Speaker 1: Hello, and welcome to What Goes Up, a Bloomberg Weekly
Speaker 1: Markets podcast. I'm Sara Ponte, a reporter on the Cross
Speaker 1: Asset team, and I'm Mike Reagan, a senior editor on
Speaker 1: the Markets Team. This week on the show, we're going abroad.
Speaker 1: The Brexit saga continues and civil unrest is growing across
Speaker 1: countries and continents. What does that mean for markets? We'll
Speaker 1: also talk credit, and we'll discuss whether or not some
Speaker 1: cracks are actually starting to emerge, and of course, speaking
Speaker 1: of cracks, will talk about the craziest things we saw
Speaker 1: in markets this week. You see what I did there? Go? Okay,
Speaker 1: I'm glad someone sorry, But as you said, we're gonna
Speaker 1: take a look abroad for much of today's program. I
Speaker 1: also do want to get sort of a temperature check
Speaker 1: on the U S Stock market, And luckily for us,
Speaker 1: our first guest is a guy who can speak with
Speaker 1: authority on all of these uh subjects as a expatriate
Speaker 1: brit As a expert of Latin markets from spending some
Speaker 1: time in Mexico City for the Financial Times. The only
Speaker 1: thing missing this week is a Red Sox appearance in
Speaker 1: the World series to make him aboutely perfect guests for
Speaker 1: this week, and I hate to rub that in, but
Speaker 1: John authors, welcome to the show. We can live with it.
Speaker 1: It's we'll not let Yankee fans who needs, you know,
Speaker 1: who needs the championship every year to justify their existence.
Speaker 1: I'm very happy to live in the the aura of
Speaker 1: last year as a Phillies fan. I'll take once that
Speaker 1: was John's way of rubbing the rough Yankees loss. And yes,
Speaker 1: that's right. And she catches everything. You can't get anything.
Speaker 1: Sarah also joining us this week. Now, Sarah, let me
Speaker 1: introduce this guest by saying, I'm thinking back to two
Speaker 1: thousand and sixteen. There's a lot of concern about the
Speaker 1: so called turn in the credit cycle. And as a
Speaker 1: guy who's covered stock markets for way too long, I
Speaker 1: can tell you stock market people get very nervous when
Speaker 1: they hear about a potential turn in the credit market.
Speaker 1: I think the thinking is that fixed income investors are
Speaker 1: a little bit smarter than your average stock trader. They
Speaker 1: see things coming down the pike. But anyway, Lisa Brahmowitz
Speaker 1: and I at the time wrote a calm for what
Speaker 1: was Gadfly then it's now part of Bloomberg Opinion. But
Speaker 1: we made the quip in the beginning that maybe we'll
Speaker 1: both be in retirement homes when this credit cycle finally turns.
Speaker 1: I gotta say it might be time to call the
Speaker 1: retirement home, get me some some slacks with the elastic
Speaker 1: waste band, and uh, I don't know a nice easy
Speaker 1: boy because I read something there it's drama. I read
Speaker 1: something this week that makes me once again wonder is
Speaker 1: the credit cycle turning? Dun Hunt Hunt? But to help
Speaker 1: us get through that, we're happy to have a first
Speaker 1: time we're on the show. Long time listener, I hope
Speaker 1: Molly Smith from the Credit team, welcome to what goes up.
Speaker 1: Don't get those pants just yet. You're good. The credit
Speaker 1: cycle is a you know those baseball fans out there
Speaker 1: want to say, is in its ninth, tenth, whatever inning
Speaker 1: we're talking about. So we're just gonna keep on rolling streak,
Speaker 1: is it okay? But John, before we go abroad, I
Speaker 1: do want to start with you and just sort of
Speaker 1: get your sort of thirty thousand foot view of the
Speaker 1: US stock market right now. I know you were a
Speaker 1: little bearish uh this year based on valuations. Uh, but
Speaker 1: I feel like you're sort of coming around to the
Speaker 1: bowl case a little bit. Walk us through how you're
Speaker 1: looking at this. That's that's questionable. I've been I've been too.
