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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside

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Speaker 1: my co host Matt Miller. Every business day we bring

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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along

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Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast

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Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and

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Speaker 1: at Bloomberg dot com slash podcast. All right, Danielle di

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Speaker 1: Martino Booth, one of our absolute faves here on Bloomberg Markets,

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Speaker 1: joins us. She's the CEO and Chief Strategies at Quill Intelligence.

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Speaker 1: She drives on social gotta follow on, Danielle, you drive it.

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Speaker 1: You have a giant pickup, don't you. UM. I have

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Speaker 1: a large SUV, but I also have four large children.

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Speaker 1: There you go. You need that space, Danielle. She's a

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Speaker 1: chief strategis Quill Intelligence and former advisor at the Federal

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Speaker 1: Reserve Bank at Dallas. UM. Danielle, A lot of our

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Speaker 1: listeners probably haven't put money to work, invested in, been

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Speaker 1: in the market, taken market risk in a rising interest

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Speaker 1: rate environment. How are you thinking about this environment? Right here?

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Speaker 1: We're talking about the Fed raising rates, and I keep

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Speaker 1: hearing people raise their expectations for the number of rate

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Speaker 1: hikes we're going to see this year. How do you

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Speaker 1: kind of frame out two and twenty three. Well, I mean,

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Speaker 1: you know, look, I applaud the idea that that the

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Speaker 1: FED is going to have that kind of flexibility because

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Speaker 1: it implies that there's there's significant runways for this economic

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Speaker 1: recovery to continue. And I just you know, I'm seeing

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Speaker 1: so many red flags raised, whether it was retail control,

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Speaker 1: whether it was Empire literally collapsing yesterday, and Empire headline

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Speaker 1: tends to follow what follows, which is the Business Leader survey.

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Speaker 1: In New York is a very service intensive state. Um,

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Speaker 1: so we're seeing some some markers out there. Uh in Michigan,

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Speaker 1: for example, I'm gonna throw a one quick example out

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Speaker 1: in Michigan, you've seen General Motors and Ford fire back

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Speaker 1: up their production line so they're they're unemploy Claims are

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Speaker 1: the healthiest in the nation if you take Michigan out

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Speaker 1: of the top ten most manufacturing intensive state. We've seen

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Speaker 1: initial jobless claims weekend for five weeks running now, and

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Speaker 1: that flashed me, you know, as along with the Empire,

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Speaker 1: that we're heading into an industrial recession and pretty quickly.

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Speaker 1: So my concern is that the global economy and the

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Speaker 1: US economy are slowing fairly quickly because we've been in

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Speaker 1: this compressed economic cycle. That's interesting. We don't see it

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Speaker 1: coming through in financial conditions yet, at least as measured

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Speaker 1: by a con On the Bloomberg Termer you can type

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Speaker 1: f c O and go for the financial conditions, but

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Speaker 1: gold other function of the day. I mean, all the

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Speaker 1: big banks also have their own con um UH indexes. Danielle,

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Speaker 1: why do you think that is? Why do you think

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Speaker 1: this UH hawkish pivot, the tightening that we're seeing not

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Speaker 1: just from the Fed but globally from central banks hasn't

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Speaker 1: um fed through into financial conditions. Well, I mean, look,

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Speaker 1: we didn't increase the paper and my good friend Dr

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Speaker 1: Lacy Hunt says that there is a three times multiplier

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Speaker 1: that you can apply to liquidity being reduced the same

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Speaker 1: way you would apply to liquidity being increased. But we

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Speaker 1: haven't seen this. But for two weeks into January with

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Speaker 1: the with the taper increased to billion from the prior

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Speaker 1: fifteen billions. We've got another thirty billion coming on February

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Speaker 1: of the first, so you know they're the liquidity is

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Speaker 1: being pulled from the system. But we're not seeing the

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Speaker 1: effects of this except for in a very lagged fashion.

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Speaker 1: Well I say very like very lagged in central banker

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Speaker 1: speak as a former central banker, means like eighteen to

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Speaker 1: twenty four months. But again we're seeing a very compressed cycle.

