WEBVTT - Credit Blowup in London Has Wall Street Chasing Billions 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business app. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.040 us live on YouTube. 0:00:27.320 --> 0:00:30.720 Christopher Verona is with us, working with Jason Trenet at strtigas. 0:00:30.760 --> 0:00:34.680 He is definitive on trend based technical analysis. As many 0:00:34.720 --> 0:00:37.520 of you know. I'm comfortable with that versus the catching 0:00:37.520 --> 0:00:40.680 a knife in the dark approach. Chris, I got eight 0:00:40.680 --> 0:00:42.280 ways to go here, but I got a first go 0:00:42.440 --> 0:00:46.280 to price up, yield down. Is it a critical pro 0:00:46.479 --> 0:00:49.280 level that the tenure yield is through four percent? 0:00:49.520 --> 0:00:50.279 I don't think it is. 0:00:50.320 --> 0:00:52.040 I mean, let's just look back at the last three years. 0:00:52.080 --> 0:00:55.040 We've effectively been between three seventy five and four fifty 0:00:55.200 --> 0:00:58.400 tenure yields for three years. We've had this very unsatisfying 0:00:58.400 --> 0:01:00.560 call on yields. At the only correct call it's no call. 0:01:00.720 --> 0:01:02.720 And I'm kind of still in that camp here. You know, 0:01:02.840 --> 0:01:05.039 under three seventy five my antenna would start to go 0:01:05.120 --> 0:01:07.520 up more than you know, maybe something's really starting to change. 0:01:07.520 --> 0:01:09.640 But you know, Frankly, Tom, it's more curve shape right 0:01:09.680 --> 0:01:11.360 now than it is anything. And you have this little 0:01:11.360 --> 0:01:12.120 subtle flattener. 0:01:12.480 --> 0:01:13.200 It's Friday. 0:01:13.400 --> 0:01:14.440 Yeah, okay, we're. 0:01:14.280 --> 0:01:18.080 Going into the weekend sweets finding California. You're supposed to say. 0:01:18.000 --> 0:01:20.040 OMG, it's like a huge deal. 0:01:21.360 --> 0:01:24.000 So we've seen Chris, you know, boy of rotation in 0:01:24.040 --> 0:01:27.479 the equity markets here. You know, the growth has definitely 0:01:27.480 --> 0:01:28.960 taken it on the chin a little bit here at 0:01:29.000 --> 0:01:31.720 some of the software socks and things like that. Some 0:01:31.800 --> 0:01:35.000 of the industrials and small midcaps have been working here. 0:01:35.360 --> 0:01:37.600 Is that a short term trade or is that something bigger? 0:01:37.640 --> 0:01:38.000 Do you think? 0:01:38.080 --> 0:01:39.880 I think this is a big right, of course, we 0:01:39.959 --> 0:01:42.320 know that we don't know right, but our hunch is 0:01:42.440 --> 0:01:44.319 that this is a big deal. And it didn't begin 0:01:44.600 --> 0:01:46.360 four weeks ago or eight weeks ago. I mean this 0:01:46.440 --> 0:01:48.840 began back in September October when you look at when 0:01:49.480 --> 0:01:52.480 like equal weights started to really outperform the cues. I 0:01:52.480 --> 0:01:56.240 think this is early early days in what is a 0:01:56.320 --> 0:01:58.800 trend that will define not just the remainder of the year, 0:01:58.880 --> 0:02:01.560 but kind of the years to come. Here, I think 0:02:01.600 --> 0:02:03.520 this is the transition in our call has been the 0:02:03.560 --> 0:02:06.120 transition from kind of the speculative corners of the market 0:02:06.160 --> 0:02:08.400 to the real economy or the old economy. I think 0:02:08.440 --> 0:02:11.280 that's well underway. It's ongoing, and I would expect it 0:02:11.320 --> 0:02:12.400 to continue moving forward. 0:02:13.040 --> 0:02:14.600 You were pretty much thlu to the earnings. Most of 0:02:14.600 --> 0:02:17.040 the SEPO five hundred companies have reported earning. Show what 0:02:17.080 --> 0:02:20.440 have you seen? Is it enough to support this market? 