WEBVTT - Things Fall Apart (in the Markets), Gartman Says 0:00:00.080 --> 0:00:13.800 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jaily. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:33.400 Bloomberg dot Com, and of course, on the Bloomberg. Earlier 0:00:33.479 --> 0:00:35.800 this week, Tom kene you asked me whether this was 0:00:35.880 --> 0:00:38.440 fun and I sat there and thought fun for who? 0:00:38.760 --> 0:00:41.360 And then I had lunch yesterday with two Global Macro guys. 0:00:41.520 --> 0:00:44.440 They bought and literally, let me say, what did they bought? It? 0:00:44.560 --> 0:00:48.200 A redd oh keeper of the MX boy. They could 0:00:48.240 --> 0:00:51.560 not have been happier. They could not have been happier 0:00:51.560 --> 0:00:54.680 after Global Macro has been smacked around for like five, six, 0:00:54.760 --> 0:00:58.800 seven years. For these guys, they're hoping this is regime 0:00:58.920 --> 0:01:01.960 change all of us and it's a trader's market with 0:01:02.000 --> 0:01:04.319 a time arising of like two minutes. Get in, get out, 0:01:04.360 --> 0:01:06.960 get back in again, get out. James Sweeney, is this 0:01:07.240 --> 0:01:09.759 is this a change? Or is Global Macrow just got 0:01:09.760 --> 0:01:11.880 a break for a week. I think this is a change. 0:01:12.040 --> 0:01:14.880 I think we're going to have more volatile interest rates 0:01:14.920 --> 0:01:17.080 and exchange rates than we've had for a while. I 0:01:17.400 --> 0:01:21.240 think we could have some new trends, including a downturns 0:01:21.280 --> 0:01:24.120 in the dollar, which which we think can continue, and 0:01:24.200 --> 0:01:28.440 you can have real conversations about inflation and central banks 0:01:28.520 --> 0:01:31.600 like the b o J and the ECB in terms 0:01:31.600 --> 0:01:34.080 of actually doing something in the in the years ahead. 0:01:34.360 --> 0:01:36.399 So I think that's why this is This is a 0:01:36.480 --> 0:01:40.000 really important conversation for our listeners who have been conditioned 0:01:40.000 --> 0:01:41.960 by the by hold, by the e t F by 0:01:42.080 --> 0:01:46.160 hold passive strategies for the last decade. Do they need 0:01:46.200 --> 0:01:49.400 to start rethinking that? Because if the global macro guys 0:01:49.400 --> 0:01:52.800 are right, if we're shifting into a trader's market where 0:01:52.840 --> 0:01:55.760 active is really going to outperform, I wonder what our 0:01:55.760 --> 0:01:58.080 listeners need to do if they've been passive by hold 0:01:58.240 --> 0:02:00.160 as much of the last decade. That's right. Like two 0:02:00.240 --> 0:02:02.840 facts about the recent week. The the US equity market 0:02:02.960 --> 0:02:06.240 was the worst performing thing, and within the US equity 0:02:06.280 --> 0:02:10.160 market there wasn't a great deal of sector differentiation. Basically 0:02:10.200 --> 0:02:14.640 everything went down. So to a stockpicker, that's great. That's 0:02:14.720 --> 0:02:16.840 I mean, basically to a macro guy or to a 0:02:16.840 --> 0:02:18.480 stock picker, this is the kind of thing that's going 0:02:18.480 --> 0:02:22.360 to create opportunities, and and you're seeing volumes and activity 0:02:22.440 --> 0:02:24.560 levels and interest in different markets. Pick up on this, 0:02:24.919 --> 0:02:28.040 James John said two words this week. One is whippy 0:02:28.080 --> 0:02:30.560 and the other is regime. And we're here in this 0:02:30.680 --> 0:02:33.160 John fer a lot, aren't we? Regime change? And a 0:02:33.240 --> 0:02:35.480 huge debate Thomas to whether we've actually got one or 0:02:35.560 --> 0:02:38.519 entering on in your world. This goes to James Bullard 0:02:38.520 --> 0:02:42.960 of St. Louis and is important short non academic paper 0:02:43.600 --> 0:02:46.160 on how it FED needs to work with regime change. 