1 00:00:13,160 --> 00:00:16,640 Speaker 1: Hello, and welcome to What Goes Up, a Bloomberg Weekly 2 00:00:16,720 --> 00:00:20,400 Speaker 1: Markets podcast. I'm Sara Ponte, a reporter on the Cross 3 00:00:20,400 --> 00:00:23,239 Speaker 1: Asset team, and I'm Mike Reagan, a senior editor on 4 00:00:23,280 --> 00:00:26,240 Speaker 1: the Markets Team. This week on the show, we're going abroad. 5 00:00:26,600 --> 00:00:30,040 Speaker 1: The Brexit saga continues and civil unrest is growing across 6 00:00:30,080 --> 00:00:33,840 Speaker 1: countries and continents. What does that mean for markets? We'll 7 00:00:33,880 --> 00:00:36,760 Speaker 1: also talk credit, and we'll discuss whether or not some 8 00:00:36,840 --> 00:00:40,519 Speaker 1: cracks are actually starting to emerge, and of course, speaking 9 00:00:40,520 --> 00:00:43,600 Speaker 1: of cracks, will talk about the craziest things we saw 10 00:00:43,800 --> 00:00:48,360 Speaker 1: in markets this week. You see what I did there? Go? Okay, 11 00:00:48,360 --> 00:00:51,840 Speaker 1: I'm glad someone sorry, But as you said, we're gonna 12 00:00:52,000 --> 00:00:55,560 Speaker 1: take a look abroad for much of today's program. I 13 00:00:55,600 --> 00:00:58,040 Speaker 1: also do want to get sort of a temperature check 14 00:00:58,040 --> 00:01:01,120 Speaker 1: on the U S Stock market, And luckily for us, 15 00:01:01,160 --> 00:01:03,840 Speaker 1: our first guest is a guy who can speak with 16 00:01:03,880 --> 00:01:08,280 Speaker 1: authority on all of these uh subjects as a expatriate 17 00:01:08,840 --> 00:01:13,679 Speaker 1: brit As a expert of Latin markets from spending some 18 00:01:13,760 --> 00:01:18,520 Speaker 1: time in Mexico City for the Financial Times. The only 19 00:01:18,520 --> 00:01:21,679 Speaker 1: thing missing this week is a Red Sox appearance in 20 00:01:21,680 --> 00:01:25,520 Speaker 1: the World series to make him aboutely perfect guests for 21 00:01:25,600 --> 00:01:27,679 Speaker 1: this week, and I hate to rub that in, but 22 00:01:27,800 --> 00:01:30,119 Speaker 1: John authors, welcome to the show. We can live with it. 23 00:01:30,120 --> 00:01:33,240 Speaker 1: It's we'll not let Yankee fans who needs, you know, 24 00:01:33,240 --> 00:01:37,959 Speaker 1: who needs the championship every year to justify their existence. 25 00:01:38,280 --> 00:01:41,920 Speaker 1: I'm very happy to live in the the aura of 26 00:01:42,080 --> 00:01:47,000 Speaker 1: last year as a Phillies fan. I'll take once that 27 00:01:47,160 --> 00:01:50,040 Speaker 1: was John's way of rubbing the rough Yankees loss. And yes, 28 00:01:51,280 --> 00:01:55,920 Speaker 1: that's right. And she catches everything. You can't get anything. 29 00:01:56,200 --> 00:01:59,320 Speaker 1: Sarah also joining us this week. Now, Sarah, let me 30 00:01:59,400 --> 00:02:02,360 Speaker 1: introduce this guest by saying, I'm thinking back to two 31 00:02:02,360 --> 00:02:06,120 Speaker 1: thousand and sixteen. There's a lot of concern about the 32 00:02:06,160 --> 00:02:09,880 Speaker 1: so called turn in the credit cycle. And as a 33 00:02:09,880 --> 00:02:12,520 Speaker 1: guy who's covered stock markets for way too long, I 34 00:02:12,520 --> 00:02:15,840 Speaker 1: can tell you stock market people get very nervous when 35 00:02:15,840 --> 00:02:18,000 Speaker 1: they hear about a potential turn in the credit market. 36 00:02:18,000 --> 00:02:20,400 Speaker 1: I think the thinking is that fixed income investors are 37 00:02:20,639 --> 00:02:23,680 Speaker 1: a little bit smarter than your average stock trader. They 38 00:02:23,720 --> 00:02:26,840 Speaker 1: see things coming down the pike. But anyway, Lisa Brahmowitz 39 00:02:26,919 --> 00:02:29,280 Speaker 1: and I at the time wrote a calm for what 40 00:02:29,320 --> 00:02:31,800 Speaker 1: was Gadfly then it's now part of Bloomberg Opinion. But 41 00:02:32,120 --> 00:02:35,240 Speaker 1: we made the quip in the beginning that maybe we'll 42 00:02:35,280 --> 00:02:39,400 Speaker 1: both be in retirement homes when this credit cycle finally turns. 43 00:02:40,160 --> 00:02:41,880 Speaker 1: I gotta say it might be time to call the 44 00:02:41,880 --> 00:02:45,399 Speaker 1: retirement home, get me some some slacks with the elastic 45 00:02:45,400 --> 00:02:48,160 Speaker 1: waste band, and uh, I don't know a nice easy 46 00:02:48,200 --> 00:02:52,760 Speaker 1: boy because I read something there it's drama. I read 47 00:02:52,760 --> 00:02:55,320 Speaker 1: something this week that makes me once again wonder is 48 00:02:55,360 --> 00:02:58,000 Speaker 1: the credit cycle turning? Dun Hunt Hunt? But to help 49 00:02:58,080 --> 00:03:00,800 Speaker 1: us get through that, we're happy to have a first 50 00:03:00,800 --> 00:03:03,440 Speaker 1: time we're on the show. Long time listener, I hope 51 00:03:03,760 --> 00:03:06,320 Speaker 1: Molly Smith from the Credit team, welcome to what goes up. 52 00:03:06,520 --> 00:03:11,040 Speaker 1: Don't get those pants just yet. You're good. The credit 53 00:03:11,080 --> 00:03:13,640 Speaker 1: cycle is a you know those baseball fans out there 54 00:03:13,680 --> 00:03:16,880 Speaker 1: want to say, is in its ninth, tenth, whatever inning 55 00:03:16,919 --> 00:03:22,320 Speaker 1: we're talking about. So we're just gonna keep on rolling streak, 56 00:03:22,440 --> 00:03:26,400 Speaker 1: is it okay? But John, before we go abroad, I 57 00:03:26,400 --> 00:03:28,359 Speaker 1: do want to start with you and just sort of 58 00:03:28,520 --> 00:03:33,040 Speaker 1: get your sort of thirty thousand foot view of the 59 00:03:33,120 --> 00:03:35,640 Speaker 1: US stock market right now. I know you were a 60 00:03:35,640 --> 00:03:40,200 Speaker 1: little bearish uh this year based on valuations. Uh, but 61 00:03:40,360 --> 00:03:43,080 Speaker 1: I feel like you're sort of coming around to the 62 00:03:43,120 --> 00:03:45,280 Speaker 1: bowl case a little bit. Walk us through how you're 63 00:03:45,280 --> 00:03:49,720 Speaker 1: looking at this. That's that's questionable. I've been I've been too. 64 00:03:49,760 --> 00:03:52,560 Speaker 1: I've been too incorrectly bearish for too long on uk 65 00:03:52,760 --> 00:03:55,560 Speaker 1: US stocks too. To compitulate totally, because I know that 66 00:03:55,600 --> 00:03:58,640 Speaker 1: if I truly capitulate, that will be the moment when 67 00:03:58,680 --> 00:04:01,280 Speaker 1: we make the peak. You this is something that all 68 00:04:01,440 --> 00:04:04,120 Speaker 1: market reporters sort of the prayer that you