0:02:20.440 --> 0:02:21.200 Here? Do you think? Well? 0:02:21.200 --> 0:02:23.360 I think earnings are grown in something like twelve thirteen 0:02:23.400 --> 0:02:26.919 percent year over year. Here when you look at yesterday's 0:02:26.960 --> 0:02:30.480 response to Nvidia, I think even more evidence in this regard. 0:02:30.560 --> 0:02:33.000 I mean stock clothes on the lows right down five 0:02:33.080 --> 0:02:37.640 or six percent, advantures overwhelmed decliners. Yesterday, more stocks up 0:02:37.639 --> 0:02:41.200 than down despite NASDAK down nearly two percent. Fourth day 0:02:41.240 --> 0:02:43.359 this year, where you've had the nasdck down at least 0:02:43.440 --> 0:02:46.760 one percent, yet more stocks up than down. That only 0:02:46.800 --> 0:02:50.399 happened three times all of last year. So you kind 0:02:50.400 --> 0:02:54.200 of see this average stock over the index continuing to proliferate. 0:02:54.520 --> 0:02:57.640 Chris's people, folks sent me the strtiguous deck on all this, 0:02:57.760 --> 0:02:59.760 and like we could literally talk to him for three 0:03:00.720 --> 0:03:03.520 ending the jump movie see in Chinese. You want now, 0:03:03.840 --> 0:03:06.800 let's stay on software stacks, because that's what everybody's focused on. 0:03:07.200 --> 0:03:12.560 You talk about a high volume reversal, is it catharsis. 0:03:11.919 --> 0:03:14.600 Where you load the boat. I don't think you load 0:03:14.600 --> 0:03:14.880 the boat. 0:03:14.919 --> 0:03:16.800 I think you cover your shorts if you're on the 0:03:16.840 --> 0:03:19.000 short side of the story here. And you know when 0:03:19.040 --> 0:03:21.240 you look at what tends to show up in the 0:03:21.240 --> 0:03:23.680 ballpark of a bottom, one of the features is this 0:03:23.840 --> 0:03:26.560 indiscriminate selling and the acceptance of narrative. 0:03:26.680 --> 0:03:28.480 Right, So you have the indiscriminate selling. 0:03:28.560 --> 0:03:30.520 The last couple of weeks in software, I think eighty 0:03:30.520 --> 0:03:33.080 percent of them made a new low, only five percent 0:03:33.080 --> 0:03:35.000 above the two or day moving average. And then suddenly 0:03:35.040 --> 0:03:37.960 there's agreed upon narrative of why they're all down that 0:03:38.120 --> 0:03:39.400 generally is found. 0:03:39.160 --> 0:03:41.240 Late in the decline, not early in the decline. 0:03:41.280 --> 0:03:44.720 So I would be covering shorts if on the short 0:03:44.760 --> 0:03:47.400 side of the boat here, I might position tactically for 0:03:47.440 --> 0:03:48.400 some type of amounts. 0:03:48.760 --> 0:03:49.960 But has the trend changed? 0:03:51.080 --> 0:03:53.720 No, Good morning across the nation, Chris Verono. This we're 0:03:53.720 --> 0:03:56.120 going to continue with a good conversation. I got to 0:03:56.200 --> 0:03:59.040 drop in some of the data points. Paul Brench Crude 0:03:59.120 --> 0:04:02.680 seventy two, twenty five up Way over a stick seventy 0:04:02.720 --> 0:04:04.840 two point twenty five on global oil. 0:04:05.440 --> 0:04:07.440 Torchton SLocker a good friend over to pollow out with 0:04:07.440 --> 0:04:07.920 a note. 0:04:07.760 --> 0:04:11.280 This morning, the average daily US equity market turnover now 0:04:11.320 --> 0:04:16.320 exceeds one trillion dollars, driven by higher retail participation, more 0:04:16.360 --> 0:04:19.600 high frequency trading, and recent tech market volatility. What does 0:04:19.640 --> 0:04:22.560 that tell you when you're seeing, you know, just trading 0:04:22.640 --> 0:04:25.480 volumes pick up. I mean, people are in this market 0:04:25.640 --> 0:04:26.839 on both sides of the trade. 0:04:26.920 --> 0:04:28.520 Well Torson does great work, He's a close friend. 