Speaker 1: I've been too incorrectly bearish for too long on uk
Speaker 1: US stocks too. To compitulate totally, because I know that
Speaker 1: if I truly capitulate, that will be the moment when
Speaker 1: we make the peak. You this is something that all
Speaker 1: market reporters sort of the prayer that you start with
Speaker 1: a Lord, do not make me into a contrarian. INDI
Speaker 1: so um no, I can I continue to think that
Speaker 1: in the in the very long term, if you're talking
Speaker 1: about the kind of people who read US are most
Speaker 1: interested in long term asset allocation, it's very, very hard
Speaker 1: to be excited about US stocks because any sensible measurement,
Speaker 1: they are historically expensive and the only reason they look
Speaker 1: like a decent buy is that they are relatively cheap
Speaker 1: compared to so that continues to be the case. What
Speaker 1: I think it probably is fair to suggest is that
Speaker 1: there is just so much negativity, so many genuinely really
Speaker 1: good reasons, excuses, but also reasons to get the heck
Speaker 1: out of the stock markets, and instead we are still
Speaker 1: very close to this sort of invisible, invisible lid of
Speaker 1: about three thousands on the SMP that that does suggest
Speaker 1: that once a few good pieces of news came in
Speaker 1: short term, that's got to be a good reason to
Speaker 1: think that the pain trade will be particularly for people
Speaker 1: like me. You've been telling you to give market that
Speaker 1: the pain trade will be will be up on the
Speaker 1: stock market. So tactically, no, I don't think there is
Speaker 1: good reason with what we know now to be hugely,
Speaker 1: hugely bearish long term. If you've got a choice between
Speaker 1: if you've got a choice between haven assets, or if
Speaker 1: you've got a choice of other equity markets around the
Speaker 1: world in which to invest for the next ten years
Speaker 1: or longer, I'm still bearish about the U S stock market.
Speaker 1: John one investor over at UBS, said something to me
Speaker 1: that really struck me this week, and he said, the
Speaker 1: pain trade won't just be stocks going up. The pain
Speaker 1: trade will be a potential rotation. And we've been hearing
Speaker 1: about this now for a couple of weeks, and we've
Speaker 1: started to see some strong performance and the likes of
Speaker 1: banks and the like of likes of energy shares. Do
Speaker 1: you get the sense that this is something that will
Speaker 1: actually be sticky and we might actually see this takeover
Speaker 1: as there it's is, it's still just way too soon
Speaker 1: to tell. It's well, it's too soon so but but
Speaker 1: we did have about a month or so ago now,
Speaker 1: we had the quant apocalypse or whatever you want to
Speaker 1: call it. When momentum, the momentum strategy, the momentum factor
Speaker 1: really did have quite a severe crash. That's the whole
Speaker 1: point of momentum. It works most of the time and
Speaker 1: very occasionally really crashes um. But the fact that that
Speaker 1: happens is an indicative that something may be ready there
Speaker 1: for the turn um. Value stocks is another one of
Speaker 1: those things. I consider myself a value guy. Uh. The
Speaker 1: number of times it's looked as though value is ready
Speaker 1: to turn and take over again in the last decade
Speaker 1: is enough to make a grown man weep. Um. It's
Speaker 1: like waiting for God. Oh I would I mean everything.
