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Speaker 1: Hello, and welcome to What Goes Up, a weekly markets podcast.

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Speaker 1: My name is Mike Reagan. I'm a senior editor at

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Speaker 1: Bloomberg DNA hawk Across as it reported with Bloomberg at

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Speaker 1: this week on the show, Well, for the last few weeks,

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Speaker 1: we've been focused on the train wreck in the crypto market,

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Speaker 1: but there's been some pretty interesting developments in the traditional markets.

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Speaker 1: The SMP five hundred is up almost thirteen pcent from

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Speaker 1: its bear market low in October. Interest rates have stopped

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Speaker 1: their alarming surge higher, and there seems to be some

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Speaker 1: cautious optimism that the worst of the inflation shock, not

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Speaker 1: to mention, the worst of the monetary policy tightening by

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Speaker 1: the Federal Reserve, maybe behind us. But is that really

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Speaker 1: the right take? Right now, we'll talk to a global

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Speaker 1: macro strategist who isn't quite convinced that inflation will fall

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Speaker 1: completely back to Earth anytime soon. But Volta, Before we

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Speaker 1: get into that, I have to ask, have you seen

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Speaker 1: the movie e T Of course? Of course, okay, you never,

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Speaker 1: I never know, you know. As an eighties child, of

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Speaker 1: course I had to see it. But so many eighties

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Speaker 1: movies in retrospect are problematic now the whole John Hughes

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Speaker 1: series of movies are have all been canceled, I think

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Speaker 1: by by the problematic. I don't know that's what. That's what.

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Speaker 1: I don't you know. We were dumb in the eighties.

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Speaker 1: We didn't know how problematic some of those movies were.

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Speaker 1: But I guess that's a little teaser for my craziest

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Speaker 1: Thing in the Market segment. I will say. I'm also

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Speaker 1: excited because this week's guest is a native French speaker,

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Speaker 1: and I know you've been taking French lessons, so yes,

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Speaker 1: but I'm so bad. Don't call me out, No, I

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Speaker 1: want you to. You got to introduce them in my

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Speaker 1: French is horrible. What's that mean? It's horrible? Obviously, Hello,

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Speaker 1: Hi horrible. We have Vincent Tellut. I hope I did

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Speaker 1: a really good job with that pronunciation. He's the director

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Speaker 1: of Global micro Strategy at Stone ex Financial. Vincent, welcome

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Speaker 1: back to the show. Letter to be back, but maybe

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Speaker 1: just to start out. So you just had this this

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Speaker 1: note doubt about the seven deadly sins within the market,

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Speaker 1: and you focus on tech specifically, and I'm thinking that

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Speaker 1: actually is a really good view into how you're viewing

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Speaker 1: the market and everything that's been going on, especially with

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Speaker 1: some of the froth and speculation that we've seen over

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Speaker 1: the last year. So maybe could you just go over

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Speaker 1: how you're seeing things right now. I think, you know,

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Speaker 1: this really reminds me of of what happened um in

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Speaker 1: the summer when we also had a slightly positive INFACI

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Speaker 1: and surprise and you know, all the strategies that had

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Speaker 1: issued the peak Inflacian note in January, February, March April

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Speaker 1: manager got this one, uh and we had a same

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Speaker 1: story monster rally, a little bit of mean stock friend

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Speaker 1: z that was bad, bath and beyond back then, and

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Speaker 1: then the view that all right, you know, just just

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Speaker 1: a couple of more hikes and will be done, and

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Speaker 1: inflation is gonna go away, and it's time to to

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Speaker 1: to go back in the hyper growth highly valued unicorn

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Speaker 1: that we're soaring in in in You know, again, we

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Speaker 1: we've seen the movie before. The main difference between this

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Speaker 1: rally and and this summers is I do believe the

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Speaker 1: path of this inflation is more valid now. I mean,

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Speaker 1: I was probably one of the earlier strategies to come

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Speaker 1: out with the view that would have eight nine percent

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Speaker 1: in fish in the US in two and even I

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Speaker 1: I have to admit, yes, the economy is disinflating, inflashing

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Speaker 1: is going to slow. Um Where I disagree with the

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Speaker 1: markets view is that it's not going to slow back

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Speaker 1: to I think that if you look at a one

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Speaker 1: year swap, we're probably looking at two point nine by

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Speaker 1: next year and then slowly going down to two percent

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Speaker 1: after that. This is the part that I disagree with.

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Speaker 1: I think we're going to look at a sustainably higher

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Speaker 1: plateau of inflation around four point four or five percent.

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Speaker 1: And I would actually argue that's a good thing. Uh,

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Speaker 1: And that's something that the market is still not pricing. Um.

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Speaker 1: So I do think that this will eventually end in tears,

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Speaker 1: which is one of the reasons why I wrote this

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Speaker 1: piece on on the seven. That is enough secon value

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Speaker 1: to show that a lot of the behaviors that we

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Speaker 1: had during double years are still there. If anything, they're

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Speaker 1: even more prevalent because the business is deteriorating. So a

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Speaker 1: lot of the kind of funny accounting being employees and

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Speaker 1: start over hiring, buying, fake growth, we've ad all that

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Speaker 1: is still happening. You know. Again, things never go in

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Speaker 1: a straight line. And now it's it's kind of a

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Speaker 1: time where the deflation work inflation worries of taking a

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Speaker 1: step back, but I expect that they will eventually return. Yeah,

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Speaker 1: I was reading that uh seven Deadly Sins note, Vincent,

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Speaker 1: and let me just read out one line here because

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Speaker 1: it really uh stuck with me. It's it's sort of

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Speaker 1: towards the end of the note, kind of kind of

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Speaker 1: where your conclusion is, and you say, the real Fed

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Speaker 1: pivot will not be to cut rates in three, but

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Speaker 1: to accept that a decade, a decade of five percent

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Speaker 1: inflation is the least painful way to de leverage the economy,

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Speaker 1: reduce inequalities, and restore sustainable growth, while a decade of

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Speaker 1: five percent inflation or I guess to your point, you know,

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Speaker 1: maybe four and a half five. How does that play

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Speaker 1: out in the markets and with the Fed? You know,

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Speaker 1: right now the Fed funds futures are are pricing at

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Speaker 1: a terminal rate of right around five would this course

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Speaker 1: the Fed even higher than that? And and what's really

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Speaker 1: driving that five percent for a decade in inflation? You

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Speaker 1: know what? What's what? Let's unpack this whole note a

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Speaker 1: little bit so, and my view is that the true

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Speaker 1: people of three will will not so be be so

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Speaker 1: much the two or three rate cuts of the market

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Speaker 1: currently has priced. So I do think we raised to

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Speaker 1: five per cents, and the pace of it ultimately is irrelevant, right,

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Speaker 1: I mean maybe the seventy you know bibs monster hikes

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Speaker 1: are over right, So yeah, we can probably you know,

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Speaker 1: afford to do a couple of fifty even twenty five.

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Speaker 1: But then I think rates do not drop after you know,

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Speaker 1: mid twenty three, like the futures market has it, because

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Speaker 1: inflation doesn't redrop. And the reason inflation doesn't drop is

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Speaker 1: because that by then inflation will be mostly about wages,

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Speaker 1: and wages are I would expect will be around four

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Speaker 1: or five percent by then, and I think we'll get

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Speaker 1: to a point where the third will be in the

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Speaker 1: position of George W. Bush after the invasion of Iraq.

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Speaker 1: So you remember two thousand three, right, Well, we're going

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Speaker 1: looking for w M. D Uh. We don't find them. Um,

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Speaker 1: So the war is not going well, the occupation is

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Speaker 1: not going well. So what do we do? We declare victory? Right,

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Speaker 1: and we never talked about it after again, right, this

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Speaker 1: is when you had George W. On the aircraft carry

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Speaker 1: the big sign. Mission accomplished. Right. If I were J Power,

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Speaker 1: I would do the exact same thing. I'd say, Hey,

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Speaker 1: mission accomplished. Right. But by May I think we we'll

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Speaker 1: get to maybe four or five percent inflation. We'll have

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Speaker 1: four or five percent fat funds rate. So so he's

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Speaker 1: done it. He's the volcan time. He's raised the fat

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Speaker 1: funds rate above the you know, the rate of inflation.

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Speaker 1: Mission accomplished. And then we should never talk again about

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Speaker 1: what happened in one when the feed was buying you know,

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Speaker 1: thirty five billion of mrtgage backed securities when we had

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Speaker 1: the massive housing bubble. That that we can forget, just

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Speaker 1: like we forgot about the UMD Dolph. Just get rid

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Speaker 1: of that supercent target. Yes, now put that on on hold.

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Speaker 1: That wouldn't be the worst thing in the world. And

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Speaker 1: that's my point. I mean, if you look back at

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Speaker 1: the history of the two percent target, it's it's amazed number.

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Speaker 1: It came, I think from a press conference in New

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Speaker 1: Zealand in the late eighties. They had a problem inflasion

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Speaker 1: back then, and they had an economist on TV and

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Speaker 1: you know, he was asked, what what what is I

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Speaker 1: think inflation is good target? For inflation is two percent,

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Speaker 1: why too, you know, not too high, not too low.