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Speaker 1: I'll be paying attention to the Philadelphia FIT and the

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Speaker 1: other surveys that come out in the days to come,

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Speaker 1: because everything that we that we're seeing right now suggests

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Speaker 1: that we're going to get in a disappointment when we

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Speaker 1: see the I s M. That's when I think you'll

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Speaker 1: see Wall Street pay pay better attention. Well, when you

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Speaker 1: say that we're headed for an industrial recession, when are

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Speaker 1: we gonna see? Is that what we see coming through

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Speaker 1: in the I s M. Where are you going to

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Speaker 1: see that? For? First, I think you will see it

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Speaker 1: in the I M first, and again I think that

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Speaker 1: if you're if you're talking about the nine most manufacturing

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Speaker 1: intensive states in the nation, with Indiana being the most

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Speaker 1: intensive of them all as as a as a percentage

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Speaker 1: of their growth state products, that five at the last,

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Speaker 1: that that five straight weeks of weakening initial jobless claims

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Speaker 1: is saying something to you. They're up in that short

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Speaker 1: time frame, Danielle. I often I just can't understand that.

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Speaker 1: Why you know Indiana when you say Indiana, I think

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Speaker 1: of um electric cars because Rivian produces there. I think

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Speaker 1: the town is called normal Indiana, Normal Indiana, and they

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Speaker 1: must be working triple shifts. I mean, isn't everyone buying

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Speaker 1: as much stuff as they can get? Aren't you ordering

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Speaker 1: all of it? I don't think we're ordering as much

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Speaker 1: as we think we're ordering. If you if you think

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Speaker 1: about car sales in America in the aggregate, again, electric

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Speaker 1: vehicles are a really hot spot right now, and there's

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Speaker 1: absolutely no denying that. But but when you think that

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Speaker 1: car sales holistically peaked in April, that's not like the

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Speaker 1: beginning of a small trend, you And there's more of

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Speaker 1: a supply chain disruption in that length of a narrative.

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Speaker 1: And we know that many companies have gone from just

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Speaker 1: in time inventory replenishment to just in case so and

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Speaker 1: we're starting to see evidence in the inventory data as

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Speaker 1: well that firms inventories they need for them to be

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Speaker 1: so in some cases you might be talking about opponent,

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Speaker 1: that being the semiconductor All right, Danielle, I love having

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Speaker 1: you on our show because oftentimes I hear from you

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Speaker 1: first on new topics like an industrial recession. Had not

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Speaker 1: heard that at all. We need to do a whole

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Speaker 1: whole show with her. Daniel, next time you're in New York,

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Speaker 1: please come in the studio. Yeah, let's do that absolutely.

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Speaker 1: Daniel de Martino, Booth CEO and Chief strategistic Quill Intelligence.

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Speaker 1: I'm telling you, folks, it's some of the smartest economic

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Speaker 1: uh and now's is out there. From my perspective, she

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Speaker 1: is so data intensive. Uh. Great follow on social media

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Speaker 1: as well because she shares her thoughts on social as well.

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Speaker 1: All right, let's bring in David Deats. Let's get h

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Speaker 1: professional again. David Deet's managing Principal Senior portfolio strategists at

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Speaker 1: Gladstone Bank. David, what do we do here? I mean,

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Speaker 1: I've got a rising interest rate environment for the remainder

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Speaker 1: of the year going into next year. It's been a

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Speaker 1: while since I've had to deal with that. What are

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Speaker 1: you telling your clients in terms of asset allocation for

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Speaker 1: the next year or two? Well, certainly you you want

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Speaker 1: to make sure that your long term asset allocations it

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Speaker 1: is here too, because the problem here, Matt is that. Um.

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Speaker 1: You know, stocks uh do not necessarily benet from rising

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Speaker 1: interest rates. Obviously it reduces the present value of all

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Speaker 1: those future earnings, but don't look so good either, um Uh.

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Speaker 1: You know, as yields go up than bond prices go down.

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Speaker 1: We saw a negative return on the major bonding necks

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Speaker 1: last year, and it started out that way this year.

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Speaker 1: So I think this year you continue to be fully

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Speaker 1: committed to stocks um, but you do want to pick

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Speaker 1: your spots because I think you're gonna see different winners

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Speaker 1: uh this year than perhaps you've seen during the pandemic.

