people to get really comfortable with
Speaker 1: transacting in something that allows them to be part of
Speaker 1: this digital revolution and not dealing with a black markets.
Speaker 1: Right like some of these countries, I go solve it
Speaker 1: over to or Argentina and Venezuela will probably go this
Speaker 1: way to Yeah, people transact more in the black markets,
Speaker 1: and and and and while they're having an official currency rate,
Speaker 1: that doesn't mean much. So I think the implication of
Speaker 1: it is is that other central banks are taking this
Speaker 1: also serious. And what I noted was just not that
Speaker 1: long ago. I think just a week or two weeks
Speaker 1: before El salvad or you know, launched this bitcoin law,
Speaker 1: the Central Bank of Australia launched a project with the
Speaker 1: Central Bank of South Africa Singapore, and I believe it
Speaker 1: was Korea to look at the way of using a
Speaker 1: digital currency central bank digital currency CBDC and allowed for
Speaker 1: international payments across boarder payments. Really more the institutional version
Speaker 1: of bitcoin and so as that happened as that project
Speaker 1: is under ways called Project Dunbar, and you have this
Speaker 1: l salved Or example. I think we're making a big
Speaker 1: leaps forward here or where ultimately going to be in
Speaker 1: is that although our currency system will not change because
Speaker 1: that would put an end to our conventional amount apolicies.
Speaker 1: It is right, you know that that will not happen.
Speaker 1: But the fact that you're going to transition to a
Speaker 1: digital world where you can settle everything digitally, you can
Speaker 1: transact everything digitally. Can you then imagine that we can
Speaker 1: actually open the stock market during the weekend. That could
Speaker 1: be an implication that sounds big, but it's actually the
Speaker 1: way because if you can instantly settle money and security
Speaker 1: is that fast because of the technology. Yeah, that's a
Speaker 1: huge lead forward right for man kinds. As famous estronaut
Speaker 1: set Vildana just got very excited when you mentioned the
Speaker 1: stock market open on the weekends. That means she'll get
Speaker 1: to work on the weekends, which I think you sometimes
Speaker 1: cover bitcoin whenever it's really volatile. We do tend to
Speaker 1: cover it over the weekends as well. But yeah, my
Speaker 1: eyes did just for all the listeners sort of get
Speaker 1: really wide. But Ben, I do want to ask you.
Speaker 1: It used to be an argument that a lot of
Speaker 1: crypto people made about bitcoin that eventually you're going to
Speaker 1: start seeing it being used to purchase your morning coffee
Speaker 1: or your morning breakfast sandwich or whatever, which never really
Speaker 1: hand out, at least not in the US. It's really
Speaker 1: difficult to to to do something like that. Depending on
Speaker 1: how things play out in El Solvador. Does that mean
Speaker 1: potentially that that could be an argument again for why
Speaker 1: somebody might want to own bitcoin where you might be
Speaker 1: able to use it to transact with your you know,
Speaker 1: your everyday needs. Yeah, I think so, because if people
Speaker 1: get comfortable with this with a cryptocurrency which is volatile,
Speaker 1: and you know, the argument was made when Fel Salvador
Speaker 1: launched this that as as bitcoin sold off because of
Speaker 1: the glitch. Okay, so I'm buying. I just bought a
Speaker 1: pizza that was worth you know, fifty bitcoin dollars of
Speaker 1: bit coin nosworth tony tous. Let's say that's a that's
Speaker 1: pretty strange, right, It would not be uh, you know,
Speaker 1: very pleasant. But I think it's just like when you
Speaker 1: had in the past, how the banking systems so traditional
Speaker 1: of just cash going around that has become very digital.
Speaker 1: I mean, I do most of my payments through my
Speaker 1: through my iPhone or an app most of it. So
Speaker 1: I think that is the direction we're heading with this.
Speaker 1: As you mentioned, there's a fair bit of regulatory um
Speaker 1: oversight that's you needed, and it's not clear who's going
Speaker 1: to be the responsible agency to look after crypto. That's
Speaker 1: I think the big issue in the United States. Um,
Speaker 1: the SEC was regulated, but then you have the I R.
