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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Lee.

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Speaker 1: We bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot com, and of course on the Bloomberg John

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Speaker 1: Let's bringing someone on Amazon, on Alphabet and on Conservative

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Speaker 1: managed Investment. Christopher Grassanti with us to the m AI

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Speaker 1: Capital joining us right now, Chris Grosanti. What an Amazon

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Speaker 1: and Alphabet signal this afternoon? So Tom, I we're expecting

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Speaker 1: decent earnings there, Tom, and I think it will be

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Speaker 1: more of the same, strong growth through the pandemic. Great

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Speaker 1: company to own when times are tough, but also great

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Speaker 1: companies to own as the economy for covers. So you know,

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Speaker 1: the spotlight is on game Stop, but but the action

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Speaker 1: the sizzles and game Stock. The steak is Amazon and

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Speaker 1: Google and Facebook, etcetera. One of the ways you go higher.

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Speaker 1: Our selected walls of worry measure the walls of worry

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Speaker 1: right now? Is there enough gloom out there, Chris where

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Speaker 1: you've got major enthusiasm about a leg up? Oh? I

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Speaker 1: think so, Tom. I mean everyone for the last week

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Speaker 1: has been talking about how the markets are broken because

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Speaker 1: game Stop has gone up a thousand percent and and

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Speaker 1: we need regulation, and it seems to me the markets

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Speaker 1: are working pretty well. Game Stop is coming back down

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Speaker 1: to earth. Uh, nobody's gone no broker dealer has gone bankrupt, etcetera.

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Speaker 1: And people made or lost the money as capitalists do so,

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Speaker 1: but I think the attention ought to come back to

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Speaker 1: where the cash flow really is, which are for many

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Speaker 1: the large technology and others. Two parts of that answer.

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Speaker 1: Let's go with the first part first, Chris, orderly is

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Speaker 1: a word we hear a lot. Can you just walk

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Speaker 1: me through the distinction between the orderly price action that

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Speaker 1: you witnessed and something you would consider to be more

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Speaker 1: disorder Oh sure, Well, you know, obviously disorderly has a

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Speaker 1: new definition of the dictionary under game Stop. And it

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Speaker 1: was the short squeeze really of my thirty five year career.

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Speaker 1: Um So, but again the system work, uh, steam is

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Speaker 1: coming out investors. Capital plugged the whole of the hedge

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Speaker 1: funds and robin Hood so that we could continue through it,

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Speaker 1: and it did it in its own self. And you know,

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Speaker 1: I don't think this is a terrible story of a

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Speaker 1: broken system. I think it's a system that's stressed and

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Speaker 1: then work any distications you took advantage of, Chris absolutely.

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Speaker 1: I think that's a great point, Jonathan. When prices moved

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Speaker 1: without fundamental reasons for them moving, there's always opportunities. So

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Speaker 1: while the focus was were on these small short squeezes, um,

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Speaker 1: you know, the rest of the market, as you guys covered,

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Speaker 1: really dropped the worst in October. So stocks like Facebook

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Speaker 1: that came in um with quite stronger and last week,

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Speaker 1: uh you know, and it's down ten or fifteen percent

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Speaker 1: from its highs of a couple of months ago. A

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Speaker 1: terrific opportunities. So we moved in there. Um, we would

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Speaker 1: move into Lockheed Martin. We bought a new position in

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Speaker 1: Texas instruments we called semiconductors the oil of the digital economy. Um,

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Speaker 1: all of that stuff was left by the wayside, and

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Speaker 1: the attention focused on this kind of tiny bit of

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Speaker 1: the market. Christmas Santy and folks game stop breaking through

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Speaker 1: the new lows one thirty two level right now, Chris

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Speaker 1: Kers Santy. In terms of measured investment, it does come

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Speaker 1: back to earnings and revenue. I guess we're seeing earnings

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Speaker 1: resiliency are we seeing revenue resiliency. I don't think yet, Tom,

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Speaker 1: you are. For obviously the companies that we all knew

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Speaker 1: were resilient, like the Amazon. But I think you'll see

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Speaker 1: more fickle to stuff like a Disney with the theme parks,

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Speaker 1: like a Comcast. Um. You'll see these companies show their

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Speaker 1: resiliency as the economy opens up. And of course the