Speaker 1: I suppose it's fair to say that with the past
Speaker 1: sing of time UM, we must be getting closer to
Speaker 1: a point of value out performance. I guess that's fair
Speaker 1: to say. And when you think about it, Um, there's
Speaker 1: a school of thought, and I admit I might be
Speaker 1: the only pupil in the school of thought, but that
Speaker 1: stock market corrections can occur on both accesses of the graph,
Speaker 1: you know, not just price, but time, and if the
Speaker 1: market is basically not that far above where it was
Speaker 1: in January of two thousand and eighteen, that's a very
Speaker 1: very good point, and I think that it should be
Speaker 1: made more often that basically you can make a very
Speaker 1: good case for for the vol apocalypse, as I think
Speaker 1: that that was the volpocalypse that might not round. The
Speaker 1: quanto pocalypse at the beginning of February of last year
Speaker 1: really was something of a turning point. That we had
Speaker 1: a brief melt up after the tax reform, and in
Speaker 1: many ways, depending on how you measure it, nothing has
Speaker 1: happened since then. You can also make an argument if
Speaker 1: you're looking at bonds versus stocks, the classic acid allocator
Speaker 1: way of looking at it, sort of last fall, when
Speaker 1: if you if you remember, we were all worried about
Speaker 1: yields going up, right, yes, and and so there was
Speaker 1: there's another turning point that has not been returned to
Speaker 1: when you look at stocks relative to bonds later last year.
Speaker 1: So you, I do agree with you. You corrections don't
Speaker 1: have to be violent and over the passing of time.
Speaker 1: You could say we are in a correcting phase. Yes,
Speaker 1: all right, so Molly, let's switch over to you. I
Speaker 1: gotta say I was kind of looking forward to shopping
Speaker 1: for retirement homes. I my time come and the elastic
Speaker 1: wastman pants you can still wear, can have some suspenders on,
Speaker 1: taking my my hopes and dreams here. My dad used
Speaker 1: to do the rest in peace, Joe Reagan. My dad
Speaker 1: used to do the sweatpants with suspenders. That is the
Speaker 1: power or a retiree. That's what I exactly I'm looking for.
Speaker 1: But let me just read something that came out from
Speaker 1: your colleagues on the credit team this week and the
Speaker 1: headline it's beginning to look a lot like two thousand
Speaker 1: and nine. But let me read the lead. Lead. Investors beware,
Speaker 1: key indicators of a turn in the credit cycle are
Speaker 1: starting to emerge, reaching levels not seen since the last recession.
Speaker 1: Upgrades of US companies in high yield markets are trailing
Speaker 1: down grades by the most since two thousand and nine,
Speaker 1: and according to SMP level ratings, so it's focusing on
Speaker 1: the upgrade to downgrade ratio um well, obviously, yield spreads
Speaker 1: are still not screaming anything, any alarm bells um to
Speaker 1: the market at all. But what's your sort of overview
Speaker 1: from sort of the macro perspective of the credit markets
Speaker 1: right now? Yeah, I think when you want to talk
Speaker 1: about it from a macro perspective, that the more leading
Speaker 1: indicator would be what are yield telling you? What are
Speaker 1: spread selling you? What are market participants who are investing
Speaker 1: in these products that would then give you these yields
Speaker 1: and spreads? What are they telling you? Um? And that's
Speaker 1: not just at all to the rating agencies, but they're
Speaker 1: not putting any of the money into the markets right now,
Speaker 1: so it's a bit a bit harder to gauge the
Speaker 1: pulse from that audience alone. So when we're looking at
Speaker 1: just talking about how does credit feel right now? Is
Speaker 1: this two thousand nine is the cycle turning? It's really
Speaker 1: hard to say that. Right now. Credit is having a
Speaker 1: remarkable year in both investment grade and high yield. On
Speaker 1: the corporate bond side, we're up double digits in both
Speaker 1: asset classes. And if you've held either of those from
Speaker 1: the beginning of the year, I mean you really haven't
Speaker 1: had to touch either. You've made a remarkable return from
Speaker 1: just holding the index in either one. Obviously, there are
Speaker 1: different exceptions to that, like when you look at leverage
Speaker 1: loans that's been a source pat this year. Obviously big
Speaker 1: part of that stemming from when the FED has has
Speaker 1: reverse course from the end of last year, going from
Speaker 1: hiking rights to now in a cutting cycle or or
Speaker 1: a pause at least, and as J. Powe would describe it,
Speaker 1: So it's definitely hard to say that this is the
Speaker 1: turn right now when a lot of deals are getting done,
Speaker 1: issuance is still strong, and the flows are looking strong too,
Speaker 1: so people are still buying these products. Like you said,
Speaker 1: double digit gains in i G, double digit gains in
Speaker 1: high yield. We've seen double digit gains and stocks if
Speaker 1: you only use the year to date period. However, we
Speaker 1: are at a point now where investors seem to be
Speaker 1: getting testy. For a lot of the credit investors that
Speaker 1: you speak with, do they seem to be as nervous
Speaker 1: or jittery? Are they still feeling pretty good? It would
Speaker 1: definitely feel like they are are definitely feeling pretty good,
Speaker 1: especially because of when you look at primary market performance,
Speaker 1: which is the most recent indicator of what the pulse
Speaker 1: would be telling you. That's the most accurate UH price
Speaker 1: gauge out there for where assets should be trading at.