start with 69 00:04:04,200 --> 00:04:06,720 Speaker 1: a Lord, do not make me into a contrarian. INDI 70 00:04:08,120 --> 00:04:11,120 Speaker 1: so um no, I can I continue to think that 71 00:04:11,160 --> 00:04:13,440 Speaker 1: in the in the very long term, if you're talking 72 00:04:13,440 --> 00:04:16,520 Speaker 1: about the kind of people who read US are most 73 00:04:16,560 --> 00:04:20,039 Speaker 1: interested in long term asset allocation, it's very, very hard 74 00:04:20,080 --> 00:04:24,160 Speaker 1: to be excited about US stocks because any sensible measurement, 75 00:04:24,560 --> 00:04:28,680 Speaker 1: they are historically expensive and the only reason they look 76 00:04:29,000 --> 00:04:33,080 Speaker 1: like a decent buy is that they are relatively cheap 77 00:04:33,480 --> 00:04:41,240 Speaker 1: compared to so that continues to be the case. What 78 00:04:41,600 --> 00:04:46,360 Speaker 1: I think it probably is fair to suggest is that 79 00:04:46,440 --> 00:04:51,320 Speaker 1: there is just so much negativity, so many genuinely really 80 00:04:51,560 --> 00:04:57,000 Speaker 1: good reasons, excuses, but also reasons to get the heck 81 00:04:57,279 --> 00:05:00,200 Speaker 1: out of the stock markets, and instead we are still 82 00:05:00,480 --> 00:05:03,720 Speaker 1: very close to this sort of invisible, invisible lid of 83 00:05:04,000 --> 00:05:06,839 Speaker 1: about three thousands on the SMP that that does suggest 84 00:05:06,880 --> 00:05:09,840 Speaker 1: that once a few good pieces of news came in 85 00:05:10,040 --> 00:05:12,560 Speaker 1: short term, that's got to be a good reason to 86 00:05:12,920 --> 00:05:15,320 Speaker 1: think that the pain trade will be particularly for people 87 00:05:15,320 --> 00:05:17,200 Speaker 1: like me. You've been telling you to give market that 88 00:05:17,240 --> 00:05:19,000 Speaker 1: the pain trade will be will be up on the 89 00:05:19,000 --> 00:05:22,159 Speaker 1: stock market. So tactically, no, I don't think there is 90 00:05:22,240 --> 00:05:26,560 Speaker 1: good reason with what we know now to be hugely, 91 00:05:27,480 --> 00:05:31,159 Speaker 1: hugely bearish long term. If you've got a choice between 92 00:05:31,760 --> 00:05:33,719 Speaker 1: if you've got a choice between haven assets, or if 93 00:05:33,720 --> 00:05:36,880 Speaker 1: you've got a choice of other equity markets around the 94 00:05:36,920 --> 00:05:38,920 Speaker 1: world in which to invest for the next ten years 95 00:05:39,400 --> 00:05:42,279 Speaker 1: or longer, I'm still bearish about the U S stock market. 96 00:05:42,680 --> 00:05:45,400 Speaker 1: John one investor over at UBS, said something to me 97 00:05:45,440 --> 00:05:47,640 Speaker 1: that really struck me this week, and he said, the 98 00:05:47,680 --> 00:05:50,760 Speaker 1: pain trade won't just be stocks going up. The pain 99 00:05:50,839 --> 00:05:54,040 Speaker 1: trade will be a potential rotation. And we've been hearing 100 00:05:54,080 --> 00:05:56,080 Speaker 1: about this now for a couple of weeks, and we've 101 00:05:56,120 --> 00:05:58,760 Speaker 1: started to see some strong performance and the likes of 102 00:05:58,839 --> 00:06:01,839 Speaker 1: banks and the like of likes of energy shares. Do 103 00:06:01,880 --> 00:06:03,960 Speaker 1: you get the sense that this is something that will 104 00:06:04,000 --> 00:06:07,240 Speaker 1: actually be sticky and we might actually see this takeover 105 00:06:07,279 --> 00:06:09,159 Speaker 1: as there it's is, it's still just way too soon 106 00:06:09,200 --> 00:06:12,200 Speaker 1: to tell. It's well, it's too soon so but but 107 00:06:12,680 --> 00:06:15,520 Speaker 1: we did have about a month or so ago now, 108 00:06:15,560 --> 00:06:17,719 Speaker 1: we had the quant apocalypse or whatever you want to 109 00:06:17,760 --> 00:06:21,599 Speaker 1: call it. When momentum, the momentum strategy, the momentum factor 110 00:06:21,680 --> 00:06:25,279 Speaker 1: really did have quite a severe crash. That's the whole 111 00:06:25,320 --> 00:06:28,040 Speaker 1: point of momentum. It works most of the time and 112 00:06:28,200 --> 00:06:31,800 Speaker 1: very occasionally really crashes um. But the fact that that 113 00:06:31,880 --> 00:06:35,560 Speaker 1: happens is an indicative that something may be ready there 114 00:06:35,600 --> 00:06:40,080 Speaker 1: for the turn um. Value stocks is another one of 115 00:06:40,080 --> 00:06:43,760 Speaker 1: those things. I consider myself a value guy. Uh. The 116 00:06:43,839 --> 00:06:46,520 Speaker 1: number of times it's looked as though value is ready 117 00:06:46,600 --> 00:06:49,520 Speaker 1: to turn and take over again in the last decade 118 00:06:49,880 --> 00:06:53,479 Speaker 1: is enough to make a grown man weep. Um. It's 119 00:06:53,480 --> 00:06:58,120 Speaker 1: like waiting for God. Oh I would I mean everything. 120 00:06:58,240 --> 00:06:59,960 Speaker 1: I suppose it's fair to say that with the past 121 00:07:00,000 --> 00:07:04,440 Speaker 1: sing of time UM, we must be getting closer to 122 00:07:04,520 --> 00:07:07,400 Speaker 1: a point of value out performance. I guess that's fair 123 00:07:07,440 --> 00:07:09,840 Speaker 1: to say. And when you think about it, Um, there's 124 00:07:09,840 --> 00:07:11,880 Speaker 1: a school of thought, and I admit I might be 125 00:07:11,920 --> 00:07:14,520 Speaker 1: the only pupil in the school of thought, but that 126 00:07:14,760 --> 00:07:19,360 Speaker 1: stock market corrections can occur on both accesses of the graph, 127 00:07:19,440 --> 00:07:22,520 Speaker 1: you know, not just price, but time, and if the 128 00:07:22,600 --> 00:07:26,040 Speaker 1: market is basically not that far above where it was 129 00:07:26,120 --> 00:07:29,120 Speaker 1: in January of two thousand and eighteen, that's a very 130 00:07:29,240 --> 00:07:31,640 Speaker 1: very good point, and I think that it should be 131 00:07:31,680 --> 00:07:36,440 Speaker 1: made more often that basically you can make a very 132 00:07:36,480 --> 00:07:39,800 Speaker 1: good case for for the vol apocalypse, as I think 133 00:07:39,960 --> 00:07:42,400 Speaker 1: that that was the volpocalypse that might not round. The 134 00:07:42,440 --> 00:07:46,040 Speaker 1: quanto pocalypse at the beginning of February of last year 135 00:07:46,120 --> 00:07:48,680 Speaker 1: really was something of a turning point. That we had 136 00:07:48,680 --> 00:07:53,160 Speaker 1: a brief melt up after the tax reform, and in 137 00:07:53,200 --> 00:07:56,640 Speaker 1: many