Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
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Speaker 1: search Bloomberg glovel News. Let's get your business week agenda
Speaker 1: on this Thursday afternoon. We've got Michael McKee, international Economics
Speaker 1: and Policy correspondent at Bloomberg News here in our interactive
Speaker 1: broker studio, So too is Creaty Group to anchor and
Speaker 1: Markets correspondent at Bloomberg. Got to start with the trade
Speaker 1: here because I agree, you know, like we just haven't
Speaker 1: seen a rally like this in a long time. We
Speaker 1: absolutely haven't, and you know this is going to be
Speaker 1: a a fun combination of or confluence of a bunch
Speaker 1: of different factors. Now the immediate one. The biggest one
Speaker 1: I would argue is that CPI report we saw this
Speaker 1: morning eight thirty am. Future shot up like uh like
Speaker 1: like a kind of way. I said, yeah, absolutely, so
Speaker 1: to see this is pretty interesting. I want to put
Speaker 1: some context though, because Dan Curtis, our markets producer DJOR,
Speaker 1: did actually crunch the numbers a little bit and he said,
Speaker 1: if you invest in the SMP five hundred year to date,
Speaker 1: you lost about on your portfolio if you invested only
Speaker 1: on the days that you had a CPI report. So basically,
Speaker 1: the ten days it was had reports you've had, you've
Speaker 1: only lost seven percent. So basically a third of the
Speaker 1: markets losses this year so far have been a direct
Speaker 1: uh relationship to those CPI numbers, which speaks to just
Speaker 1: how sensitive the market is. Also, keep in mind that
Speaker 1: a lot of these shorts that were into that were
Speaker 1: kind of positioned in the market in the last couple
Speaker 1: of weeks. A lot of them were kind of liquidated
Speaker 1: before the election. The midterm election. The idea here being
Speaker 1: that gridlock was going to be a good thing for
Speaker 1: the markets. A Republican red wave would then once again
Speaker 1: be a positive, So a lot of shorts were taken
Speaker 1: out of the market. So the confluence of that, the
Speaker 1: CPI report work, and then of course the idea I
Speaker 1: would say a little bit of a short covering because
Speaker 1: they were already taken out. It's not a short cover
Speaker 1: um from what I from what I hear just from
Speaker 1: my sources. But then also keep in mind a little
Speaker 1: bit of a side relief what's going on in the cryptosphere,
Speaker 1: because yesterday there was the big question of is there
Speaker 1: contagion this? Uh, today perhaps not so much? Right, right, exactly,
Speaker 1: all right, So let's come in with Mike. I was
Speaker 1: listening to him this morning break it on Bloomberg surveillance
Speaker 1: that cp I print. It's it's down. We still have
Speaker 1: a ways to go, but it's a trend line that
Speaker 1: continues to go down. Right if you look at the
Speaker 1: reaction in the equity market, certainly you're welcome. Rooster gets
Speaker 1: credit for the sunrise, I get credit breaking Um, it's down,
Speaker 1: and it was down more than anybody could have anticipated.
Speaker 1: Now that's a relative judgment because seven point seven percent
Speaker 1: out the head like six point three on the core
Speaker 1: is still quite a bit. But uh, guests that we're
Speaker 1: going in the right direction. We don't know because it's
Speaker 1: only one month, but the overall number, especially in the core,
Speaker 1: there were a lot of things that went down in
Speaker 1: price which we had not seen. For the most part,
Speaker 1: what you're looking for is the rate of inflation slows,
Speaker 1: but in this case there were actual declines. Milk went down,
Speaker 1: orange juice went down, um bacon went down, which is
Speaker 1: always the most important item used. Cars went down. So yeah,
Speaker 1: basically you're you're looking at what could be a turning point,
Speaker 1: and I think that's what the markets were reacting to
Speaker 1: is because it was more than expected, more than anybody
Speaker 1: had thought possible. It's okay, this is this is a change,
Speaker 1: this is the turning point. It will lead the FED
Speaker 1: to put some sort of uh stopping point in place
Speaker 1: soon enough and maybe we get that soft landing. But
Speaker 1: is the headline number coming to Like I thought I
Speaker 1: had seen something on the TV side that they were
Speaker 1: talking about. This was like the fourth month in a row.
Speaker 1: Is there is there a trendline yet or no, there's
Speaker 1: not a trend line yet. The problem being with the
Speaker 1: headline is that food and gasoline are still going up.
Speaker 1: Food increased less than it did the month before, Gasoline
Speaker 1: was down five in September and up in September, so
Speaker 1: in October, brothers. So you know, the headline is subject
Speaker 1: to the vagaries of things that the FED has nothing
Speaker 1: to do with, so safe to say crety when you
Speaker 1: look at the markets and certainly what happened on the
Speaker 1: fixed income side of things. I mean, investors are expecting
Speaker 1: that the FED is kind of done with not that
Speaker 1: they're done raising rates, but done with those big rates. Well,
Speaker 1: I'm not going to use the word pivot, as I
Speaker 1: was told not to by someone in this room, but
Speaker 1: what I will say is that there is there is.
Speaker 1: I mean, look, the commentary has already changed in literally
Speaker 1: the last six hours or so since we've gotten this data.