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Speaker 1: market is in anticipating that. But but we're in the

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Speaker 1: middle of the cold, dark winter, and uh, what if

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Speaker 1: you rolled the tape forward, You've already vaccinated almost ten

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Speaker 1: percent of the population if you rolled the tape forward

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Speaker 1: three or four months. It's hard not to be optimistic

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Speaker 1: about the emerging county. Fact, I'm more worried about overheating

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Speaker 1: by the end of the year. But but I'm very

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Speaker 1: confident the economy is going to get there and you'll

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Speaker 1: see that revenue growth well do you kind of will

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Speaker 1: get rid of the revenue growth picks up? We're getting

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Speaker 1: out front. Now are we pricing for the end of summer?

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Speaker 1: Are we already pricing into two thousand twenty two? Oh?

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Speaker 1: I don't think so, Tom. I think when when when

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Speaker 1: an economy comes out of a recession, And remember that

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Speaker 1: says this was a deep recession for many travel companies,

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Speaker 1: restaurant companies, things like that. UM, the revenue and earnings

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Speaker 1: growth typically takes analysts by surprise on the upside. So

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Speaker 1: how many of us are sitting at home planning that

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Speaker 1: vacation we haven't been able to take for eighteen months now?

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Speaker 1: So I think you're gonna see pent up the and

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Speaker 1: I think you're gonna see strong ernie. Um. Have we

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Speaker 1: priced some of that in? Absolutely? Have we priced it

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Speaker 1: all in? I don't think. Let me jump in, Tom.

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Speaker 1: Do you remember when we talked about Mr Olariya over

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Speaker 1: Ryan Air. I think it's about three months ago and

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Speaker 1: he came on Bloomberg and he said the beaches will

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Speaker 1: be packed in Europe next summer. They will be packed

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Speaker 1: three months later. Tom, there's anyone think the beaches will

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Speaker 1: be packed in Europe this summer now? And again it's

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Speaker 1: it is about the COVID the vaccine recovery. But John,

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Speaker 1: as you mentioned earlier, the fact is we are seeing

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Speaker 1: better statistics in the United States and we have some

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Speaker 1: form of a daily and John, I'm gonna say this

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Speaker 1: on the X axis as much as I can. It

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Speaker 1: is a daily effort to get people vaccinated, and to me,

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Speaker 1: that's non linear. That really pays off down the road.

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Speaker 1: Find a question, Chris. It's really spice here. Sure, but

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Speaker 1: but I think you're being way to pestimistic John as usual. Hey, Chris,

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Speaker 1: I've got the flight book for Italy that I'm just

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Speaker 1: asking a question. I'm just asking a questions. It's a

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Speaker 1: matter of timing. It's not a matter of if. It's

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Speaker 1: a matter of when, So the beaches will be packed

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Speaker 1: in or later, and that's what we're inst I hope.

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Speaker 1: So Chris, git to catch you up first. Thank you,

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Speaker 1: m Ai Capital on the vaccine. This is my most

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Speaker 1: important conversation of the day. Washington State and the University

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Speaker 1: of Washington is definitive in microbiology. Leading their charge academically

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Speaker 1: is Deborah Fuller. They do terrific work across all of

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Speaker 1: biology and virology as well. Dr Fuller, thank you so

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Speaker 1: much for joining us. The Mayo Clinic tells me I

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Speaker 1: need a tetness shot every ten years to prose like

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Speaker 1: you just assume that we're going to be vaccinated for

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Speaker 1: COVID out into the future. We're anticipating that these particular

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Speaker 1: viruses as we see this virus evolve and we see

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Speaker 1: new variants occur UH. That desirous is going to the endemic,

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Speaker 1: and that means that it will remain in our population

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Speaker 1: for years UH to come, and that we can anticipate

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Speaker 1: occasional outbreaks and possibly even new variants to merge UM.