ways, depending on how you measure it, nothing has 138 00:07:56,680 --> 00:07:59,320 Speaker 1: happened since then. You can also make an argument if 139 00:07:59,320 --> 00:08:04,760 Speaker 1: you're looking at bonds versus stocks, the classic acid allocator 140 00:08:05,320 --> 00:08:09,760 Speaker 1: way of looking at it, sort of last fall, when 141 00:08:10,000 --> 00:08:12,440 Speaker 1: if you if you remember, we were all worried about 142 00:08:12,640 --> 00:08:17,920 Speaker 1: yields going up, right, yes, and and so there was 143 00:08:17,960 --> 00:08:21,000 Speaker 1: there's another turning point that has not been returned to 144 00:08:21,320 --> 00:08:25,120 Speaker 1: when you look at stocks relative to bonds later last year. 145 00:08:25,360 --> 00:08:28,880 Speaker 1: So you, I do agree with you. You corrections don't 146 00:08:28,920 --> 00:08:30,800 Speaker 1: have to be violent and over the passing of time. 147 00:08:31,320 --> 00:08:33,600 Speaker 1: You could say we are in a correcting phase. Yes, 148 00:08:33,640 --> 00:08:36,800 Speaker 1: all right, so Molly, let's switch over to you. I 149 00:08:36,840 --> 00:08:39,360 Speaker 1: gotta say I was kind of looking forward to shopping 150 00:08:39,400 --> 00:08:44,040 Speaker 1: for retirement homes. I my time come and the elastic 151 00:08:44,080 --> 00:08:50,400 Speaker 1: wastman pants you can still wear, can have some suspenders on, 152 00:08:51,400 --> 00:08:54,560 Speaker 1: taking my my hopes and dreams here. My dad used 153 00:08:54,559 --> 00:08:57,200 Speaker 1: to do the rest in peace, Joe Reagan. My dad 154 00:08:57,240 --> 00:08:59,720 Speaker 1: used to do the sweatpants with suspenders. That is the 155 00:08:59,720 --> 00:09:04,280 Speaker 1: power or a retiree. That's what I exactly I'm looking for. 156 00:09:05,960 --> 00:09:08,000 Speaker 1: But let me just read something that came out from 157 00:09:08,400 --> 00:09:10,800 Speaker 1: your colleagues on the credit team this week and the 158 00:09:10,800 --> 00:09:13,000 Speaker 1: headline it's beginning to look a lot like two thousand 159 00:09:13,040 --> 00:09:16,240 Speaker 1: and nine. But let me read the lead. Lead. Investors beware, 160 00:09:16,400 --> 00:09:18,880 Speaker 1: key indicators of a turn in the credit cycle are 161 00:09:18,880 --> 00:09:22,240 Speaker 1: starting to emerge, reaching levels not seen since the last recession. 162 00:09:22,800 --> 00:09:26,800 Speaker 1: Upgrades of US companies in high yield markets are trailing 163 00:09:26,880 --> 00:09:29,280 Speaker 1: down grades by the most since two thousand and nine, 164 00:09:29,280 --> 00:09:32,679 Speaker 1: and according to SMP level ratings, so it's focusing on 165 00:09:32,760 --> 00:09:38,480 Speaker 1: the upgrade to downgrade ratio um well, obviously, yield spreads 166 00:09:38,480 --> 00:09:43,960 Speaker 1: are still not screaming anything, any alarm bells um to 167 00:09:44,040 --> 00:09:46,320 Speaker 1: the market at all. But what's your sort of overview 168 00:09:46,320 --> 00:09:49,160 Speaker 1: from sort of the macro perspective of the credit markets 169 00:09:49,240 --> 00:09:51,439 Speaker 1: right now? Yeah, I think when you want to talk 170 00:09:51,480 --> 00:09:54,520 Speaker 1: about it from a macro perspective, that the more leading 171 00:09:54,559 --> 00:09:56,920 Speaker 1: indicator would be what are yield telling you? What are 172 00:09:56,960 --> 00:09:59,920 Speaker 1: spread selling you? What are market participants who are investing 173 00:10:00,240 --> 00:10:02,679 Speaker 1: in these products that would then give you these yields 174 00:10:02,679 --> 00:10:05,280 Speaker 1: and spreads? What are they telling you? Um? And that's 175 00:10:05,280 --> 00:10:07,440 Speaker 1: not just at all to the rating agencies, but they're 176 00:10:07,480 --> 00:10:10,200 Speaker 1: not putting any of the money into the markets right now, 177 00:10:10,240 --> 00:10:12,320 Speaker 1: so it's a bit a bit harder to gauge the 178 00:10:12,360 --> 00:10:16,520 Speaker 1: pulse from that audience alone. So when we're looking at 179 00:10:16,679 --> 00:10:18,920 Speaker 1: just talking about how does credit feel right now? Is 180 00:10:18,960 --> 00:10:21,760 Speaker 1: this two thousand nine is the cycle turning? It's really 181 00:10:21,760 --> 00:10:23,800 Speaker 1: hard to say that. Right now. Credit is having a 182 00:10:23,800 --> 00:10:26,679 Speaker 1: remarkable year in both investment grade and high yield. On 183 00:10:26,720 --> 00:10:29,559 Speaker 1: the corporate bond side, we're up double digits in both 184 00:10:29,600 --> 00:10:32,600 Speaker 1: asset classes. And if you've held either of those from 185 00:10:32,640 --> 00:10:35,160 Speaker 1: the beginning of the year, I mean you really haven't 186 00:10:35,160 --> 00:10:37,800 Speaker 1: had to touch either. You've made a remarkable return from 187 00:10:37,840 --> 00:10:41,160 Speaker 1: just holding the index in either one. Obviously, there are 188 00:10:41,200 --> 00:10:44,240 Speaker 1: different exceptions to that, like when you look at leverage 189 00:10:44,240 --> 00:10:47,079 Speaker 1: loans that's been a source pat this year. Obviously big 190 00:10:47,160 --> 00:10:50,120 Speaker 1: part of that stemming from when the FED has has 191 00:10:50,200 --> 00:10:52,520 Speaker 1: reverse course from the end of last year, going from 192 00:10:52,640 --> 00:10:56,000 Speaker 1: hiking rights to now in a cutting cycle or or 193 00:10:56,040 --> 00:10:59,640 Speaker 1: a pause at least, and as J. Powe would describe it, 194 00:10:59,720 --> 00:11:03,160 Speaker 1: So it's definitely hard to say that this is the 195 00:11:03,200 --> 00:11:06,080 Speaker 1: turn right now when a lot of deals are getting done, 196 00:11:06,120 --> 00:11:10,000 Speaker 1: issuance is still strong, and the flows are looking strong too, 197 00:11:10,080 --> 00:11:12,720 Speaker 1: so people are still buying these products. Like you said, 198 00:11:12,760 --> 00:11:15,600 Speaker 1: double digit gains in i G, double digit gains in 199 00:11:15,760 --> 00:11:18,839 Speaker 1: high yield. We've seen double digit gains and stocks if 200 00:11:18,840 --> 00:11:21,680 Speaker 1: you only use the year to date period. However, we 201 00:11:21,720 --> 00:11:23,880 Speaker 1: are at a point now where investors seem to be 202 00:11:23,880 --> 00:11:26,200 Speaker 1: getting testy. For a lot of the credit investors that 203 00:11:26,240 --> 00:11:29,280 Speaker 1: you speak with, do they seem to be as nervous 204 00:11:29,360 --> 00:11:31,840 