Speaker 1: And we're looking at really really strong performance across the board,
Speaker 1: and that deals are getting done in both investment grade
Speaker 1: and how yields granted and how yield These are mostly
Speaker 1: higher quality names, so we haven't seen a ton of
Speaker 1: issuance from that triple Sea bucket, the lowest ratings to here.
Speaker 1: But even triple ces right now are having the best
Speaker 1: run they've had in a year performance wise, and that
Speaker 1: is hard to rationalize that against what maybe feels like
Speaker 1: two thousand nine from a raider's perspective. It's part of it,
Speaker 1: just this giant ball of money. I think that's how
Speaker 1: Tracy Allaway would call the giant ball of money that's
Speaker 1: gotta roll somewhere. And and it makes me bring up
Speaker 1: another piece she wrote this week, uh uh, the headline
Speaker 1: being with little yield in sight, bond buyers turned to
Speaker 1: a liquid debt And it's basically talking about how an
Speaker 1: investment grade um there is a demand for bonds that
Speaker 1: don't trade very awesome, very often highly a liquid and
Speaker 1: how big of a risk is that? I mean, I'm thinking,
Speaker 1: if if the payments are coming in if the coupons
Speaker 1: are being paid, how much do I have to worry
Speaker 1: about liquidity in as a credit investorent. If that's all
Speaker 1: you want, then you don't have to worry. And there
Speaker 1: are plenty of buyers out there that that is their mandate.
Speaker 1: That's the pension funds and the insurance companies of the
Speaker 1: world that they're the typical buy and hold community copound clipping,
Speaker 1: not looking to get any kind of price appreciation. And
Speaker 1: these are very high dollar price bonds. One like traded
Speaker 1: around like the forty range on cents on the dollars.
Speaker 1: So if you're looking to buy at that range in
Speaker 1: the one sixty area, there's not going to be a
Speaker 1: whole lot of capital appreciation, right because at the end
Speaker 1: of the day, you're getting paid back at a hundred
Speaker 1: cents on the dollars. So clearly this is not where
Speaker 1: you're going to get the big gains of the bond market,
Speaker 1: and that's where it really becomes like an individual credit
Speaker 1: pickers market. But yeah, if you just want to buy
Speaker 1: and hold, go for that all day long. It's great strategy. Welly,
Speaker 1: you also get very involved with the earning season and
Speaker 1: I feel like on the show Whenever we talk about earnings,
Speaker 1: we always think about the stock side. But you've been
Speaker 1: very involved in the coverage of Tesla, which did post
Speaker 1: a surprise profit gain for the last quarter, also for
Speaker 1: which lowered its full your forecast, what have really been
Speaker 1: the standouts and from the credit side, what have learned? Yeah,
Speaker 1: so those are the big ones, especially auto earnings this week.
Speaker 1: That it's uh. I think we focus on Tesla a
Speaker 1: lot for pretty obvious reasons. Right, It's a pretty flashy
Speaker 1: company in every sense of the word, has a pretty
Speaker 1: flashy guy running it. So when the thing is from
Speaker 1: a bond perspective, it's I feel like it's getting increasingly
Speaker 1: less of a credit story. It's Tesla is not at
Speaker 1: all like a massive name in the high yield index,
Speaker 1: and it's hardly a bell weather of where to sense
Speaker 1: like how high how people feel about the high yield market. Um.