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Speaker 1: But we do have the weapon to fight that, and

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Speaker 1: that is with vaccines. Just like you mentioned with tetanus,

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Speaker 1: that's every ten years we've studied the particular pathogen and

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Speaker 1: we know that's how often you need to get re

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Speaker 1: vaccinated to sustain your immunity. We're going to be studying

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Speaker 1: that for stars covie too, and it could be just

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Speaker 1: like influenza, where you have to get the annual vaccination

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Speaker 1: to sustain your immunity. Do you assume that this covid

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Speaker 1: vaccination is specific to this two thousand twenty bug or

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Speaker 1: can it be used on other covid viruses forward. That's

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Speaker 1: a great question. We are studying that right now in

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Speaker 1: terms of particularly with the development of vaccines and trying

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Speaker 1: to design new vaccines that will eventually protect against just

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Speaker 1: this SARS covie too. But could we actually design vaccines

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Speaker 1: against future variants that we haven't even seen yet. And

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Speaker 1: the way we do that is we try to focus

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Speaker 1: immune responses against parts of the virus that will not

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Speaker 1: undergo viral evolution. They just can't, otherwise it would actually

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Speaker 1: result in loss of fitness of the virus itself. So,

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Speaker 1: uh so that's a that's a futuristic study of futuristic

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Speaker 1: exaccine down the line. In the meantime, tweaking viruses and

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Speaker 1: updating them to keep pace of emerging variant is a

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Speaker 1: common practice, one that we know work certainly for other pathogens,

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Speaker 1: and we anticipated it should work for this one too, Deborah,

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Speaker 1: is the question of the moment. I keep going back

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Speaker 1: to it, vaccine nationalism. Can you just comment on it,

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Speaker 1: how world you are about it vaccine nationalism? To find

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Speaker 1: that for me, please absolutely sure. So Europe right now

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Speaker 1: does not want to export some of the vaccines. The

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Speaker 1: UK is far more concerned about vaccinating its population beyond

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Speaker 1: just the at risk in society, to try and get

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Speaker 1: the whole population towards what some people would consider her

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Speaker 1: immunity at the sense of not making sure that the

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Speaker 1: developing world also has access to the vaccine, and therefore

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Speaker 1: we could have a proliferation of the mutations that we've

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Speaker 1: seen already in places like Brazil, South Africa and in in

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Speaker 1: the UK, and it would stop us from being able

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Speaker 1: to re up from the economy. Is that okay, No,

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Speaker 1: that's not okay. That's a major concern. As long as

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Speaker 1: there is virus somewhere in the world, we are going

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Speaker 1: to be battling this pandemic. So it needs to be

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Speaker 1: a worldwide collective effort to to shut down this uh,

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Speaker 1: this pandemic everywhere in the world. And that's that's why

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Speaker 1: too we're looking at wanting to make sure that we

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Speaker 1: develop vaccines that are going to be able to be

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Speaker 1: distributed UH to far reaches of the world and we

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Speaker 1: cost effective and hopefully UH work potentially in a single shot. Debra,

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Speaker 1: thank you appreciate your time this morning. Thank you very much.

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Speaker 1: Debra Fella, the University of Washington School of Medicine, Microbiology Professor.

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Speaker 1: On some of the key issues right now surrunder up

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Speaker 1: as the society general, they have an acute heritage of

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Speaker 1: mathematics and bonds where thrills you could join us today

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Speaker 1: on rates strategy, sour boundary. What level do you need

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Speaker 1: on ten year yield to signal breakout out of the

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Speaker 1: range for me that level is is one twenty in intense.

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Speaker 1: I think that it's that teny years. We're gonna struggle

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Speaker 1: to get past one until we see clear signs of uh,

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Speaker 1: you know, return to normalcy, you know, more vaccine deployment.

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Speaker 1: So so really the struggle is going to be trying

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Speaker 1: to get past one twenty. Also, I think has implications

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Speaker 1: for a broader risky assets. If you talk to say

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Speaker 1: equity analysts or or corporate bonds strategies, what yourtability time

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Speaker 1: to hear is that you know, beyond one intense they

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Speaker 1: could see some stress in the in risky assets, and

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Speaker 1: the FED is very much heen on keeping rates in

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Speaker 1: place so that you know, you don't see the sort

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Speaker 1: of route in ski assets. So that's gonna be a

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Speaker 1: moving target. But I just wonder where they're comfortable and

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Speaker 1: where they start to get uncomfortable. We know the e

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Speaker 1: c B from our reporting there are some levels of

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Speaker 1: spreads that they are targeting. We don't know what those

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Speaker 1: levels are, but apparently they exist. What do you think

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Speaker 1: it is the point on the curve that they're focused

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Speaker 1: on the level of rights yields that makes them a

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Speaker 1: little bit more uncomfortable. Well, I think any sort of

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Speaker 1: rapid rising yields is going to make them uncomfortable. So

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Speaker 1: the repricing in rates has to be very gradual and

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Speaker 1: something that they feel like they have have a handle on.