Speaker 1: The idea that the conversation of soft landing is back
Speaker 1: into the narrative, The idea of that perhaps another seventy
Speaker 1: five basis point hike is thrown out the window. Um
Speaker 1: so far that the quote unquote pivot that everyone was
Speaker 1: expecting going into I want to say, even last month
Speaker 1: is actually coming the slow down that you will of
Speaker 1: rate hikes, and that is actually a good sign. There's
Speaker 1: also this commentary on the jobs market, specifically because look
Speaker 1: at the layoff numbers that you are starting to see
Speaker 1: in corporate America, people all of a sudden are saying,
Speaker 1: and I want to say on Wall Street and off
Speaker 1: Wall Street, because that matters. The markets are always going
Speaker 1: to talk about sentiment off Wall Street, They're gonna not
Speaker 1: necessarily have that same timeline. They're talking about the fact
Speaker 1: that the economy is actually turning. Yeah, exactly, all right,
Speaker 1: Mike twenty seconds. I say for you in terms of
Speaker 1: FED talk, because we are FED speakers, anything that's a
Speaker 1: note for you, No, they basically followed a script. We've
Speaker 1: had a lot of FED speakers today and almost all
Speaker 1: of them said the same thing that, um, it is
Speaker 1: time to consider slowing down the pace of rating races.
Speaker 1: But we've got a long way to go, and the
Speaker 1: inflation battle is not one. Inflation still way too high.
Speaker 1: So if heeds the narrative, not gonna be but probably
Speaker 1: going to be fifty and then there'll be another one
Speaker 1: after that. All right, Michael McKee and Crety Groupta, thank
Speaker 1: you so much for our markets set up here on
Speaker 1: this Thursday. This is Bloomberg Business Week with Carol Messer
Speaker 1: and Bloomberg Quick Takes. Tim Stinovic on Bloomberg Radio Paul
Speaker 1: and I were just talking. He got his COVID vaccine,
Speaker 1: the number five COVID vaccine. Me too this morning. It's
Speaker 1: the one against the O macron variants. Uh. This as
Speaker 1: we see COVID nine hospitalizations rising among babies under six
Speaker 1: months old, and the US CDC is urging mothers to
Speaker 1: get vaccinated to reduce the risk of infection that was
Speaker 1: not yet eligible for shots. That was coming from the
Speaker 1: CDC director Rochelle Wallinski. Well back with us is Dr
Speaker 1: Ian LUs Beder, clinical Professor of Medicine at n y
Speaker 1: U Land God he is once again on the phone
Speaker 1: in New York City. Hey Ian, Dr LUs Beder, good
Speaker 1: to have you here with Paul and myself. So I
Speaker 1: got my COVID chat. I'm feeling kind of good. I'm
Speaker 1: running out of space on my card. Um tell us
Speaker 1: about the what's going on? First of all, how are you?
Speaker 1: Everything is great, Nice to be with you, Carol and
Speaker 1: Paul and uh, yep, COVID is still with us. So
Speaker 1: we've talked about us for several years and not going
Speaker 1: away yet. And some of the data which we can
Speaker 1: talk about this time or next time. In Nature Journal,
Speaker 1: the prestigious journal we're seeing more variants out there. Dr
Speaker 1: Lensky raises a point about seeing more COVID in really
Speaker 1: the very young and the very old. They're the most susceptible,
Speaker 1: and the CDC does not recommend vaccines for babies under
Speaker 1: six months, so that group is somewhat more susceptible. According
Speaker 1: to my sources, they're seeing a number of infections r SC,
Speaker 1: power influenza, add no rhinoviruses, well, this sort of virus
Speaker 1: soup that kids are coming in with. So I don't
Speaker 1: think we can say kids are getting sicker from or
Speaker 1: dying from, but they're certainly being hospitalized with COVID. And
Speaker 1: so the thought is, since antibodies crossed the placenta, that
Speaker 1: mothers or pregnant women probably would benefit from getting vaccines
Speaker 1: and being boosted because that should gives passive immunity for
Speaker 1: the first few months after delivery to the babies. UH
Speaker 1: complicating that, and certainly that's true for older people. To
Speaker 1: definitely be up to date, we've talked for a long
Speaker 1: time diabetes, heart disease, lung disease. Those people are much
Speaker 1: more at risk. So we're not seeing a big increase
Speaker 1: in COVID deaths the opposite. We're seeing fewer cases nationally
Speaker 1: and the death rate is dropping as well. But for
Speaker 1: vulnerable populations, they need to be aware of this not
Speaker 1: less fare for folks. To characterize where we are in
Speaker 1: this process, is covid Is is endemic not pandemic. Yes,
Speaker 1: I think that's a very good and I think you
Speaker 1: know that's what we will see. In other words, endemic.
Speaker 1: We're going to be living with it for a long time.