Speaker 1: S and then you have the Treasury Department, then you
Speaker 1: have maybe Department of Justice, and there's another agency. I
Speaker 1: do think that we're not that far away from that
Speaker 1: reality to have crypto being used for payment because last
Speaker 1: year and summer bit quietly, but the Office of Currency Controller,
Speaker 1: which is the regulator for commercial banks, did allow banks
Speaker 1: to accept crypto as a cortical deposit and so that
Speaker 1: people have purchase crypto they could actually deposited at their
Speaker 1: at their bank. And I don't know the exact technical
Speaker 1: specifics of it, but that new SIDEM always was in
Speaker 1: my mind like, okay, so if we're starting with making
Speaker 1: it possible to be a deposit, then it becomes an
Speaker 1: anchor right for for using it as a means of
Speaker 1: payment over time, even though it's still very subject to
Speaker 1: volatility markets, subject to technological challenges, and the concerns over
Speaker 1: the technological chances in frauds and criminal activity that that
Speaker 1: obviously here big concerns about Politically, they want to make
Speaker 1: sure that that obviously doesn't happen. So but I think
Speaker 1: I'll solve it, or a small country it is, it
Speaker 1: is one you know, wants to step forward of this. Uh.
Speaker 1: I find it fascinating that no regulators can sort of
Speaker 1: decide who's in charge of this thing. But I think
Speaker 1: they should put the Space Force in charge of it.
Speaker 1: You know, the goal, the goal is always to send
Speaker 1: these things to the moon. So put the put the
Speaker 1: space to force in charge of regulating it. But but
Speaker 1: I know you've been doing a lot of analysis sort
Speaker 1: of looking at relationships between bitcoin and ethereum and crypto
Speaker 1: in general with the more traditional asset classes in the market,
Speaker 1: oil and stocks at meme stocks. I think you know
Speaker 1: you've noticed some kind of correlations and relationship. Walk us
Speaker 1: through what your analysis of that looks like. You know,
Speaker 1: how does bitcoin sort of fit into the traditional asset classes.
Speaker 1: Is it influencing the prices of I mean Obviously you've
Speaker 1: got your stocks that are exposed to crypto in some way,
Speaker 1: but is it influencing things on a macro level in
Speaker 1: your opinion, Well, you have to start with at last
Speaker 1: point as you're making so you know, the list of
Speaker 1: company needs that have using bitcoin or crypto or having
Speaker 1: a more digitalized business has just compounded as it's increased
Speaker 1: very rapidly, and you know that that does influence the
Speaker 1: stock market because if you take all those companies together
Speaker 1: as a market way, and it's direct or indirect exposure
Speaker 1: to crypto bitcoin, then the fluctuation of bitcoin has become
Speaker 1: more correlated with the changes in the S and P
Speaker 1: five that's particularly this year has been that's been the case.
Speaker 1: That's a big difference from the number of years before.
Speaker 1: Then obviously as we had the more wider adoption, if
Speaker 1: not recognition on institutional side to hit the people who
Speaker 1: manage money institutionally looking at crypto as this must be
Speaker 1: another alternative that plays a big role too, And that's
Speaker 1: where the regulatory parts of it comes come into play
Speaker 1: when it comes to the SEC and and the Treasury Department,
Speaker 1: and then you as you have this sort of correlate
Speaker 1: issue between bitcoin and broader markets. Positive, it's been a
Speaker 1: positive correlation this year. You may think about and that
Speaker 1: you can take the steps further of Okay, this could
Speaker 1: effect different assets, not just equities, but it could spill
Speaker 1: over to other assets. Now, what's interesting with with with
Speaker 1: crypto and an etherium for example? Two, it's obviously high
Speaker 1: energy uses right and one thing that has happened with
Speaker 1: the etherium as it got back in significant demand because
Speaker 1: of the upgrade London upgrades that happened a few weeks
Speaker 1: ago and the fact that that the non fungible tokens
Speaker 1: have exploded in trading, so people very excited about that.
Speaker 1: But you need etherium for that. Eterium is of course
Speaker 1: related to the big to the blockchain technology. The ethereum
Speaker 1: does require a fair bit of energy and so etherium
Speaker 1: gas prices as they say, which are you can find
Speaker 1: online I have jumped. So there's a bit of a
Speaker 1: relationship too of the physical markets with the space of crypto.
Speaker 1: So at think it all points to the same direction
Speaker 1: of as we were talking in the previous discussion, was
Speaker 1: you have crypto assets at becoming part of the investment universe.
Speaker 1: The transition from what it was like a very esoteric
Speaker 1: technology that was off exchange and very privately managed and
Speaker 1: traded becomes more wider adopters. And then what you're going
Speaker 1: to get now is crypto stock, scripto bounds, crypto features,
Speaker 1: which which exists Bitcoin features, and as we moved to
Speaker 1: that e t F, which is I think likely to
Speaker 1: happen at some point, you get the retail public even
Speaker 1: more involved, at different retail public than those meme traders
Speaker 1: that you talk about, which is the link. They've moved
Speaker 1: from memes stocks to non fungible tokens recently for some reason.