0:02:46.680 --> 0:02:50.200 Is j Powell going to enjoy a regime change? Well, 0:02:50.240 --> 0:02:53.200 so the regime change. Actually I wrote something on this 0:02:53.320 --> 0:02:56.360 last year, and I think the critical thing about the 0:02:56.360 --> 0:02:59.880 regime from a policy perspective is the inflation regime. So 0:03:00.040 --> 0:03:02.560 what is the inflation regime? So, since since the early 0:03:02.600 --> 0:03:05.520 to mid nineties and the developed market countries, you've had 0:03:05.639 --> 0:03:11.679 essentially trendless core inflation with very low volatility, with very 0:03:11.760 --> 0:03:16.560 low correlations to the previous year's growth, wages, credit, all 0:03:16.600 --> 0:03:19.840 these things that the precursors to inflation in the past. 0:03:20.160 --> 0:03:22.200 And this has been that this has been the inflation 0:03:22.280 --> 0:03:26.640 targeting central bank era. And and so you know, you 0:03:26.680 --> 0:03:31.680 can't really find equations math econometrics that forecast next year's 0:03:31.720 --> 0:03:36.040 inflation on the basis of this year's unemployment rate, wages work, 0:03:36.520 --> 0:03:39.280 it used to work, it used Could that change? That's 0:03:39.320 --> 0:03:41.800 the regime change. That's that's the most regime change here 0:03:41.880 --> 0:03:46.080 is to go mathematically to jump conditions. How do our 0:03:46.120 --> 0:03:51.280 listeners adapt to a world of jump conditions. Well, there's 0:03:51.320 --> 0:03:53.520 there's you know, there's different types of regimes. So the 0:03:53.560 --> 0:03:56.040 regime I just mentioned in terms of inflation is a 0:03:56.200 --> 0:03:58.320 is a longer term thing, and I don't think we've 0:03:58.320 --> 0:04:01.280 had a big inflation regime change at this point. It's 0:04:01.320 --> 0:04:06.360 just something worth speculating. But volatility in equity markets has regimes, 0:04:06.440 --> 0:04:09.960 and volatility can jump from a low volatility regime where 0:04:10.200 --> 0:04:13.240 basically things aren't moving around that much, suddenly jump and 0:04:13.280 --> 0:04:16.680 then be much more volatile for several months, even a 0:04:16.760 --> 0:04:19.520 year at a time. So that's regime is a little 0:04:19.560 --> 0:04:21.840 bit of a kind of over over glamorous word and 0:04:21.920 --> 0:04:24.680 something like that can change over a shorter period. I 0:04:24.720 --> 0:04:27.720 think a twenty five year inflation regime is more regime 0:04:27.760 --> 0:04:30.320 e to me. But but I think, you know, I 0:04:30.360 --> 0:04:33.240 think the clustering of low volatility and then the clustering 0:04:33.279 --> 0:04:36.920 of high volatility within a market is of the essence. 0:04:36.960 --> 0:04:39.359 At this moment, maybe it looks like that might have 0:04:39.440 --> 0:04:42.039 just happened. Maybe we should use the word paradigm. Um, 0:04:42.080 --> 0:04:44.200 the current paradigm that we've been in for such a 0:04:44.240 --> 0:04:46.880 long time. The FET reaction function has been pretty clear. 0:04:47.160 --> 0:04:49.880 That doesn't like vol if, that doesn't like draw downs, 0:04:50.040 --> 0:04:53.720 that doesn't like corrections. Um, something's changed because apparently the 0:04:53.720 --> 0:04:56.280 FETE doesn't care now. Well, I think the causality is 0:04:56.320 --> 0:04:58.520 running a little bit differently this way. I I think 0:04:58.520 --> 0:05:01.320 what's happened recently is that the market has been pricing 0:05:01.360 --> 0:05:05.120 in more policy, and not just from the US but 0:05:05.200 --> 0:05:07.640 the rest of the world. And and you know, you know, 0:05:07.760 --> 0:05:11.200 there's this big uh, there's gonna be this reduction of QWI. 0:05:11.360 --> 0:05:14.279 The ECB is gonna stop purchasing later this year, the 0:05:14.279 --> 0:05:17.000 FETE is reducing its balance sheet. People are actually even 0:05:17.000 --> 0:05:19.920 talking about bo J policy change over over the next 0:05:19.960 --> 0:05:23.120 over the next few years. I think, really what's happening 0:05:23.200 --> 0:05:25.839 is this is sinking into the market and and and 0:05:25.880 --> 0:05:28.359 so the market has to adjust to those James Sweeney, 0:05:28.360 --> 0:05:30.919 thank you so much, barely appreciate it. With credit sweez 0:05:31.400 --> 0:05:47.120 very valuable. Uh this morning and Jeff Curry joins us 0:05:47.120 --> 0:05:49.520 from Goldman Sex. Right, Now here's the number one question. 