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Speaker 1: I mean, there was no there's no scientific backing behind

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Speaker 1: the two percent. If you look at the distribution of

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Speaker 1: inflation and growth in the US, will actually notice that

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Speaker 1: growth has been actually faster, Really economic growth has been faster.

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Speaker 1: Inflation has been in the four to five percent range.

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Speaker 1: And you can very much, very well make the case

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Speaker 1: that what really hurts is when you have inflation at

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Speaker 1: above ten percent or really unpredictable inflation, because this is

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Speaker 1: when agents complan for the future, Investments don't get made,

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Speaker 1: people wore stuff. But as long as you have stable,

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Speaker 1: somewhat moderate inflation, whether it's two or four or five percent,

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Speaker 1: doesn't really change things. And I think that's the way

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Speaker 1: most Americans also feel like the most Americans don't don't

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Speaker 1: even know what the FED does. They don't know about

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Speaker 1: the two percent faction, and they just think of inflation

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Speaker 1: as as whatever happened in the past, So that that's

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Speaker 1: where the inflasion expectation channel comes in. So a decade

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Speaker 1: of four or five percent in facition is is really

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Speaker 1: not bad. I think we are in a period where

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Speaker 1: we have a structurally tighter labor market, mostly because of demography,

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Speaker 1: uh and also because we no longer have access to

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Speaker 1: Mexican labor um. A lot of the great moderation of

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Speaker 1: the past thirty years was with the product of free forces.

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Speaker 1: On the labor side, you had about twelve million Mexicans

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Speaker 1: that across the border between UM basically the under the

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Speaker 1: tecular crisis n four and two thousand seven, and that

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Speaker 1: this flow is stopped and even reversed since COVID, so

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Speaker 1: we no longer have cheap labor. On the good side,

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Speaker 1: it was a China shock, right, We had this massive

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Speaker 1: evaluation on the RMB about at that the station crisis,

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Speaker 1: the entry of China and t o them subsidizing all

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Speaker 1: sorts of productions. So suddenly we have access to the

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Speaker 1: supply Chaine courtesy of of Amazon and First World more

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Speaker 1: than Amazon obviously. You know, if you follow what's been

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Speaker 1: happening in China right now, this is maybe not why

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Speaker 1: you want to supply chain and and this is not

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Speaker 1: you know, if you just to get a demography of China,

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Speaker 1: we'll have a massive crunch in the population of young

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Speaker 1: workers in China because of the one child policy, So

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Speaker 1: we don't have cheap goods from China. We don't have

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Speaker 1: cheap labor from Mexico. And then the last the last

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Speaker 1: part was cheap capital as the US of these massive

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Speaker 1: deficits in the late nineties. But that meant is that

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Speaker 1: you had all these countries that as a very large

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Speaker 1: troopers Europe, Germany, Japan, uh and then Saudi Arabia, Commari,

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Speaker 1: polus in countries, and these these services would flow back

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Speaker 1: into the U S treasury market get a capital account

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Speaker 1: because all these countries were trying to under undercat their

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Speaker 1: currencies so that they could get more exports. So for

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Speaker 1: the U S it worked great, right because we basically

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Speaker 1: send people treasuries, send them treasuries, and then we got

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Speaker 1: goods from them. So it was it was it was

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Speaker 1: fantastic that channel is also clogged now Japan and Germany

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Speaker 1: in Afroanic count deficits, China actually selling treasuries. So the

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Speaker 1: three factors that boosted univation low. And then maybe it's

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Speaker 1: so easy for us to achieve that two percent inflation

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Speaker 1: are gone cheap labor, cheap good, cheap capital, so it

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Speaker 1: would be a lot harder to get down to two percent.

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Speaker 1: I mean, I'm sure we could like if if if

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Speaker 1: Power wanted to be Vulcan and he gets the fat

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Speaker 1: funds right percent, we get to two percent. You know, why,

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Speaker 1: why would you want to destroy the labor market when

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Speaker 1: we are seeing the gap for minority wages actually closing,

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Speaker 1: We're seeing young people do better. Finally, we are seeing

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Speaker 1: asset prices go down, which is a good thing. You

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Speaker 1: want people to be able to buy homes. You are

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Speaker 1: seeing the real value of the dead being wiped out.

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Speaker 1: I mean inflation, if it doesn't go above seven eight

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Speaker 1: percent is actually the medicine that we need. And we

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Speaker 1: need to let that run out for a couple of

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Speaker 1: years and will be in a much better place. And

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Speaker 1: by the way, it's not just me saying that there

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Speaker 1: was a very good outped I think in the ft

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Speaker 1: about the same thing. So I think you'll see a

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Speaker 1: lot more of that next year as central bankers realized

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Speaker 1: that the cost of going back to back to two

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Speaker 1: greatly exceed the scenario. To me sounds though like a

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Speaker 1: nightmare for profit margins and US corporate profits EPs for

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Speaker 1: the span is that is that the sort of bottom

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Speaker 1: line conclusion from from that type of outcome. I think

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Speaker 1: for now we are steal in the first order concept

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Speaker 1: once of infaction when in facial invades everything, including profits,

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Speaker 1: Like there's the money illusion in in terms of Kanes,

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Speaker 1: everybody thinks they're getting richer. Uh And and and also

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Speaker 1: because of how accounting works with with inventories, like if

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Speaker 1: you if you value inventory at the lower pre infaction costs,

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Speaker 1: which actually shows very very high profits. So I think

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Speaker 1: that's one of the reasons why we saw profit margin

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Speaker 1: spike in But as some passes, You're absolutely right, I mean,

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Speaker 1: the cost of everything goes up, right, Your cost of

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Speaker 1: energy goes up, the cost of labor is going up.

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Speaker 1: Wages are not slowing. Maybe they're hitting a plateau, but

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Speaker 1: there's something not slowing in service is and then you

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Speaker 1: supply chains getting a lot more complex. If you can

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Speaker 1: produce in China, you cannot do the just in time anymore. So, yes,

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Speaker 1: margins would need to come down, but I mean, unless

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Speaker 1: you're an owner, I would argue that's a good thing.

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Speaker 1: I mean, one of the issue we had for four

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Speaker 1: years is this steady expansion of margins um at the

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Speaker 1: expense of labor. Uh and that contributed to the concentration

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Speaker 1: of wealth one percent. Inequality issues and I think that

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Speaker 1: the pendulum is finally swinging the other way in terms

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Speaker 1: of sharing the you know, the value added by by

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Speaker 1: the economy was being captured by a handful of monopolies

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Speaker 1: and and and and their capital owners. And now the

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Speaker 1: dependulm sushing back and power is swishing back towards towards labor.

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Speaker 1: And I would argue that's a healthy thing after four

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Speaker 1: years of concentration. I like your caveat there, unless you're

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Speaker 1: an owner of stock, which might be one or two

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Speaker 1: listeners out there, I hope more than two three, very

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Speaker 1: hopefully vincent. I'm wondering how likely it would be for

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Speaker 1: for the FED to give up on its two percent

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Speaker 1: inflation target, because with that not absolutely destroy their credibility. Well,

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Speaker 1: that's why they would have to be smart about it,

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Speaker 1: and I think they can. There are many ways you

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Speaker 1: can do it quietly without actually acknowledging. And I do

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Speaker 1: agree that, you know, my whole plan only works if

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Speaker 1: people believe the two percent target is still a reality, right,

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Speaker 1: because what are we talking about, funny, is ultimately fincial repression. Right,

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Speaker 1: So you need to convince bond holder to keep buying

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Speaker 1: bonds and are at low yield and then you constantly

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Speaker 1: kind of stealthily defaulting on them, but by this highly inflation.

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Speaker 1: So you I don't think you know, J. Powell is

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Speaker 1: going to come out and say, you know, guys, you

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Speaker 1: know five years on YouTube, but there are many ways

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Speaker 1: you can do it. One days is one way you

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Speaker 1: could do it is called hedonic adjustment. So hedonic adjustment

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Speaker 1: is something that the FEDS has developed over time to

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Speaker 1: address for the fact houses get bigger, cars get better,

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Speaker 1: TVs get smaller and larger story uh and and that

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Speaker 1: the quality of the product increases. So they only apply

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Speaker 1: that to I think about six percent on the index

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Speaker 1: right now. And it's it's um it has a very

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Speaker 1: strong deflational impact, right because the two thousand, for example,

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Speaker 1: the phone. You know, the price of an iPhone is

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Speaker 1: you know, a thousand, one thousand bucks now, but if

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Speaker 1: you look in the CPI you see it come downtown

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Speaker 1: down because the fat is I think correctly saying well,

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Speaker 1: an iPhone is incomparably better than the the old Nokia

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Speaker 1: that I'm sure Michael still uses. That's such a good

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Speaker 1: dig I did have one of them. Yes, he doesn't

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Speaker 1: know how to open it though he doesn't know how

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Speaker 1: to plup it open. So yeah, so the so the

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Speaker 1: fat has been hedonically adjusted at certain time series and

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Speaker 1: others not for example, Men's out where his head on

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Speaker 1: the clear justice, but our underwear is not so And

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Speaker 1: I could go on with the list. Cars are hedonically adjusted,

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Speaker 1: meaning when cars do get better, the price in the

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Speaker 1: CPI is adjusted down, but motorcycle or not. So you

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Speaker 1: have a lot of leeway. And this is like a

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Speaker 1: really tiny technical thing, like you don't even need to

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Speaker 1: issue a press release that you know that they could

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Speaker 1: just do that that the b RS could just do

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Speaker 1: that overnight, no one would notice. Uh. Another way, you

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Speaker 1: could kind of adjust the index in the infasionary way, sorry,

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Speaker 1: in a defasionary way, so that you actually tolerate a

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Speaker 1: higher level of infation while still showing that you're technically

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Speaker 1: meeting the two percent target. Would be on the rents

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Speaker 1: um and the onn recurrent rents. So there's this huge

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Speaker 1: debate right now about you know the way the FED

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Speaker 1: computes rent and especially oh e R so shelter as

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Speaker 1: a whole is about thirty percent the CPI. You have

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Speaker 1: seven percent in ran on rent. These are horrible statistical

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Speaker 1: monsters that the BRS computes and really and it's lagging

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Speaker 1: a lot, right that that's that's what people are complaining about,

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Speaker 1: is that the FED is driving in the review mirror

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Speaker 1: that the real estate market is already turning, has already turned.