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Speaker 1: We don't want to see what we saw back in

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Speaker 1: in March, where you saw this unruly moving in yields

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Speaker 1: and the felt had to come in and intervene. So

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Speaker 1: if you do see a rising yields, and if it's

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Speaker 1: gradual and over time and warranted as fundamentals improved, then

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Speaker 1: I think they'll be comfortable with it. I mean, our

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Speaker 1: forecast for your end is one fifteen ten or yields.

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Speaker 1: I think it's on the high end of of street

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Speaker 1: forecast contrast to what we had last year when we

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Speaker 1: were in the had the lowest forecast for for ten

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Speaker 1: ye year olds. Um. So I think that we will

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Speaker 1: get there, but I think it has to be very,

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Speaker 1: very gradual. I think a lot of that move in

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Speaker 1: tenny years is going to happen in the second half,

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Speaker 1: not so much in the first half. What's positioning like

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Speaker 1: Savantra right now, it just feels like a massive change

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Speaker 1: that everyone's on the same page for once of a

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Speaker 1: treasuries typically come into any given year and people will

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Speaker 1: be looking for something a hundred basis points higher, something

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Speaker 1: north of that. Sometimes it seems like the ranges for

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Speaker 1: estimates is a lot lot tighter than it has been

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Speaker 1: in years gone by. Yeah, it's it's entirely because of

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Speaker 1: fair intervention. I mean J Pow fed chair J Power

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Speaker 1: last week basically shot down the idea of tapering asset

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Speaker 1: purchases anytime this year. They're sort of on track to

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Speaker 1: continue to to buy bonds. So I think for the

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Speaker 1: most part, positioning it's kind of, you know, is sort

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Speaker 1: of favoring the range trade. Are you when you start

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Speaker 1: getting towards you know, one percent, you know, investors are

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Speaker 1: broadly thinking, oh, this is probably a good good place

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Speaker 1: to go short the market. And around one seventy you're

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Speaker 1: gonna start seeing people cover shorts. So that's kind of

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Speaker 1: the range I think that people are going to be

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Speaker 1: trading in. That's right right where I wanted to God.

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Speaker 1: The idea here of convexity or the dynamics of the

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Speaker 1: full faith and credit a ginormous market as well. If

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Speaker 1: we go one eleven to one twenty, do we get

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Speaker 1: accelerated tendencies can convexity click in and the market as

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Speaker 1: deep as the ten year yield. Yeah, I mean you

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Speaker 1: do have some some convexity hedging activity, but you know,

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Speaker 1: for the most part, it's not going to come from

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Speaker 1: the mortgage universe. And for the mortgage convexity had just

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Speaker 1: to come in and start hedging their duration. It's going

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Speaker 1: to have to happen perhaps beyond one twenty, but I

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Speaker 1: think within one to one twenty you're going to see

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Speaker 1: the range trade, um, you know, alive and well where

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Speaker 1: people start to sort of take profits when they get

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Speaker 1: to intense. How will the Federal respond at one I

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Speaker 1: don't think they're going to be concerned. If the fundamentals

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Speaker 1: warrant the rise in years, and we saw at any

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Speaker 1: yields get to one seventeen are so in today this year.

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Speaker 1: So I think that if it's if it's accompanied by

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Speaker 1: strong data, arise in inflation expectations arise in real yields,

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Speaker 1: which is what we saw earlier on this year, so

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Speaker 1: it's sort of a healthy reflation trade, then I think

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Speaker 1: the Fed is not going to be very concerned. I

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Speaker 1: think that they're much more concerned, but sort of you know,

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Speaker 1: dramatic moves higher or lower and yields um You know

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Speaker 1: that that's going to you know, disrupt the risky assets

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Speaker 1: and and and the national conditions generally speaking. Spante graz

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Speaker 1: catchy up. Now, the estimate in this ball market last

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Speaker 1: year really did Supantrac Grazer, catchy up. Sabato Japa of

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Speaker 1: Silk Gent talk about the global commandities markets, talk about gold,