Speaker 1: We're seeing more and more variance. This Nature Journal talked
Speaker 1: about variant soup XBB. Different countries are having different offshoots
Speaker 1: of O macron u, you know, which is why in
Speaker 1: part we need to find out the origin of the virus,
Speaker 1: you know, because this is new. We are not really
Speaker 1: living with viruses in the past that have had the
Speaker 1: ability to mutate this much and really um be in
Speaker 1: every area, and vaccines are not able to keep up
Speaker 1: with the mutations. We're seeing um more mutations in what's
Speaker 1: called the receptor binding domain, right, so that's where the
Speaker 1: virus attaches and when you have more rb D changes,
Speaker 1: and we're seeing really an exponential increase in those mutations
Speaker 1: and variants. You can have as many vaccines as you
Speaker 1: want the virus outruns you, So there's a lot more
Speaker 1: work to do. The good news is um over time,
Speaker 1: whether it'svaccines, are just getting COVID a few times, people
Speaker 1: seem to be more resistant. But how this will end
Speaker 1: we don't really know yet. Certainly we're going to live
Speaker 1: with it for a while, but how it will end,
Speaker 1: we don't know. So are you anticipating I'm curious, you know,
Speaker 1: you guys at n y U Land going or what's
Speaker 1: the talk of the medical community. Are we anticipating some
Speaker 1: other kind of spike among the general population come to
Speaker 1: fall in winter months or is it just like we'd
Speaker 1: see a spike in flu cases, which we know can
Speaker 1: also be deadly right, Unfortunately, vaccines are not perfect. Right,
Speaker 1: the flu vaccine is about fifty effect of UM. You know,
Speaker 1: we have to take it. Certainly, you don't want the flu.
Speaker 1: It's not fun and it does kill certainly people. So
Speaker 1: I think vaccines are helping. But all of these viruses
Speaker 1: are piercing a lot of those vaccines. I do think
Speaker 1: we are going to see a bit of a rise,
Speaker 1: and I'm concerned about other countries where these other variants
Speaker 1: are going on that are resistant to our by valence vaccine,
Speaker 1: So we don't really know will that be another way?
Speaker 1: It doesn't look that way at this point. The number
Speaker 1: of cases are dropping, hospitalizations from COVID or dropping. What
Speaker 1: will happen in the winter. Uh, hopefully it will stay
Speaker 1: in those other countries and not come to the US,
Speaker 1: but we're not sure. Yeah, right, Uh, stay tuned for
Speaker 1: all of this. Um Ian, Thank you so much. Dr
Speaker 1: Ian los bad Our, Clinical Professor Medicine at n y
Speaker 1: U Landgoing Medical Center. You're listening to Bloomberg Business Week
Speaker 1: with Carol Messer and Bloomberg Quick Takes Tim Stinovic on
Speaker 1: Bloomberg Radio. The new issue of Bloomberg Business Week is out.
Speaker 1: Is on newsstands, it's online of Bloomberg dot com slash
Speaker 1: business weekend of course, on the Bloomberg terminal. The cover story,
Speaker 1: appropriately so, is about this week's midterm elections. It's a
Speaker 1: story you'll find in the issue's remarks. It's about Republican
Speaker 1: Congressman Kevin McCarthy's dream and nightmare coming true. Here to explain,
Speaker 1: Bloomberg Business Week National correspondent Josh Green. He's with us
Speaker 1: on the phone in Washington, d C. Josh, good to
Speaker 1: have you here with Paul and myself, So tell us
Speaker 1: about Kevin McCarthy his dream come true, And yeah, it's
Speaker 1: probably not exactly maybe like he envisioned. Well. McCarthy is
Speaker 1: a longtime Republican House leader who has wanted to be
Speaker 1: Speaker of the House for years and years and years.
Speaker 1: UM was expected to be in UM and was sort
Speaker 1: of uh forced out, forced to remove himself from the
Speaker 1: race uh in favor of Paul Ryan before he could
Speaker 1: get in there, because he just didn't have the trust
Speaker 1: to the right wing of this caucus. Over the last
Speaker 1: seven years, he's plotted, he's raised money, he's campaigned, uh,
Speaker 1: and it seemed like on election night he was on
Speaker 1: the cost of taking over the speakership, maybe by a
Speaker 1: pretty wide margin. And then of course the red wave
Speaker 1: uh turned out not to be much of a wave
Speaker 1: after all. So we're I write in the New Business Week,
Speaker 1: is that it still looks like Republicans and win the House,
Speaker 1: but it's gonna be a very very narrow majority. And
Speaker 1: so it's it's the dream for McCarthy in the sense
Speaker 1: that he'll finally realize the speakership, but it's a nightmare
Speaker 1: because it means that the right wing of his caucus.
Speaker 1: You know, rat icals like Marjorie Taylor Green are really
Speaker 1: going to have a lot of leverage over him, and
Speaker 1: I think that's a recipe for chaos. This is a
Speaker 1: great quote in here, uh that from Senator Green quote.
Speaker 1: She made this to the New York Times. I think
Speaker 1: that to be the best Speaker of the House and
Speaker 1: to please the base, he's going to give me a
Speaker 1: lot of power and a lot of leeway. So that's
Speaker 1: some pressure on the next Speak of the House, whoever
Speaker 1: that is, to really do cater to some of the
Speaker 1: right wing elements of the Republican Party. Is McCarthy willing
Speaker 1: able to do that? Well, I think he's in a
Speaker 1: position where he's not going to have much of a choice. Um,
Speaker 1: you know, he he needs in order to elected speaker,
Speaker 1: he needs two hundred eighteen votes. And if you've got
Speaker 1: you know, had there been a big wave and they
Speaker 1: were you know, let's say, you know, two hundred fifty
Speaker 1: two and sixty Republicans, I think he might have been
Speaker 1: able to marginalize people like Representative Green. And just to
Speaker 1: be clear for for listeners, um, you know, this isn't
Speaker 1: somebody who wants aggressive tact cuts. She is someone who
Speaker 1: suggested a while back, um that forest fires in California
Speaker 1: were caused by lasers from space. Um, She's retweeted a
Speaker 1: lot of q and on conspiracy theories. And she was
Speaker 1: stripped in this current Congress of her committee assignments for
Speaker 1: having endorsed social media posts calling on Democratic officials to
Speaker 1: be assassinated. So we're talking way way off the deep
Speaker 1: end um extreme right. And yet you hear from the
Speaker 1: quote you just read that she expects and is getting
Speaker 1: a lot of catering to by McCarthy simply because he
Speaker 1: needs her vote in order to assemble those two eighteen votes.