Speaker 1: or jittery? Are they still feeling pretty good? It would 205 00:11:31,960 --> 00:11:35,720 Speaker 1: definitely feel like they are are definitely feeling pretty good, 206 00:11:35,800 --> 00:11:39,679 Speaker 1: especially because of when you look at primary market performance, 207 00:11:39,720 --> 00:11:43,240 Speaker 1: which is the most recent indicator of what the pulse 208 00:11:43,280 --> 00:11:46,600 Speaker 1: would be telling you. That's the most accurate UH price 209 00:11:46,640 --> 00:11:49,120 Speaker 1: gauge out there for where assets should be trading at. 210 00:11:49,280 --> 00:11:53,160 Speaker 1: And we're looking at really really strong performance across the board, 211 00:11:53,200 --> 00:11:56,040 Speaker 1: and that deals are getting done in both investment grade 212 00:11:56,080 --> 00:11:58,640 Speaker 1: and how yields granted and how yield These are mostly 213 00:11:58,720 --> 00:12:01,280 Speaker 1: higher quality names, so we haven't seen a ton of 214 00:12:01,360 --> 00:12:04,240 Speaker 1: issuance from that triple Sea bucket, the lowest ratings to here. 215 00:12:04,480 --> 00:12:07,520 Speaker 1: But even triple ces right now are having the best 216 00:12:07,600 --> 00:12:10,280 Speaker 1: run they've had in a year performance wise, and that 217 00:12:10,920 --> 00:12:14,320 Speaker 1: is hard to rationalize that against what maybe feels like 218 00:12:14,320 --> 00:12:17,560 Speaker 1: two thousand nine from a raider's perspective. It's part of it, 219 00:12:17,640 --> 00:12:19,960 Speaker 1: just this giant ball of money. I think that's how 220 00:12:20,120 --> 00:12:22,440 Speaker 1: Tracy Allaway would call the giant ball of money that's 221 00:12:22,440 --> 00:12:26,080 Speaker 1: gotta roll somewhere. And and it makes me bring up 222 00:12:26,320 --> 00:12:29,480 Speaker 1: another piece she wrote this week, uh uh, the headline 223 00:12:29,480 --> 00:12:32,080 Speaker 1: being with little yield in sight, bond buyers turned to 224 00:12:32,240 --> 00:12:35,920 Speaker 1: a liquid debt And it's basically talking about how an 225 00:12:35,920 --> 00:12:40,240 Speaker 1: investment grade um there is a demand for bonds that 226 00:12:40,280 --> 00:12:44,720 Speaker 1: don't trade very awesome, very often highly a liquid and 227 00:12:45,120 --> 00:12:47,160 Speaker 1: how big of a risk is that? I mean, I'm thinking, 228 00:12:47,200 --> 00:12:50,440 Speaker 1: if if the payments are coming in if the coupons 229 00:12:50,480 --> 00:12:52,440 Speaker 1: are being paid, how much do I have to worry 230 00:12:52,480 --> 00:12:55,560 Speaker 1: about liquidity in as a credit investorent. If that's all 231 00:12:55,640 --> 00:12:57,360 Speaker 1: you want, then you don't have to worry. And there 232 00:12:57,400 --> 00:12:59,680 Speaker 1: are plenty of buyers out there that that is their mandate. 233 00:12:59,760 --> 00:13:02,760 Speaker 1: That's the pension funds and the insurance companies of the 234 00:13:02,760 --> 00:13:06,400 Speaker 1: world that they're the typical buy and hold community copound clipping, 235 00:13:06,720 --> 00:13:09,440 Speaker 1: not looking to get any kind of price appreciation. And 236 00:13:09,640 --> 00:13:12,400 Speaker 1: these are very high dollar price bonds. One like traded 237 00:13:12,600 --> 00:13:16,360 Speaker 1: around like the forty range on cents on the dollars. 238 00:13:16,400 --> 00:13:18,599 Speaker 1: So if you're looking to buy at that range in 239 00:13:18,640 --> 00:13:21,880 Speaker 1: the one sixty area, there's not going to be a 240 00:13:21,920 --> 00:13:24,200 Speaker 1: whole lot of capital appreciation, right because at the end 241 00:13:24,200 --> 00:13:25,839 Speaker 1: of the day, you're getting paid back at a hundred 242 00:13:25,920 --> 00:13:28,240 Speaker 1: cents on the dollars. So clearly this is not where 243 00:13:28,280 --> 00:13:31,560 Speaker 1: you're going to get the big gains of the bond market, 244 00:13:31,679 --> 00:13:34,559 Speaker 1: and that's where it really becomes like an individual credit 245 00:13:34,600 --> 00:13:37,040 Speaker 1: pickers market. But yeah, if you just want to buy 246 00:13:37,040 --> 00:13:40,240 Speaker 1: and hold, go for that all day long. It's great strategy. Welly, 247 00:13:40,520 --> 00:13:42,839 Speaker 1: you also get very involved with the earning season and 248 00:13:42,920 --> 00:13:45,120 Speaker 1: I feel like on the show Whenever we talk about earnings, 249 00:13:45,120 --> 00:13:47,360 Speaker 1: we always think about the stock side. But you've been 250 00:13:47,440 --> 00:13:50,720 Speaker 1: very involved in the coverage of Tesla, which did post 251 00:13:50,760 --> 00:13:54,240 Speaker 1: a surprise profit gain for the last quarter, also for 252 00:13:54,559 --> 00:13:57,160 Speaker 1: which lowered its full your forecast, what have really been 253 00:13:57,200 --> 00:14:00,960 Speaker 1: the standouts and from the credit side, what have learned? Yeah, 254 00:14:01,000 --> 00:14:04,240 Speaker 1: so those are the big ones, especially auto earnings this week. 255 00:14:04,360 --> 00:14:07,920 Speaker 1: That it's uh. I think we focus on Tesla a 256 00:14:07,920 --> 00:14:10,319 Speaker 1: lot for pretty obvious reasons. Right, It's a pretty flashy 257 00:14:10,360 --> 00:14:12,120 Speaker 1: company in every sense of the word, has a pretty 258 00:14:12,120 --> 00:14:15,600 Speaker 1: flashy guy running it. So when the thing is from 259 00:14:15,600 --> 00:14:18,320 Speaker 1: a bond perspective, it's I feel like it's getting increasingly 260 00:14:18,400 --> 00:14:21,360 Speaker 1: less of a credit story. It's Tesla is not at 261 00:14:21,400 --> 00:14:24,400 Speaker 1: all like a massive name in the high yield index, 262 00:14:24,560 --> 00:14:27,600 Speaker 1: and it's hardly a bell weather of where to sense 263 00:14:27,680 --> 00:14:31,160 Speaker 1: like how high how people feel about the high yield market. Um. 264 00:14:31,200 --> 00:14:35,240 Speaker 1: But granted, even saying all that, like looking at Tesla specifically, 265 00:14:36,000 --> 00:14:38,000 Speaker 1: this really is a great sign for the company, and 266 00:14:38,040 --> 00:14:40,800 Speaker 1: that this is UH to see that they're posting now 267 00:14:41,160 --> 00:14:44,640 Speaker 1: more quarters of positive free cash flow. We're wondering when 268 00:14:44,680 --> 00:14:47,960 Speaker 1: are they going to finally get to being sustainably profitable. 