0:04:29.400 --> 0:04:32.560 I think the point is well took here that there 0:04:32.680 --> 0:04:36.160 is a lot going on under the surface for an 0:04:36.240 --> 0:04:38.880 index that really has gone nowhere for six months. I 0:04:38.880 --> 0:04:40.920 mean SMP is in one of the narrowest six months 0:04:40.960 --> 0:04:43.200 rains that we've seen in a long time, call up 0:04:43.200 --> 0:04:46.039 between sixty seven hundred and seven thousand. It doesn't tell 0:04:46.080 --> 0:04:48.599 half the story of what's played out under the surface here. 0:04:48.920 --> 0:04:51.480 I think the question here, as we move forward with 0:04:51.560 --> 0:04:53.920 ten yure yields back to the lower end of the range, 0:04:54.000 --> 0:04:57.960 can lower bond yields recatalyze the more cyclical corners of 0:04:57.960 --> 0:05:00.720 the market, and if they can't, and what is the 0:05:00.839 --> 0:05:03.200 message to the markets attempting to send us. Right, you 0:05:03.279 --> 0:05:06.080 started the year with all these anticipations and all this 0:05:06.240 --> 0:05:10.560 hope of some big cyclical recovery. If the cyclicals can't go, 0:05:10.600 --> 0:05:12.360 and when do we start to get more worried about that? 0:05:12.440 --> 0:05:15.040 What does Dan Clifton say about that? It's fatigus. You've 0:05:15.040 --> 0:05:18.640 got public policy down cold. Is this a nervous market 0:05:18.680 --> 0:05:21.640 looking forward to a nervous public policy? 0:05:21.960 --> 0:05:22.159 Yeah? 0:05:22.200 --> 0:05:24.240 I think if Dan was sitting here and we were 0:05:24.240 --> 0:05:27.039 with each other yesterday, we were talking about this idea 0:05:27.800 --> 0:05:31.680 we are every day hard to believe, you know, we 0:05:31.720 --> 0:05:36.000 were talking about this idea of that public policy. Fiscal 0:05:36.040 --> 0:05:39.160 policy is really in the gunnet mode here over the 0:05:39.200 --> 0:05:41.680 next number of months. So if the market's going to 0:05:41.760 --> 0:05:44.400 respect that, I think it's time we start seeing the 0:05:44.440 --> 0:05:46.840 discretionary names turn back up. I think it's time that 0:05:46.880 --> 0:05:50.120 we see, you know, a lot of those pro cyclical 0:05:50.160 --> 0:05:53.000 stocks really reclaim the baton of leadership. 0:05:53.040 --> 0:05:54.919 Moving forward, Right, We're going to go to London the 0:05:55.120 --> 0:05:57.680 end of this hour for Global Wall Street a brief 0:05:57.960 --> 0:06:00.680 on this MFS uproar London. 0:06:00.520 --> 0:06:03.000 Paul Us versus rest of the world. 0:06:03.000 --> 0:06:05.080 We saw in twenty twenty five while the US equity 0:06:05.120 --> 0:06:08.880 indises did very well. Many of the stock markets around 0:06:08.880 --> 0:06:10.920 the world did even better, and that's continuing in this year. 0:06:10.920 --> 0:06:13.440 How do you think about the US allocation versus rest 0:06:13.480 --> 0:06:14.040 of the world here? 0:06:14.080 --> 0:06:16.159 So I think that trend that began really in late 0:06:16.240 --> 0:06:20.080 twenty twenty four continues here and it continues. 0:06:19.640 --> 0:06:20.440 In a very big way. 0:06:20.960 --> 0:06:22.800 If you look at US market cap as a share 0:06:22.800 --> 0:06:25.120 of global market cap, that peaked in the fourth quarter 0:06:25.160 --> 0:06:27.360 of twenty four, So we're almost eighteen months into this, 0:06:27.880 --> 0:06:32.080 into this transition. Put aside the dollar considerations for a moment, 0:06:32.279 --> 0:06:35.120 and just look in the month of February. You have 0:06:35.200 --> 0:06:37.760 new highs in almost every global market. Where do you 0:06:37.760 --> 0:06:41.320 not have a new high? Triple QS, SMP Right, the 0:06:41.400 --> 0:06:43.799 price action is telling you the character of the global 0:06:43.880 --> 0:06:45.720 leadership has changed the character of. 0:06:45.640 --> 0:06:50.360 Your work is a logarithmic y axis, very careful moving averages. 0:06:50.600 --> 0:06:54.360 I use what are called climate exponential. Chris uses something different. 