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Speaker 1: What about the you know, we're talking with cretty good

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Speaker 1: earlier across assets reporter, and she said, one way a

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Speaker 1: lot of people are hedging inflation is just by buying

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Speaker 1: the things that inflate, i e. The commodities themselves. Well,

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Speaker 1: certainly stay diversified, but but we have seen, of course

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Speaker 1: commodities and energy prices, particularly UH skyrocket since the depths

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Speaker 1: of the pandemic. UM. Energy prices have gone up every

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Speaker 1: day this year. Certainly, there's geopolitical developments on the horizon.

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Speaker 1: You've got a pipeline explosion between Turkey and Iraq. They've

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Speaker 1: got United State says that Russia may immediently invade Ukraine.

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Speaker 1: All those things could drive energy prices higher. Posts of course,

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Speaker 1: the more overriding factor is we are ultimately think going

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Speaker 1: to get out of this pandemic and that's going to

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Speaker 1: drive demand for energy. So that's interesting, gave. You know,

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Speaker 1: on the energy front, I'm looking at w T I

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Speaker 1: crewed here up another one point four percent, just under

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Speaker 1: eight seven dollars per barrel. You know, the energy stocks,

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Speaker 1: you know they've been they were so out of favor

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Speaker 1: for both cyclical and secular reasons, but they've had a

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Speaker 1: nice run. And do I take my profits here? Do

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Speaker 1: I have more room to go? So I definitely agree

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Speaker 1: with you that they seem over bought here. Um And

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Speaker 1: and certainly, you know, some analysts are coming out now

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Speaker 1: and saying, hey, you know, um, this business that they're

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Speaker 1: gonna hold back on further development because of pressure from

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Speaker 1: green forces and because they just want to return capital shareholders.

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Speaker 1: Not necessarily we're not. We're seeing you know, junk graded

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Speaker 1: energy companies being able to uh tap the borrowing windows

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Speaker 1: very easily. We're seeing rick count surge at the same

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Speaker 1: pace that it did back in the last time that's

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Speaker 1: happened two thousand sixteen, two thousand seventeen. Nevertheless, I do

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Speaker 1: think that um uh, that there is more discipline on

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Speaker 1: the part of these energy companies. They want to return

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Speaker 1: money to shareholders. Basically shareholders need to return. Has been

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Speaker 1: so long that they've been down in the cellar that

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Speaker 1: they think we've got more room to go. And I

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Speaker 1: think that should be part of a world there's reverse

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Speaker 1: surviveed portfolio. When do you think the tightening environment? And

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Speaker 1: to be fair, we've had basically job owning us far right.

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Speaker 1: But um if the FED is going to tighten uh

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Speaker 1: and by raising raids four something some people are saying

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Speaker 1: and and Wong from Bloomberg in tellis now five times

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Speaker 1: this year. As as they run off the balance sheet,

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Speaker 1: when does that hit the real economy? David Well, Historically

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Speaker 1: it takes twelve to twenty four months, and historically stocks

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Speaker 1: have continued to do well until about the third rate hike.

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Speaker 1: If in fact we get there, you know there's three

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Speaker 1: steps and the stumbles of famous Well Streets solved from

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Speaker 1: back in the seventies and eighties. Um So, I think

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Speaker 1: it's going to take a while. One reason we are

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Speaker 1: optimistic here, of course is there's tremendous political pressure to

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Speaker 1: keep this economy going for those in power to stay

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Speaker 1: in power. Um. And of course there's there's tremendous political

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Speaker 1: pressure to make sure that everyone states fully employed here.

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Speaker 1: So I think that although there's a lot of jaw

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Speaker 1: boning bowing, as you pointed out, UM, if they see

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Speaker 1: any real effect on the economy. And it's difficult because

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Speaker 1: all this stuff works with the lag, it takes a while.

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Speaker 1: I think you're gonna be quick to recalibrate exactly what

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Speaker 1: they need to do. That's interesting. That's in Muhammad arians

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Speaker 1: op ed that came out overnight. He essentially said that's

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Speaker 1: one of the main reasons that the market and financial

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Speaker 1: conditions haven't tightened along with the Fed tawk Is pivot,

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Speaker 1: is that a lot of people don't believe the central

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Speaker 1: banks will even do it, or that if they do that,

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Speaker 1: they'll fall allow through and go the whole way. Really,

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Speaker 1: I mean, I mean, the communication has been so clear.