Speaker 1: But you know the fact that you get then Meme
Speaker 1: stucks with saying micro Strategy is a company that's considered
Speaker 1: to me, memes stuck. Yeah, that's all about bitcoin, right,
Speaker 1: micro Strategy. So there goes those linkages between meme stucks,
Speaker 1: non fungible tokens, and bitcoin right. So I think it's
Speaker 1: it's just morphing into this larger and larger universe of
Speaker 1: the relationships between bitcoin, crypto aspects, and financialists. And not
Speaker 1: to spend too much time on cryptocurrencies, although it is
Speaker 1: so fun to talk about, and I do have questions
Speaker 1: about um the broader market as well, but I want
Speaker 1: to ask you one more thing. I was looking at
Speaker 1: one of your notes and you wrote that bitcoin slide
Speaker 1: is that necessary means to achieve digitization of financial markets?
Speaker 1: And I wanted to ask you what you meant by that,
Speaker 1: and maybe in particular if you can focus on that
Speaker 1: bitcoin slide part of the question. So we had now
Speaker 1: three sell offs and called the slide, but the sell
Speaker 1: off in bitcoin, and there's all these particular reasons for
Speaker 1: why that happened. The last one this was more specifically
Speaker 1: ready to fitness realy. Uh just I guess a market
Speaker 1: reaction of people being overly excited along bitcoin and there's
Speaker 1: a glitch and people get a little scared and itself off.
Speaker 1: But the real the way I look at that is
Speaker 1: to say that volatility that we're experiencing is indeed maturing
Speaker 1: asset right of it should actually be very volatile as
Speaker 1: it becomes more matured, because there's more more people involved
Speaker 1: in that space, right, And there's no surprise that then
Speaker 1: if something like with this event's reel event would you
Speaker 1: would have not really mattered much at all, suddenly becomes
Speaker 1: very sought out on the web, and it leads to
Speaker 1: volatility of bitcoin even though it didn't need to be
Speaker 1: that way. It was just you know, a short glitch
Speaker 1: in the app chief of wallet as opposed to anything
Speaker 1: with where bitcoin was mind or traded on exchange or
Speaker 1: anything like that. Right, So, so I think it's a
Speaker 1: function of that that it becomes a it's maturing, and
Speaker 1: therefore the volatility isn't necessary means for us to make
Speaker 1: that further step to this completely digitalized financial markets. I
Speaker 1: find amazing that we already making steps that way. The
Speaker 1: central maker Thailand has issued the bonds over blockchain settled it,
Speaker 1: and the European Investment Bank, which is the agency Europe
Speaker 1: that looks after infrastructure investments, is issuing bonds over blockchain.
Speaker 1: When you gets institutions involved testing that that ours, this
Speaker 1: is going to become very quickly mainstream within I predict
Speaker 1: alms will predict within the next year. So we're going
Speaker 1: to have a lot of corporations doing this um same way,
Speaker 1: all adopting that technology. But it cannot come along with
Speaker 1: more volatility as more more people are getting involved in this, right,
Speaker 1: And that's I think where I'm coming from. But I
Speaker 1: wanted to switch gears a little bit, uh to another topic.
Speaker 1: I know you've been watching closely. That was Christine Laguard
Speaker 1: at the European Central Bank this week. I feel she
Speaker 1: pulled a bit of a Jedi mind trick by basically
Speaker 1: announcing tapering and then saying, no, I'm not tapering. You know,
Speaker 1: but you know, given the negative yields in Europe, and
Speaker 1: the case has always made whenever the question is well,
Speaker 1: who's buying US treasuries at these yields that the argument is, well,
Speaker 1: have you seen the yields in Europe? Um, you know,
Speaker 1: how big of a deal is DCB sort of taking
Speaker 1: the foot off the gas a little bit with their
Speaker 1: emergency pandemic program. I mean, is this It doesn't seem
Speaker 1: like it's caught anyone by surprise in the markets. You
Speaker 1: know that the euro was kind of mixed against most currencies.
Speaker 1: I didn't see any sort of dramatic moves. But how
Speaker 1: are you thinking about this announcement from Regard this week?