Speaker 1: The smaller the Republican margin is, uh, the more leverage
Speaker 1: people like Green and the House Freedom Caucus are going
Speaker 1: to have. You know, Josh, it feels like the Republicans
Speaker 1: over the last few years, five years, ten years, I guess,
Speaker 1: you know, have been smart when they're all kind of
Speaker 1: on a singular mission and whether it's Supreme Court justices
Speaker 1: and you know, different initiatives that are out there, abortion
Speaker 1: and so on and so forth. Um, what is the
Speaker 1: the Republican mission at this point? What is the agenda?
Speaker 1: Because you kind of you right, that that's a problem
Speaker 1: for McCarthy because they don't really have an agenda. Yeah,
Speaker 1: you know, it is, I mean one of the one
Speaker 1: of the difficulties when you have a kind of chaotic
Speaker 1: Republican party like like McCarthy does, it's hard to get
Speaker 1: people to degree of an establishment wing that wants you
Speaker 1: to government responsibly. You have a radical ring that wants
Speaker 1: to impeach Joe Biden, and so Republicans this election really
Speaker 1: didn't agree on a clear set of legislative goals the
Speaker 1: way that let's say New Gingrich did in the Contract
Speaker 1: with America UM. That was in order to focus attention
Speaker 1: on on Biden and the problems with inflation and crime. Uh.
Speaker 1: And it you know, it looks like that's worked to
Speaker 1: a very narrow extent of Republicans do wind up winning
Speaker 1: the House. But the problem is it leaves a vacuum
Speaker 1: for anybody to rush in uh and push their issue.
Speaker 1: And so one of the things that we're gonna be
Speaker 1: contending when the Republicans are gonna be contending with is
Speaker 1: there's an element that wants to engineer another debt ceiling
Speaker 1: showdown in order to cut Medicare and Social Security. I'm sure.
Speaker 1: You guys, remember eleven years ago, after Republicans won the
Speaker 1: House tried to do that same thing. We came to
Speaker 1: the brink of default and US government uh dead wound
Speaker 1: up or credit wound up being written down. So a
Speaker 1: lot of concern among both Republicans and Democrats are at
Speaker 1: least the more responsible ones about what exactly h McCarthy
Speaker 1: led the House would look like, what they'd be able
Speaker 1: to engineer, and what kind of problems that might cost
Speaker 1: with the global economy. So, I mean, you point out
Speaker 1: in your piece here that boy, it's tough to be
Speaker 1: a Republican Speaker of the House. The last two John
Speaker 1: Baynard and Paul Ryan, they were effectively hounded out of
Speaker 1: the position and out of politics in general by the
Speaker 1: right wing of their caucus. I mean, McCarthy, representative McCarthy
Speaker 1: has to be sensitive to that, cognizant of that, you know, absolutely.
Speaker 1: I mean, the lifespan of a Republican House speaker, it's
Speaker 1: sort of like being the drummer for spinal tap, Like
Speaker 1: you're not gonna be around for very long. Um, And
Speaker 1: you know, arguing McCarthy actually has a tougher job than
Speaker 1: John Bayner or Paul Ryan, the last two Republican speakers
Speaker 1: who were both hounded out of the job by their wings.
Speaker 1: Um A, because the right wing is just more radical today,
Speaker 1: there's gonna be a narrow majority. But the other reason
Speaker 1: is that, you know, the big influential voice on the
Speaker 1: outside who's dictating a lot of behavior. Donald Trump wasn't
Speaker 1: on the scene for for John Banner. Mean, John Bender
Speaker 1: couldn't hold on to his job, and it was you know,
Speaker 1: Donald Trump wasn't even weighing in. Well he's going to
Speaker 1: be now. Uh. You know, everybody's expecting a presidential announcement
Speaker 1: from Trump in the next couple of days or in
Speaker 1: the next week. Uh, you know, and he's somebody who
Speaker 1: likes to weigh in and criticize people Kevin McCarthy in particular. Uh.
Speaker 1: And you know, that's one more headache that McCarthy is
Speaker 1: going to have to grapple with as he tries to
Speaker 1: cobble together this narrow majority, uh and keep his Republican
Speaker 1: caucus from revolting. So does that mean you're expecting that
Speaker 1: he doesn't really get anything done? Or maybe I think
Speaker 1: that's right. Uh, you know, I think it would be
Speaker 1: considered a win for from McCarthy and Democrats. You know,
Speaker 1: if we're just able to avoid a death ceiling to fall. Um.