Speaker 1: But granted, even saying all that, like looking at Tesla specifically,
Speaker 1: this really is a great sign for the company, and
Speaker 1: that this is UH to see that they're posting now
Speaker 1: more quarters of positive free cash flow. We're wondering when
Speaker 1: are they going to finally get to being sustainably profitable.
Speaker 1: I hold my breath in saying we could be there,
Speaker 1: because certainly we felt this way a year ago and
Speaker 1: that didn't turn out to be the case. But it's
Speaker 1: looking better this time around. And for Ford, unfortunately, um,
Speaker 1: the this is where you might say to start to say,
Speaker 1: is this two thousand five all over again when the
Speaker 1: automakers proceeded the ultimate the financial crisis and a few
Speaker 1: years later. So with Ford, it's a very different story.
Speaker 1: And GM could tell you the same thing that the
Speaker 1: growth overseas is certainly challenging, and I'm sure we talked
Speaker 1: about this on the show all the time, about the
Speaker 1: macro challenges in China and Europe in those markets, and
Speaker 1: it's not the best time to be buying a car
Speaker 1: right now. And that's where Ford is struggling. Has been
Speaker 1: going on this multi year restructuring plan and is increasingly
Speaker 1: looking like they're going to get another downgrade. Don't cancel
Speaker 1: my sweatpant order just yet. Yeah, let's let's do a
Speaker 1: tour of the world here, because I really wanted to
Speaker 1: talk about Chili. Uh, you know, obviously we came in
Speaker 1: on Monday to these alarming headlines. I guess if you're
Speaker 1: paying attention over the weekend. Unlike me, you saw the
Speaker 1: news over the weekend about these alarming protests and Chili
Speaker 1: really turning violent. Uh, several deaths. I don't know what
Speaker 1: the count is now, but um a lot of it
Speaker 1: being uh pinned on, of all things, the increase of
Speaker 1: a subway fair um and your headline UH really stuck
Speaker 1: with me. You wrote, the Chili unrest has a worrisome
Speaker 1: message for the rest of the world, and then in
Speaker 1: your commune, right, if it can happen in Santiago, it
Speaker 1: can happen anywhere. So walk us through. You know, how
Speaker 1: alarming should we be? And you know, one thing to
Speaker 1: look at this from a sociologist perspective, but obviously our
Speaker 1: audiences markets perspective. So so how worried should investors be
Speaker 1: about this type of thing? I mean, if, first of all,
Speaker 1: if you're an investors, increasingly the sociological things that I'll
Speaker 1: beginning to are you it's is civil order going to
Speaker 1: break down in some countries, and that even includes my
Speaker 1: own home country, which justiness can probably guess is Britain
Speaker 1: where things are getting very alarming. Indeed, is the country
Speaker 1: still can't work out how to how to resolve brexits
Speaker 1: now in the case of Chile, it is by an
Speaker 1: order of magnitude traditionally the calmest, stablest country in the region.
Speaker 1: It did have a very unpleasant dictatorship for a while,
Speaker 1: that was a stable dictatorship. It had had the longest
Speaker 1: continuous democracy before Pinochet took over, and it has had
Speaker 1: a stable democracy without pause since Pinochet fell peacefully. So
Speaker 1: it is the stablest country in the region. It is
Speaker 1: by any sensible measure, the wealthiest country in the region.
Speaker 1: And one of the critical points, which is why this
Speaker 1: is alarming for a lot of the markets type, capitalist
Speaker 1: type of people that we talked to at Bloomberg, is
Speaker 1: that it's the country in Latin America which is has
Speaker 1: done things exactly the way your average markets person, your
Speaker 1: average Washington d C. Policy wonk, would think they had
Speaker 1: to do them. Under Pinochet, you did have then known
Speaker 1: as the Chicago Boys, a group of people largely trained
Speaker 1: under Milton Freedom of the University of Chicago, established away
Speaker 1: for chill later work, and that plainly does have a
Speaker 1: lot to do with why Chile has performed better than
Speaker 1: most of the rest of the region for a long time.