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Speaker 1: It seems like the messaging has been so clear. The

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Speaker 1: transitory messaging was super clear last year. Good point, good point,

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Speaker 1: all right. David Date's managing principal and senior portfolio strategists

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Speaker 1: for Gladstone Bank joining us there giving us his thoughts

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Speaker 1: on these markets and inflation outlook and risk assets. Let's

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Speaker 1: get right to R. J. Gallo, senior portfolio manager at

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Speaker 1: Federator Hermes. He's a former financial alice with the Federal

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Speaker 1: Reserve Bank of New York and ARCH. I guess I

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Speaker 1: want to start with the Federal Reserve. Is my Federal

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Speaker 1: Reserve behind the curve here? Um? Yes? I think the

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Speaker 1: tone of the FOMC speakers recently clearly portrays that the

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Speaker 1: policy making officials, the FOC members voting or not, all

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Speaker 1: have woken up to the idea that inflation is just

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Speaker 1: too high and they need to act boldly to address it.

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Speaker 1: So how boldly will they act? We're starting to hear

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Speaker 1: and see the my market basically price in if you

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Speaker 1: look at Euro dollar futures um a fifty point at

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Speaker 1: the possibility of a fifty basis point hike in March, Yeah,

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Speaker 1: it's striking. I mean, it's been a long time since

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Speaker 1: we've seen that type of incremental tightening that scale, usually

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Speaker 1: twenty five basis points is dogma these days. But obviously

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Speaker 1: we're in challenging times. The FED throughout the playbook to

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Speaker 1: ease in the face of the pandemic crisis. I wouldn't

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Speaker 1: be surprised if they have to rewrite some things or

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Speaker 1: revisit the past and being more bold on the way

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Speaker 1: back up In terms of tightening. That's said, I don't

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Speaker 1: anticipate in the fifty basis point move um. I think

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Speaker 1: one of the key challenges to the FED right now

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Speaker 1: is can they address the inflation problem without causing financial

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Speaker 1: conditions to tighten accessively. It's sort of like walking a

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Speaker 1: tight rope. I think part of the language we're getting

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Speaker 1: from them it sounds very bold by design now that

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Speaker 1: I don't think you're trying to deceive us. But they

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Speaker 1: have to talk tough. One of the key facets of

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Speaker 1: the market's interpretation of inflation lately has been it's really

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Speaker 1: high now, but it won't stay there. How do you

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Speaker 1: keep that market in that mindset? You talk tough as

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Speaker 1: a FEDE official, and you're gonna have to deliver, You're

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Speaker 1: gonna have to tighten, you're gonna have to taper. All

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Speaker 1: the things they're talking about. I don't think it serves

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Speaker 1: their purpose to do so in a way that causes

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Speaker 1: financial conditions to crumble. Well, we still see financial conditions,

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Speaker 1: We still see them quite loose. And this is a

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Speaker 1: question that John Faroh has been asking a lot over

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Speaker 1: the past couple of weeks. When our financial condition is

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Speaker 1: going to be affected by UM, you know, rate increases

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Speaker 1: Muhammad Area and posing the same question and an op

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Speaker 1: ed overnight. But I guess what you're saying is the

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Speaker 1: question should be if it's possible for the FED to

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Speaker 1: tighten without financial conditionings, financial conditions UM getting uh too problematic,

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Speaker 1: too difficult. I think they need financial conditions to tighten.

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Speaker 1: You know, obviously the stock markets had an incredible run.

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Speaker 1: Credit spreads are tight, cost the capital is low, capital provision.

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Speaker 1: You can get capital in most places of reasonable prices

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Speaker 1: these days, and I think the FED wants that to

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Speaker 1: reverse somewhat, But they don't want to cause a disorderly

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Speaker 1: crash of some sort. They don't want the stock market

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Speaker 1: to go down. We know how the FED responds when

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Speaker 1: that happens. How many people have been talking about the

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Speaker 1: FED put probably is UH further out of the money

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Speaker 1: these days, and that might be true, but the FED

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Speaker 1: isn't going to try to engineer a situation where we

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Speaker 1: see a bear market in stocks just to tighten financial conditions.