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Speaker 1: We can see those data. But because of the way

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Speaker 1: it's computing, the BS compute renting faction, that's going to

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Speaker 1: keep increasing for the next twelve months. Well, maybe they

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Speaker 1: could revise that, say, you know what, we just wanted

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Speaker 1: to make it better closer to reality. And what that

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Speaker 1: would do is that it would are you know, it

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Speaker 1: wouldn't change the reality, but it would make that what

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Speaker 1: would have been five pre cientifation becomes stuporcentifaction and being metric.

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Speaker 1: I'd love to hear the rationale for the underwear not

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Speaker 1: being adjusted. Just there's just no innovation in underwear underwear anymore.

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Speaker 1: I guess maybe maybe that's it. But but but so,

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Speaker 1: how does one position their investments for this type of

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Speaker 1: environment you're describing, Uh, you know, it sounds like maybe

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Speaker 1: take advantage of real yields if if you get if

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Speaker 1: you're able to get some to boil it down in

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Speaker 1: the equity market, Is it as simple as a growth

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Speaker 1: versus value trade to stick with, stick with value over growth,

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Speaker 1: that sort of thing. You're generally correct, Um, you know,

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Speaker 1: short duration. If my scenari is correct, I would expect

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Speaker 1: the yield care to steep and quite aggressively next year. Yeah.

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Speaker 1: I find some of the short term rates to be

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Speaker 1: quite attractive. I mean, we now have positive rear rates

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Speaker 1: in the US for the first time, tips rates, you know,

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Speaker 1: one five one point six percent time. I actually, if

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Speaker 1: you really want to get crazy with tips going Brazil,

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Speaker 1: they're like six to seven percent inflation adjusted yield on

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Speaker 1: on on short term Brazilian bonds. In terms of equities,

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Speaker 1: the portfolio that I've been recommending is what I call

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Speaker 1: the Holy Trinity uh and it's three equity sectors with

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Speaker 1: very simpol ty of to trade, Energy, healthcare, financials. That

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Speaker 1: portfolio just equally spit one third one third, one third

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Speaker 1: is up sixteen percent for the year. Your sixty four

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Speaker 1: portfolio is down sev I would stick with that, you know,

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Speaker 1: because with what I love about that Holy Trinity re

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Speaker 1: portfolio is that it hedges against the free macro ris

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Speaker 1: that we're facing. One, of course, is still inflation. In

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Speaker 1: my opinion. You need your energy there. Energy is kind

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Speaker 1: of your dark horse, you know scenario or I go

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Speaker 1: if we have something that happening in Russia or trying

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Speaker 1: to reopening Song suddenly whatever your cities. Energy a weapon.

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Speaker 1: That's how it works. In energy was your risk off asset.

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Speaker 1: So energy helges against inflation. Healthcare hedgies against recessionary risk.

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Speaker 1: Healthcare is actually the most defensive sector, performs best in recession,

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Speaker 1: better than utilities, especially now that you know the problem

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Speaker 1: is that with a recession with higher rates, right, so,

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Speaker 1: you don't want to go in your utilities or consumer stable.

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Speaker 1: You want to go in a sector that actually has

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Speaker 1: some potential for secular growth in addition to being defensive,

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Speaker 1: which is what health care is. Uh. And then the

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Speaker 1: third pillar of my holy Trinity portfolio is financials, which

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Speaker 1: which I'm very excited going into Tree. If my scenario

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Speaker 1: is correct. Um, so I will see is your curule

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Speaker 1: step and and that's very good for banks. You'll have

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Speaker 1: you know, you have about one point five tree and

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Speaker 1: in reserves access reserve right now. I mean they're just

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Speaker 1: gonna sit just sitting at the FED. They're gonna connect

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Speaker 1: five recent from from zero. So that's about like cant

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Speaker 1: readio the math. I think that's about only fifty billion subsidiy,

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Speaker 1: just increasing pure profit, just for for the banks to

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Speaker 1: have excess cause of the FED. Uh. And then if

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Speaker 1: I'm correct that the economy is actually doing quite well,

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Speaker 1: you know, like the labor market is very resilient, wedges

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Speaker 1: are still growing, people are not going to default. Um,

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Speaker 1: So I think the market is somewhat expricing a bit

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Speaker 1: of a repeat of two thousand eight. Oh, like you know,

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Speaker 1: create card bounces are going up, the you know, the

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Speaker 1: housing market is including. I do not believe these things

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Speaker 1: are going to happen in twenty twenty three. And as

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Speaker 1: a result, think banks are going to be the leader

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Speaker 1: in my holy trenity portfolio in twenty three. How about

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Speaker 1: the US versus rest of the world inequities? You know,

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Speaker 1: it's uh some outperformance. Uh you know global x US

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Speaker 1: type of the next is these days? Is that? Uh?

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Speaker 1: Is that going to continue? I think when the market

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Speaker 1: starts to understand that the FED will people on inflation, um,

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Speaker 1: that trend of our performance of the US will stop.

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Speaker 1: It will be back to kind of the reflation trade

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Speaker 1: like what we saw in two thousand three. Two thousand

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Speaker 1: seven week dollar. So you want to be long emerging market,

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Speaker 1: I would say emerging markets outside of China, which I've

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Speaker 1: already done very well. By the way, that the one

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Speaker 1: issue with with you know, global investing is is Europe.

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Speaker 1: So okay, forget about Europe, forget about Japard, forget about China.

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Speaker 1: Now the problem is this is really the big pieces

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Speaker 1: of Europe. You know, if you look at the MSCI index,

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Speaker 1: these are the three big pieces. But once you've dropped,

399
00:21:30,760 --> 00:21:34,439
Speaker 1: the things that have gone down your left were actually

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Speaker 1: pretty good stuff. So I call that the bim chip.

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00:21:38,880 --> 00:21:45,600
Speaker 1: It's Brazil, Indonesia, Mexico, Chile, India, and Peru. Uh. These

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00:21:45,680 --> 00:21:48,919
Speaker 1: are seven countries that are actually up on the year. UH,

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Speaker 1: and they are emerging markets. And these are not the

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Speaker 1: count of countries that you would expect to do well

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Speaker 1: in a year. And when the fedest tightened by about

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Speaker 1: four hundred basis point and the US dollar has you know,

407
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Speaker 1: dollar in excess as radied by twenty points, these these

408
00:22:02,720 --> 00:22:04,920
Speaker 1: used to be thought as these kind of weak, vulnerable

409
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Speaker 1: emerging markets, and they actually doing very well. There there

410
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Speaker 1: is still a very strong case for global investing. You

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Speaker 1: just don't want to do it for an index, because

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Speaker 1: the index is gonna get you into places you don't

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Speaker 1: necessarily want to be, which is mostly Europe or China's

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Speaker 1: big deck, which you know, who knows what's going to

415
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Speaker 1: happen there? And what I do. Want to go back

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Speaker 1: to your seven Deadly Sins note and talk about number

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Speaker 1: one and six because they're kind of two sides of

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Speaker 1: the same coin, one being uh paying employees with stock

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Speaker 1: instead of cash, and the other being uh, what you

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Speaker 1: call bad buy backs buy backs that incinerate value for

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Speaker 1: share shareholders. You you mentioned uh Meta in particular, metas

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Speaker 1: by back program incinerated seventy five billion of shareholder wealth

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Speaker 1: or thirty of its current capitalization. So how do you

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Speaker 1: see both of those issues playing out in the next

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Speaker 1: few years? You know, the this massive buy back binge

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Speaker 1: that US market spent on for I don't know a

427
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Speaker 1: decade or longer, and that notion of silicon value using

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Speaker 1: you know, stock as a currency to pay employees. Are

429
00:23:13,160 --> 00:23:15,840
Speaker 1: both of them sort of jump the shark, if you will,

430
00:23:16,080 --> 00:23:19,119
Speaker 1: or both of those things kind of taboo going forward?