0:05:50.120 --> 0:05:54.120 Is commodities part of this party? We talk about modern correlations, 0:05:54.240 --> 0:05:59.880 f X correlation. Is there a commodity correlation to equity upset? Well, 0:06:00.000 --> 0:06:04.440 there was one exception, Jonathan, that was Bulks iron Ar, 0:06:04.800 --> 0:06:12.080 and that because there are a pure e m play 0:06:12.400 --> 0:06:14.200 and they didn't have as many investors in it. So 0:06:14.240 --> 0:06:16.440 I like to point out the greater the trend, the 0:06:16.480 --> 0:06:19.080 more the investors that were in these markets, the bigger 0:06:19.080 --> 0:06:22.640 to sell off like x, like the short sellers. And 0:06:22.640 --> 0:06:25.080 in fact, I like to point out in commodities world 0:06:25.120 --> 0:06:26.880 had to this. We had it all last year, exactly, 0:06:27.000 --> 0:06:29.080 it all last year. But Monday you have to publish 0:06:29.120 --> 0:06:31.360 for Goldman Sex. What will be the tone of that 0:06:31.440 --> 0:06:35.280 report to your clients, One in which most of this 0:06:35.480 --> 0:06:40.719 is driven by trend following, short sellers, systematic trading strategies, 0:06:41.040 --> 0:06:44.000 and that the underlying fundamentals are very much intact. The 0:06:44.040 --> 0:06:47.760 transmission mechanism between this weakness and trading and the fundamentals 0:06:47.800 --> 0:06:51.039 is through financial conditions. Yes, financial conditions have tightened, but 0:06:51.080 --> 0:06:53.880 they were at the highest ever, the best ever recorded 0:06:54.160 --> 0:06:56.800 last Monday before the sell off, so you have it's 0:06:56.800 --> 0:06:59.960 the underlying fundamental situation deteriorate enough for us to change 0:07:00.000 --> 0:07:02.800 of views. Absolutely not. In fact, there's not even one 0:07:02.920 --> 0:07:05.359 data point that you can point to that suggests that 0:07:05.400 --> 0:07:08.680 there's a fundament something wrong fundamentally. Is this a period 0:07:08.680 --> 0:07:10.560 of deleveraging that's going to take a little bit more 0:07:10.600 --> 0:07:12.480 time to play out When you sit around the table 0:07:12.520 --> 0:07:14.320 with the committee at Golment Sacks, it's that the view 0:07:14.360 --> 0:07:16.920 of of you guys right now, Jeff, there's financial de 0:07:17.040 --> 0:07:21.600 leveraging happening, but there's not fundamental de leveraging happening. Fundamentally. 0:07:21.680 --> 0:07:25.720 The market still re levering. So you know, we look 0:07:25.760 --> 0:07:28.240 at you know, commodity prices. You still have very high 0:07:28.320 --> 0:07:31.160 commodity prices. You know, you still have brand at sixty 0:07:31.200 --> 0:07:33.920 four dollars a barrel um, you have iron r at 0:07:33.920 --> 0:07:37.280 seventy seven fifty, you have copper nearly at seven thousands. 0:07:37.320 --> 0:07:40.760 So yes, we've seen a five point two percent correction 0:07:41.000 --> 0:07:43.720 in um commodities altogether, but that's not the end of 0:07:43.760 --> 0:07:46.440 the world. So, you know, we look at the underlying 0:07:46.480 --> 0:07:49.080 fundamentals re leverying on the demand side. In fact, that's 0:07:49.080 --> 0:07:52.280 the core of our three rs. Reflation leads to re levering, 0:07:52.680 --> 0:07:55.720 re Levering leads to re convergence of global growth, and 0:07:55.720 --> 0:07:58.280 it cycles back over. That story has not changed. So 0:07:58.360 --> 0:08:00.280 the equity market pain, you think it can the main 0:08:00.560 --> 0:08:03.800 contained to the equity market. So it was so far 0:08:03.960 --> 0:08:06.360 it appears to be the case because again the underlying 0:08:06.360 --> 0:08:08.920 fundamental story, even on the equities is still rocks. And 0:08:08.960 --> 0:08:11.600 this is critical, John, I was so busy today, folks, 0:08:11.640 --> 0:08:13.640 I didn't have a chart out in TV. You'll see 0:08:13.640 --> 0:08:16.880 it first on Bloomberg Radio, which puts in perspective the 0:08:17.000 --> 0:08:21.600 Dow of where it is versus nine. You mentioned the 0:08:21.680 --> 0:08:25.760 c T as the commodity traders with an alternative investments, 0:08:25.760 --> 0:08:28.560 and they're all trend based. Good morning, Monroe Trout, Good 