Speaker 1: But as far as passing legis flation, if McCarthy takes
Speaker 1: over and Republicans win the House, that effectively ends the
Speaker 1: period of the bride and presidency where we're getting big
Speaker 1: pieces of legislation through the House. Um, nothing's really going
Speaker 1: to kind of get through. The thing that I think
Speaker 1: a lot of people are worried about is will mccorthy
Speaker 1: be able to do basic things like pass an appropriation bill,
Speaker 1: have the the U. S Government payoff its debts by
Speaker 1: raising the debt limit. The basic kind of blocking and
Speaker 1: tackling that didn't used to be contentious ten years ago. Uh,
Speaker 1: but now has become very much so. And it's really
Speaker 1: not clear is there going to be an adult in
Speaker 1: the room who can make these things happen or is
Speaker 1: McCarthy in trouble. Josh really quickly twenty seconds here an
Speaker 1: impeachment of President Biden. Is that likely to happen with
Speaker 1: him as speaker? It's certainly possibility. A lot of Republicans
Speaker 1: telling Bloomberg News that that's something they want to push
Speaker 1: in the new Congress. It will be made more difficulty
Speaker 1: by the narrow majority, but I think it's something that's
Speaker 1: certain to come up interesting times. They just continue, Josh Green,
Speaker 1: great cover story of Bloomberg Business Week. It is the
Speaker 1: remarks of the new issue of Bloomberg Business Week on newstands,
Speaker 1: on the Bloomberg terminal and at Bloomberg dot com slash
Speaker 1: business Week. Josh by the way, national correspondent Bloomberg Business Week,
Speaker 1: joining us on the phone in d C. And we
Speaker 1: appreciate that, like job, be careful what you wished exactly.
Speaker 1: This is Bloomberg Business Week with Carol Messer and Bloomberg
Speaker 1: Quick Takes Tim Stinovic on Bloomberg Radio. You're listening to
Speaker 1: Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes
Speaker 1: Tim Stinovic on Bloomberg Radio. The crypto story that was
Speaker 1: the recent cover, really entire issue of Bloomberg Business Week
Speaker 1: was written by Bloomberg opinion columnist Matt Levin. So I
Speaker 1: knew we wanted Matt to weigh in on this week's
Speaker 1: flurry of activity and calamity surrounding the meltdown of the
Speaker 1: crypto Exchange f t X. Matt is a Bloomberg opinion
Speaker 1: calumnist covering finance, former editor of deal Breaker from her
Speaker 1: investment banker colgmnacts so much more. He is back in
Speaker 1: our Bloomberg Interactive Broker studio. Thank you, thank you, thank you.
Speaker 1: I know you're busy. Um, you went through all the
Speaker 1: nix and crannies of how the crypto world came to be.
Speaker 1: Really taught us kind of the understanding of all of
Speaker 1: the terminology of the significance of the development since crypto
Speaker 1: has come to be, how do you then take this
Speaker 1: week and kind of cross it with what you wrote about? Well,
Speaker 1: I mean, one thing that I wrote towards the end
Speaker 1: of that piece was that Crypto this summer had its
Speaker 1: own two thousand eight where it had a financial crisis
Speaker 1: caused by like over leverage and opaque interconnections between firms.
Speaker 1: And you know, in the summer, the person bailing out
Speaker 1: the you know, providing the bailouts to these firms that
Speaker 1: we're wearing bust was f t X. And this week
Speaker 1: ft X is having its two thousand eight crisis. So
Speaker 1: what does that mean when the White Night, as everybody
Speaker 1: keeps calling him, has his own crisis. Well, it's bad,
Speaker 1: I mean, I mean it's it's bad because like the
Speaker 1: place where you thought your money was safe in crypto
Speaker 1: is not safe. It's bad also because like if your money,
Speaker 1: if you had your money somewhere else, you're like, well,
Speaker 1: if something goes wrong, ft X will ballot out. Right.
Speaker 1: There was a sort of like ft X Laura under
Speaker 1: the market, and now that that seems to be gone
Speaker 1: as well. All right, So there are a lot of
Speaker 1: people out there in the financial services industry, and most
Speaker 1: notably Jamie Diamond, who have not been supportive of this space,
Speaker 1: of the crypto space broadly defined. Are they right? I mean,
Speaker 1: they certainly seem vindicated this week. Look. I mean, like
Speaker 1: like you can have views about like the technology and
Speaker 1: the usefulness of tokens. But you know, when Jamie Diamond
Speaker 1: is like, this is all decentralized Ponzi schemes, Like everything
Speaker 1: that comes out looking like a Ponzi scheme makes him
Speaker 1: look more right. I don't think he's entirely right, but
Speaker 1: like he's not wrong to say this is a sector
Speaker 1: with a lot of troubles, right, I mean, what do
Speaker 1: you think Sam Bankman freed, what how do you think
Speaker 1: it plays out for him? I mean, you were a lawyer.