431
00:23:19,160 --> 00:23:22,639
Speaker 1: Do you think, well, first of all, a muslag a

432
00:23:23,000 --> 00:23:26,959
Speaker 1: complaint because you gave my craziest thing. Um, so I'm

433
00:23:27,000 --> 00:23:31,040
Speaker 1: gonna think of something else on the fly. So in

434
00:23:31,119 --> 00:23:34,399
Speaker 1: the case of Facebook, is sweet to uh so I

435
00:23:34,880 --> 00:23:37,160
Speaker 1: want is just you You multiply the price that which

436
00:23:37,200 --> 00:23:40,080
Speaker 1: here rebushes the shares by the quantity, and then you

437
00:23:40,200 --> 00:23:43,840
Speaker 1: compare to where they are today. So that that's about

438
00:23:44,320 --> 00:23:46,200
Speaker 1: betting lost right there. And the other one is it

439
00:23:47,040 --> 00:23:49,200
Speaker 1: is by really saying that you know, if if you

440
00:23:49,840 --> 00:23:52,120
Speaker 1: if you do a buy back because you issued yourself

441
00:23:52,960 --> 00:23:55,399
Speaker 1: some you know, some stocks, you're not really doing a

442
00:23:55,480 --> 00:23:57,800
Speaker 1: buy back. You're just taking your shareholders money and putting

443
00:23:57,800 --> 00:24:01,280
Speaker 1: in your pocket. So I had the stock based compensation.

444
00:24:01,359 --> 00:24:03,480
Speaker 1: It's about thirty five billion in the past five years

445
00:24:03,520 --> 00:24:06,400
Speaker 1: of Facebook. So half half of that came from from

446
00:24:06,680 --> 00:24:09,320
Speaker 1: totally timing to buy back and the stock price declining

447
00:24:09,400 --> 00:24:12,359
Speaker 1: last year, and then half of that came from stock

448
00:24:12,400 --> 00:24:14,359
Speaker 1: based conversation, which by the way, is the norm. Like

449
00:24:14,440 --> 00:24:17,320
Speaker 1: in another example would be Google. So in the past

450
00:24:17,359 --> 00:24:20,040
Speaker 1: three years, Google as we purchased about eleven percent of

451
00:24:20,160 --> 00:24:23,440
Speaker 1: its uh of its share of sending if you just

452
00:24:23,600 --> 00:24:26,640
Speaker 1: get number, but the shares of sending haven't changed. Why

453
00:24:26,760 --> 00:24:30,919
Speaker 1: is that because because they've been issuing that too. To shareholders.

454
00:24:31,000 --> 00:24:33,080
Speaker 1: So you know that that that's long been going on,

455
00:24:33,359 --> 00:24:36,440
Speaker 1: and I think investors have used to have a somewhat

456
00:24:36,440 --> 00:24:39,040
Speaker 1: of the benign neglect on on the practice when sock

457
00:24:39,080 --> 00:24:41,720
Speaker 1: price going up because technical to buyback made money, right,

458
00:24:41,760 --> 00:24:43,560
Speaker 1: I mean if the sockpwrice higher next year, you can say, oh,

459
00:24:43,600 --> 00:24:45,960
Speaker 1: look at back a hundred nurse hundred twenties. So I

460
00:24:46,320 --> 00:24:48,880
Speaker 1: it's been a wise use of share all the money,

461
00:24:48,880 --> 00:24:51,720
Speaker 1: even though really what it is it's just a trick

462
00:24:52,359 --> 00:24:57,400
Speaker 1: to save cash. And then um, you know it's tax

463
00:24:57,440 --> 00:25:01,520
Speaker 1: advantage also a little bit um and then it makes

464
00:25:01,560 --> 00:25:04,000
Speaker 1: you look better on certain metrics like free cash flow

465
00:25:04,040 --> 00:25:05,760
Speaker 1: or in cash flow. All that looks a lot better

466
00:25:06,160 --> 00:25:08,800
Speaker 1: because you're paying. In most big tech companies about half

467
00:25:08,880 --> 00:25:12,840
Speaker 1: of your salary is paid in stock. So yeah, when

468
00:25:12,880 --> 00:25:15,080
Speaker 1: when when the bubble was going, everybody was happy with that.

469
00:25:15,480 --> 00:25:17,440
Speaker 1: And and now I think, you know, we're seeing the

470
00:25:18,640 --> 00:25:21,680
Speaker 1: reality bike right, I think the the interest of the

471
00:25:21,720 --> 00:25:25,640
Speaker 1: shareholders and that of of workers are not aligned. Uh.

472
00:25:26,240 --> 00:25:28,480
Speaker 1: And you see a lot of companies that you know,

473
00:25:28,600 --> 00:25:31,320
Speaker 1: now that the stock price have cone down, they actually

474
00:25:31,359 --> 00:25:33,399
Speaker 1: have to give out more stock, right because they want

475
00:25:33,440 --> 00:25:37,119
Speaker 1: to give X dollars to their employee to be competitive

476
00:25:37,160 --> 00:25:40,040
Speaker 1: with the Google, the Facebook, whatever. And now that you

477
00:25:40,119 --> 00:25:42,080
Speaker 1: know stock prices you have dropped by eight percent, they

478
00:25:42,119 --> 00:25:44,879
Speaker 1: have to give five times stock as they used to.

479
00:25:45,240 --> 00:25:47,520
Speaker 1: So the amount of delution that people are taking from

480
00:25:47,600 --> 00:25:51,440
Speaker 1: from this is enormous. UM and I do expect that,

481
00:25:51,760 --> 00:25:53,399
Speaker 1: you know, next year there will be somewhat of a

482
00:25:53,440 --> 00:25:57,600
Speaker 1: shareholder revolt because not only are is the company not

483
00:25:58,119 --> 00:26:00,960
Speaker 1: not performing? Um, you know, you've seen this kind of

484
00:26:01,000 --> 00:26:05,000
Speaker 1: slow down in in in deck and social media, but

485
00:26:05,080 --> 00:26:08,119
Speaker 1: on top of that, whatever earnings is left has diluted

486
00:26:08,160 --> 00:26:25,280
Speaker 1: across you know, much many more shades. Well, so if

487
00:26:25,880 --> 00:26:29,399
Speaker 1: that's if a company is actually reducing its number of

488
00:26:29,440 --> 00:26:33,040
Speaker 1: shares outstanding with buy backs, is that, uh do they

489
00:26:33,119 --> 00:26:36,200
Speaker 1: get sort of a pass on the deadly sin of

490
00:26:36,840 --> 00:26:40,720
Speaker 1: bad buy backs? Yeah? Apple would be a case where

491
00:26:40,760 --> 00:26:42,919
Speaker 1: you have about a one to one ratio between buy

492
00:26:42,960 --> 00:26:44,920
Speaker 1: back and flow drink. I think, by the way, that's

493
00:26:44,960 --> 00:26:47,320
Speaker 1: that's insane that I think Apple recrut is more than

494
00:26:47,400 --> 00:26:50,320
Speaker 1: five hundred billion in stock since he started to buy back.

495
00:26:50,359 --> 00:26:52,440
Speaker 1: I mean five hundred billion. Can you imagine this? This?

496
00:26:52,600 --> 00:26:54,280
Speaker 1: I mean this, this would have been the largest company

497
00:26:54,280 --> 00:26:58,120
Speaker 1: in this and five just a couple of years ago. Yeah,

498
00:26:58,160 --> 00:27:00,399
Speaker 1: I mean you have always don't less they want to

499
00:27:00,480 --> 00:27:02,960
Speaker 1: go in the you know, the buy back debate. Some

500
00:27:04,359 --> 00:27:10,080
Speaker 1: some people you know hate them. I mean it's if

501
00:27:10,119 --> 00:27:13,000
Speaker 1: you make a lot of money the way Apple does,

502
00:27:14,000 --> 00:27:16,760
Speaker 1: if you don't return cash your shareholder, you'll end up,

503
00:27:16,920 --> 00:27:19,120
Speaker 1: as you know, having more and more equity and less

504
00:27:19,160 --> 00:27:21,640
Speaker 1: and less debt. Right, And you may want to keep

505
00:27:21,680 --> 00:27:23,600
Speaker 1: your fincial structure the same, and the buy back is

506
00:27:23,640 --> 00:27:26,240
Speaker 1: a way to do that. And it's a way to

507
00:27:26,359 --> 00:27:28,760
Speaker 1: do that in a way that's more flexible than the dividend, right,

508
00:27:28,760 --> 00:27:30,320
Speaker 1: because if you get the dividend, people are going to

509
00:27:30,400 --> 00:27:32,439
Speaker 1: get back mad at you. Buy back is a bit different.

510
00:27:32,480 --> 00:27:35,960
Speaker 1: But so I'm not like philosophically against the use of

511
00:27:36,040 --> 00:27:39,160
Speaker 1: buy backs. I'm philosophically against the use of buy backs

512
00:27:39,240 --> 00:27:43,080
Speaker 1: if it's a trick to hide lavish stock option packages

513
00:27:43,200 --> 00:27:47,399
Speaker 1: to employees that basically just you know, use the company

514
00:27:47,440 --> 00:27:49,760
Speaker 1: as a stock printing machine and run away the cash.