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Speaker 1: I think they would instead talk tough, deliver in a

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Speaker 1: methodical and still somewhat gradual way. Don't go fifty five,

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Speaker 1: but stop adding to the balance sheet. He talked about

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Speaker 1: reducing the balance sheet and do it in ways that

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Speaker 1: the markets are not surprised at the fact that the Fed,

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Speaker 1: facing nearly seven percent inflation, is acting aggressively. People rationally

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Speaker 1: expect they should be acting aggressively. If they weren't, I

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Speaker 1: think the markets would be worse off. We'd be very

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Speaker 1: concerned that our central bankers have just lost all religion

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Speaker 1: with respect to inflation. That would be a worse outcome

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Speaker 1: than actually trying to tighten those conditions without causing a crash.

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Speaker 1: All right, r J, thank you so much for joining us.

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Speaker 1: Always appreciate getting your perspective here. R J. Gallo, Senior

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Speaker 1: portfolio manager for Federated Herme's talking about these fixed income markets.

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Speaker 1: What is being discounted in the credit markets today. Let's

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Speaker 1: talk a little crypto here. You know are when we

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Speaker 1: talk crypto a lot of times we'll go to Mike McGlone.

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Speaker 1: He's there, kind of our crypto guy at Bloomberg Intelligence

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Speaker 1: to get the investment research angling, he moved to Miami, Florida,

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Speaker 1: And I thought it was just a scam, everybody else

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Speaker 1: moving to Miami, getting out of New York, selling their

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Speaker 1: New York property and going down there. But he tells

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Speaker 1: me Miami is becoming a crypto hub. And I'm like,

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Speaker 1: wait a minute, New York is the financial hub, but

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Speaker 1: what's going on here? So let's bring in somebody who

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Speaker 1: kind of as the stuff for living Alex Lamberg, CEO

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Speaker 1: of Nimbus. Alex doesn't matter. Does crypto have a hub

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Speaker 1: like Wall Street for the financial services industry, like the

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Speaker 1: City of London for financial services in Europe? Does crypto

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Speaker 1: have a kind of a hub? Uh? Good, good afternoon,

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Speaker 1: A good morning still, and thank you for having me this.

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Speaker 1: This crypto have a hub? Well, it should, but it

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Speaker 1: certainly shouldn't be one city. And I'll give you my

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Speaker 1: my my logic here. Right. Um, So you started off

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Speaker 1: by saying, you know, New York as a hub for

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Speaker 1: financial products and and it should retain that. It should

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Speaker 1: retain that, Monica, right, you know, no matter what we

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Speaker 1: do as far as witch industries, we're going to we

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Speaker 1: always want to find a standard, right, and a gold

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Speaker 1: standard or some form of guidance or some form of

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Speaker 1: some kind of a standard. And and you you you

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Speaker 1: have to understand that blockchain will cater to a whole

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Speaker 1: school of products, a whole smooth innovation from from finance

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Speaker 1: to social, to medical, to you know, to everything else. Right.

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Speaker 1: So so when we do speak about you know, when

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Speaker 1: we do speak about New York, you know, it's important

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Speaker 1: that New York screams from the top of the from

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Speaker 1: the mountains that they want to retain that financial you know,

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Speaker 1: to become to retain that financial hub as a as

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Speaker 1: a gold standard. Not not only that that they should

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Speaker 1: also retain that gold standard from a regulatory perspective, right,

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Speaker 1: And and that's what they are to the world. And

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Speaker 1: I know, I know, regulatory is the most horrific word

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Speaker 1: when it comes to blockchain and define everything else. But

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Speaker 1: it really isn't right, Uh, you know, regulation, regulation is

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Speaker 1: going to be tried for you know, when you know

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Speaker 1: investors or that participants, let's in this particular space, UH

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Speaker 1: need someone that that policing and that guidance. Right. Everyone

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Speaker 1: hates the police until your house gets robbed, right, and

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Speaker 1: then they started screaming and even even CEOs like myself, right,

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Speaker 1: you know, you know we we we cry against regulation

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Speaker 1: because we want to get into this space. What happens

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Speaker 1: when we actually create a company and we have a

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Speaker 1: product in service and other participants in the view want it,

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Speaker 1: you know, are not doing it the right way, right,

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Speaker 1: and then we want regulation as well. Right, So New

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Speaker 1: York women should be that stand up or wherever c

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Speaker 1: Z is at the time. I guess Alex, let me