0:08:28.560 --> 0:08:31.679 morning John, Henry and everybody else had invented this act. 0:08:32.320 --> 0:08:36.079 We're just back to support on too many charts, aren't 0:08:36.080 --> 0:08:40.360 we to be clear, Jeff Curry, we haven't broken support 0:08:41.120 --> 0:08:44.840 thing after thing efter thing three absolutely, which just goes 0:08:45.160 --> 0:08:48.200 the point that the bigger the up word trend, that 0:08:48.320 --> 0:08:50.320 the bigger the sell off has man because you're just 0:08:50.360 --> 0:08:52.920 bringing yourself back into a correction where you're finding these 0:08:52.960 --> 0:08:56.520 normal support levels. Have they cleared markets? And this is 0:08:56.600 --> 0:08:58.800 something that John Farrow would ask, do we have one 0:08:58.840 --> 0:09:02.360 way bets on live cattle? Do we have one way 0:09:02.440 --> 0:09:05.280 bets on copper? Do we have one way Ben's on 0:09:05.440 --> 0:09:08.440 burnt crude? Right now? Is the market stacked or is 0:09:08.480 --> 0:09:11.240 it flat ready to go? At this point, You've cleaned 0:09:11.320 --> 0:09:13.840 up a lot of the markets, particularly in oil in 0:09:13.840 --> 0:09:15.600 the last and that was the one that was the longest. 0:09:15.600 --> 0:09:17.760 In fact, if you ask somebody to tell a bear 0:09:17.880 --> 0:09:20.640 story in oil two weeks ago, it was positioning. Now 0:09:20.640 --> 0:09:23.680 the positioning has been cleaned up, which again reinforces the 0:09:23.679 --> 0:09:25.880 fundamental story going forward. Jeff, I want to talk to 0:09:25.920 --> 0:09:28.480 the economist in you, not just the market participant um. 0:09:28.600 --> 0:09:30.880 A big discussion of bloombags avance throughout the whole of 0:09:30.920 --> 0:09:33.520 this week has been whether we're breaking into a new regime, 0:09:33.640 --> 0:09:36.640 Whether this is regime change? Is it for you? Is 0:09:36.679 --> 0:09:39.280 that what this is this price sanction a symptom of 0:09:39.320 --> 0:09:42.520 the beginning of a regime change. I would argue we 0:09:42.600 --> 0:09:46.080 had the regime change last year, and so in terms 0:09:46.160 --> 0:09:49.120 of thinking about you know, the underlying fundamental story that 0:09:49.120 --> 0:09:51.640 that came out of last year is you know, you 0:09:51.960 --> 0:09:56.360 see that the correlation between oil and the dollar resurfacing 0:09:56.400 --> 0:09:58.200 a lot of you know what, you know, the process 0:09:58.200 --> 0:10:00.920 asset correlation you're referring to the lynch pin to that 0:10:00.960 --> 0:10:04.600 really is the dollar. So from our perspective, that regime change, 0:10:04.640 --> 0:10:07.679 it happened last year. Um, we're in it. And then 0:10:08.080 --> 0:10:10.400 part of it reinforces that bullish story. We've seen what 0:10:10.440 --> 0:10:14.080 happens when you have this whole three rs reflation, re leveraging, 0:10:14.200 --> 0:10:16.800 and re convergence, UM, and the lynch pen that keeps 0:10:16.840 --> 0:10:20.000 the cycle going and creating the upward pressure and commodity prices. 0:10:20.120 --> 0:10:23.080 Really is the dollar. Let's be clear here the reflation story, 0:10:23.640 --> 0:10:26.360 this is reminiscent of this time last year. A lot 0:10:26.360 --> 0:10:28.640 of people very bullish on inflation and a lot of 0:10:28.640 --> 0:10:32.120 money made over the preceding months by fading the reflation trade. 0:10:32.920 --> 0:10:37.320 Why is this time different? It isn't. As you know, 0:10:37.640 --> 0:10:40.040 if you look at this this story, it really began 0:10:40.120 --> 0:10:43.400 in April two thousand and sixteen. The reflation story, and 0:10:43.600 --> 0:10:45.760 you know is my boss likes to point out, if 0:10:45.760 --> 0:10:48.040 you go back to the nineteen sixties, a reflation story 0:10:48.080 --> 0:10:51.280 took started in nineteen sixty two. It didn't finish until 0:10:51.360 --> 0:10:54.360 nineteen seventy eight. Um, it takes a while for these 0:10:54.720 --> 0:10:57.880 for the fundamentals to create these inflationary pressures. It doesn't 0:10:58.360 --> 0:11:00.840 fundamental markets are not like finance to markets. They just 0:11:00.920 --> 0:11:04.880 don't happen overnight. Um. You know, it takes years for 0:11:04.960 --> 0:11:07.199 you to get these pressures to develop. So talked to 0:11:07.200 --> 0:11:09.800 me about the transmission. We've got the market pain. It's 0:11:09.880 --> 0:11:13.199 financial market pain. Let's be clear about that. It's not 0:11:13.280 --> 0:11:16.080 economic pain yet. Um, when do you start to see 0:11:16.120 --> 0:11:18.760 it bleed into the economy if it's all there any concerns, 0:11:19.000 --> 0:11:21.720 and if there are, there is a transmission mechanism, what 0:11:21.800 --> 0:11:23.760 have you got your on? What is it? It's it's 0:11:23.800 --> 0:11:28.080 the financial conditions that the financial markets create. And you 0:11:28.080 --> 0:11:31.200 know you have you have a drop in equity prices 0:11:31.240 --> 0:11:34.600 that creates a drop in wealth. You have rising interest rates? 0:11:34.679 --> 0:11:36.600 Is which which what's what you see with the ten 0:11:36.640 --> 0:11:39.680 your treasure? But even there you look at the rise 0:11:39.720 --> 0:11:42.440 and you know interest rates what you're still two point 0:11:42.480 --> 0:11:46.360 eight two versus two point seven seven? Shun we talk 0:11:46.400 --> 0:11:50.160 about non crisis stuff. The vix in a stick, futures 0:11:50.200 --> 0:11:55.959 negative five down futures negative. How's oil demand spectacular. That's 0:11:56.000 --> 0:11:58.800 the thing is, if you look at all of these markets, 0:11:59.080 --> 0:12:03.840 demand is solid across not only across geography, across product. 0:12:04.040 --> 0:12:07.360 So I'm talking to Rio Tinto CEO yesterday. He's taken 0:12:07.400 --> 0:12:10.079 a victory lap and allocating financial I know you've got 0:12:10.080 --> 0:12:12.360 people at Goldman follow individual stocks. You don't want to 0:12:12.360 --> 0:12:15.200 comment on that. I get that. But is the industry 0:12:15.200 --> 0:12:17.280 gonna make the same mistakes or are they like the 0:12:17.280 --> 0:12:21.680 airline business where they finally wised up. This time the 0:12:21.760 --> 0:12:25.439 financial participants won't let them make the same And the 0:12:25.559 --> 0:12:28.000 key here is we had a theme that we talked 0:12:28.000 --> 0:12:29.840 about in the late nineties and early two thousand. It's 0:12:29.880 --> 0:12:32.880 called revenge of the Old economy. It's the same dynamic here. 0:12:33.040 --> 0:12:36.280 The new economy, the fans the bats are printing great 0:12:36.320 --> 0:12:40.080 financial numbers. Capital is being redirected towards the new economy 0:12:40.160 --> 0:12:41.760 at the expense of the old economy. And I know, 0:12:41.960 --> 0:12:44.880 I know Jean Sebastian Jacket, Rio sin so very very well. 0:12:44.920 --> 0:12:47.880 In the shift after Walsh left, Rio was to get 0:12:47.920 --> 0:12:50.880 away from the volume story and get to value. They 0:12:50.920 --> 0:12:53.640 got punished by their investors for what they did over 0:12:53.640 --> 0:12:55.480 the last ten years. Tom and I think it's a 0:12:55.480 --> 0:12:59.480 real discipline amongst the private companies at least to respond 0:12:59.480 --> 0:13:01.400 in the way they were done, to stay disciplined. I 0:13:01.400 --> 0:13:04.720 think the key question it's not in iron all, it's 0:13:04.720 --> 0:13:07.480 not in copper. It's not these big companies riot inside 0:13:07.679 --> 0:13:11.040 HP bulletin. It's way whether the governments of OPEC can 0:13:11.120 --> 0:13:14.880 remain disciplined. It's whether Soundi Arabia can remain disciplined. It's 0:13:14.880 --> 0:13:17.559 whether some of these big Opeque participants that have capped 0:13:17.640 --> 0:13:21.440 volume can remain disciplined with crewed. Getting back towards when 0:13:21.480 --> 0:13:24.040 you talk commodities and you talk iron or in copper, 0:13:24.280 --> 0:13:29.240 with the British accent, it sounds better do a London 0:13:29.320 --> 0:13:35.440 medals aluminum aluminium exactly. But to John's important question, if 0:13:35.480 --> 0:13:37.680 they learned the lessons or there is the Middle East 0:13:37.960 --> 0:13:40.880 going to make the same lessons again failures again in oil. 0:13:41.080 --> 0:13:43.600 But but even you take take Saudi Arabia, they're focused 0:13:43.640 --> 0:13:47.240 on their their vision, which is diversification across the economy. 