515
00:27:49,880 --> 00:27:52,280
Speaker 1: But in theory, there's nothing wrong with the buybacks. What

516
00:27:52,400 --> 00:27:55,399
Speaker 1: I will say, however, is that the market has become

517
00:27:55,520 --> 00:27:58,720
Speaker 1: very reliant on these buy backs. Um So over the

518
00:27:58,760 --> 00:28:00,639
Speaker 1: past year we had about a tree Dan dollar in

519
00:28:00,720 --> 00:28:03,880
Speaker 1: buy back in the past year. That is a lot.

520
00:28:04,720 --> 00:28:06,960
Speaker 1: It's a lot that that is a record, and I

521
00:28:07,119 --> 00:28:10,200
Speaker 1: doubt that this is going to keep happening because you know,

522
00:28:10,280 --> 00:28:11,840
Speaker 1: it's a lot harder to issue that you have a lot,

523
00:28:11,920 --> 00:28:15,160
Speaker 1: a lot more to pay on that um a lot

524
00:28:15,160 --> 00:28:17,120
Speaker 1: of company of conserving cash. We also have a buy

525
00:28:17,160 --> 00:28:20,000
Speaker 1: back tax that's coming as part of the Inflasion Reduction Act,

526
00:28:20,119 --> 00:28:22,440
Speaker 1: is a one percent tax on your buy back. So

527
00:28:22,600 --> 00:28:25,000
Speaker 1: one of my concerns that we could see a fall

528
00:28:25,240 --> 00:28:28,240
Speaker 1: in buy backs next year, also because the big tech

529
00:28:28,320 --> 00:28:31,240
Speaker 1: companies are not going to get away with these take

530
00:28:31,280 --> 00:28:33,560
Speaker 1: buy backs anymore. And maybe you could see dropped from

531
00:28:33,760 --> 00:28:36,520
Speaker 1: one trillion to five billion. And then the question is

532
00:28:36,840 --> 00:28:40,080
Speaker 1: what replaced that five billion equity demand. I don't have

533
00:28:40,120 --> 00:28:44,280
Speaker 1: a good answer for that. I think Goldman is estimating

534
00:28:44,360 --> 00:28:48,040
Speaker 1: something like eight billion. But I want to ask about

535
00:28:48,120 --> 00:28:51,600
Speaker 1: one of your other since, which is over hiring. And

536
00:28:51,680 --> 00:28:54,760
Speaker 1: obviously we've seen a bunch of tech layoffs, obviously a

537
00:28:54,880 --> 00:28:58,320
Speaker 1: ton of crypto layoffs. There's seemingly a new company in

538
00:28:58,360 --> 00:29:01,560
Speaker 1: crypto announcing layoffs just about every day. So I'm just

539
00:29:01,640 --> 00:29:04,400
Speaker 1: wondering if that's sort of representative of what you think

540
00:29:04,720 --> 00:29:07,240
Speaker 1: potentially we could be seeing going forward in the labor

541
00:29:07,280 --> 00:29:09,800
Speaker 1: market because we're not seeing it yet, right, Yes, that's

542
00:29:09,840 --> 00:29:12,160
Speaker 1: a good question. So I want to put the tech

543
00:29:12,320 --> 00:29:14,760
Speaker 1: layoffs in in perspective. And of course, you know we

544
00:29:14,840 --> 00:29:17,160
Speaker 1: all have friends and I mean led in San Francisco,

545
00:29:17,320 --> 00:29:20,480
Speaker 1: So I want have friends who are you're concerned with

546
00:29:20,640 --> 00:29:24,880
Speaker 1: it or so it's it's unfortunate when when that happens.

547
00:29:24,960 --> 00:29:30,520
Speaker 1: But um, if you look at the MAGA stock, the

548
00:29:30,600 --> 00:29:35,800
Speaker 1: Big textalks head count doubled since uh pre Covid you

549
00:29:35,920 --> 00:29:40,520
Speaker 1: had this insane hiring boom one. I mean, I have

550
00:29:40,880 --> 00:29:44,240
Speaker 1: you know, friends who are like you know who told

551
00:29:44,240 --> 00:29:47,120
Speaker 1: me I couldn't even Google, I couldn't do my job

552
00:29:47,360 --> 00:29:50,360
Speaker 1: because I spend my days just interviewing candidates. And what

553
00:29:50,520 --> 00:29:53,440
Speaker 1: the panemic did? It created this once in a lifetime

554
00:29:53,520 --> 00:30:00,800
Speaker 1: flood of demand for device online entertainment, U cloud services

555
00:30:01,720 --> 00:30:05,000
Speaker 1: and another big tech firms. I thought that this was

556
00:30:05,040 --> 00:30:06,720
Speaker 1: going to be permanent in some way. That kind of

557
00:30:06,800 --> 00:30:09,400
Speaker 1: reminded me of what happened in oh six or or

558
00:30:09,480 --> 00:30:11,280
Speaker 1: five or six with the big banks. You know when

559
00:30:11,760 --> 00:30:13,719
Speaker 1: that that's when I started. I remember that you had

560
00:30:13,760 --> 00:30:17,120
Speaker 1: these lavish cocktail parties at US universities where you know,

561
00:30:17,600 --> 00:30:21,320
Speaker 1: the class of seven was twice the class of for

562
00:30:21,640 --> 00:30:24,760
Speaker 1: the new analysts and UM and of course the hangover

563
00:30:24,840 --> 00:30:26,960
Speaker 1: lasted for ten years in the banks. UM. So I

564
00:30:27,240 --> 00:30:30,760
Speaker 1: think what we're seeing in tech is very similar UM.

565
00:30:31,080 --> 00:30:34,400
Speaker 1: And it's unfortunately just the tip of the iceberg. So

566
00:30:34,800 --> 00:30:37,520
Speaker 1: it doubles into thousand nineteen. Right, so we could technically

567
00:30:37,800 --> 00:30:40,360
Speaker 1: all have the Twitter treatment of firing fifty percent the

568
00:30:40,400 --> 00:30:46,280
Speaker 1: workforce and we would only be back but by three years. UM. Now,

569
00:30:46,440 --> 00:30:48,200
Speaker 1: as far as what that means for the labor market,

570
00:30:48,400 --> 00:30:57,080
Speaker 1: I really would not UM um over emphasize the relevance

571
00:30:57,320 --> 00:31:00,240
Speaker 1: of the tech layoff for the economy. I mean, is

572
00:31:00,280 --> 00:31:03,080
Speaker 1: still a very small sector, and it's it's not a

573
00:31:03,160 --> 00:31:05,960
Speaker 1: very working inventive sector. I mean, you know, the bulk

574
00:31:06,040 --> 00:31:11,760
Speaker 1: of your workers in the US are cashiers, UH, wires,

575
00:31:12,960 --> 00:31:16,960
Speaker 1: factory workers. UM. And and this is where the inflation

576
00:31:17,080 --> 00:31:19,920
Speaker 1: problem is. Like if you look at the job openings data,

577
00:31:20,120 --> 00:31:21,920
Speaker 1: the wage cool of data, you you'll see that the

578
00:31:21,960 --> 00:31:24,440
Speaker 1: pressure is at the low end. UM. It's very hard

579
00:31:24,520 --> 00:31:27,760
Speaker 1: to get a roofer, it's very hard to get a

580
00:31:27,880 --> 00:31:30,880
Speaker 1: waiter that's gonna stick around for more than a month. Uh,

581
00:31:31,000 --> 00:31:35,360
Speaker 1: it's very very hard to get, um, someone to work

582
00:31:35,400 --> 00:31:38,840
Speaker 1: in the kitchen. And I don't really see how you know,

583
00:31:39,000 --> 00:31:42,760
Speaker 1: laying off somewhat overpaid, you know, twenty five year old

584
00:31:42,800 --> 00:31:46,680
Speaker 1: product managers at a LinkedIn who you know used to

585
00:31:46,840 --> 00:31:49,480
Speaker 1: go to the office to do yoga and eat avocado

586
00:31:49,560 --> 00:31:53,360
Speaker 1: toasts is really going to address then shame the millennials.

587
00:31:53,920 --> 00:31:58,000
Speaker 1: I don't shame in the zoomers here. Hey, I eat

588
00:31:58,040 --> 00:32:01,560
Speaker 1: avocado toast and I'm a well, not getting what generation,

589
00:32:03,080 --> 00:32:05,320
Speaker 1: but but Fince, it's your point on all that. You know,

590
00:32:05,640 --> 00:32:09,120
Speaker 1: every time that Jolts job openings number comes out, I'm

591
00:32:09,200 --> 00:32:12,520
Speaker 1: just my mind kind of boggles at the fact that

592
00:32:12,600 --> 00:32:16,640
Speaker 1: there's still this ten million job openings. How big of

593
00:32:16,680 --> 00:32:18,520
Speaker 1: a deal is that or are they gonna just sort

594
00:32:18,520 --> 00:32:23,520
Speaker 1: of evaporate? Um? Were they just going to keep stay

595
00:32:23,560 --> 00:32:28,959
Speaker 1: there and keep this unemployment rate low regardless of how

596
00:32:29,040 --> 00:32:31,800
Speaker 1: many Silicon Valley layoffs we've seen, you know, to your point,

597
00:32:32,320 --> 00:32:36,120
Speaker 1: you know, maybe a twenty five year old avocado toast

598
00:32:36,160 --> 00:32:38,120
Speaker 1: eater at Lincoln doesn't want to go be a waiter,

599
00:32:38,240 --> 00:32:40,640
Speaker 1: but at some point maybe they want to have a choice.