Speaker 1: Is it, you know, changed the calculus at all? Thinking
Speaker 1: about um, you know, bond markets going forward for the
Speaker 1: rest of the year. It could be mine because I
Speaker 1: think like so she says that you know, the lady
Speaker 1: can't can't taper, and it isn't tapering that that reference
Speaker 1: to market tenters speech. But in the in the yes,
Speaker 1: it's they are right whatever you call slowing down those
Speaker 1: purchases and any survey it ultimately is taper. But the market,
Speaker 1: you know, the bond marketing Europe rallies on this because
Speaker 1: you know, whatever they are slowing down the pace with,
Speaker 1: it still covers a fair bit of issuance well into
Speaker 1: next year. And that's just I think the reason why
Speaker 1: there was a bit of a relief, but almost all
Speaker 1: of it issuance, right, And yeah, fair fair bit of
Speaker 1: But here's the interesting change it's going to happen um
Speaker 1: is the e c p IS is very smart running
Speaker 1: two programs at the same time. Right, they have this
Speaker 1: emergency program called PEP, and they have this Q program.
Speaker 1: It's called a p P and a Q program will
Speaker 1: come back in a more meaningful way as the PET
Speaker 1: program buying sound and they she talked about that extensively.
Speaker 1: But the importance for the bond market is that under
Speaker 1: that PET program, we really are addressing the pandemic and
Speaker 1: we're going to buy large volumes as much we can
Speaker 1: to keep market really really loose influential conditions and everything
Speaker 1: functioning well till the pandemic video is weighing off is
Speaker 1: the first step for the easy B to acknowledge that
Speaker 1: the pandemic is in their minds slowly changing, but it
Speaker 1: is waning. And they made the point about that they
Speaker 1: hit the vaccination, which is a key metric to the ECB.
Speaker 1: So this that change happening. Plus they're going to make
Speaker 1: the app the normal keyv program a more important part
Speaker 1: of their their two kit. And the reason why that
Speaker 1: matters is because that program is designed to bring inflation
Speaker 1: back to the target and keep it to the target.
Speaker 1: And that program is really the guidance on that is
Speaker 1: about interest rate hikes in the future once you succeed
Speaker 1: by bringing inflation back to the target. So my view, Illness,
Speaker 1: is that yes, we've got this nice rally on this bat,
Speaker 1: you know, okay, slowly adjusting issues still covered, But on
Speaker 1: the app, the issues and issues or bond is not
Speaker 1: much covered. It doesn't need to be an eight billion program,
Speaker 1: probably much smaller, maybe forty maybe thirty billion. Do you
Speaker 1: ever put pressure on yields in the future. Plus it's
Speaker 1: really designed to bring inflation back, which the marketable does know,
Speaker 1: like once you get there the rate hig so to speak,
Speaker 1: will be coming into the horizon, and and that's that's
Speaker 1: I think what's going to play from here now. Now,
Speaker 1: why does this matter even further is that year Zone
Speaker 1: government bonds, as you say, are negative yielding majority of it.
Speaker 1: So you have this negative yielding bond indecks that you
Speaker 1: can look up on Bloomberg. That was something like I
Speaker 1: think sixteen seventeen trilling recently, and it has fallen by
Speaker 1: a few trilling because yes, boond deals and French governmentent
Speaker 1: deals and all those have all moved up a little
Speaker 1: bit higher. I think it's going to continue that way,
Speaker 1: which means that the deflationary expectations in those bond prices
Speaker 1: in Europe are really moving away. As the ECB is
Speaker 1: succeeding with the strategy of managing the pandemic then bringing
Speaker 1: that new that old TV program back to life again
Speaker 1: inflation to the target. Some people may be sounding like, wow,
Speaker 1: this that's a pretty ambitious man, because that's never gonna
Speaker 1: happen Europe. But I think that they have some window
Speaker 1: here to succeed with that. So I think negative feels
Speaker 1: your will somewhat disappear entirely, but will someone even though
Speaker 1: the e C you will keep buying bosh. I appreciate that. Then,
Speaker 1: you know, Bildna gets bored with the ECB talk. She
Speaker 1: wants to talk about stunks with with an end stuns
Speaker 1: right right, I'm not going to use that word. But
Speaker 1: I did want to bring us back to the domestic,
Speaker 1: the U S stock market, because something that we were
Speaker 1: looking at this week is strength in tech, in particular
Speaker 1: the big cap text talks, and we found that about
Speaker 1: fifty of SMP five hundred stocks are down ten percent
Speaker 1: since May, and that's true of of Russell two thousand stocks.
Speaker 1: So what does that tell us about tech strength and
Speaker 1: why investors might be treating big tech as safe havens
Speaker 1: right now? And is it at all tied to some
Speaker 1: of the worries that people have about COVID and the
Speaker 1: delta variant. It's certainly with that IKS so there's uncertainty
Speaker 1: about delta variant. And really because of the delay of
Speaker 1: going back to office, is made to stay at home
Speaker 1: trade so to speak. You know again you know flaring
Speaker 1: up in in in in value right, the meaning it's
Speaker 1: it's becoming populican at tech plays a big role in it.
