Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Summer's over single best idea, and the answer is here.
Speaker 2: It's the beginning of the new year a million years ago.
Speaker 2: It really started Wednesday after Labor Day, and that's changed
Speaker 2: because across the nation so many people have kids back
Speaker 2: into school before Labor Day, the whole sports oocracy of
Speaker 2: America and you know, athletic teams and all that. But
Speaker 2: also I think it was just a sense, particularly in
Speaker 2: the more affluent East Coast climbs, of getting the September fifteenth,
Speaker 2: maybe September tenth, I don't know, but somewhere out there
Speaker 2: is the new year. We're committed. It's single best idea
Speaker 2: and across all of Bloomberg Surveillance to give you the
Speaker 2: best conversations we can on economics, finance, and investment. We
Speaker 2: started incredibly strong. Today. I was surprised the interns all left.
Speaker 2: Lisa Mateo's interns left two weeks ago because she was
Speaker 2: on sabbatical. But walking today and there's only two or
Speaker 2: three interns left from the hoard that got us through
Speaker 2: the summer, and so we had a really good set
Speaker 2: of conversations out there today. I thought that Linda dissol
Speaker 2: At Federated was really quite good about figuring out the
Speaker 2: balance between value and the growthiness of the mag seven
Speaker 2: call it mag Eate now with Berkshire Hathaway. Scott Clemens
Speaker 2: is the Brown Brothers Harriman with some huge multi decade experience.
Speaker 2: We talked to Scott Clemens simply about the valuations of
Speaker 2: the market.
Speaker 1: We've been very encouraged since really the beginning of June.
Speaker 1: I guess to see the market broaden now a little bit.
Speaker 1: So small caps have outperformed over the past two months
Speaker 1: three months now, NASDAK hasn't necessarily led the way. That's
Speaker 1: encouraging to me. I get worried when the market is
Speaker 1: so top heavy, top heavy, narrowly led markets tend to
Speaker 1: be volatile. I think all that a little bit. In
Speaker 1: early August we had a couple of days worth of
Speaker 1: reminder of that. I don't think that's gone away. Volatility
Speaker 1: tends to a company turning points in economic activity, turning
Speaker 1: points in monetary policy. We may be on the verge
Speaker 1: of that, so buckle up, but pay attention to the
Speaker 1: long term into fundamentals, and.
Speaker 2: What I'd pay attention to is a tape today I
Speaker 2: really know, Brent crude three dollars move West Texas Intermedia.
Speaker 2: You know, by the time you listen to this, you
Speaker 2: may be under seventy a barrel, under seventy one dollars
Speaker 2: a barrel in West Texas Intermedia. Brent crud sliding down
Speaker 2: above that. But the whole global slowdown feel and you
Speaker 2: know the ISM numbers that come out the first of
Speaker 2: the month. John Ferrer puts a huge amount of weight
Speaker 2: on ISM. Maybe I put less weight on, but the
Speaker 2: reality is ism manufacturing coming in below. Survey gets your
Speaker 2: attention and we're off to the races on this idea. Okay,
Speaker 2: rates come down, but does GDP come down with it?
Speaker 2: Maybe that's a titanic battle through the week. We'll have
Speaker 2: all sorts of economic data on that. Dean Kurnent, we've
Speaker 2: been trying to get into the studio since well August whatever.
Speaker 2: When the market blew up. The vis went out through
Speaker 2: the Lehman thirty out to sixty something came right back.
Speaker 2: It was a flash crash, I guess. We talked to
Speaker 2: Dean Kernet at Macro Risk Advisors about that. But far
Speaker 2: more importantly, away from indexes, the correlations between individual stocks
Speaker 2: Dean Kurnit looked at Invidia and Apple.
Speaker 3: Just take in Vidia and its correlation to Apple, it
Speaker 3: was actually running negative for a period of time. That's
Speaker 3: unheard of to have the two largest stocks, both three
Speaker 3: trillion dollars plus market caps, to be uncorrelated. If you
Speaker 3: think about the impact that that's having on overall levels
Speaker 3: of realized volatility the S ANDP, it's significant. And why
Speaker 3: does that matter. It's because in today's day of investing,
Speaker 3: volatility is not just a statistic we watch. It's actually
Speaker 3: an input into how portfolios are sized, a mathematical input.
Speaker 3: So you lower the realize volatility and people get longer,
Speaker 3: they think they can run bigger levels of exposure because
Speaker 3: your value at risk is lower because VOLL is lower.
Speaker 3: And so one of the things Tom I think is
Speaker 3: a big, you know, unknown, but something we should be
Speaker 3: really watchful for, is a shift in the correlation. So
Speaker 3: if the mag seven magate starts to get more correlated
Speaker 3: to the S and P, or if these names start
Speaker 3: to become more correlated to each other, we certainly got
Speaker 3: a glimpse of that on August fifth. That's going to
Speaker 3: add a lot of volatility to the index.
Speaker 2: It's unfair. I mean ding Current. It's on macrorisk Advisors
Speaker 2: and I'm soost wax philosophical here about what he just
Speaker 2: said as an arch quant and the answer is, my
Speaker 2: brain is still on summertime, so bear with me. Buried
Speaker 2: in that brilliant discussion of interrasector correlation individual stock correlation,
Speaker 2: and as a partition this goes back to a getting
Speaker 2: Tu Shushande at MIT years ago. There's correlation across indexes
Speaker 2: and sectors, and that's as a general rule, very different
Speaker 2: than correlations between individual stocks. The pro dan current there
Speaker 2: talking about individual stocks, and buried in that was a
Speaker 2: Global Wall Street mantra called value at risk or var VAR.
Speaker 2: You study value at risk, and some people believe in it.
Speaker 2: It's sort of an institutional requirement and measurement of big banks.
Speaker 2: They're trading desks, their investment desk, whatever you want to
Speaker 2: call it. And the answer is, you make a decision
Speaker 2: if you believe in this malarkey, and I'll tell you
Speaker 2: I'm death on VAR. I really listen carefully there to
Speaker 2: Dean Current, But I just think the VAR measurements is
Speaker 2: a trap for Global Wall Street of the highest highest level.
Speaker 2: It's just it's just something to really watch out for
Speaker 2: their Dean Curnet on Nvidia and Apple. It's so simple.
Speaker 2: We're on on YouTube, subscribe to Bloomberg Podcasts, also on
Speaker 2: Apple podcasts. It's single best I