0:06:54.520 --> 0:06:56.760 We all got our own way. And what I see 0:06:56.800 --> 0:07:00.000 in your charts and you feature HSBC out of London. Yeah, 0:07:00.160 --> 0:07:04.320 on this it's remarkable, given the frantic nature, how things 0:07:04.320 --> 0:07:07.440 are still on trend. Yeah, if we've broken trend, if 0:07:07.440 --> 0:07:10.040 somebody listening with a four to oh one k they're 0:07:10.040 --> 0:07:12.760 going home this weekend. They're words that the Islanders beat 0:07:12.800 --> 0:07:15.920 the Montreal Canadians in the last minute. Should they be 0:07:16.080 --> 0:07:18.080 worried about trend in their retirement. 0:07:18.880 --> 0:07:21.520 No trends have been broken here, or no trends of 0:07:21.520 --> 0:07:24.119 any significance kind of at the index level have been broken, 0:07:24.160 --> 0:07:25.080 particularly globally. 0:07:25.160 --> 0:07:26.680 I mean, is that in the media. 0:07:26.800 --> 0:07:29.800 I think you're right, and the frenzy here is ridiculous, 0:07:29.840 --> 0:07:30.640 it's juvenile. 0:07:31.040 --> 0:07:32.280 I think it's remarkable. 0:07:33.560 --> 0:07:35.160 You know, when you look at all these things, there's 0:07:35.160 --> 0:07:38.040 almost this desire for some of these idiosyncratic episodes to 0:07:38.120 --> 0:07:39.000 become systemic. 0:07:39.160 --> 0:07:40.920 Like you can kind of sense it in the tone, 0:07:40.960 --> 0:07:42.240 particularly of the. 0:07:41.880 --> 0:07:45.320 Financial media here. Of course both of you are outstanding. 0:07:46.680 --> 0:07:49.240 It just gets the sense that there's this desire to 0:07:49.280 --> 0:07:52.160 almost repeat what we saw in seven o A big 0:07:52.160 --> 0:07:55.440 differences here. I think number one, the bank stocks globally 0:07:55.760 --> 0:07:58.480 in you know, really by six we're starting to send 0:07:58.480 --> 0:08:01.040 a very ominous message that's just not I mean, look 0:08:01.080 --> 0:08:03.120 at these European banks, look at the Japanese banks, they're 0:08:03.120 --> 0:08:05.840 still very much in trend, and I think public credit 0:08:06.040 --> 0:08:08.600 spreads are modestly wider here, but they're not exploding. 0:08:09.080 --> 0:08:11.040 I get the concern around private capital. 0:08:11.040 --> 0:08:14.480 I think there's more of that story than perhaps this 0:08:14.640 --> 0:08:18.760 kind of this kind of story that we're being told. 0:08:18.840 --> 0:08:22.560 I mean, think about the financial deregulation aspect of this. 0:08:22.600 --> 0:08:24.800 If we're going to deregulate money center banks, why would 0:08:24.840 --> 0:08:26.680 I want to own an Apollo or a KKR or 0:08:26.680 --> 0:08:28.480 an OWL when I can to own a Goldman or 0:08:28.480 --> 0:08:30.720 a Market Stanley or a Bank of America. 0:08:30.840 --> 0:08:32.920 I think that's part of the story here as well. 0:08:33.280 --> 0:08:35.800 So you mentioned the spreads. I mean, they're widening, but 0:08:35.800 --> 0:08:38.520 they're not blowing out. And that's what we've heard from 0:08:39.120 --> 0:08:41.800 bond folks that are saying, if the tech companies want 0:08:41.800 --> 0:08:44.320 to issue more paper, we'll take it. So is a 0:08:44.360 --> 0:08:47.040 bond market do they have a better handle on risk 0:08:47.080 --> 0:08:48.760 out there that maybe the equity markets do here? 0:08:48.960 --> 0:08:51.440 I think the demand, particularly in the high yield quarter 0:08:51.480 --> 0:08:56.240 of the debt market, remains pretty remarkable. This stuff gets 0:08:56.600 --> 0:09:00.800 just absorbed almost immediately as it comes to market. Widespreads again, 0:09:00.840 --> 0:09:03.760 while modestly wider, are not really blowing out here. I 0:09:03.800 --> 0:09:05.800 think the more difficult question is when you look at 0:09:05.800 --> 0:09:10.160 the kind of arc of the leadership over the last 0:09:10.240 --> 0:09:13.720 number of months with staples better with healthcare, with utilities? 0:09:15.160 --> 0:09:16.559 Is this the market messaging? 