Speaker 1: But I think it's also to do with that this
Speaker 1: defensive nature of the market goes further than tech. And
Speaker 1: that's that's fifty fifty portfolio. I'm jumping maybe to the
Speaker 1: topics if you wanted to discuss, but it's fifty fifty.
Speaker 1: Idea that I was looking at was you have industrial staples,
Speaker 1: and you know this type of even utilities, and that
Speaker 1: includes TACK considerably defensive. Some of those have actually lacked
Speaker 1: TACH even though the defensive sectors. And at the same
Speaker 1: time you have the offensive side of the market, retail,
Speaker 1: some of the reopening sectors that are still much value
Speaker 1: in there, let's say airlines as an example. And so
Speaker 1: I thought about this fifty fifty portfolio of those combined
Speaker 1: and tracking that against the tech sector. And it actually,
Speaker 1: interestingly how the fifty fifty portfolio is performing better now
Speaker 1: than tech. And you can also see this from the
Speaker 1: relative value between tech and say industrials. So industrials have
Speaker 1: been really strong because of the pandemic and all the
Speaker 1: production is needed, all the pipeline pressures a sorry supply
Speaker 1: chain supply chain pressures that we have. But if you
Speaker 1: take the relative ratio between tech and industrials, that's now
Speaker 1: a lot lower than it was during the major disruption
Speaker 1: phases in January or last year when really attack was
Speaker 1: huge the outperforming. So there is strengthen tech, but it's
Speaker 1: not as strong anymore, I think if you compared to
Speaker 1: industrials that has been before. At the same time, the
Speaker 1: market to your point is defensive or getting more defensive,
Speaker 1: which is I think also now the debate in the
Speaker 1: market you had Interestingly b of Ay were really barished
Speaker 1: on the market, upgraded there and here in target, but
Speaker 1: I still buries. You have another more Stanley who are
Speaker 1: much more bullish and they have kind of become more cautious.
Speaker 1: I think that speaks to this market ready to have
Speaker 1: some sort of correction again and tack therefore place this
Speaker 1: defensive role. You know, it is an easy position to
Speaker 1: be in if you do get this draw down so
Speaker 1: to speak. But I would say though this that as
Speaker 1: the last point the draw down ultimately will really happen.
Speaker 1: I think because of the economy shifting again from what
Speaker 1: we had a bit of a delta impact of number
Speaker 1: of months of weeks becoming again more visible, that that's
Speaker 1: going to weigh because that way full taper will taper
Speaker 1: off and then the tapering from the fat comes into play.
Speaker 1: Plus the bunch of resolution that's being negotiated is a
Speaker 1: big pressure to get that really through. There's plenty of
Speaker 1: that fundamental vision to see a draw down in the market,
Speaker 1: which then would make tech I think, a bit vulnerable
Speaker 1: ultimately at a large s capturle on the perform. So
Speaker 1: tech is in demands because of defense. But I think
Speaker 1: there's come a moment that this draw down in the
Speaker 1: markets is upon us again, as all these opinions are gatting,
Speaker 1: converging to one another, and everybody's getting cautious. Yeah, I'm
Speaker 1: curious about that, but I think in one note, correct
Speaker 1: me if I'm wrong. But you mentioned that one possible
Speaker 1: catalyst for a drawdown could be sort of a renewed
Speaker 1: rotation into Europe or other parts of the world. And
Speaker 1: you know, how are you thinking about that relative value globally?