0:13:47.360 --> 0:13:49.319 They need to make investments in other things. And I 0:13:49.360 --> 0:13:51.599 guess it's the point here is the attractiveness of the 0:13:51.640 --> 0:13:54.120 rest of the world outside of commodities is much better 0:13:54.160 --> 0:13:56.240 at this time around than it was a decade ago. 0:13:56.880 --> 0:13:58.880 Jeff Curry, thank you so much. I get some sleep 0:13:58.960 --> 0:14:01.719 this weekend, and never an Tom Jeff, That's true. I 0:14:01.760 --> 0:14:16.760 always feel that way. Nobody knows the minutia of how 0:14:16.920 --> 0:14:21.400 you actually spend it. Like John Hugh Deck at Brookie's Institution. 0:14:22.200 --> 0:14:25.080 He has made a cottage industry of what you do 0:14:25.320 --> 0:14:28.240 with the billions and trillions. John, wonderful they have you 0:14:28.320 --> 0:14:32.960 with us. What's different now in how a given department 0:14:33.200 --> 0:14:36.960 spends a given marble building in Washington, how they spend 0:14:37.080 --> 0:14:42.360 the next marginal new billion. Well, these UH agencies have 0:14:42.440 --> 0:14:45.280 a couple of choices. They can either continue to fund 0:14:45.640 --> 0:14:50.960 the existing programs that they have under their authorization, or 0:14:51.080 --> 0:14:53.920 where they have discretion, they can start to build out 0:14:54.120 --> 0:14:56.560 new programs. And I think there will be some agencies 0:14:56.800 --> 0:14:58.600 that are going to want to do that under the 0:14:58.680 --> 0:15:02.600 new spending visions of the bill that was passed this morning. 0:15:02.680 --> 0:15:05.320 At the same time, though a lot of agencies had 0:15:05.440 --> 0:15:09.360 had hiring troubles, and hiring people back just to man 0:15:09.520 --> 0:15:11.600 these agencies is something I think you're going to see 0:15:11.600 --> 0:15:14.160 a lot of agencies doing out of the gate to review. 0:15:14.520 --> 0:15:21.560 President Obama was am I right? Fiscally prudent on discretionaries spending? 0:15:22.200 --> 0:15:27.200 What portion of what was wrought overnight is you know, 0:15:27.480 --> 0:15:32.000 bipartisan catch up with the frugality that we've had over 0:15:32.040 --> 0:15:35.640 the last X number of years. So so you're right, 0:15:35.760 --> 0:15:38.680 we had sort of two different Barack Obama's. We had 0:15:38.720 --> 0:15:43.320 Barack Obama early on, right after the recession began, where 0:15:43.640 --> 0:15:47.560 he passed the stimulus bill, and that wasn't necessarily fiscally prudent, 0:15:47.640 --> 0:15:50.000 although I think it was economically prudent at the time. 0:15:50.400 --> 0:15:54.000 And then later on, under Republican pressure from Congress, you 0:15:54.160 --> 0:15:59.000 had a more fiscally frugal President Obama. But now what 0:15:59.160 --> 0:16:03.360 we're seeing is the Congress pass what is a massive 0:16:03.520 --> 0:16:06.480 increase in spending, or rather the authorization for a massive 0:16:06.520 --> 0:16:10.040 increase of spending, which is more than a third of 0:16:10.120 --> 0:16:12.800 the size of the stimulus that many of these same 0:16:12.840 --> 0:16:17.040 Republicans have railed against for years. How do we define 0:16:17.120 --> 0:16:24.720 fiscal responsibility? John tweeted six hours ago, Make no mistake, 0:16:24.960 --> 0:16:28.400 I will always stand up for fiscal responsibility. What does 0:16:28.440 --> 0:16:31.920 he mean? Well, I'll say I think if you're a 0:16:32.040 --> 0:16:36.320 member of Congress, you define fiscal responsibility by whatever you 0:16:36.440 --> 0:16:38.640 happen to vote for that day. But I think what 0:16:38.720 --> 0:16:43.000 we're seeing right now is a Congress that likes catch phrases. 