Speaker 1: I don't know. I don't know. I mean, I still
Speaker 1: don't know what went wrong, and I think that there's
Speaker 1: certainly a possibility of like something along the lines of
Speaker 1: innocent mistake crossed with like one thing that did happen
Speaker 1: is that FTTS seems to have been kind of knifed
Speaker 1: by its biggest competitor. And so you know, like how
Speaker 1: bad this ends up looking at don't know, but it
Speaker 1: doesn't look good. Yeah. Well, hey, Matt, I mean, do
Speaker 1: you had a long conversation with SPF Right, Yeah, I've
Speaker 1: done a couple of few conversations. I mean, you know,
Speaker 1: and we've been running sought strings about kind of all
Speaker 1: the things that he has said. I mean, is it
Speaker 1: a case of I mean, this is I guess what
Speaker 1: we forget to the bottom of what he said. Was
Speaker 1: it true back then? Or is it a case of
Speaker 1: that the market got so volatile or sold off and
Speaker 1: there were so many losses that this is why we
Speaker 1: are having this discussion right now. Is it part of
Speaker 1: the market environment or is it something specifically he did
Speaker 1: and how he ran or didn't run his businesses. I mean,
Speaker 1: I never asked him like do you keep customer money safe?
Speaker 1: Because one sort of hopes that just assume you know,
Speaker 1: like I think that you know, like one thing that
Speaker 1: definitely happened here, it was just the failure of risk management, right,
Speaker 1: and a failure of of like you know, concentrating too
Speaker 1: much money and about that went bad. But like whether
Speaker 1: that is an innocent failure or something more in nefarious
Speaker 1: is I think it's a little too early to tell.
Speaker 1: But there's no doubt that some very smart people made
Speaker 1: very bad decisions and lost a lot of money here.
Speaker 1: I think about that just the latest round of fundraising,
Speaker 1: which I think value the company dollars. I mean, there
Speaker 1: were real people in Silicon Valley, like Sequoia, right exactly,
Speaker 1: I mean down that putting it off? How do you
Speaker 1: how do you think happen there? Was it just blind faith?
Speaker 1: Those guys don't invest on blind faith. Well, I mean,
Speaker 1: so one thing is they didn't put that much money
Speaker 1: in and the scheme of things, right, I mean, is
Speaker 1: value at thirty billion, but they're putting you're writing you know,
Speaker 1: nine figure checks, which is real money, but it's not
Speaker 1: like they're fund um. The other thing is that I
Speaker 1: don't know, like like if you're if you're an adventure
Speaker 1: investor investing in crypto and people come to with like
Speaker 1: some wild dream and they say, in twenty years, you'll
Speaker 1: pay for tweets on the blockchain. You kick in some money,
Speaker 1: but then same banquetry comes to you. It's like, look
Speaker 1: I make know I have real revenue, Like we make
Speaker 1: a lot of money, Like we're very profitable, we have
Speaker 1: lots of cash. Like that was all true, Like they
Speaker 1: were making money. Like like one thing that is happening
Speaker 1: here is that venture capitalists are good at and evaluating
Speaker 1: tech business models and maybe not so good at evaluating
Speaker 1: highly levered financial services business models. Um, but like they
Speaker 1: were making money, you know, So Matt, we take a
Speaker 1: step back. Like one thing I feel like Bloomberg is
Speaker 1: good about is like putting things in perspective. So what
Speaker 1: is the smart perspective on this? I mean, we've got
Speaker 1: an incredible rally in the equity markets today right like
Speaker 1: they are focusing on something else. They're not focusing at
Speaker 1: least equity investors are focusing on the inflation print today
Speaker 1: so that the system financial system hasn't come down, Like,
Speaker 1: is there some smart perspective in terms of how we
Speaker 1: look at crypto at this point. Oh look, I mean
Speaker 1: I think for a while now, certainly since like the
Speaker 1: baillouts of the summer, it's been fairly clear that crypto
Speaker 1: could go to zero without bringing down like the financial system.
Speaker 1: Right like there is that crypto is still kind of
Speaker 1: isolated off on its own. It is is a place
Speaker 1: where there is you know, hundreds of billions of dollars
Speaker 1: of notional value and where people are getting rich and
Speaker 1: where people have money, but it is not deeply tied
Speaker 1: to the real economy in a way that like you know,
Speaker 1: FDS goes down, like the people who are FDS customers
Speaker 1: will lose money, but like the banks won't notice. It
Speaker 1: won't affect mortgages, There won't be foreclosures, there won't be
Speaker 1: like high unemployment numbers. It's just like it is its
Speaker 1: own isolated system at this point, will bring in anti crypto,
Speaker 1: I don't think so, but it's it doesn't help, you know,
Speaker 1: like it doesn't help that you know, there's a lot
Speaker 1: of a lot of trust in crypto was undermine this
Speaker 1: summer as all these high profile firms went bust, and
Speaker 1: the person who was doing the most to restore trust
Speaker 1: was Sam Bankman Freed, who is bailing out those firms
Speaker 1: that their customers got made whole. And when he goes
Speaker 1: under like I think a lot of people are going
Speaker 1: to have real doubts about trusting anything in the crypto system.
Speaker 1: I just want to know where he is. Well. I
Speaker 1: think it's the Bahamas. Great place. Next, traditional want to
Speaker 1: do some snorkeling York. It's better than New York. Matt Levin,
Speaker 1: thank you so much. I know you're so busy, but
Speaker 1: I knew we want to do away in on this
Speaker 1: about these huge columns. He's not bad. I mean I
Speaker 1: think I think he dreams it and then it just
Speaker 1: comes out miraculously on paper. Matt Levin is columnist in
Speaker 1: Bloomberg Opinion, A must read here for all of us
Speaker 1: at Bloomberg and for you Bloomberg and director Burger Studio.