Speaker 1: I mean, if we especially here in the US, you know,
Speaker 1: obviously we're we're kind of plateauing out on vaccines. You know,
Speaker 1: we we seem to have this hesitancy to vaccination that
Speaker 1: parts of Europe and the rest of the world don't
Speaker 1: quite have. Um at the same time, you know, uh,
Speaker 1: it doesn't look like this three and a half trillion
Speaker 1: dollar budget plan from Biden is is going to pass
Speaker 1: without some some cuts to it. We've got the that
Speaker 1: treaded UH debt sailing approaching again and the famous extraordinary
Speaker 1: measures and all that. Is it a time to start
Speaker 1: looking outside of the US and start looking overseas. Do
Speaker 1: you think you could use it as an argument micas
Speaker 1: Um if we had some relative under performance of Asian
Speaker 1: markets to the US, because Asia was the first resion
Speaker 1: to come out of pandemic without much pain, but there
Speaker 1: was also the region where the vaccinations were really slow
Speaker 1: in the first phase. Now they're picking up really rapidly,
Speaker 1: right and and it's not just in Singapore. Is happening
Speaker 1: also in even markets at Hong Kong, but it was
Speaker 1: huge hesitancy about vaccinations. And Japan now too has picked
Speaker 1: up really quickly. So Asia is getting in that respect
Speaker 1: a bit in a better position. If you think about
Speaker 1: this rotation trade, which really a momentum trade, right that
Speaker 1: that has been playing the entire pandemic. Each time one
Speaker 1: area under performs another area, and a progress made in
Speaker 1: the pandemic, and one way or the other, right, whether
Speaker 1: the lockdowns end or vaccinations increase the money flows to
Speaker 1: that under that relative underperforming area. In this case, now
Speaker 1: it's it's Asia specific area. Think of Singapore, think of
Speaker 1: Hong Kong, think of New Zealand, think of Japan. And yeah,
Speaker 1: if you look at an at a graph where you
Speaker 1: normalize those ets versus dispiety, that is a gap, right,
Speaker 1: and I think it will not pret entirely close that gap,
Speaker 1: but it will definitely be a catch up here really
Speaker 1: playing on on again, this reopening cyclical momentum idea that
Speaker 1: we've been into and since say April of last year,
Speaker 1: when we come out of the depth of the of
Speaker 1: the of the worst of the pandemic. Europe on the
Speaker 1: other hand, is now a little bit in a phase
Speaker 1: of that. Yes, E c B is my view, tapering
Speaker 1: the lady can taper, right, So it is happening, and
Speaker 1: and you can kind of tell right it's it starts
Speaker 1: like way way on the markets there that they're down
Speaker 1: more month to day so far since all that hawkey
Speaker 1: language came out and now today we get the news
Speaker 1: then then US markets or Asian markets. So so I
Speaker 1: do think that the Europe probably despite the success with
Speaker 1: vaccination rates, will deal now with more the policy changing
Speaker 1: to degree. So that's an interesting aspect of the global
Speaker 1: macro landscape too, right because if you look at Asia Pacific,
Speaker 1: New Zealand and Korea for example, they booked success against
Speaker 1: the virus and they now seeing their bunches normalized was
Speaker 1: two on the tenure. So it does show that when
Speaker 1: you get that advice better on the control, that interests
Speaker 1: can depart from the virus influence on the pandemic at
Speaker 1: that's important observation. And the second ones is Europe that
Speaker 1: you made a huge progress with all the vaccination, you're
Speaker 1: getting the situation. They're also better under control. Now you
Speaker 1: can focus on adjusting policy and that will affect markets
Speaker 1: negatively inequities there right, So I think if you look
Speaker 1: at both examples, I think the opportunities in Asia specific
Speaker 1: equalities they have lacked the US and you know the
Speaker 1: this progress in the pandemic there, but that also means
Speaker 1: yields normalizing, So there is that risk on trade where
Speaker 1: the Europe is a bit of the opposite way. You
Speaker 1: get a bit of traction attraction on equalities we are
Speaker 1: in the US. Not that that in that situation just yet,
Speaker 1: but the yields of trasies are kind of arranged around
Speaker 1: the boxing, and so is the SNP. So I do
Speaker 1: think we're gonna go to that scenario. I mean, I
Speaker 1: would expect us that we will get to a point
Speaker 1: where fields are going to be reflecting more of a
Speaker 1: normal economy that is not so much anymore the influence
Speaker 1: of the pandemic as tapering then gets on the way.
Speaker 1: Tiden up your straight jackets. It's time for the craziest
Speaker 1: things we saw in markets this week? Now the thought,
Speaker 1: as you know, Ben is no stranger to this podcast,
Speaker 1: it's not his first time at the rodeo, so I
Speaker 1: know he came prepared with the crazy thing for us. Bend,
Speaker 1: Let's have it. What's the craziest thing you saw in
Speaker 1: markets this week? So you know, you know it's a
Speaker 1: bit from history too that you know. I had once
Speaker 1: Twitter account of while back, and it got hacked and
Speaker 1: all kinds of funky stuff happened. So but these days
Speaker 1: I'm a little bit on there again. I watched all
Speaker 1: the celebrities on there, and it's your Fildana tweeting and
Speaker 1: Bloomberg tweeting, and then all of a sudden, one evening,
Speaker 1: I see this this is tweet coming out of a
Speaker 1: guy laying with two hairy legs on the beach, you know.