600
00:32:42,000 --> 00:32:45,600
Speaker 1: We'll see. There's been some debate about the quality of

601
00:32:45,720 --> 00:32:49,400
Speaker 1: that jolt data, because if you do, I mean where

602
00:32:49,520 --> 00:32:51,880
Speaker 1: we are is absurd, right, I mean if you plant

603
00:32:51,920 --> 00:32:54,600
Speaker 1: the series over time, I mean the prior peaks in

604
00:32:54,800 --> 00:32:59,320
Speaker 1: you know, seven, we had about five million job openings

605
00:32:59,360 --> 00:33:03,360
Speaker 1: and now we at ten, basically because it's it's free

606
00:33:03,440 --> 00:33:06,719
Speaker 1: now to post the job opening somewhere. That is one

607
00:33:06,840 --> 00:33:09,120
Speaker 1: argument that people have made. Also because of the work

608
00:33:09,200 --> 00:33:13,760
Speaker 1: from home movement. Uh, you're no longer you know, if

609
00:33:13,800 --> 00:33:16,320
Speaker 1: you're a Google you you only advertised in Mountain View

610
00:33:16,440 --> 00:33:18,640
Speaker 1: or Silicon Valley, right, But now since your your labor

611
00:33:18,720 --> 00:33:22,160
Speaker 1: pool is potentially uh can be spread across the country

612
00:33:22,240 --> 00:33:24,560
Speaker 1: or then the world, maybe you're gonna have ten job

613
00:33:24,640 --> 00:33:28,000
Speaker 1: posting for a single position. It's possible that there is

614
00:33:28,080 --> 00:33:32,840
Speaker 1: some of that. But to me, the real labor shortage,

615
00:33:32,840 --> 00:33:36,040
Speaker 1: and I think any labor economies would agree, is not

616
00:33:36,840 --> 00:33:41,200
Speaker 1: product manager at at at LinkedIn or or Facebook or

617
00:33:41,840 --> 00:33:47,280
Speaker 1: one more data scientists at Twitter. Uh, it's it's kind

618
00:33:47,320 --> 00:33:50,360
Speaker 1: of the old economy boring job that you know, I'm

619
00:33:50,400 --> 00:33:56,560
Speaker 1: going back to retail cash ears waiters and these are

620
00:33:56,640 --> 00:33:58,880
Speaker 1: not the kind of jobs that are posted on LinkedIn.

621
00:33:59,640 --> 00:34:03,040
Speaker 1: That with a son in bonus, um so I actually

622
00:34:03,120 --> 00:34:05,440
Speaker 1: do believe that the labor market is going to remain

623
00:34:05,520 --> 00:34:09,840
Speaker 1: tight um. And I'm not sure that we we want

624
00:34:10,560 --> 00:34:12,400
Speaker 1: to destroy it. I mean sure, you know, like like

625
00:34:12,480 --> 00:34:14,040
Speaker 1: I said, if if we get the fat forms rate

626
00:34:14,080 --> 00:34:18,040
Speaker 1: at ten percent, uh, we'll solve it. Wow, We'll have

627
00:34:18,280 --> 00:34:22,960
Speaker 1: you know, ten percent employment rate, we'll have food riots, uh,

628
00:34:23,080 --> 00:34:26,359
Speaker 1: and will undo the past few years we've actually seen

629
00:34:26,440 --> 00:34:29,880
Speaker 1: gains for young workers, for minority workers, for workers paid hourly,

630
00:34:30,040 --> 00:34:32,520
Speaker 1: for workers of our college degrees. I mean, this is

631
00:34:32,600 --> 00:34:34,719
Speaker 1: what we want it. Right for ten years, you know,

632
00:34:35,040 --> 00:34:38,880
Speaker 1: every double Summit was about, oh, how do we solve inequality?

633
00:34:39,040 --> 00:34:42,399
Speaker 1: You know, you know, because they care? Right? Uh, now

634
00:34:42,480 --> 00:34:46,480
Speaker 1: we have it. So why would we want to destroy that?

635
00:34:46,760 --> 00:34:51,680
Speaker 1: Especially as inflation is slowing naturally, like even even you know,

636
00:34:51,800 --> 00:34:54,359
Speaker 1: like why is inflation slowing because of commodities and US

637
00:34:54,400 --> 00:34:57,759
Speaker 1: cars and playing tickets? Um, So just because of its

638
00:34:57,800 --> 00:35:00,799
Speaker 1: own inertia, inflation is going to slow. So why would

639
00:35:00,840 --> 00:35:02,920
Speaker 1: you want to kill the labor market on top of

640
00:35:03,000 --> 00:35:05,680
Speaker 1: that event? And I want to go back to the

641
00:35:05,840 --> 00:35:08,000
Speaker 1: point you made about China because you mentioned China, but

642
00:35:08,120 --> 00:35:10,719
Speaker 1: we haven't really talked about and how what your views

643
00:35:10,719 --> 00:35:12,400
Speaker 1: are on what's going on there? Or what we can

644
00:35:12,480 --> 00:35:16,000
Speaker 1: expect from China and any potential reopening they have. I'm

645
00:35:16,000 --> 00:35:19,239
Speaker 1: wondering how hard it is to have conviction in your

646
00:35:19,800 --> 00:35:22,000
Speaker 1: views right now when China is such a big part

647
00:35:22,040 --> 00:35:24,640
Speaker 1: of the equation and we don't quite know what's going

648
00:35:24,719 --> 00:35:28,239
Speaker 1: to be happening with China, that that isn't an excellent point.

649
00:35:28,680 --> 00:35:33,520
Speaker 1: Uh And that's difficult, especially in commodity sectors right where

650
00:35:33,640 --> 00:35:36,560
Speaker 1: you know it's copper, iron ore, I mean, you know,

651
00:35:36,760 --> 00:35:41,279
Speaker 1: China famously consumes half of everything um and and the

652
00:35:41,400 --> 00:35:44,200
Speaker 1: fact that you know, Chinese policy is so erratic right

653
00:35:44,239 --> 00:35:47,040
Speaker 1: now makes it very hard to plan. Uh So in

654
00:35:47,120 --> 00:35:50,239
Speaker 1: the short term, unfortunately, I think there is no good

655
00:35:50,280 --> 00:35:53,520
Speaker 1: answer other than how would argue kind of avoiding it

656
00:35:53,680 --> 00:35:56,600
Speaker 1: and focusing on on non China I am the beamship

657
00:35:56,640 --> 00:36:01,000
Speaker 1: countries I mentioned. Um. In the long term, I actually

658
00:36:01,080 --> 00:36:05,200
Speaker 1: do think that that what we're seeing is is a

659
00:36:05,320 --> 00:36:09,080
Speaker 1: trap for the deflation is crowd to the pick inflation crowd, right,

660
00:36:09,160 --> 00:36:12,600
Speaker 1: because what's going on really is, you know, China is

661
00:36:12,680 --> 00:36:15,880
Speaker 1: looking down much harder than people thought. Uh And as

662
00:36:15,920 --> 00:36:20,320
Speaker 1: a result, that gets all your your iron or your copper,

663
00:36:20,600 --> 00:36:23,440
Speaker 1: your steel, or all the comedy prices are are falling

664
00:36:23,480 --> 00:36:27,239
Speaker 1: off a cliff and that makes you feel like, oh,

665
00:36:27,320 --> 00:36:31,040
Speaker 1: it's working. You know, infaction is slowing down, the fret

666
00:36:31,120 --> 00:36:33,719
Speaker 1: is the fet is solving the problem. No, it's not

667
00:36:34,719 --> 00:36:37,320
Speaker 1: the real problem. And I would argue it's not a problem,

668
00:36:37,480 --> 00:36:38,839
Speaker 1: but it's a problem if you want to go back

669
00:36:38,840 --> 00:36:40,640
Speaker 1: to the personal problem in the US is wages in

670
00:36:40,680 --> 00:36:44,200
Speaker 1: the labor market. But because of the China situation, we

671
00:36:44,320 --> 00:36:46,919
Speaker 1: are seeing this this air pocket that that inflation isn't

672
00:36:47,040 --> 00:36:51,400
Speaker 1: dropping very rapidly. But that's temporary, right, I mean, at

673
00:36:51,440 --> 00:36:53,120
Speaker 1: some point we know that China is going to reopen,

674
00:36:53,239 --> 00:36:55,440
Speaker 1: so whatever we are getting now in terms of deflation

675
00:36:55,520 --> 00:36:58,800
Speaker 1: will be tomorrows inflation. And then also what what the

676
00:36:59,160 --> 00:37:01,560
Speaker 1: China situation does is that it further messages up your

677
00:37:01,560 --> 00:37:05,000
Speaker 1: supply chained. It made the global economy less efficient, and

678
00:37:05,080 --> 00:37:06,520
Speaker 1: at the end of the day, that is a long

679
00:37:06,640 --> 00:37:10,080
Speaker 1: term problem with inflation is you know, if we cannot

680
00:37:10,760 --> 00:37:13,400
Speaker 1: you know, manufacture everything in China anymore and have the

681
00:37:13,520 --> 00:37:16,520
Speaker 1: super efficient supply chain with your inventory, we'll have to

682
00:37:16,560 --> 00:37:19,279
Speaker 1: pay more for stuff. So the more messed up China is,

683
00:37:19,360 --> 00:37:22,799
Speaker 1: the more inflation we have here. Eventually, So I think,

684
00:37:22,880 --> 00:37:25,600
Speaker 1: what what China is doing is laying out almost a

685
00:37:25,680 --> 00:37:29,200
Speaker 1: perfect trap for the uh. He always told you that

686
00:37:29,280 --> 00:37:32,239
Speaker 1: infection was going to beat crowd. Uh and and we'll

687
00:37:32,280 --> 00:37:35,040
Speaker 1: we'll get the second effect consequences in points only three.