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Speaker 1: ask you about Nimbus because, um, you know, Bitcoin was

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Speaker 1: the white paper came out what two thousand nine by

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Speaker 1: Satoshi and Nimbus is, as far as I understood it,

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Speaker 1: a cipher that was from ten years before that. So

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Speaker 1: what do you do? So so Nimbus Nimbus is a

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Speaker 1: traditional defying company. Well, we'll defined the way defines being

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Speaker 1: used today. Right, it's you know, we have a school

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Speaker 1: of products, of school of apps, but primarily we're focused

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Speaker 1: on lending, uh, you know, peer to liquidity, providing peer

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Speaker 1: to peer uh and and lending. Where I'm taking nimbusis

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Speaker 1: taking Nimblais to start leveraging all of the alternative assets

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Speaker 1: that we've wanted to run in efficient markets and have

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Speaker 1: price discovery. Uh. And pure liquidity and all that other

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Speaker 1: good stuff. So we're taking what is a four hundred

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Speaker 1: billion dollar alternative asset space that exists purely on the

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Speaker 1: auction model and actually starting to bring it in uh

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Speaker 1: to a more liquid market and more efficient marketplace. That's

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Speaker 1: what embasis, you know, for the most part. I mean,

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Speaker 1: we're a hundred men organization, hundred person organization, I should say, uh,

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Speaker 1: in seven different countries, and we're starting to get a

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Speaker 1: decent foothold in the US. Alex yeh. I'm looking at,

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Speaker 1: you know, the volatility that we've I guess become accustomed

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Speaker 1: to in the crypto space. And again Bitcoin just for example,

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Speaker 1: down one point three today, just unders per token. What's

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Speaker 1: your outlook for crypto this year and beyond, because you know,

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Speaker 1: we're going to be in an inflation we are an

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Speaker 1: inflationary period. We're in a period were interest rates or

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Speaker 1: will be right using. How do you think the crypto

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Speaker 1: asset class performs in that environment? I think, uh, I

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Speaker 1: think that I fullheartedly believe that the crypto ax the

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Speaker 1: class is going to do extraordinarily well for for for

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Speaker 1: basically what you just said, right, you know, you know,

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Speaker 1: inflationary periods. What's going to happen with the interest rates

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Speaker 1: uh uh and the whole slow of other factors that

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Speaker 1: crypto really should live outside of now right now, because

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Speaker 1: so much of that is either pegged or or or

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Speaker 1: have a tie into the traditional markets. I believe that

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Speaker 1: those things are going to start, you know, instead of

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Speaker 1: converging there, they're gonna start to try to dislocate from

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Speaker 1: each other. When that happens, uh, they'll start trading on

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Speaker 1: their own basis what is the utility of that coin um, etcetera, etcetera.

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Speaker 1: And and and the fact that you can't just keep printing

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Speaker 1: those things and like you can with the US dollar

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Speaker 1: or other fiat currencies, the world will start getting down understanding.

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Speaker 1: The other thing is going to start driving the volatility

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Speaker 1: down is keep in mind that the crypto space is

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Speaker 1: into a test similarly tiny I mean, uh, you know,

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Speaker 1: Amazon has a bigger market value market cap, and then

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Speaker 1: then the whole crypto space combined, and as as regulators

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Speaker 1: start to you know, get on the ball and start

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Speaker 1: working with companies like you know, like Nimbus and others,

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Speaker 1: uh and and you know, and and actually start to

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Speaker 1: tease and and help this space more than um, you

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Speaker 1: know more than heard it. For now you're gonna you're

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Speaker 1: gonna see that value and the volatilities start to drive

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Speaker 1: itself down. Alex, thanks so much for joining us. Alex Lamberg,

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Speaker 1: there is the CEO of Nimbus talking to us about crypto.

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Speaker 1: Thanks for listening to the Bloomberg Markets podcast. You can

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Speaker 1: subscribe and listen to interviews with Apple Podcasts or whatever

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Speaker 1: podcast platform you prefer. I'm Matt Miller. I'm on Twitter

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Speaker 1: at Matt Miller three and on ball Sweeney I'm on

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Speaker 1: Twitter at pt Sweeney. Before the podcast, you can always

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Speaker 1: catch us worldwide at Bloomberg Radio