Speaker 1: The pension program that they basically many people would say
Speaker 1: a better version of the four oh one K and
Speaker 1: better thought through version of the four oh one K
Speaker 1: which they established in the late seventies or early eighties.
Speaker 1: And that's one of the biggest things that people are
Speaker 1: now protesting about that that we're having the first wave
Speaker 1: of people who have really been on one of these
Speaker 1: pension plans throughout their working lives. And I've had plenty
Speaker 1: of emails from chileans two hundred dollars month mentions for
Speaker 1: people who have worked as engineers for thirty forty years.
Speaker 1: What is also very interesting, just just throw the other
Speaker 1: final point, which is which is concerning, is that yes,
Speaker 1: it's transport fairs which were aimed at making it helping
Speaker 1: ease the transition away from carbon fuels. And also there's
Speaker 1: a fuel price increase, a general electricity price increase all
Speaker 1: over the world that tends to be the catalyst when
Speaker 1: people are angry, including the Hill Jane in in France.
Speaker 1: To make it clear that this isn't just a Latin
Speaker 1: American story. You've got to be very careful indeed, when
Speaker 1: you make people pay more for fuel for energy for transport.
Speaker 1: You had a follow up column as well, and the
Speaker 1: title was the big issue confronting the stock market, and
Speaker 1: you mentioned Chile, you mentioned Spain, Braxit, and really what
Speaker 1: it comes down to is what you say is inequality.
Speaker 1: As for companies too, when you talk about mode that
Speaker 1: companies build around themselves competition wise, when they can keep
Speaker 1: building themselves up to be larger and larger, how does
Speaker 1: this actually affect the process of investing and thinking about markets. Well,
Speaker 1: the moats phrase is a beautifully folksy phrase that it
Speaker 1: comes from Warren Buffett himself. He looks for companies with
Speaker 1: a wide economic moats and coming from Warren Buffetts, who
Speaker 1: manages to make being a plutocratic billionaire so charming and
Speaker 1: folksy in Midwestern and it sounds really cool. But when
Speaker 1: you think about it's actually when you when you say
Speaker 1: you're building an economic motor around your company, what you
Speaker 1: mean is you're ruthlessly exploiting it's whatever monopoly power it
Speaker 1: has since entrenching it in a way that you can
Speaker 1: rip off people for more than you otherwise would be
Speaker 1: able to rip them off. Um and uh, that has
Speaker 1: been a process that has been rewarded. This comes back
Speaker 1: to the long term beer case for the US stock market.
Speaker 1: If you look at um, the priced book multiples that
Speaker 1: people will pay on the biggest five companies in each
Speaker 1: sector compared to the rest of the market. I don't
Speaker 1: have the numbers in front of me, but it's like
Speaker 1: double um. And if you look at the profitability of
Speaker 1: the biggest companies compared to all the rest, again it's
Speaker 1: quite startling. The big get bigger, get more profitable, and
Speaker 1: the rest are left nowhere or very very little to do.
Speaker 1: The other interesting thing, which might come back to some
Speaker 1: of the points that that Molly was making there there
Speaker 1: is an interesting debate whether this is about exploiting monopoly
Speaker 1: power or whether it's about exploiting the ability to leverage
Speaker 1: yourself up seriously to the hilt. Because the leverage by
Speaker 1: all the nor sensible measures, debtory bits are or whatever
Speaker 1: is of the biggest companies in each sector is again
Speaker 1: off the top of my head, of an order of
Speaker 1: double the typical leverage for every body else. That's the
Speaker 1: leverage we're seeing in the economy is largely these huge,
Speaker 1: well protected companies. And that then needs policy question, which
Speaker 1: you don't need to be Elizabeth Warrant to think there
Speaker 1: might be a very good case for splitting some of
Speaker 1: these companies up. But does that then begin to become
Speaker 1: the moment when actually the amount of credit we've extended
Speaker 1: gets very nervous because we've extended them to these companies
Speaker 1: that we've allowed to get so big they rip us off,
Speaker 1: and once we no longer let them rip us off,
Speaker 1: they might also not be able to repay their debt,
Speaker 1: but we're still extending to them. So it's it seems
Speaker 1: that like that that that we haven't reached. So maybe
Speaker 1: we'd better let them keep ripping us off or otherwise
Speaker 1: keep on doing it. Yeah, sure, let's keep giving the money.