688
00:37:35,880 --> 00:37:39,480
Speaker 1: Vincent tell Ward of Stone as always a real treat

689
00:37:39,560 --> 00:37:43,319
Speaker 1: to get your views. And I apologize that I front

690
00:37:43,440 --> 00:37:47,800
Speaker 1: ran your craziest thing there. That's that's bad bad etiquette

691
00:37:47,840 --> 00:37:50,640
Speaker 1: on my part. I do feel bad now. The data

692
00:37:51,320 --> 00:37:54,440
Speaker 1: trivia question about Et. Do you know the name of

693
00:37:54,520 --> 00:37:57,640
Speaker 1: the actor who actually played Et? No, I have no coal.

694
00:37:57,960 --> 00:37:59,799
Speaker 1: Do you think there was an actor inside the suit

695
00:38:00,000 --> 00:38:04,800
Speaker 1: playing Et? I don't know how they did it about it.

696
00:38:05,120 --> 00:38:07,880
Speaker 1: It was not a small, little skinny neck actor inside

697
00:38:07,920 --> 00:38:11,919
Speaker 1: of it. It was actually a mechatronic model. It's really cool.

698
00:38:12,400 --> 00:38:14,480
Speaker 1: I wish you know on the podcast you can't. I

699
00:38:14,560 --> 00:38:19,080
Speaker 1: can't really describe it. But it's this sale bundle of

700
00:38:19,520 --> 00:38:24,400
Speaker 1: cables and circuits and metal and it is for sale.

701
00:38:25,560 --> 00:38:31,240
Speaker 1: Mecatronic model used is going up for auction at Julian's auction.

702
00:38:31,920 --> 00:38:33,480
Speaker 1: Let me tell you a little bit about it before

703
00:38:33,480 --> 00:38:37,680
Speaker 1: the bidding starts in our Prices precise segment, which Vincent,

704
00:38:37,719 --> 00:38:39,600
Speaker 1: by the way, I regret to inform you you are

705
00:38:39,600 --> 00:38:43,520
Speaker 1: a contestant on our game show. The prices precise, precise.

706
00:38:44,719 --> 00:38:47,560
Speaker 1: It's made from Dora aluminum. Try. I don't even not

707
00:38:47,640 --> 00:38:50,400
Speaker 1: insure what that is. It has eighty five points of movement.

708
00:38:50,520 --> 00:38:55,319
Speaker 1: It can blink, make abdomen rotations. Uh. It's enabled through

709
00:38:55,400 --> 00:38:59,600
Speaker 1: both electric and mechanical cables. Takes twelve people. By the

710
00:38:59,640 --> 00:39:04,759
Speaker 1: way it's operate the ET model UM one disupporting A

711
00:39:04,840 --> 00:39:07,440
Speaker 1: hole in the story from art net where I got

712
00:39:07,520 --> 00:39:10,560
Speaker 1: this is. They don't tell you if it's still operating

713
00:39:11,000 --> 00:39:12,560
Speaker 1: the way it should. I assume it is, I thought,

714
00:39:13,200 --> 00:39:15,279
Speaker 1: I think. I assume it probably is. I don't know.

715
00:39:15,480 --> 00:39:17,600
Speaker 1: You know, these things are built to last. There's uh,

716
00:39:17,800 --> 00:39:20,560
Speaker 1: you know, it looks like it is anyway. However, this

717
00:39:20,760 --> 00:39:26,600
Speaker 1: ET mechatronic model is considered his masterpiece. So the question

718
00:39:26,680 --> 00:39:28,880
Speaker 1: for you two is what do you think the auction

719
00:39:28,960 --> 00:39:33,400
Speaker 1: house expects to get the winning bid for the mechatronic

720
00:39:33,480 --> 00:39:36,560
Speaker 1: model of ET. You're ready to bid, You're ready to bid.

721
00:39:37,360 --> 00:39:41,719
Speaker 1: I'm gonna go with three point eight million. Three point

722
00:39:41,760 --> 00:39:47,560
Speaker 1: eight million. Vincent's making big eyes. I'm gonna say one above,

723
00:39:48,120 --> 00:39:50,040
Speaker 1: what do you have three point eight three point It

724
00:39:50,120 --> 00:39:52,400
Speaker 1: seems like a lot, honesty. Do you know what I'm

725
00:39:52,480 --> 00:39:58,920
Speaker 1: gonna No, No, the FED height rates, Uh you know comies. No,

726
00:39:59,680 --> 00:40:01,239
Speaker 1: I'm I'm going to go to I'm gonna go at

727
00:40:01,560 --> 00:40:05,240
Speaker 1: one two million, one point two million, I think, given

728
00:40:05,640 --> 00:40:10,600
Speaker 1: the rules of the game. Unfortunately, Vincent Juan Villdonna, when

729
00:40:10,600 --> 00:40:13,800
Speaker 1: you were closer, you were closer. But but Vincent Winds

730
00:40:14,040 --> 00:40:19,040
Speaker 1: given uh you Bob over three million. It's what they're expecting.

731
00:40:21,680 --> 00:40:24,720
Speaker 1: I can kind of see that for you know, a movie,

732
00:40:26,160 --> 00:40:30,200
Speaker 1: you know, I can kind of see it. Okay, should

733
00:40:30,200 --> 00:40:32,040
Speaker 1: I go? Mine is very good too? But I love

734
00:40:32,080 --> 00:40:35,360
Speaker 1: your teeth? So that was really good. Okay, And we

735
00:40:35,480 --> 00:40:39,319
Speaker 1: have to talk about crypto. What's a week this year

736
00:40:39,640 --> 00:40:43,759
Speaker 1: without crypto? So this this story is from the Ft.

737
00:40:44,200 --> 00:40:47,440
Speaker 1: It's about all the lavish spending that happened at f

738
00:40:47,600 --> 00:40:51,320
Speaker 1: t X. First, the story says Amazon didn't deliver to

739
00:40:51,400 --> 00:40:53,920
Speaker 1: the Bahamas, so f TX actually hired a private air

740
00:40:54,040 --> 00:40:58,040
Speaker 1: carrier to fly in orders. They's been three d million

741
00:40:58,080 --> 00:41:00,680
Speaker 1: dollars in real estate in the Bahamas, and the Ft

742
00:41:00,760 --> 00:41:03,240
Speaker 1: says most of those purchases related to homes and vacation

743
00:41:03,320 --> 00:41:06,560
Speaker 1: properties used by senior executives. Then they had round the

744
00:41:06,640 --> 00:41:10,960
Speaker 1: clock catering. They had free groceries, a barbershop pop up,

745
00:41:11,200 --> 00:41:14,920
Speaker 1: bi weekly massages. They had a full street of cars

746
00:41:15,120 --> 00:41:19,399
Speaker 1: and gas covered for all employees, and also unlimited, full

747
00:41:19,520 --> 00:41:22,960
Speaker 1: expense covered trips to any office globally. That sounds cool.

748
00:41:23,560 --> 00:41:26,760
Speaker 1: Staff at f t X US, So that's the US

749
00:41:26,920 --> 00:41:30,359
Speaker 1: arm of f t X. Separate, separate arm. But they

750
00:41:30,400 --> 00:41:34,920
Speaker 1: were allowed two hundred dollars a day indoor dash delivery credits.

751
00:41:35,160 --> 00:41:38,520
Speaker 1: That's all that stood out to me. Two who could

752
00:41:38,520 --> 00:41:41,520
Speaker 1: spend two hundred like I would spend thirty bucks? And

753
00:41:42,280 --> 00:41:46,120
Speaker 1: and then the last one is Almita Research owed Margaritaville

754
00:41:46,560 --> 00:41:54,960
Speaker 1: in Nassau nine open Jimmy Buffett restaurant, Yes, exactly, yep,

755
00:41:55,239 --> 00:41:57,400
Speaker 1: my goodness. But they were told to be good tippers

756
00:41:57,560 --> 00:42:01,239
Speaker 1: because of the whole altruism thing. So there's that. I

757
00:42:01,280 --> 00:42:03,160
Speaker 1: don't know they're gonna miss them down there in the Bahamas.