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Speaker 1: oil and silver. Jeffrey Curry Golden sax Scobe ahead of commodities. Jeffrey,

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Speaker 1: thank you so much for coming on. I don't know

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Speaker 1: whether the parallels right between game Stop and some of

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Speaker 1: the Reddit action can really directly transferred to silver because

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Speaker 1: it's a differ market and actually in the positions from

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Speaker 1: a lot of the hedge funds were completely different. Well,

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Speaker 1: I think when we look at the silver market, one

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Speaker 1: thing to keep in mind, it is a lot larger

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Speaker 1: than these equity markets. You know, you put the total

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Speaker 1: amount of of open interest of silver, including both above

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Speaker 1: ground and below ground, you know, somewhere in that two

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Speaker 1: hundred billion dollar range on an annual output basis, you

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Speaker 1: know that is substantially larger, and as a result, to

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Speaker 1: corner the market and create a short squeeze. Um, we

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Speaker 1: estimate it require each one of these Wall Street individuals

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Speaker 1: to accumulate a positions of somewhere around that's a lot

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Speaker 1: of silver, and where are you going to put it?

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Speaker 1: So that the analogy to let's say, the Hunt Brothers

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Speaker 1: are uh, you know Thursday, you know silver Thursday, I

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Speaker 1: think are far stretched. And also, let's not forget because

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Speaker 1: of the Hunt Brothers squeeze back in nineteen eighty, there

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Speaker 1: are regulatory policies put in place that prevent a re

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Speaker 1: replication of that, you know, i e. Position limits. So

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Speaker 1: to see a similar type of dynamic take place in

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Speaker 1: a macro market, we see it as extremely unlikely. So, Jeff,

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Speaker 1: what are you expecting silver to go from here until

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Speaker 1: the end of the year. You know, our target is

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Speaker 1: thirty dollars announced, really being driven by a combination of

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Speaker 1: a stronger gold market as well as you know, the

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Speaker 1: solar panel demand or call it the green capex driving prices. Now,

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Speaker 1: we do expect if you see the Biden administration approved

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Speaker 1: its solar ambitions, UM that target had moved to thirty

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Speaker 1: three dollars announced. Now, given the markets trade in in

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Speaker 1: that dollars announced, it means there's a real fundamental story here.

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Speaker 1: We like silver, however, we don't like it because of

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Speaker 1: a sports short squeeze. We like it because of the

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Speaker 1: fundamental story behind it. But Jeff Curry, you were mentioning

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Speaker 1: as we went into the interview about Jennings Bryan and

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Speaker 1: the cross of gold. Let's talk about the cross of

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Speaker 1: silver right now, which is the fixation of the public

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Speaker 1: on trading commodities versus the fundamental story around tangible assets.

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Speaker 1: You've always waited the fundamental story is that a dated view?

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Speaker 1: Do you have to shift and be more supple than

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Speaker 1: you're thinking about the speculative market of tangible assets. Well,

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Speaker 1: we think about the fundamental story of commodities in real

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Speaker 1: assets more broadly. Part of the reason we never saw

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Speaker 1: a commodity bullmarket over the last let's say, twelve or

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Speaker 1: fifteen years is because we never saw significant demand for commodities.

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Speaker 1: What we think that these populist movements are likely to

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Speaker 1: do is create an environment in which government starts spending,

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Speaker 1: particularly on lower income households. That will create that demand

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Speaker 1: for commodities and goods more broadly and create a more

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Speaker 1: cyclical commodity intensity economic backdrop. And that really sits at

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Speaker 1: the core of our bullish view on commodities as we

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Speaker 1: see red policies, redistributional policies, environmental policies like environmental capex

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Speaker 1: and versatility and supply chains, um and and these things

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Speaker 1: are very much related. You know, I think I could

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Speaker 1: use green leveling spending on green capex to level income.

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Speaker 1: These types of expansion programs are really going to be

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Speaker 1: behind our bullish view on commodities. Your bulls, your bullish

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Speaker 1: view and commodities. There's been noted there's some people pushing

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Speaker 1: against you, Jeff Curry. It seems like it's just guarded

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Speaker 1: and you're out two standard deviations. Uh, through the trend.