0:09:16.800 --> 0:09:20.400 Something more sinister from a defensive perspective is coming. 0:09:20.800 --> 0:09:22.000 I'm not quite there yet. 0:09:22.520 --> 0:09:25.120 I think healthcare the narrative will become, Hey, this is 0:09:25.200 --> 0:09:28.120 the beneficiary of AI. Look at all this drug discovery. 0:09:28.160 --> 0:09:31.199 That's where I think the puck is probably going on healthcare. Staples, 0:09:31.200 --> 0:09:33.839 for as good as they've been recently, actually have not 0:09:33.920 --> 0:09:36.160 turned in our work. They're still in a relative down trend. 0:09:36.320 --> 0:09:38.760 And in the spirit of trend following Tom, Staples are 0:09:38.800 --> 0:09:41.720 still a relative laggard over the longer term in this market. 0:09:41.920 --> 0:09:45.720 What's we're going to go here? But from the technical 0:09:45.760 --> 0:09:48.560 analysis that Chris and I do, Folks, is trend based 0:09:49.200 --> 0:09:51.520 versus catching the knife, and people love to try to 0:09:51.559 --> 0:09:55.520 catch the knife in the dark. How do you use 0:09:55.960 --> 0:10:01.080 moving averages? I see such a misuse nuts folks on 0:10:01.120 --> 0:10:04.000 the death Cross and the life Cross. 0:10:04.280 --> 0:10:05.079 If it were going up? 0:10:05.120 --> 0:10:07.480 Is it? What's it on? Don't know? Birth Cross? I 0:10:07.520 --> 0:10:10.240 don't know. How do you use moving averages? 0:10:10.440 --> 0:10:10.680 Tom? 0:10:10.760 --> 0:10:13.680 You remember how your mom probably said nothing good happens 0:10:14.080 --> 0:10:15.880 after midnight? 0:10:16.000 --> 0:10:18.680 Well, in our world, nothing good happens below downward sloping 0:10:18.800 --> 0:10:19.480 moving averages. 0:10:19.559 --> 0:10:21.800 Right, So if it's the two undre day moving average 0:10:21.960 --> 0:10:25.240 downward sloping, we just don't play. And it's tempting to 0:10:25.280 --> 0:10:27.480 want to catch niner, it's tempting to want to call loas. 0:10:27.559 --> 0:10:29.360 That's just not where the money's made in this business. 0:10:29.360 --> 0:10:32.000 The money is made in up trends. The money is 0:10:32.040 --> 0:10:35.680 made both from a volatility adjusting perspective. Okay, owning things 0:10:35.679 --> 0:10:37.080 with upward sloping movie brilliant. 0:10:37.160 --> 0:10:40.000 So let's get let's get the verone keen approach here, 0:10:40.280 --> 0:10:43.200 and have you talk about the software stocks. The only 0:10:43.240 --> 0:10:45.520 way you can really make money, folks, on a risk 0:10:45.559 --> 0:10:49.800 adjusted basis is an up market an up sector in 0:10:49.880 --> 0:10:54.760 an upstock. If the software stocks is Microsoft broken that maximum. 0:10:55.160 --> 0:10:56.840 So if you look at a very long term basis, 0:10:57.280 --> 0:11:00.000 Microsoft right now is hovering right near it's upward slope 0:11:00.120 --> 0:11:02.120 in two hundred week moving average. So this is kind 0:11:02.120 --> 0:11:06.440 of where the decline stopped both in twenty twenty two, 0:11:06.800 --> 0:11:09.720 which where it stopped in twenty eighteen. So you're in 0:11:09.760 --> 0:11:12.679 the zone where Microsoft is going to stabilize. It kind 0:11:12.679 --> 0:11:14.959 of has to happen here that is very different than 0:11:14.960 --> 0:11:18.600 many of its peers Workday Service now are in long 0:11:18.679 --> 0:11:21.440 term down trends, dose salesforce. 0:11:20.920 --> 0:11:22.880 To the cash of Microsoft. 0:11:22.920 --> 0:11:25.520 In the spirit of the same group, I would be 0:11:25.679 --> 0:11:28.840 very skeptical of bounces in that other quality of ste 0:11:28.880 --> 0:11:29.760 I'll get one more in there. 0:11:29.760 --> 0:11:31.920 But the key thing mister Varone said there, folks is 0:11:31.920 --> 0:11:33.720 is unit based weeks. 0:11:34.000 --> 0:11:36.040 Pros use weeks. 