Speaker 1: And but the interesting thing is that those lacks for
Speaker 1: it's just the lower legs will actually looked like she's
Speaker 1: but the restaurants pretty hairy, it turned out to you,
Speaker 1: And I thought, like, this is crazy thing. You were
Speaker 1: you at the Jersey Shore. That was me at the
Speaker 1: Jersey Shore. Yes, yes, I do not shave the upper
Speaker 1: parts of the legs. That's just uh, that's just my natural,
Speaker 1: uh receding hairline. I guess that's why you should stay
Speaker 1: off Twitter. Ben enough, I was hacked to Ben. Yeah
Speaker 1: you did. Okay, those are my legs. I'm proud of
Speaker 1: those legs. Alright. Thought that's a that's a good one.
Speaker 1: I don't know, can you beat my hairy legs? Well,
Speaker 1: I was just gonna go with something that happened to me,
Speaker 1: which is I was reporting on bitcoin earlier this week,
Speaker 1: and I was in the midst of talking to somebody
Speaker 1: about why bitcoin could potentially hit and then go above
Speaker 1: that this week, we were just looking at some technical
Speaker 1: signal and while we were talking, it started dropping. And
Speaker 1: that's my weirdest thing for for this week. It's just
Speaker 1: the speed with which bitcoin fell, Like I think it
Speaker 1: was on Tuesday, Tuesday morning, New York time, it went
Speaker 1: from down ten percent down twelve, down fifty. I looked up.
Speaker 1: I have this little screen on my bloom Book terminal.
Speaker 1: I was down and I literally couldn't believe it. We
Speaker 1: were just talking about it potentially going higher, and just
Speaker 1: the speed with which it fell it was. It was
Speaker 1: something that's when you quickly say, well, where's the support
Speaker 1: that if? Right? Yeah? And then I was I was
Speaker 1: chatting the topic, I was chatting with people. I was like,
Speaker 1: what just happened? And I was like, I have no idea,
Speaker 1: but this is normal for the clear point. Yeah, it
Speaker 1: looked more like a Saturday Night special for bitcoin then, right.
Speaker 1: You know? Then, uh, what you see at the opening
Speaker 1: of a week. That's a good one, Bill Donna, I'm
Speaker 1: gonna give you mine. Mine's courtesy of U story in
Speaker 1: Coin Desk the Matt Live Mean Excellent Money Stuff newsletter.
Speaker 1: Now it kind of feels like cheating to talk about
Speaker 1: n f t s and the crazy things, because the
Speaker 1: whole concept is crazy in my opinion, but this one
Speaker 1: is especially crazy. Um because okay, there was and it
Speaker 1: combines the other craziest thing of our lifetime, which is
Speaker 1: doge coin. So the image of the original Sheba a
Speaker 1: new dog that dose coin is based on. It's a meme.
Speaker 1: I'm hopefully people know what I'm talking about, but it
Speaker 1: was a meme with a dog, and that that's what
Speaker 1: dose coin was created around. That was turned into an
Speaker 1: n f T. That image, it's sold for about four
Speaker 1: million dollars uh a few months ago. Three months ago.
Speaker 1: Now here's where it gets crazy. So someone whoever bought
Speaker 1: it decided, Okay, I'm gonna carve this up and offer
Speaker 1: fractional shares of this n f T um seventeen billion
Speaker 1: tokens were created by cutting up this n f T.
Speaker 1: Of of them sold to one buyer, and it's time
Speaker 1: to play prices, right, all right? All right? Ben, if
Speaker 1: I were to if I were to buy a four
Speaker 1: million dollar n f T, what would you expect someone
Speaker 1: to pay for twenty of that four million dollar n
Speaker 1: f T. Yeah, well that would be eight on the town?
Speaker 1: Is that right? It would be eight on? That's a
Speaker 1: good quick math there. I put you on the spot there,
Speaker 1: but yeah, but yeah, but you know of four million
Speaker 1: is not eight on the thousands, right, It maybe be
Speaker 1: more two millions, right, because in can be doubles easily,
Speaker 1: simply because it's such a unique artifact that that you
Speaker 1: own on that blockchain. No one else can until those
Speaker 1: that changes. So now it's just not transaction zoo zooper
Speaker 1: monetized market here, that's for sure. Yep, yep, you're in
Speaker 1: the right direction. Forty five million for of an n
Speaker 1: f T that originally sold a few months ago for
Speaker 1: four million. So I guess the idea is that you
Speaker 1: break this thing up. I don't know. I'm trying to
Speaker 1: guess what the idea is for Bretti. This is crazy,
Speaker 1: but I guess that notion of fractionalizing it and breaking
Speaker 1: it up, you know, I don't know. I don't know.