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Speaker 1: It's a really remarkable breakout of the long term resistance

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Speaker 1: that we've seen. Reaffirmed the magnitude of the movement you

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Speaker 1: believe we will see. Yeah, I would put it on

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Speaker 1: car to the bullmarket we saw in the seventies or

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Speaker 1: the bull market we saw in the two thousands. I

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Speaker 1: would say this is more akin to what we saw

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Speaker 1: in the seventies to the two thousands. Why our redistributional

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Speaker 1: policies back then were the um the greatest society of

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Speaker 1: the War on poverty, are environmental policies. You had the

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Speaker 1: War on Acid rain, Clean Air Act, you had the

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Speaker 1: Clean Water Acts and lots of spending environmental policy back then.

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Speaker 1: And then our be our versatility and supply chains or

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Speaker 1: resiliency and supply chains. You know, then you have the

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Speaker 1: Cold War with Russia. Now we have a quaisi cold

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Speaker 1: war with China's that can require spending. In fact, the

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Speaker 1: big move in agriculture that we have seen over the

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Speaker 1: last week is buying by the Chinese. Their building strategic

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Speaker 1: reserves and grains, very similar to what the US and

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Speaker 1: Europeans did back in the seventies and when they built

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Speaker 1: their strategic reserves. So you know, the analogy here in

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Speaker 1: the magnitude is probably something more similar to the supercycle

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Speaker 1: of the seventies than the one of the two thousand's.

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Speaker 1: And Jeff, going back to the silver trait, do you

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Speaker 1: see the potential for retail traders to actually break into

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Speaker 1: natural gas or oil? Again, the size of these markets,

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Speaker 1: they're extremely large. They can break in it and they

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Speaker 1: trade it and they have been a part of these markets. Um,

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Speaker 1: you have the e T f s and natural gas,

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Speaker 1: you have the e T s in oil, which are

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Speaker 1: very large and um you do see an active presence

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Speaker 1: of retail participation in those markets. However, I think what

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Speaker 1: what is different about this is the idea that they

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Speaker 1: could drive these markets and push them. And they did

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Speaker 1: drive and push silver yesterday, But when you start to

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Speaker 1: get to markets like oil and natural gas, the liquidity

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Speaker 1: is substantially larger and it becomes that much more difficult

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Speaker 1: to do. So, I don't you know, there's a question

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Speaker 1: here participation. Yes they are participating, Yes they are part

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Speaker 1: of these markets. But to be the marginal driver of

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Speaker 1: these markets like they wear in silver yesterday, is you know,

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Speaker 1: a much larger question. Market different. Is there an instrument

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Speaker 1: though that that could if that's what they decided to do,

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Speaker 1: you know, would they play it through E t S

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Speaker 1: or is there an instrument that would make it easier

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Speaker 1: of access? You know? The E t F is that

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Speaker 1: the the easiest accessing one thing, And I want to

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Speaker 1: point out that makes oil radically different than silver or gold.

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Speaker 1: The E t F in silver and gold is physically back.

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Speaker 1: In fact, that short that the retail investors were focused

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Speaker 1: on in the comax market is the hedging of that

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Speaker 1: physical position in the E t F. The E t

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Speaker 1: F in natural gas and oil is nothing other than

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Speaker 1: a rolling front month G s c I style contract.

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Speaker 1: It is a paper position. It's not a physical position.

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Speaker 1: To understand why, I like to make this simple example,

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Speaker 1: you can take all of the E T F physical

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Speaker 1: position in gold and put it in your office. It

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Speaker 1: may break the four floor it's so heavy is it

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Speaker 1: would fall through. However, you can fit it in this office.

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Speaker 1: And then let's think about this. The E T F

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Speaker 1: position in oil, if you were to hold it in

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Speaker 1: physical position, it will require something like seventy or ninety

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Speaker 1: b LCCs. Now, imagine in your head parking ninety b

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Speaker 1: LCCs in the East Rimber in New York. Are the

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Speaker 1: Thames here in London, It would be pretty difficult. Jeffrey,

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Speaker 1: thanks so much, Jeffrey Curry there, Goldman Saxon. Thanks for

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Speaker 1: listening to the Bloomberg Surveillance podcast. Subscribe and listen to

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Speaker 1: interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer.

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Speaker 1: I'm on Twitter at Tom Keane before the podcast. You

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Speaker 1: can always catch us worldwide. I'm Bloomberg Radio