Speaker 1: It's so cheap. Why not everybody is so happy? I
Speaker 1: mean exactly what Mike had said before. There's just this
Speaker 1: giant pile of money. Where is it going to go?
Speaker 1: And you have I'm sure we have where ever we
Speaker 1: hammered this all the time. It's the negative yields in
Speaker 1: Europe and in Asia, and where else are you going
Speaker 1: to park your money and expect to generate some sort
Speaker 1: of a reliable turn And right now that's us fixed
Speaker 1: income and particularly credit that is that is really proving
Speaker 1: to be that place. Molly said, the magic word which
Speaker 1: allows us to transition into the craziest things we've ever seen.
Speaker 1: This week, she said it fixed income, and we got
Speaker 1: a call into the Bloomberg What Goes Up podcast hotline
Speaker 1: from our own fleece mirans Uh with a very interesting,
Speaker 1: craziest thing regarding fixed income. Let's give a listen. Almost
Speaker 1: nobody knows what fixed income is. That's according to a
Speaker 1: Bank of New York Mellon survey of about two thousand people.
Speaker 1: It turns out that only eight percent of those people
Speaker 1: could define the term fixed income. It's even crazier if
Speaker 1: you think about a broader group of people, say people
Speaker 1: who were unwilling to fill out an online survey about investing,
Speaker 1: maybe the percentage of people who know what fixed income
Speaker 1: is it's actually a lot lower. My only question I
Speaker 1: wonder if the people who answered fixed income is an
Speaker 1: investment that pays you a positive yield, if they were
Speaker 1: ruled in incorrect, Maybe that's maybe that's people really just confused.
Speaker 1: You're truly positive at least had sent me this survey,
Speaker 1: and you know it kind of honestly, I'm embarrassed to
Speaker 1: say this now that I am a fixed income reporter
Speaker 1: and I took a fixed income class in college and
Speaker 1: left that class not really knowing what fixed income on.
Speaker 1: That's a really that's hard on on the part of
Speaker 1: the teacher. Then the guy actually was a Moody's officer
Speaker 1: during the financial crisis, So maybe that's as I've been into,
Speaker 1: but I have thankfully learned since what fixed income is
Speaker 1: to know. Yeah, it feels good to know what it is.
Speaker 1: And as a reminder, if you want to call in
Speaker 1: and let us know the craziest things that you guys
Speaker 1: have seen in markets, or ask us any questions, let
Speaker 1: us know what you're up to, what you're thinking about markets,
Speaker 1: feel free to give us a call. That number is
Speaker 1: six or six three to four three four nine zero,
Speaker 1: and we may even play your message on the show.
Speaker 1: All right, I guess I'll I'll try to top that.
Speaker 1: I don't know if I can top that. That's pretty good. Uh.
Speaker 1: But on Thursday, the so many people in the markets
Speaker 1: suddenly became fixated on a speech by Vice President Mike
Speaker 1: Pence about China because there there was concerns that he
Speaker 1: would say something offensive and blow up the whole trade discussion. Um, So,
Speaker 1: my craziest thing of the week is that people in
Speaker 1: markets actually paid attention to a speech by the vice
Speaker 1: president any vice president, John, do you ever remember traders
Speaker 1: watching a speech by a vice president? The last time
Speaker 1: Mike Pence gave a speech? Oh okay, what was that?
Speaker 1: When was that? Or he was supposed to give a
Speaker 1: speech and it was highly critical of China where he
Speaker 1: was supposed to That's yeah, he got canceled and then
Speaker 1: it postponed to this So same speech was paying attention
Speaker 1: to the vice president not giving a speech. That's even crazy.