Speaker 1: I can't wrap my head around this. As Levine said,
Speaker 1: it's all a big joke. And uh, you know, the
Speaker 1: original joke was at selling for four million, and then
Speaker 1: it's an even better joke that it sells for million.
Speaker 1: But well, you know, the topic that we didn't talk about.
Speaker 1: It you wanted to talk about was by Bill Gross.
Speaker 1: It's only an interest in these n f T st
Speaker 1: about that now, now listeners don't know Ben used to
Speaker 1: work at PIMCO back in the Bill Gross era. He
Speaker 1: was it was a credit fund you you uh manage right?
Speaker 1: Global funds have also as also involved in his total
Speaker 1: Yeah yeah, so you know. But you know Bill's history
Speaker 1: is also artifacts. Is this postamp collection, right, a huge collection,
Speaker 1: a very unique posted so again, same idea. He was
Speaker 1: the only one owning that and unless he sold them,
Speaker 1: which he did, but he has sold a part of
Speaker 1: it for for charity. I think that's why he was
Speaker 1: interested in the n f T concept. But the interesting
Speaker 1: thing I found from his opted was that he you know,
Speaker 1: he was complaining a lot about Okay, we're not really
Speaker 1: too lower interest rates already told you ten years ago
Speaker 1: that rates were too low, even lower, and gosh, we're
Speaker 1: going to do here. Those are the bomb funds, you know,
Speaker 1: think about the n f T s. And I always
Speaker 1: wanted to say, like, well, that's your diversification, right If
Speaker 1: if you think about if you're worried about inflation, if
Speaker 1: you worry about lower interest is a real interest rates
Speaker 1: being so negative, then an n f T probably is
Speaker 1: is another sort of form of a hedge against you're
Speaker 1: dissiccated bond market, so to speak. Because it bonds have
Speaker 1: a risk reward that's so asymmetric. You have more downside
Speaker 1: and upside in the current situation, even much worse than
Speaker 1: when he rented about it ten years ago, when he
Speaker 1: also said that it was a really poor time for treasuries.
Speaker 1: Then an nf he could make a difference, and the
Speaker 1: returns and NFTs are so gigantic that that would compensate
Speaker 1: you so much for any kind of inflation shark. That
Speaker 1: was sort of I think where he was coming from.
Speaker 1: But you know, at the end of the day, a
Speaker 1: mutual funds and you know, for the act mutual funds
Speaker 1: so to speak, you know, it's unlikely to purchase n
Speaker 1: f T s and they're not going to be calling
Speaker 1: on the n f T king anytime soon, as I suppose,
Speaker 1: not like you know, but but but both even though
Speaker 1: he you know, during the time that he managed his funds, yeah,
Speaker 1: he was an advent post stamp collector, right, and and
Speaker 1: he was very known in that world, which is, you know,
Speaker 1: completely outside of the defencial markets world. So like like
Speaker 1: n f T, that's a good comparison because you know,
Speaker 1: what is the intrinsic value of that little piece of
Speaker 1: paper that stamps purnt it on you know nothing, No,
Speaker 1: but it's the value is what someone's willing to pay
Speaker 1: for it, So I it kind of makes sense to
Speaker 1: think of n f T s in that perspective. I guess. Yeah,
Speaker 1: collectors item, you know, and people want to hold it
Speaker 1: and it's there for an emotional value. I guess, but
Speaker 1: collectors item, so no one else has it but you.
Speaker 1: You just really have this really unique artifact and therefore
Speaker 1: it's worth a lot more intrinsically than than than with
Speaker 1: the physical value for this. Yeah, vildonna, should I make
Speaker 1: an n f T and my dog? Do you think
Speaker 1: anyone would should try it? Definitely? Well why not? This
Speaker 1: is the time? Yeah, And speaking of the time, I
Speaker 1: think that is all the time we have for today.
Speaker 1: Bett Emon is always a pleasure to catch up with
Speaker 1: you Bet on the podcast many times. Listeners. If you
Speaker 1: want to hear Ben's takes on other things, you gotta
Speaker 1: scroll through a few months worth episodes. But he's been
Speaker 1: on a few times and we are he's appreciate his time.
Speaker 1: Thank you, Ben, Thank you make thank you for that.
Speaker 1: It's great to be a good discussion. Thanks Ben. What
Speaker 1: goes up will be next week. Until then, you can
Speaker 1: find us on the Bloomberg Terminal, website and app, or
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Speaker 1: Apple Podcasts so more listeners can find us. And you
Speaker 1: can find us on Twitter follow me at Reaganonymous. Bildonna
Speaker 1: high Rich is at Bildonna hi Rich. You can also
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Speaker 1: See you next time.