269 00:14:48,320 --> 00:14:50,440 Speaker 1: I hold my breath in saying we could be there, 270 00:14:50,680 --> 00:14:53,440 Speaker 1: because certainly we felt this way a year ago and 271 00:14:53,480 --> 00:14:55,680 Speaker 1: that didn't turn out to be the case. But it's 272 00:14:55,720 --> 00:14:59,480 Speaker 1: looking better this time around. And for Ford, unfortunately, um, 273 00:14:59,800 --> 00:15:01,920 Speaker 1: the this is where you might say to start to say, 274 00:15:02,280 --> 00:15:04,320 Speaker 1: is this two thousand five all over again when the 275 00:15:04,320 --> 00:15:08,400 Speaker 1: automakers proceeded the ultimate the financial crisis and a few 276 00:15:08,440 --> 00:15:12,440 Speaker 1: years later. So with Ford, it's a very different story. 277 00:15:12,520 --> 00:15:15,320 Speaker 1: And GM could tell you the same thing that the 278 00:15:15,400 --> 00:15:18,760 Speaker 1: growth overseas is certainly challenging, and I'm sure we talked 279 00:15:18,760 --> 00:15:20,440 Speaker 1: about this on the show all the time, about the 280 00:15:20,480 --> 00:15:23,440 Speaker 1: macro challenges in China and Europe in those markets, and 281 00:15:24,040 --> 00:15:26,000 Speaker 1: it's not the best time to be buying a car 282 00:15:26,120 --> 00:15:28,680 Speaker 1: right now. And that's where Ford is struggling. Has been 283 00:15:28,720 --> 00:15:32,200 Speaker 1: going on this multi year restructuring plan and is increasingly 284 00:15:32,200 --> 00:15:36,120 Speaker 1: looking like they're going to get another downgrade. Don't cancel 285 00:15:36,200 --> 00:15:55,680 Speaker 1: my sweatpant order just yet. Yeah, let's let's do a 286 00:15:55,680 --> 00:15:57,840 Speaker 1: tour of the world here, because I really wanted to 287 00:15:57,840 --> 00:16:00,920 Speaker 1: talk about Chili. Uh, you know, obviously we came in 288 00:16:00,960 --> 00:16:04,480 Speaker 1: on Monday to these alarming headlines. I guess if you're 289 00:16:04,480 --> 00:16:07,200 Speaker 1: paying attention over the weekend. Unlike me, you saw the 290 00:16:07,680 --> 00:16:11,960 Speaker 1: news over the weekend about these alarming protests and Chili 291 00:16:12,040 --> 00:16:15,880 Speaker 1: really turning violent. Uh, several deaths. I don't know what 292 00:16:15,920 --> 00:16:18,280 Speaker 1: the count is now, but um a lot of it 293 00:16:18,360 --> 00:16:22,800 Speaker 1: being uh pinned on, of all things, the increase of 294 00:16:22,960 --> 00:16:27,800 Speaker 1: a subway fair um and your headline UH really stuck 295 00:16:27,840 --> 00:16:31,600 Speaker 1: with me. You wrote, the Chili unrest has a worrisome 296 00:16:31,640 --> 00:16:34,240 Speaker 1: message for the rest of the world, and then in 297 00:16:34,320 --> 00:16:37,200 Speaker 1: your commune, right, if it can happen in Santiago, it 298 00:16:37,240 --> 00:16:40,920 Speaker 1: can happen anywhere. So walk us through. You know, how 299 00:16:40,960 --> 00:16:44,960 Speaker 1: alarming should we be? And you know, one thing to 300 00:16:45,000 --> 00:16:48,520 Speaker 1: look at this from a sociologist perspective, but obviously our 301 00:16:48,520 --> 00:16:52,360 Speaker 1: audiences markets perspective. So so how worried should investors be 302 00:16:52,800 --> 00:16:55,480 Speaker 1: about this type of thing? I mean, if, first of all, 303 00:16:55,520 --> 00:16:58,760 Speaker 1: if you're an investors, increasingly the sociological things that I'll 304 00:16:58,800 --> 00:17:02,360 Speaker 1: beginning to are you it's is civil order going to 305 00:17:02,440 --> 00:17:06,439 Speaker 1: break down in some countries, and that even includes my 306 00:17:06,520 --> 00:17:09,520 Speaker 1: own home country, which justiness can probably guess is Britain 307 00:17:10,400 --> 00:17:13,159 Speaker 1: where things are getting very alarming. Indeed, is the country 308 00:17:13,160 --> 00:17:15,640 Speaker 1: still can't work out how to how to resolve brexits 309 00:17:15,640 --> 00:17:19,679 Speaker 1: now in the case of Chile, it is by an 310 00:17:19,800 --> 00:17:25,320 Speaker 1: order of magnitude traditionally the calmest, stablest country in the region. 311 00:17:25,640 --> 00:17:28,040 Speaker 1: It did have a very unpleasant dictatorship for a while, 312 00:17:28,119 --> 00:17:30,600 Speaker 1: that was a stable dictatorship. It had had the longest 313 00:17:30,600 --> 00:17:34,320 Speaker 1: continuous democracy before Pinochet took over, and it has had 314 00:17:34,320 --> 00:17:40,199 Speaker 1: a stable democracy without pause since Pinochet fell peacefully. So 315 00:17:40,280 --> 00:17:42,919 Speaker 1: it is the stablest country in the region. It is 316 00:17:43,320 --> 00:17:46,840 Speaker 1: by any sensible measure, the wealthiest country in the region. 317 00:17:47,480 --> 00:17:50,720 Speaker 1: And one of the critical points, which is why this 318 00:17:51,240 --> 00:17:55,280 Speaker 1: is alarming for a lot of the markets type, capitalist 319 00:17:55,400 --> 00:17:58,080 Speaker 1: type of people that we talked to at Bloomberg, is 320 00:17:58,119 --> 00:18:00,240 Speaker 1: that it's the country in Latin America which is has 321 00:18:00,280 --> 00:18:06,080 Speaker 1: done things exactly the way your average markets person, your 322 00:18:06,080 --> 00:18:09,720 Speaker 1: average Washington d C. Policy wonk, would think they had 323 00:18:09,760 --> 00:18:13,920 Speaker 1: to do them. Under Pinochet, you did have then known 324 00:18:13,920 --> 00:18:17,440 Speaker 1: as the Chicago Boys, a group of people largely trained 325 00:18:17,520 --> 00:18:22,280 Speaker 1: under Milton Freedom of the University of Chicago, established away 326 00:18:22,280 --> 00:18:24,960 Speaker 1: for chill later work, and that plainly does have a 327 00:18:25,000 --> 00:18:27,479 Speaker 1: lot to do with why Chile has performed better than 328 00:18:27,480 --> 00:18:30,080 Speaker 1: most of the rest of the region for a long time. 329 00:18:30,720 --> 00:18:34,760 Speaker 1: The pension program that they basically many people would say 330 00:18:35,160 --> 00:18:37,000 Speaker 1: a better version of the four oh one K and 331 00:18:37,080 --> 00:18:39,480 Speaker 1: better thought through version of the four oh one K 332 00:18:39,560 --> 00:18:43,400 Speaker 1: which they established in the late seventies or early eighties. 333 00:18:44,520 --> 00:18:46,760 Speaker 1: And that's one of the biggest things that people are 334 00:18:46,800 --> 00:18:50,439 Speaker 1: now protesting about that that we're having the first wave 335 00:18:50,520 --> 00:18:52,640 Speaker 1: of people who have really been on one of these 336 00:18:52,680 --> 00:18:57,080 Speaker 1: pension plans throughout their working lives. And I've had plenty 337 00:18:57,119 --> 00:19:02,920 Speaker 1: of emails from chileans two hundred dollars month mentions for 338 00:19:03,000 --> 00:19:06,400 Speaker 1: people who have worked as engineers for thirty forty years. 