758
00:42:03,400 --> 00:42:07,000
Speaker 1: The bartenders of the Bahamas and the waiters and waitresses

759
00:42:07,120 --> 00:42:11,239
Speaker 1: might be the hardest hit, uh, victims of this unbelievable then,

760
00:42:11,320 --> 00:42:13,360
Speaker 1: So have you ever spent two hundred a day on DoorDash?

761
00:42:17,560 --> 00:42:20,839
Speaker 1: He's shaking his head, no, yeah, speechless. That's good, right,

762
00:42:21,800 --> 00:42:23,839
Speaker 1: how's it going? That was a good good stuff? Hey

763
00:42:24,000 --> 00:42:27,120
Speaker 1: they I don't know. I don't know what to say

764
00:42:27,200 --> 00:42:29,839
Speaker 1: anymore about F t X. The minute you think you've

765
00:42:29,920 --> 00:42:32,240
Speaker 1: heard it all, it just keeps getting stranger and stranger.

766
00:42:32,560 --> 00:42:35,880
Speaker 1: Well I'm gonna add my own strange thing to that.

767
00:42:36,040 --> 00:42:38,719
Speaker 1: And again, apologies, I'm going on the fly here. But

768
00:42:39,320 --> 00:42:41,680
Speaker 1: so this is more of a question than a crazy thing. Um.

769
00:42:41,880 --> 00:42:46,920
Speaker 1: I still on Twitter, and apparently there's already a movie. Um,

770
00:42:47,200 --> 00:42:48,960
Speaker 1: of course there's always a movie being ready, you know,

771
00:42:49,080 --> 00:42:52,359
Speaker 1: like Netflix now will come out with movies before the event.

772
00:42:52,400 --> 00:42:57,920
Speaker 1: Actually take the case. And one thing that really puzzled

773
00:42:58,000 --> 00:43:01,319
Speaker 1: me was they had rhyme Goslings SBF. Have you guys

774
00:43:01,440 --> 00:43:04,280
Speaker 1: seen that? And was that? Was that like a fake?

775
00:43:04,760 --> 00:43:09,040
Speaker 1: Or who thought that would be a good idea? I

776
00:43:09,120 --> 00:43:14,040
Speaker 1: did not see Ryan Gosling being started SPF. Is there

777
00:43:14,320 --> 00:43:17,759
Speaker 1: is there truth to this rumor? Maybe we should ask

778
00:43:17,840 --> 00:43:20,120
Speaker 1: the audit? You never know. I mean they did give

779
00:43:20,200 --> 00:43:24,120
Speaker 1: him like a weird uh wig and they tried their

780
00:43:24,200 --> 00:43:29,520
Speaker 1: best to to to hide our attractive he is. But um,

781
00:43:30,120 --> 00:43:33,520
Speaker 1: we still very far from you know, the original cast.

782
00:43:36,840 --> 00:43:40,239
Speaker 1: I actuously await that movie regardless of who it is.

783
00:43:40,600 --> 00:43:43,080
Speaker 1: Where was that guy Seth Rogan. I think I could

784
00:43:43,080 --> 00:43:45,120
Speaker 1: play him right with the curly hair. Yes, Seth rog

785
00:43:45,320 --> 00:43:48,880
Speaker 1: would be a much better pick. Yeah up to Uh.

786
00:43:49,719 --> 00:43:51,560
Speaker 1: But but if if I may use this like as

787
00:43:51,640 --> 00:43:54,080
Speaker 1: as you know, an opportunity to kind of make a

788
00:43:54,480 --> 00:43:59,040
Speaker 1: broader social case. UM. I think if you look at

789
00:43:59,080 --> 00:44:01,800
Speaker 1: the list of the top grossing movies or documentaries of

790
00:44:01,880 --> 00:44:05,200
Speaker 1: the past couple of years, it's all about fraud. You know,

791
00:44:05,400 --> 00:44:09,279
Speaker 1: you got your your Tinder swindler, your Anna you know

792
00:44:10,480 --> 00:44:15,120
Speaker 1: is so good paraos. Uh, of course it's going to

793
00:44:15,200 --> 00:44:19,360
Speaker 1: be the crypto stuff. And I think it says something

794
00:44:19,440 --> 00:44:22,560
Speaker 1: about U, you know, the time we live in um

795
00:44:22,760 --> 00:44:25,400
Speaker 1: compared to you know when when I was growing up.

796
00:44:25,480 --> 00:44:27,759
Speaker 1: You know, it's your your rambos and rockies, you know,

797
00:44:27,880 --> 00:44:31,000
Speaker 1: kind of manly matchual man and and now we have

798
00:44:31,160 --> 00:44:34,840
Speaker 1: this really weird sub general that is highly popular of

799
00:44:35,120 --> 00:44:39,960
Speaker 1: all fire festival like you know, documentaries about epic frauds um.

800
00:44:40,600 --> 00:44:42,600
Speaker 1: And I think it, you know, it speak to the

801
00:44:42,880 --> 00:44:46,719
Speaker 1: zygas of our time. That's pretty good observation. Actually, So

802
00:44:47,120 --> 00:44:50,920
Speaker 1: someone Vell Donna could uh cough make a story out

803
00:44:50,920 --> 00:44:54,240
Speaker 1: of that. Perhaps I could, Perhaps this is a good idea,

804
00:44:54,760 --> 00:44:56,880
Speaker 1: but no, It's true when you when you log into Netflix,

805
00:44:56,960 --> 00:44:59,200
Speaker 1: it tells you what's trending on Netflix, and it is

806
00:44:59,239 --> 00:45:03,279
Speaker 1: always tender Swindler, a couple of like those Love Is

807
00:45:03,320 --> 00:45:07,040
Speaker 1: Blind shows, which I'm gonna admit I love those films.

808
00:45:07,080 --> 00:45:10,640
Speaker 1: They're so fun to watch. And then yeah, the rest

809
00:45:10,760 --> 00:45:14,200
Speaker 1: is like stuff that's happened. That's real life stories where

810
00:45:14,360 --> 00:45:17,480
Speaker 1: somebody got swindled out of a lot of money. Yeah,

811
00:45:18,440 --> 00:45:20,160
Speaker 1: there you go. Oh with the Hollywood, who were the

812
00:45:20,719 --> 00:45:22,840
Speaker 1: two that were breaking in all the Hollywood stars? That

813
00:45:22,960 --> 00:45:24,120
Speaker 1: was a big one too, And what was the name

814
00:45:24,160 --> 00:45:27,680
Speaker 1: of that? I don't remember, you know they were they

815
00:45:27,760 --> 00:45:31,439
Speaker 1: became famous for breaking in all the Hollywood I don't

816
00:45:31,840 --> 00:45:34,480
Speaker 1: I'll buy duxt Holmes. Was that the name of it?

817
00:45:34,800 --> 00:45:38,320
Speaker 1: Bling Ring, Our producer Stacy says, it's ring, Thank you,

818
00:45:38,480 --> 00:45:41,200
Speaker 1: Stacy bling Ring. You know, they would go on social

819
00:45:41,239 --> 00:45:43,839
Speaker 1: media and if some a list celebrity was like looking

820
00:45:43,880 --> 00:45:46,279
Speaker 1: forward to a vacation in Hawaii, they'd be like, all right,

821
00:45:46,600 --> 00:45:49,040
Speaker 1: they'd head to their house and rip them off. Not

822
00:45:49,160 --> 00:45:53,280
Speaker 1: quite fraud, but smart criminals. That's a good observation. Vincent

823
00:45:53,400 --> 00:45:57,719
Speaker 1: tell Ward Uh, director of Global macro Strategy at stone X,

824
00:45:57,960 --> 00:46:01,640
Speaker 1: always fascinating to hear how you thinking about markets and

825
00:46:01,920 --> 00:46:04,319
Speaker 1: movies too, So we appreciate it and hope we can

826
00:46:04,360 --> 00:46:06,600
Speaker 1: bring you back again someday soon. Yeah, thank you, Vincent,

827
00:46:15,080 --> 00:46:17,120
Speaker 1: What Goes Up We'll be back next week and so

828
00:46:17,239 --> 00:46:19,520
Speaker 1: then you can find us on the Bloomberg Terminal website

829
00:46:19,560 --> 00:46:22,920
Speaker 1: and app or wherever you get your podcasts. We love

830
00:46:22,960 --> 00:46:24,720
Speaker 1: it if you took the time to rate and review

831
00:46:24,800 --> 00:46:27,839
Speaker 1: the show on Apple Podcasts, so more listeners can find us.

832
00:46:28,440 --> 00:46:30,640
Speaker 1: And you can find us on Twitter follow me at

833
00:46:30,680 --> 00:46:35,080
Speaker 1: Rea Anonymous. Bill Donna Hirich is at Bildonna Hirich. You

834
00:46:35,120 --> 00:46:39,680
Speaker 1: can also follow Bloomberg Podcasts at podcasts. What Goes Up

835
00:46:39,800 --> 00:46:42,520
Speaker 1: is produced by Stacy Wong. Thanks for listening, See you

836
00:46:42,600 --> 00:47:00,160
Speaker 1: next time. Wh