Speaker 1: I'm brooom a journal. But you let me drive? Oh no, no,
Speaker 1: no, no no, who's please? I'll do the ride gravels. I
Speaker 1: want to drive. It's a good question. Drive. This is
Speaker 1: the drive to the Clobell on Bloomberg Radio. All Right,
Speaker 1: just got about eleven minutes left in today's trading session,
Speaker 1: and we have stocks we're seeing buying into the clothes,
Speaker 1: as Charlie mentioned, up more than seven percent on the NASDAC.
Speaker 1: We've got about a five point three percent gain on
Speaker 1: the sp Paul, I mean it is broad based, all
Speaker 1: in it is. I mean that Nashtack is just amazing.
Speaker 1: But we've been buying him into the clothes here, so
Speaker 1: we've seen some strength and trading. Yeah, pretty significant. Alright,
Speaker 1: let's so let's get to it. Let's see what Doug
Speaker 1: Ciocca has to say. He is CEO and partner at
Speaker 1: Kvar Capital Partners. They've got over a billion in assets
Speaker 1: under management based on Leewood, Kansas. That's where we find
Speaker 1: him joining us via zoom. All right, Doug Ciocca, how
Speaker 1: are you? I'm great? How are you? Thank you for
Speaker 1: having me on? Doing well enough? There's Notre Dame shirt.
Speaker 1: I mean people you can't, They're just they wear the
Speaker 1: Notre Dame stuff everywhere. Like Paul Sween, you cannot object.
Speaker 1: And that's exactly right. That's cute. So uh interesting day
Speaker 1: to say the least yields backing off a tremendous rally.
Speaker 1: I can't remember the last day I saw such a
Speaker 1: buy in into the equity trade. Doug, is this it.
Speaker 1: Have we bottomed out when it comes to stocks and
Speaker 1: topped out when it comes to yields? Uh? You know,
Speaker 1: And that's that's obviously the six four th question. It
Speaker 1: is incredible, actually, Carrol, to see the Bloomberg Barkley's agg Now,
Speaker 1: I think this is gonna be the best day it's
Speaker 1: had a single day performance two So it's amazing. Is
Speaker 1: the bond rally, the stock rally, the incredible decline of
Speaker 1: the dollar, and yet the Bloomberg Financial Conditions Index of
Speaker 1: the United States is actually tightening. And I don't know
Speaker 1: if the FED would take this is all very positive news,
Speaker 1: but um, it couldn't be the peak and c P
Speaker 1: I maybe for the core, yet to be seen yet
Speaker 1: for the for for the I'm sorry for the headline,
Speaker 1: but yet to be seen for the core. But certainly
Speaker 1: I think a nicely motivating factor as far as taking
Speaker 1: some of the worst case scenarios off the table. So,
Speaker 1: I mean, I'm not sure if this is just a
Speaker 1: technical short squeeze or we've got real and long term
Speaker 1: investors buying in here. If this is a trade, I'm
Speaker 1: not really sure, but it's clear that to the extent
Speaker 1: and anybody wasn't paying attention. This is a market that
Speaker 1: that's paying close attention to the federal reserve, just as
Speaker 1: a federal reserve is paying close attention uh to inflation.
Speaker 1: But it's not so much earnings. It's just what's this
Speaker 1: fed gonna do? And I guess the market sellers today
Speaker 1: we think we're maybe if we're not at the peak,
Speaker 1: we're close to it. Well, it's interesting, right, So you
Speaker 1: had kind of the Powe switcheroo last week, Paul, and
Speaker 1: you had a very dubbish or at least largely dubbish
Speaker 1: statement and then a very hawkish press conference. And then
Speaker 1: we had a couple of the fat governors when they
Speaker 1: hit the media circuit post press conference, um, and they
Speaker 1: were a little bit mixed me. Mary Daily seems to
Speaker 1: be reasonably dubbish, and and of course Bullet and Cash
Speaker 1: Cary and more hawkish. And then Loretto Mester today, who
Speaker 1: is set up to maybe told throw some cold water
Speaker 1: on the rally, came out with there four or five
Speaker 1: headlines around Aloomberg that probably could be interpreted as her
Speaker 1: most most dubbish um interpretation of the new data. So
Speaker 1: if they're actually seeing right this long and variable lag
Speaker 1: making its way into the data. I don't know why
Speaker 1: you would need to throw a fuel on the fire,
Speaker 1: and it's reflected in the production in the turmal rates.
Speaker 1: So the mark kid is trying to price in what
Speaker 1: it thinks it is going to be the next couple
Speaker 1: of moves and then by no mean done. And I
Speaker 1: think there's a major difference between a pivot and a pause.
Speaker 1: But we when when they say in the press conference,
Speaker 1: we're nowhere near considering pausing. I don't know mathematically how
Speaker 1: that is the case. Have you already raised rates before
Speaker 1: an invasive points you're not gonna raise them by eight
Speaker 1: hundred You certainly are past that inflection point where at
Speaker 1: least would be something you would have to consider in
Speaker 1: future meeting. All right, So I'm trying to translate that.
Speaker 1: Does that mean, Doug, you think we're overdone here certainly
Speaker 1: on the equity trade, that we're just too amped up here? No,
Speaker 1: by no means I certainly see that there's whether it's
Speaker 1: shortcoming relief for ally, I do think, like anything, there
Speaker 1: was an elevation of a liquidity concern given what's taking
Speaker 1: place in the crypto complex in the last forty eight hours,
Speaker 1: I think a little reprieve if if it isn't going
Speaker 1: to be taking additional equidity out of the system because
Speaker 1: of the cooling off on some of the inflation data.