0:11:36.080 --> 0:11:40.240 Good morning, Louis Jamonta Las Sweety's one more with Christopher Varone. 0:11:40.240 --> 0:11:42.280 I'm going to just the Nasdaq with the tech heavy 0:11:42.360 --> 0:11:44.760 NASAC and I type in the RSI function in the 0:11:44.800 --> 0:11:47.280 Bloomberg terminal. You know it says, you know that that 0:11:47.480 --> 0:11:50.880 RSI function says we're over sold. If the indexes at thirty, 0:11:51.000 --> 0:11:53.560 we're overbought. If it's at seventy, we're at forty seven. 0:11:53.640 --> 0:11:55.480 Right smash in the middle of the NASDAK. I don't 0:11:55.480 --> 0:11:56.120 know what to do here. 0:11:56.160 --> 0:11:58.040 I don't I think tech traders don't know what to 0:11:58.080 --> 0:11:58.360 do here. 0:11:58.440 --> 0:12:00.480 You know, it's funny, We've joked about this four time. 0:12:00.520 --> 0:12:03.079 I think overbought, oversold are the most misused terms in 0:12:03.120 --> 0:12:07.120 this business. Oversold, parish, overbought, bullish, right, things that get 0:12:07.160 --> 0:12:09.880 overbought against they overbought are your best trends, things that 0:12:09.920 --> 0:12:13.520 get oversold, No thanks, Yeah, particularly when you're oversold in 0:12:13.520 --> 0:12:14.080 weak trends. 0:12:14.120 --> 0:12:16.320 And you look at the NASDAK right now, it's. 0:12:16.160 --> 0:12:19.040 Probably the weakest of the major trends, and it's in 0:12:19.160 --> 0:12:21.800 kind of no man's land from a momentum standpoint. I 0:12:21.840 --> 0:12:24.520 believe as of last night, only about forty percent of 0:12:24.559 --> 0:12:26.920 the tech sector was above the TUTOR day moving average. 0:12:26.960 --> 0:12:28.320 I mean, that's a very. 0:12:28.120 --> 0:12:32.559 Difficult place to expect that you're going to make consistent returns. 0:12:33.040 --> 0:12:35.640 I want to fish where the fish are most abundant. 0:12:35.679 --> 0:12:37.760 That's not with forty percent of issues above TUNA day. 0:12:37.760 --> 0:12:40.560 Don't be a stranger bringing Jason trendet is what Christopher 0:12:40.640 --> 0:12:46.200 Varone is with stratigis stay with us. More from Bloomberg 0:12:46.360 --> 0:12:48.400 Surveillance coming up after this. 0:12:55.640 --> 0:12:59.200 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:12:59.280 --> 0:13:02.480 weekday afternoons from seven to ten am Eastern Listen on 0:13:02.520 --> 0:13:06.200 Applecarplay and Android Auto with the Bloomberg Business app, or 0:13:06.360 --> 0:13:07.840 watch us live on YouTube. 0:13:07.880 --> 0:13:11.240 Speaking to her in the coming weeks here, particularly on IRAN. 0:13:11.920 --> 0:13:14.800 So this is the way it works, folks. We have teams. 0:13:14.840 --> 0:13:16.720 Paul and I don't really have a job. We sort 0:13:16.720 --> 0:13:19.680 of saunter in and you know, hang out, get a coffee, 0:13:19.679 --> 0:13:23.960 make jokes. We have people that work definitive on this 0:13:24.120 --> 0:13:28.520 crisis in London are Scott Carpenter, Donald Griffin and the 0:13:28.600 --> 0:13:32.720 leadership of Constantine Carculis. Constantine joins us off the desk 0:13:33.040 --> 0:13:35.920 at Queen Victoria Street this morning. He's in charge of 0:13:35.920 --> 0:13:41.160 Distressed Debt and cockroaches at Bloomberg Nation. I Constantine, first 0:13:41.160 --> 0:13:45.599 of all, congratulations on the impact of your reporting worldwide. 0:13:46.000 --> 0:13:51.040 If we look at Market Financial Solutions Limited, is there contagion? 