339 00:19:07,280 --> 00:19:09,840 Speaker 1: What is also very interesting, just just throw the other 340 00:19:09,880 --> 00:19:13,359 Speaker 1: final point, which is which is concerning, is that yes, 341 00:19:13,440 --> 00:19:18,800 Speaker 1: it's transport fairs which were aimed at making it helping 342 00:19:19,600 --> 00:19:22,920 Speaker 1: ease the transition away from carbon fuels. And also there's 343 00:19:22,920 --> 00:19:28,160 Speaker 1: a fuel price increase, a general electricity price increase all 344 00:19:28,200 --> 00:19:31,200 Speaker 1: over the world that tends to be the catalyst when 345 00:19:31,240 --> 00:19:35,159 Speaker 1: people are angry, including the Hill Jane in in France. 346 00:19:35,160 --> 00:19:37,200 Speaker 1: To make it clear that this isn't just a Latin 347 00:19:37,240 --> 00:19:40,920 Speaker 1: American story. You've got to be very careful indeed, when 348 00:19:40,960 --> 00:19:44,560 Speaker 1: you make people pay more for fuel for energy for transport. 349 00:19:45,320 --> 00:19:47,280 Speaker 1: You had a follow up column as well, and the 350 00:19:47,280 --> 00:19:50,159 Speaker 1: title was the big issue confronting the stock market, and 351 00:19:50,200 --> 00:19:55,080 Speaker 1: you mentioned Chile, you mentioned Spain, Braxit, and really what 352 00:19:55,160 --> 00:19:57,159 Speaker 1: it comes down to is what you say is inequality. 353 00:19:57,160 --> 00:20:00,159 Speaker 1: As for companies too, when you talk about mode that 354 00:20:00,280 --> 00:20:03,199 Speaker 1: companies build around themselves competition wise, when they can keep 355 00:20:03,200 --> 00:20:07,000 Speaker 1: building themselves up to be larger and larger, how does 356 00:20:07,080 --> 00:20:11,320 Speaker 1: this actually affect the process of investing and thinking about markets. Well, 357 00:20:12,000 --> 00:20:15,920 Speaker 1: the moats phrase is a beautifully folksy phrase that it 358 00:20:15,960 --> 00:20:18,480 Speaker 1: comes from Warren Buffett himself. He looks for companies with 359 00:20:18,520 --> 00:20:21,239 Speaker 1: a wide economic moats and coming from Warren Buffetts, who 360 00:20:21,240 --> 00:20:24,720 Speaker 1: manages to make being a plutocratic billionaire so charming and 361 00:20:24,800 --> 00:20:29,120 Speaker 1: folksy in Midwestern and it sounds really cool. But when 362 00:20:29,119 --> 00:20:31,360 Speaker 1: you think about it's actually when you when you say 363 00:20:31,400 --> 00:20:33,639 Speaker 1: you're building an economic motor around your company, what you 364 00:20:33,680 --> 00:20:38,720 Speaker 1: mean is you're ruthlessly exploiting it's whatever monopoly power it 365 00:20:38,760 --> 00:20:41,320 Speaker 1: has since entrenching it in a way that you can 366 00:20:41,680 --> 00:20:43,680 Speaker 1: rip off people for more than you otherwise would be 367 00:20:43,720 --> 00:20:48,080 Speaker 1: able to rip them off. Um and uh, that has 368 00:20:48,119 --> 00:20:50,720 Speaker 1: been a process that has been rewarded. This comes back 369 00:20:50,720 --> 00:20:52,760 Speaker 1: to the long term beer case for the US stock market. 370 00:20:53,760 --> 00:20:58,480 Speaker 1: If you look at um, the priced book multiples that 371 00:20:58,520 --> 00:21:02,360 Speaker 1: people will pay on the biggest five companies in each 372 00:21:02,400 --> 00:21:05,280 Speaker 1: sector compared to the rest of the market. I don't 373 00:21:05,320 --> 00:21:06,720 Speaker 1: have the numbers in front of me, but it's like 374 00:21:06,800 --> 00:21:14,600 Speaker 1: double um. And if you look at the profitability of 375 00:21:14,640 --> 00:21:19,720 Speaker 1: the biggest companies compared to all the rest, again it's 376 00:21:19,800 --> 00:21:24,600 Speaker 1: quite startling. The big get bigger, get more profitable, and 377 00:21:24,760 --> 00:21:29,560 Speaker 1: the rest are left nowhere or very very little to do. 378 00:21:30,160 --> 00:21:32,199 Speaker 1: The other interesting thing, which might come back to some 379 00:21:32,240 --> 00:21:34,080 Speaker 1: of the points that that Molly was making there there 380 00:21:34,119 --> 00:21:37,000 Speaker 1: is an interesting debate whether this is about exploiting monopoly 381 00:21:37,040 --> 00:21:40,960 Speaker 1: power or whether it's about exploiting the ability to leverage 382 00:21:41,000 --> 00:21:47,280 Speaker 1: yourself up seriously to the hilt. Because the leverage by 383 00:21:47,320 --> 00:21:50,399 Speaker 1: all the nor sensible measures, debtory bits are or whatever 384 00:21:51,200 --> 00:21:55,320 Speaker 1: is of the biggest companies in each sector is again 385 00:21:56,200 --> 00:21:57,840 Speaker 1: off the top of my head, of an order of 386 00:21:57,960 --> 00:22:01,679 Speaker 1: double the typical leverage for every body else. That's the 387 00:22:01,760 --> 00:22:05,840 Speaker 1: leverage we're seeing in the economy is largely these huge, 388 00:22:06,400 --> 00:22:11,400 Speaker 1: well protected companies. And that then needs policy question, which 389 00:22:11,480 --> 00:22:13,040 Speaker 1: you don't need to be Elizabeth Warrant to think there 390 00:22:13,119 --> 00:22:14,639 Speaker 1: might be a very good case for splitting some of 391 00:22:14,680 --> 00:22:17,720 Speaker 1: these companies up. But does that then begin to become 392 00:22:17,760 --> 00:22:21,119 Speaker 1: the moment when actually the amount of credit we've extended 393 00:22:21,560 --> 00:22:25,680 Speaker 1: gets very nervous because we've extended them to these companies 394 00:22:25,680 --> 00:22:27,640 Speaker 1: that we've allowed to get so big they rip us off, 395 00:22:27,800 --> 00:22:29,760 Speaker 1: and once we no longer let them rip us off, 396 00:22:29,880 --> 00:22:31,600 Speaker 1: they might also not be able to repay their debt, 397 00:22:31,760 --> 00:22:34,240 Speaker 1: but we're still extending to them. So it's it seems 398 00:22:34,280 --> 00:22:36,200 Speaker 1: that like that that that we haven't reached. So maybe 399 00:22:36,200 --> 00:22:38,359 Speaker 1: we'd better let them keep ripping us off or otherwise 400 00:22:38,440 --> 00:22:41,040 Speaker 1: keep on doing it. Yeah, sure, let's keep giving the money. 