0:16:43.120 --> 0:16:46.360 But when it comes down to the actual business of governing, 0:16:46.760 --> 0:16:50.680 the actual business of funding our government, there's a very 0:16:50.760 --> 0:16:53.720 effective way to build bipartisan support, and that is not 0:16:53.920 --> 0:16:57.960 to be fiscally prudent. And so you see Republicans who 0:16:57.960 --> 0:17:01.560 are screaming about deficits olding twice now in the past 0:17:01.640 --> 0:17:05.240 couple of months to expand deficits in a massive way, 0:17:05.359 --> 0:17:08.000 first through the tax bill and second through this budget deal. 0:17:08.200 --> 0:17:11.159 So important question for me, John It doesn't seem to 0:17:11.240 --> 0:17:13.360 me that it matters what your political colors are. Once 0:17:13.400 --> 0:17:17.639 you empower, your fiscal responsibility dissipates rather quickly when I 0:17:17.720 --> 0:17:19.600 have the Democrats out of power, and I wonder whether 0:17:19.640 --> 0:17:22.400 they inherit the position of the Republicans before them, where 0:17:22.400 --> 0:17:27.280 they also become the fiscal responsible ones, the deficit hawks. Now, 0:17:27.359 --> 0:17:30.200 if they do one, that's the first question. If they do. 0:17:30.920 --> 0:17:32.920 The second question is whether that actually resonates with the 0:17:32.920 --> 0:17:37.880 electorate at all. Well, Jonathan, there's certainly some uh, there's 0:17:37.880 --> 0:17:41.160 certainly a lot of truths to that. Rather, the depending 0:17:41.200 --> 0:17:45.000 on whether you're in power, helps determine how fiscally responsible 0:17:45.040 --> 0:17:48.000 you are. When Democrats are in power, they don't care 0:17:48.080 --> 0:17:51.000 that much about death, deficits and debt. When they're out 0:17:51.040 --> 0:17:53.640 of power and Republicans are trying to spend money, then 0:17:53.800 --> 0:17:57.480 all of a sudden they become fiscal hawks. And so yeah, 0:17:57.600 --> 0:18:02.120 the the system ends up being turns upside down essentially 0:18:02.280 --> 0:18:05.440 depending on who is in power. But it's important to 0:18:05.520 --> 0:18:08.720 note that there are a lot of fiscally responsible individuals 0:18:08.760 --> 0:18:11.560 who did vote against the legislation this morning, on both 0:18:11.640 --> 0:18:13.480 sides of the eye. But John, the second pound of 0:18:13.520 --> 0:18:17.520 the question for a fiscal conservative, For a conservative, being 0:18:17.560 --> 0:18:20.880 a fiscal hawk resonates with most of your electorate, your 0:18:20.920 --> 0:18:23.240 core electorate. So if you're a Republican and you're a 0:18:23.320 --> 0:18:25.600 deficit hawk and you're out of power, you know that 0:18:25.680 --> 0:18:28.159 will win your votes. If you're a Democrat, can you 0:18:28.240 --> 0:18:31.800 make the same argument. So you can't make the same 0:18:31.880 --> 0:18:34.399 argument with your base if you're a Democrat. But what 0:18:34.520 --> 0:18:36.800 I think Democrats are trying to do in the next 0:18:36.880 --> 0:18:40.840 ten months is to start to appeal to moderate voters, 0:18:41.000 --> 0:18:44.200 independent voters, and a lot of independent voters. They might 0:18:44.359 --> 0:18:46.879 be liberal on social issues, but a lot of them 0:18:46.920 --> 0:18:49.080 are physical talks, and so I think it's reaching out 0:18:49.119 --> 0:18:51.680 to them. Well, John Farroll doesn't understand. He just stumbled 0:18:51.720 --> 0:18:54.440 in the Democratic Party history here, whether it's John Fitzgerald, 0:18:54.520 --> 0:18:57.639 Kennedy or Scoop Jackson, etcetera, etcetera. I believe I can 0:18:57.720 --> 0:19:02.960 identify former fiscally responsible Democrats. Are they out there or 0:19:03.040 --> 0:19:06.520 does the party have to invent them? Well, in a 0:19:06.600 --> 0:19:08.920 lot of ways, the party has to invent them. There 0:19:09.080 --> 0:19:12.800 are a lot of Democrats now who don't look like 0:19:13.720 --> 0:19:16.560 those same figures who you just mentioned. There aren't a 0:19:16.560 --> 0:19:19.760 lot of Kennedy Democrats left in Congress, even though we 0:19:19.800 --> 0:19:22.800 still have a Kennedy left in Congress. You really see 0:19:23.040 --> 0:19:27.200 a party that is committed to expanding social programming and 0:19:27.359 --> 0:19:31.200 not thinking about necessarily the long term fiscal health of 0:19:31.280 --> 0:19:34.040 the nation. Very good, January, Nick, thank you for the 0:19:34.119 --> 