0:13:52.640 --> 0:13:55.280 I mean, that's a big question. So far, we haven't 0:13:55.280 --> 0:13:57.400 seen any signs alow in the equity market. Some of 0:13:57.440 --> 0:14:01.480 these lenders definitely took a hit. I think Jeffreys was 0:14:01.520 --> 0:14:04.720 down as much as ten percent yesterday because they're exposed 0:14:04.760 --> 0:14:07.440 to a round one hundred million to this entity. Apollo 0:14:08.280 --> 0:14:13.920 also down five percent. It had lent around four hundred 0:14:14.360 --> 0:14:20.600 to this entity. Ya it secured credit vehicle Atlas. So yeah, 0:14:20.600 --> 0:14:22.800 there's already signs of Jeter's in the equity market, but 0:14:23.280 --> 0:14:25.720 not seeing this spreading to credit yet. 0:14:25.880 --> 0:14:29.280 I've done my amateur work on their chief executive officers 0:14:29.320 --> 0:14:32.880 sum reports. He slipped a dubai Paresh Raja. I hope 0:14:32.880 --> 0:14:37.400 I'm pronouncing that correctly. Who is Paresh Raja? 0:14:37.880 --> 0:14:40.160 Very good question. We don't know all that much about him. 0:14:40.200 --> 0:14:42.880 We have, I mean Bloomberg our colleagues, My colleagues have 0:14:43.320 --> 0:14:47.200 done an investigation on him back in two thousand and 0:14:47.440 --> 0:14:50.760 twenty four and showed that a group of firms that 0:14:50.840 --> 0:14:56.320 had tied tied to him, including MFS and another entity, Zirkon, 0:14:56.520 --> 0:15:01.800 lent money, lent money in relation to property deals to 0:15:01.920 --> 0:15:07.640 a former land minister in Bangladesh. So yeah, the story 0:15:07.720 --> 0:15:10.640 kind of starts back there. But yeah, we don't know 0:15:10.960 --> 0:15:13.880 other than the fact that he is the sole owner 0:15:14.040 --> 0:15:19.080 and officer in the sprawling empire of MFS and then 0:15:19.080 --> 0:15:22.040 this investigation back in twenty twenty four. Yeah, we don't 0:15:22.080 --> 0:15:24.400 know all that much about him, but that's something we're chasing. 0:15:25.480 --> 0:15:28.280 Talk to us about market financial solutions. 0:15:28.280 --> 0:15:30.440 So are these people and what part of the credit 0:15:30.440 --> 0:15:31.280 market do they play in? 0:15:31.880 --> 0:15:37.160 So they're a niche market mortgage lender, I suppose, So 0:15:37.200 --> 0:15:42.240 they kind of step in where traditional banks won't and 0:15:42.280 --> 0:15:46.160 they provide short term sort of bridging loans or other 0:15:46.200 --> 0:15:51.640 complex structures to help facilitate like maybe there's an entity 0:15:51.680 --> 0:15:53.520 that wants to sell a property and buy another, doesn't 0:15:53.520 --> 0:15:56.760 have the doesn't have the cash to do that immediately. 0:15:56.800 --> 0:16:02.560 That's what's called the bridging loan. So they to finance this, 0:16:03.240 --> 0:16:07.040 they borrowed vast amounts of money from traditional lenders on 0:16:07.120 --> 0:16:11.840 Wall Street, and then they're tasked with collecting, collecting payments, and. 0:16:13.480 --> 0:16:15.560 Servicing these these loans in a sense. 0:16:16.280 --> 0:16:20.400 So so that that's the business model. But what turns 0:16:20.400 --> 0:16:23.200 out the allegations are that a lot of this money 0:16:23.200 --> 0:16:26.520 that was supposed to be going back into the certain 0:16:26.560 --> 0:16:32.000 bank accounts went to other bank accounts. The court documents 0:16:32.040 --> 0:16:37.400 so far show that there's around two hundred million that 0:16:37.560 --> 0:16:42.200 kind of got channeled in the wrong place. And on 0:16:42.280 --> 0:16:44.320 top of that, and this is what makes it much 0:16:44.360 --> 0:16:48.440 more interesting is that it appears and the allegations are 0:16:48.480 --> 0:16:50.720 that there's been some double pledging of collateral. 