401 00:22:41,080 --> 00:22:44,840 Speaker 1: It's so cheap. Why not everybody is so happy? I 402 00:22:44,880 --> 00:22:47,119 Speaker 1: mean exactly what Mike had said before. There's just this 403 00:22:47,280 --> 00:22:49,520 Speaker 1: giant pile of money. Where is it going to go? 404 00:22:49,680 --> 00:22:51,760 Speaker 1: And you have I'm sure we have where ever we 405 00:22:51,840 --> 00:22:54,000 Speaker 1: hammered this all the time. It's the negative yields in 406 00:22:54,040 --> 00:22:56,440 Speaker 1: Europe and in Asia, and where else are you going 407 00:22:56,480 --> 00:22:59,120 Speaker 1: to park your money and expect to generate some sort 408 00:22:59,160 --> 00:23:01,960 Speaker 1: of a reliable turn And right now that's us fixed 409 00:23:01,960 --> 00:23:05,119 Speaker 1: income and particularly credit that is that is really proving 410 00:23:05,400 --> 00:23:08,400 Speaker 1: to be that place. Molly said, the magic word which 411 00:23:08,440 --> 00:23:11,880 Speaker 1: allows us to transition into the craziest things we've ever seen. 412 00:23:11,880 --> 00:23:15,040 Speaker 1: This week, she said it fixed income, and we got 413 00:23:15,119 --> 00:23:19,199 Speaker 1: a call into the Bloomberg What Goes Up podcast hotline 414 00:23:19,800 --> 00:23:23,480 Speaker 1: from our own fleece mirans Uh with a very interesting, 415 00:23:23,560 --> 00:23:27,040 Speaker 1: craziest thing regarding fixed income. Let's give a listen. Almost 416 00:23:27,040 --> 00:23:30,439 Speaker 1: nobody knows what fixed income is. That's according to a 417 00:23:30,520 --> 00:23:34,320 Speaker 1: Bank of New York Mellon survey of about two thousand people. 418 00:23:34,840 --> 00:23:37,160 Speaker 1: It turns out that only eight percent of those people 419 00:23:37,400 --> 00:23:41,679 Speaker 1: could define the term fixed income. It's even crazier if 420 00:23:41,760 --> 00:23:44,560 Speaker 1: you think about a broader group of people, say people 421 00:23:44,600 --> 00:23:47,680 Speaker 1: who were unwilling to fill out an online survey about investing, 422 00:23:48,080 --> 00:23:50,760 Speaker 1: maybe the percentage of people who know what fixed income 423 00:23:50,840 --> 00:23:53,879 Speaker 1: is it's actually a lot lower. My only question I 424 00:23:53,920 --> 00:23:57,240 Speaker 1: wonder if the people who answered fixed income is an 425 00:23:57,240 --> 00:23:59,720 Speaker 1: investment that pays you a positive yield, if they were 426 00:24:00,320 --> 00:24:06,200 Speaker 1: ruled in incorrect, Maybe that's maybe that's people really just confused. 427 00:24:06,880 --> 00:24:09,360 Speaker 1: You're truly positive at least had sent me this survey, 428 00:24:09,560 --> 00:24:12,680 Speaker 1: and you know it kind of honestly, I'm embarrassed to 429 00:24:12,680 --> 00:24:14,640 Speaker 1: say this now that I am a fixed income reporter 430 00:24:14,760 --> 00:24:17,440 Speaker 1: and I took a fixed income class in college and 431 00:24:18,000 --> 00:24:20,639 Speaker 1: left that class not really knowing what fixed income on. 432 00:24:21,600 --> 00:24:23,879 Speaker 1: That's a really that's hard on on the part of 433 00:24:23,880 --> 00:24:28,280 Speaker 1: the teacher. Then the guy actually was a Moody's officer 434 00:24:28,359 --> 00:24:32,040 Speaker 1: during the financial crisis, So maybe that's as I've been into, 435 00:24:32,080 --> 00:24:37,040 Speaker 1: but I have thankfully learned since what fixed income is 436 00:24:37,280 --> 00:24:39,840 Speaker 1: to know. Yeah, it feels good to know what it is. 437 00:24:40,040 --> 00:24:42,240 Speaker 1: And as a reminder, if you want to call in 438 00:24:42,320 --> 00:24:44,520 Speaker 1: and let us know the craziest things that you guys 439 00:24:44,520 --> 00:24:46,760 Speaker 1: have seen in markets, or ask us any questions, let 440 00:24:46,800 --> 00:24:49,520 Speaker 1: us know what you're up to, what you're thinking about markets, 441 00:24:49,560 --> 00:24:51,399 Speaker 1: feel free to give us a call. That number is 442 00:24:51,560 --> 00:24:55,720 Speaker 1: six or six three to four three four nine zero, 443 00:24:55,920 --> 00:24:57,920 Speaker 1: and we may even play your message on the show. 444 00:24:58,960 --> 00:25:00,760 Speaker 1: All right, I guess I'll I'll try to top that. 445 00:25:00,800 --> 00:25:03,439 Speaker 1: I don't know if I can top that. That's pretty good. Uh. 446 00:25:03,480 --> 00:25:08,359 Speaker 1: But on Thursday, the so many people in the markets 447 00:25:08,920 --> 00:25:13,880 Speaker 1: suddenly became fixated on a speech by Vice President Mike 448 00:25:13,960 --> 00:25:17,000 Speaker 1: Pence about China because there there was concerns that he 449 00:25:17,000 --> 00:25:22,600 Speaker 1: would say something offensive and blow up the whole trade discussion. Um, So, 450 00:25:22,800 --> 00:25:24,919 Speaker 1: my craziest thing of the week is that people in 451 00:25:24,960 --> 00:25:28,000 Speaker 1: markets actually paid attention to a speech by the vice 452 00:25:28,040 --> 00:25:31,120 Speaker 1: president any vice president, John, do you ever remember traders 453 00:25:31,119 --> 00:25:34,840 Speaker 1: watching a speech by a vice president? The last time 454 00:25:34,880 --> 00:25:37,840 Speaker 1: Mike Pence gave a speech? Oh okay, what was that? 455 00:25:37,960 --> 00:25:39,720 Speaker 1: When was that? Or he was supposed to give a 456 00:25:39,760 --> 00:25:41,879 Speaker 1: speech and it was highly critical of China where he 457 00:25:41,920 --> 00:25:44,360 Speaker 1: was supposed to That's yeah, he got canceled and then 458 00:25:44,359 --> 00:25:48,680 Speaker 1: it postponed to this So same speech was paying attention 459 00:25:48,720 --> 00:25:54,040 Speaker 1: to the vice president not giving a speech. That's even crazy. 460 00:25:55,040 --> 00:25:58,400 Speaker 1: I think I got one. Ok so uh. Speaking after 461 00:25:58,800 --> 00:26:01,320 Speaker 1: the Tesla earning this week, I was looking to a 462 00:26:01,320 --> 00:26:04,159 Speaker 1: convertible bomb matreaty they have due next week, and in 463 00:26:04,200 --> 00:26:07,040 Speaker 1: the past this has been I don't want to say, 464 00:26:07,040 --> 00:26:09,280 Speaker 1: one of the highlights of my year, but certainly something 465 00:26:09,320 --> 00:26:11,560 Speaker 1: that we look forward to to see, Like will Tesla 466 00:26:11,640 --> 00:26:13,400 Speaker 1: be able to make this? It's always a question. There's 467 00:26:13,400 --> 00:26:16,040 Speaker 1: always a bit of skepticism leading up to these end. 468 00:26:16,600 --> 00:26:18,359 Speaker 1: I looked at it this week and like, man, like, 469 00:26:18,400 --> 00:26:20,680 Speaker 1: they've got a record amount of cash on the balance sheet. 