Speaker 1: I think that the market is trying to find some
Speaker 1: level ground. But more than anything, you're chasing out shorts
Speaker 1: pretty quickly today. But the question always becomes like, is
Speaker 1: this just another bear market rally? And is someone in
Speaker 1: your program a couple of weeks ago and said maybe
Speaker 1: it is, maybe it isn't. But they all look the
Speaker 1: same right at the beginning, And so the question just becomes,
Speaker 1: are we at a point where the FED is not
Speaker 1: going to end the rally by talking down um any
Speaker 1: optimism by very harsh hawk is language. If you think
Speaker 1: what ended the bear market bump that took place in
Speaker 1: July and August, it was poul and Jackson hole. If
Speaker 1: you think what ended the bear market pop two weeks ago,
Speaker 1: it's when the FED came out of the press conference.
Speaker 1: So if the FED now in the in the red semester,
Speaker 1: being one of the the head hawks, is talking a
Speaker 1: little less strongly, the market might take that as a
Speaker 1: higher probability that this may not be a bear market bounce.
Speaker 1: But something start of the next legable market, Doug. If
Speaker 1: it is somewhat along that scenario that maybe you know
Speaker 1: the fetish starting to taper here, it's it's increases. Where
Speaker 1: are you suggesting folks go in this market? Yeah, great question, Paul.
Speaker 1: I mean I think within the equity realm, we still
Speaker 1: think defensive products sectors makes sense, healthcare, staples, some industrials,
Speaker 1: but they need to they need to sell at low multiples. Right,
Speaker 1: You're not gonna get multiple expansion in a high interest rate,
Speaker 1: low growth environment. They need to have super clean balance sheets.
Speaker 1: Into the three they can self sufficiency and sourcing products. Okay,
Speaker 1: So we still think right, and the equity market is
Speaker 1: larger than been resilient, even though the average stock has
Speaker 1: done what genterments peak. There's been a lot of damage
Speaker 1: that's been done to really good companies that have been
Speaker 1: thrown into discriminately and treated like very poor stocks. So
Speaker 1: there's opportunity particularly those three sectors. But in fixed income
Speaker 1: is likely we're we're most excited. Right. It's interesting when
Speaker 1: Paul talks about needing to establish positive real yields. They're there, right, three, five, seven, nine,
Speaker 1: fifteen years out they are positive real yields based upon
Speaker 1: the five year fourd on the break evens for these tips.
Speaker 1: So if you think about right, everyone talks about built
Speaker 1: by association um colonal damage when certain class of assets
Speaker 1: become impaired, but there's also a rising tide component when
Speaker 1: all aspects of an asset class become more attractive do
Speaker 1: purely to their spread over the risk free treasury. And
Speaker 1: this is fixed income. And at times like this, some
Speaker 1: of these companies actually their balance sheets not being cynical
Speaker 1: that the federal government that are offering yield previous at three,
Speaker 1: four or five basis points above. How much of do
Speaker 1: you think the move today that we're seeing is because
Speaker 1: the dollar has backed off. I'm looking at the dollar index.
Speaker 1: It's down about two point three and that has certainly
Speaker 1: been troubling, uh for the profit picture. We've heard that
Speaker 1: from a lot of CEOs. Yeah, I think it's a
Speaker 1: large part of it. Carol, there's no question. I mean
Speaker 1: with everyone that came down to your point of CEO
Speaker 1: is coming to the quarterly confessional and saying, we've read
Speaker 1: a couple of the companies we cover this morning, so
Speaker 1: the same thing, right, we have to be a little
Speaker 1: bit cautious in our revenue projections just because of the
Speaker 1: head win of the PAX. Now, if that gets into
Speaker 1: the multiple and that starts to abate, then you're gonna
Speaker 1: have upward surprises in the out quarters. But there's no question, Carol,
Speaker 1: you hit on one of the primary catalysts for today's move. Hey, Doug,
Speaker 1: you're in the burbs of Kansas City there. How's the
Speaker 1: economy out there? Yeah, I mean it's it's pretty strong.
Speaker 1: It's pretty resilient. One of the great things about I mean,
Speaker 1: I'm in southern Johnson County, Johnson County in Kansas, but
Speaker 1: the whole sort of broad case area, we have very
Speaker 1: diverse revenue base. Right, There are not two or three
Speaker 1: single community pillars of large public companies that employ a
Speaker 1: lot of people. So we have a very big service industry,
Speaker 1: particularly within professional services, legal accounting, financial services. But we
Speaker 1: also have a very diverse healthcare business. There was a
Speaker 1: cast off of a company that had been kind of
Speaker 1: the king pin of the city back in the eighties
Speaker 1: and nineties, So the economy is probably very very resilient.
Speaker 1: All right, We're gonna leave it there, Hey, Doug. Always
Speaker 1: fun to check in with you, Doug Cioca is CEO
Speaker 1: and partner at Capital Partner uh AS we said over
Speaker 1: a billion dollars in assets under manager basically Wood Kansas
Speaker 1: and joining us via zoom from their dog take care.
Speaker 1: Good to talk with you. Thanks for listening to Bloomberg
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