0:19:36.159 quick briefing here in the fiscal policy. We're gonna do 0:19:36.280 --> 0:19:53.080 much more on this in the coming day forward. Right now, 0:19:53.119 --> 0:19:56.960 A romantic conversation with Dennis Garbon. People. I got a 0:19:57.000 --> 0:19:58.639 lot of emails. Old Garbon is going to be and 0:19:58.760 --> 0:20:01.760 it's very important this. We spoke to one Douglas cast 0:20:01.800 --> 0:20:05.119 of Florida earlier today, he is eighty percent in cash 0:20:05.320 --> 0:20:10.280 and has applied long trades off the Catharsis yesterday. Did 0:20:10.320 --> 0:20:14.120 you go along yesterday. I'm actually short, have been short 0:20:14.240 --> 0:20:17.760 for the past two or three weeks, and I'm probably 0:20:17.800 --> 0:20:20.960 going to get just a tiny little bit shorter. I 0:20:21.080 --> 0:20:24.400 own a few things. I own some ball bearings manufacturers, 0:20:24.400 --> 0:20:27.080 I own a bank here in in southern Virginia. But 0:20:27.200 --> 0:20:30.120 on balance with derivatives, I'm I'm a little bit net short. 0:20:30.320 --> 0:20:32.840 Probably gonna stay that way. I got eight questions. John 0:20:32.880 --> 0:20:34.920 Farrell has twelve questions. But we're gonna go to a 0:20:35.000 --> 0:20:37.760 clinic here right now. What you heard Mr Gartman say, folks, 0:20:37.840 --> 0:20:43.600 is exceptionally important. You're in a trade, the trade is successful, 0:20:44.400 --> 0:20:47.400 and you add more to the trade. That's called na 0:20:47.480 --> 0:20:51.040 Martin Gale theory. Explain to me why you're adding more 0:20:51.680 --> 0:20:56.440 shorts now, if you're looking pretty well, I think that 0:20:56.560 --> 0:20:59.000 the simplest thing to understand about trading is is this 0:20:59.680 --> 0:21:02.200 in life and in trading, the best rule to follow 0:21:02.280 --> 0:21:04.560 us do more of that which is working and less 0:21:04.600 --> 0:21:06.280 of that which is not. Why do you buy a 0:21:06.359 --> 0:21:09.520 stock at twenty and buy more at fifteen? And buy 0:21:09.600 --> 0:21:12.560 more at ten when the market is telling you you're wrong. 0:21:13.000 --> 0:21:15.879 That's just illogical. If you bought a stock at twenty 0:21:15.880 --> 0:21:18.080 and it goes to thirty, you should be buying more 0:21:18.160 --> 0:21:20.119 because the market is telling you that you're right. For 0:21:20.240 --> 0:21:23.640 whatever reason, you're right. So do more of that which 0:21:23.720 --> 0:21:25.399 is working, do less of that which is not. If 0:21:25.440 --> 0:21:27.560 you do that in life, if you if you take 0:21:27.600 --> 0:21:30.359 flowers to your girlfriend more often, you're probably gonna get 0:21:30.400 --> 0:21:37.160 lucky romantic. You think he was talking to Mrs Keane. 0:21:37.320 --> 0:21:39.440 I think he was talking to Mrs Kane West. You're 0:21:39.600 --> 0:21:42.320 talking to my lovely bride. Were you were? I think 0:21:42.359 --> 0:21:45.200 when Tom takes out vet bills, some flowers are arriving 0:21:45.240 --> 0:21:49.440 from Mrs Kane, from Kennis Government. Um, Dennis, you said 0:21:49.520 --> 0:21:51.760 you sure, okay, I want an idea. Just give me 0:21:51.840 --> 0:21:53.399 sort of lift the lid on the options market at 0:21:53.400 --> 0:21:55.879 the moment and tell me how expensive downside protection has 0:21:55.920 --> 0:21:59.320 got on the SMP. Well, if you're using options, it's 0:21:59.359 --> 0:22:03.520 gotten ridiculously over expensive. There are other cheaper methodologies. There's 0:22:03.600 --> 0:22:06.639 futures that don't get more expensive, there's no they They 0:22:06.880 --> 0:22:09.240 they fall, but they don't go and value higher than 0:22:09.320 --> 0:22:12.399 an option does there are derivatives that that are I 0:22:12.520 --> 0:22:16.800 think reasonably usable. UM I would avoid at this point 0:22:16.840 --> 0:22:19.240 the options market just because of the expansion in premium. 0:22:19.240 --> 0:22:20.880 So talk to me about the best, the best way 0:22:20.880 --> 0:22:22.960 of expressing that trade at the moment, Dennis, what is it? 0:22:23.800 --> 0:22:25.480 The easiest way, in the best way, in the cleanest 0:22:25.520 --> 0:22:27.200