Speaker 1: I think I got one. Ok so uh. Speaking after
Speaker 1: the Tesla earning this week, I was looking to a
Speaker 1: convertible bomb matreaty they have due next week, and in
Speaker 1: the past this has been I don't want to say,
Speaker 1: one of the highlights of my year, but certainly something
Speaker 1: that we look forward to to see, Like will Tesla
Speaker 1: be able to make this? It's always a question. There's
Speaker 1: always a bit of skepticism leading up to these end.
Speaker 1: I looked at it this week and like, man, like,
Speaker 1: they've got a record amount of cash on the balance sheet.
Speaker 1: I almost started to write the headline, Tesla's convertible bond
Speaker 1: to drop in the bucket compared to record cash pile. Wow.
Speaker 1: I never thought I'd see myself right that it didn't
Speaker 1: make it to the print, but I thought it. I
Speaker 1: definitely thought it for a minute there. That's pretty crazy. Sorry, yes, coming, okay, John,
Speaker 1: how about you? You You have a maddest thing of the week.
Speaker 1: I guess the best example I can I have a
Speaker 1: few coming on from the discussion of the big getting
Speaker 1: bigger is that this is a factory that I found
Speaker 1: out from Bespoke Investments. If you take what you might
Speaker 1: call the NASDAC too, the eternal rivals Microsoft and Apple,
Speaker 1: their market their combined market cap is now virtually identical
Speaker 1: to the market cap of the entire Russell two thousands. Unbelievable.
Speaker 1: So just these two companies are now basically the same
Speaker 1: size as what most investors take to be the entire
Speaker 1: small cap sector in this country. That is amazing, and
Speaker 1: that sort of brings to mind your point about anti trust.
Speaker 1: I don't think that's an issue that's going to go
Speaker 1: does It's well? Anti trust. The fascinating thing is that
Speaker 1: it's one of these issues which unites people at the
Speaker 1: ends of politics against the middle. It's a perfectly respectable
Speaker 1: left wing Elizabeth Warren or right wing libertarian argument for
Speaker 1: really aggressive anti trust, and I think it probably will
Speaker 1: happen at some point, and a lot depends on whether
Speaker 1: it's actually done well. Alright, Sora, how about you? All Right?
Speaker 1: So what I have today isn't so crazy, but I
Speaker 1: think some people will find it pretty surprising, just because
Speaker 1: when we think about value and growth, people always talk
Speaker 1: about the demise of value is value in a crisis,
Speaker 1: and people typically think about value in a long short way,
Speaker 1: which has not done very well over the last many years.
Speaker 1: You could say, but if you look at a long
Speaker 1: only version, if you look at the SMP five hundred
Speaker 1: value index that actually hit a record high this week,
Speaker 1: which many people might look at and say, how in
Speaker 1: the world is that possible? But the fact of the
Speaker 1: matter is that if you look at that index, it's
Speaker 1: up about four percent since the bottom of the bull market.
Speaker 1: Growth stocks are just up even more. And it really
Speaker 1: just brings you back to the idea that it's really
Speaker 1: really hard to find anything that just hasn't done well
Speaker 1: in this bull market, right and to go to your
Speaker 1: long short uh point, it's hard to find a long
Speaker 1: short strategy that's done well. Absolute that's pretty good. I
Speaker 1: think I got to give it to our Powerfullice brands
Speaker 1: with the survey on no one knowing what fixed income is.
Speaker 1: That's uh, that was pretty startling. She beat me to it.
Speaker 1: It's sad. Get out there and tell the people, Molly,
Speaker 1: they should subscribe to the Credit Daybook by yours truly
Speaker 1: spread the word shameless plug in there for Molly Smith.
Speaker 1: That's good. That's another Bloomberg plug. We're all the same
Speaker 1: team with the plug bote Molly Smith, John Authors. Thank
Speaker 1: you so much for joining us on the show today,
Speaker 1: What Goes Up. We'll be back next week. Until then,
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