470 00:26:21,240 --> 00:26:25,240 Speaker 1: I almost started to write the headline, Tesla's convertible bond 471 00:26:25,280 --> 00:26:29,320 Speaker 1: to drop in the bucket compared to record cash pile. Wow. 472 00:26:29,480 --> 00:26:32,639 Speaker 1: I never thought I'd see myself right that it didn't 473 00:26:32,640 --> 00:26:34,959 Speaker 1: make it to the print, but I thought it. I 474 00:26:35,040 --> 00:26:42,960 Speaker 1: definitely thought it for a minute there. That's pretty crazy. Sorry, yes, coming, okay, John, 475 00:26:42,960 --> 00:26:44,960 Speaker 1: how about you? You You have a maddest thing of the week. 476 00:26:46,280 --> 00:26:48,320 Speaker 1: I guess the best example I can I have a 477 00:26:48,400 --> 00:26:51,720 Speaker 1: few coming on from the discussion of the big getting 478 00:26:52,080 --> 00:26:56,520 Speaker 1: bigger is that this is a factory that I found 479 00:26:56,520 --> 00:26:59,360 Speaker 1: out from Bespoke Investments. If you take what you might 480 00:26:59,520 --> 00:27:05,640 Speaker 1: call the NASDAC too, the eternal rivals Microsoft and Apple, 481 00:27:06,240 --> 00:27:10,760 Speaker 1: their market their combined market cap is now virtually identical 482 00:27:11,160 --> 00:27:15,920 Speaker 1: to the market cap of the entire Russell two thousands. Unbelievable. 483 00:27:16,200 --> 00:27:19,200 Speaker 1: So just these two companies are now basically the same 484 00:27:19,240 --> 00:27:23,000 Speaker 1: size as what most investors take to be the entire 485 00:27:23,359 --> 00:27:26,800 Speaker 1: small cap sector in this country. That is amazing, and 486 00:27:26,840 --> 00:27:30,000 Speaker 1: that sort of brings to mind your point about anti trust. 487 00:27:30,000 --> 00:27:31,760 Speaker 1: I don't think that's an issue that's going to go 488 00:27:31,920 --> 00:27:35,480 Speaker 1: does It's well? Anti trust. The fascinating thing is that 489 00:27:35,480 --> 00:27:38,000 Speaker 1: it's one of these issues which unites people at the 490 00:27:38,160 --> 00:27:42,280 Speaker 1: ends of politics against the middle. It's a perfectly respectable 491 00:27:42,520 --> 00:27:47,479 Speaker 1: left wing Elizabeth Warren or right wing libertarian argument for 492 00:27:47,680 --> 00:27:52,719 Speaker 1: really aggressive anti trust, and I think it probably will 493 00:27:53,240 --> 00:27:55,720 Speaker 1: happen at some point, and a lot depends on whether 494 00:27:55,720 --> 00:28:00,240 Speaker 1: it's actually done well. Alright, Sora, how about you? All Right? 495 00:28:00,320 --> 00:28:04,080 Speaker 1: So what I have today isn't so crazy, but I 496 00:28:04,119 --> 00:28:07,280 Speaker 1: think some people will find it pretty surprising, just because 497 00:28:07,320 --> 00:28:11,040 Speaker 1: when we think about value and growth, people always talk 498 00:28:11,119 --> 00:28:14,680 Speaker 1: about the demise of value is value in a crisis, 499 00:28:14,760 --> 00:28:18,200 Speaker 1: and people typically think about value in a long short way, 500 00:28:18,320 --> 00:28:23,080 Speaker 1: which has not done very well over the last many years. 501 00:28:23,080 --> 00:28:25,080 Speaker 1: You could say, but if you look at a long 502 00:28:25,160 --> 00:28:27,399 Speaker 1: only version, if you look at the SMP five hundred 503 00:28:27,480 --> 00:28:31,080 Speaker 1: value index that actually hit a record high this week, 504 00:28:31,480 --> 00:28:34,040 Speaker 1: which many people might look at and say, how in 505 00:28:34,080 --> 00:28:36,560 Speaker 1: the world is that possible? But the fact of the 506 00:28:36,560 --> 00:28:38,720 Speaker 1: matter is that if you look at that index, it's 507 00:28:38,880 --> 00:28:42,760 Speaker 1: up about four percent since the bottom of the bull market. 508 00:28:43,040 --> 00:28:45,720 Speaker 1: Growth stocks are just up even more. And it really 509 00:28:45,760 --> 00:28:48,120 Speaker 1: just brings you back to the idea that it's really 510 00:28:48,320 --> 00:28:52,360 Speaker 1: really hard to find anything that just hasn't done well 511 00:28:52,400 --> 00:28:55,160 Speaker 1: in this bull market, right and to go to your 512 00:28:55,160 --> 00:28:57,920 Speaker 1: long short uh point, it's hard to find a long 513 00:28:57,920 --> 00:29:02,160 Speaker 1: short strategy that's done well. Absolute that's pretty good. I 514 00:29:02,200 --> 00:29:04,520 Speaker 1: think I got to give it to our Powerfullice brands 515 00:29:04,600 --> 00:29:08,080 Speaker 1: with the survey on no one knowing what fixed income is. 516 00:29:08,160 --> 00:29:11,920 Speaker 1: That's uh, that was pretty startling. She beat me to it. 517 00:29:11,920 --> 00:29:16,040 Speaker 1: It's sad. Get out there and tell the people, Molly, 518 00:29:16,200 --> 00:29:19,400 Speaker 1: they should subscribe to the Credit Daybook by yours truly 519 00:29:19,880 --> 00:29:22,240 Speaker 1: spread the word shameless plug in there for Molly Smith. 520 00:29:23,360 --> 00:29:28,200 Speaker 1: That's good. That's another Bloomberg plug. We're all the same 521 00:29:28,200 --> 00:29:32,080 Speaker 1: team with the plug bote Molly Smith, John Authors. Thank 522 00:29:32,120 --> 00:29:34,360 Speaker 1: you so much for joining us on the show today, 523 00:29:38,880 --> 00:29:41,920 Speaker 1: What Goes Up. We'll be back next week. Until then, 524 00:29:42,040 --> 00:29:44,760 Speaker 1: you can find us on the Bloomberg Terminal website and app, 525 00:29:45,160 --> 00:29:48,000 Speaker 1: or wherever you get your podcasts. We'd love it if 526 00:29:48,040 --> 00:29:49,960 Speaker 1: you took the time to rate and review the show 527 00:29:50,000 --> 00:29:53,200 Speaker 1: on Apple Podcasts so more listeners can find us. And 528 00:29:53,280 --> 00:29:55,960 Speaker 1: you can find us on Twitter. Follow me at at 529 00:29:56,000 --> 00:30:00,120 Speaker 1: Sarah pont Sech, Mike is at Reaganonymous, our guest on 530 00:30:00,200 --> 00:30:03,680 Speaker 1: Authors is at John Authors, and Molly Smith is at 531 00:30:03,760 --> 00:30:08,640 Speaker 1: Molly Smith News. You can also follow Bloomberg Podcasts at podcasts. 532 00:30:09,200 --> 00:30:12,000 Speaker 1: What Goes Up is produced by tober Foreheads. The head 533 00:30:12,000 --> 00:30:15,320 Speaker 1: of Bloomberg podcast is Francesco Levie. Thanks for listening See 534 00:30:15,320 --> 00:30:15,920 Speaker 1: you next time.