0:16:51.600 --> 0:16:54.840 So, yeah, Constantika Koros so with us. We're going to 0:16:54.880 --> 0:16:57.600 continue with him with his public service, to his grease 0:16:58.200 --> 0:17:00.640 working with us at Bloomberg News. And I says earlier 0:17:00.720 --> 0:17:03.640 it was a joke, folks, He's not distressed debt and 0:17:03.800 --> 0:17:07.720 cockroach reporter. It was kidding, is well, consciously, how do 0:17:07.760 --> 0:17:12.720 you respond to James Diamond upset about the cockroaches mathematically 0:17:12.800 --> 0:17:15.800 or as a former Greek finance horse, how do you 0:17:15.840 --> 0:17:16.640 respond to that. 0:17:18.920 --> 0:17:21.480 I don't know if I'm in a position to respond 0:17:21.520 --> 0:17:24.840 to the Jamie Diamond, but you know, he does make 0:17:24.880 --> 0:17:28.800 a good point that look, I think, you know, the 0:17:28.840 --> 0:17:32.680 examples are adding up, right, First Brands, trickle Ore, now 0:17:32.760 --> 0:17:35.359 this right, So I feel that we're in the point 0:17:35.359 --> 0:17:39.240 in the cycle where, yeah, fraud is surfacing to the top, 0:17:39.600 --> 0:17:43.280 and people kind of push into corners of finance to 0:17:43.520 --> 0:17:49.720 get that extra return, and it's probably, in hindsight, looks 0:17:49.760 --> 0:17:50.840 like a bad idea for something. 0:17:50.880 --> 0:17:52.520 And Paul You turned to me and said, what about 0:17:52.560 --> 0:17:56.840 Jeffery's you know, first Brands, tricolor and now this next. 0:17:56.760 --> 0:17:58.159 Thing exactly constantine. 0:17:58.160 --> 0:17:59.800 I guess that kind of goes to the question of 0:18:00.440 --> 0:18:02.399 do we put this in this Oh it's just a 0:18:02.440 --> 0:18:06.520 one off, idiosyncratic thing, or is there something more broader 0:18:06.560 --> 0:18:08.520 here that people are concerned about? 0:18:09.600 --> 0:18:10.320 I think definitely. 0:18:10.400 --> 0:18:13.359 I think you know, it's only how many how many 0:18:13.400 --> 0:18:15.840 examples you need for it not to be considered a trend. 0:18:15.920 --> 0:18:20.439 That's my view, So of course they'll tell you that 0:18:20.560 --> 0:18:27.600 each instance is idiosyncratic and comes with its own yeah, yeah, parameters. 0:18:27.640 --> 0:18:31.120 But at the end of the day, these are yeah, 0:18:31.160 --> 0:18:32.440 the evidence is just there. 0:18:32.440 --> 0:18:37.560 That is the tilt here towards what I'm going to 0:18:37.680 --> 0:18:42.920 call executive fiction delusion, fraud, or is the tilt here 0:18:43.119 --> 0:18:49.720 to normative leverage market forces where oops, something goes wrong 0:18:49.840 --> 0:18:51.760 because of leverage. 0:18:52.440 --> 0:18:54.760 It's where those two things intersect. 0:18:54.960 --> 0:18:59.280 It's when leverages, when you use leverage and then you 0:18:59.359 --> 0:19:02.000 end up in in the situation and then and then 0:19:02.000 --> 0:19:03.520 it's just the losses are just compounding. 0:19:03.640 --> 0:19:06.040 We got to go, yeah, cause we got to go here, 0:19:06.080 --> 0:19:07.479 and you got to get back to work. I mean, 0:19:07.520 --> 0:19:12.159 you haven't done You've completely slacked off here this morning. 0:19:12.400 --> 0:19:15.359 What I want to know is, what's your biggest mystery? 0:19:15.880 --> 0:19:17.560 Is you published a Monday morning? 0:19:18.480 --> 0:19:18.840 Okay? 0:19:18.880 --> 0:19:22.480 So questions that I want to find out where is 0:19:22.760 --> 0:19:28.240 Rajah and more about who he is, because the allegations 0:19:28.280 --> 0:19:32.000 in court were that he's he's skipped down. The other 0:19:32.040 --> 0:19:34.600 one is kind of how exactly this went down, what 0:19:35.480 --> 0:19:40.320 precipitated the blow up exactly right? And then obviously who 0:19:40.359 --> 0:19:42.760 else is involved? Because I have a sense that there 0:19:42.760 --> 0:19:47.119 are some other names that we haven't unearthed yet. 0:19:47.359 --> 0:19:50.520 Constantine on behalf of all of Teams Surveillance. Thank you 0:19:50.560 --> 0:19:53.400 to your team for your reporting on this story. It's 0:19:53.400 --> 0:19:57.480 gone worldwide this morning. I really can't say enough about 0:19:57.480 --> 0:20:00.639 the work that we've seen off the Derivatives desk Bloomberg 0:20:01.160 --> 0:20:07.280 at Queen Victoria Street. Constantine kurkulis with his stay with us. 0:20:07.520 --> 0:20:10.720