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Speaker 1: Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene

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Speaker 1: Jay Lee. 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 Sonny

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Speaker 1: to watch dropping by the studio kind of cogenity, chief

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Speaker 1: market strategist and he joins us. Now, good money to Tony,

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Speaker 1: Good morning Joe. So what's the highlight of the wait

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Speaker 1: for you looking ahead? Well, the markets had such a run.

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Speaker 1: It's had a thirtecent gain off the Christmas Eve low.

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Speaker 1: And typically when you get this kind of overbought and

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Speaker 1: you've had that kind of reflex reraili, you have a

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Speaker 1: little bit of a pause. So, no matter what, I

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Speaker 1: can't see a lack of volatility in the news coming out,

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Speaker 1: whether it's corporate profits, it's it's one of the biggest

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Speaker 1: weeks of corporate pro fit season. Um, so we're gonna

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Speaker 1: hear a lot of forward guidance, which is probably like

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Speaker 1: be a little bit soft. We're gonna hear from the

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Speaker 1: Fed who's gonna sound dovish, which offsets the softness and

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Speaker 1: corporate profits. So there's a lot of cross currents that

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Speaker 1: are happening that probably mean we just kind of digest

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Speaker 1: the gains. What do we need from the trite sulks

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Speaker 1: in Washington? Do we need some better optics, do we

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Speaker 1: need some substance? What is that good? Lord? I mean,

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Speaker 1: we've had different optics and different UH commentaries both ways

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Speaker 1: for the last couple of months, And ultimately what it

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Speaker 1: really comes down to, John, is you just need some

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Speaker 1: sort of resolution. But it comes down to Fed policy.

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Speaker 1: I'm much more focused on Fed policy than the trade tensions. Um. Clearly,

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Speaker 1: both economies are now softer. It spen soft for a while,

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Speaker 1: the emerging economies have been soft for a while, and

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Speaker 1: the US is outperformed, but that's softening too. So you know, truly,

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Speaker 1: I think we just make stuff up to look at

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Speaker 1: the direction of the market. It comes down to is

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Speaker 1: the FED going to provide more quick to your last liquarity?

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Speaker 1: So it's the Fed gonna pause because all the communication

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Speaker 1: over the last month suggests they are tony. Well, we've

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Speaker 1: we've done this analog to the last time that you

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Speaker 1: got to the Yeld curve as flat as it is

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Speaker 1: without inverting, and you got into a very very soft

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Speaker 1: economic backdrop for the first half, and the FED went

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Speaker 1: from tightening interest rates in February one they eased in

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Speaker 1: July because the data got so soft so quickly. I

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Speaker 1: think there could be a replay of that where the

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Speaker 1: data gets soft enough that the next FED move may

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Speaker 1: not just be a pause. Not obviously not today, but

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Speaker 1: this summertime they may actually ease if the data gets

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Speaker 1: soft enough. Welcome back the buttons over there, the butt

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Speaker 1: the button here. You know you like to push the

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Speaker 1: buttons on TV. What was the word we're butchering? We

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Speaker 1: can do on radio? Didn't work on television this morning, Tony.

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Speaker 1: The dirty little secret is you write a hyper detailed

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Speaker 1: research note for can recordingenuity. You come out on media

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Speaker 1: and you're all general statements. I get that for for

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Speaker 1: dumb people like me. You write a hyper detailed note.

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Speaker 1: What in your note has the most interest to you?

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Speaker 1: Right now, that we've had a mediancent, we've had three

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Speaker 1: crashes and a crap and since nineteen fifty nine recession

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Speaker 1: crashes and the crashes de fined. Is a drop in

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Speaker 1: less than four months. By my buddy Jason Goldford, a

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Speaker 1: sentiment trader. Of those three crashes, your median rally back

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Speaker 1: your reflex rally was thirteen point four over the exact

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Speaker 1: amount of time that we've done it this time. So

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Speaker 1: so that's the charts I think that are the most

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Speaker 1: important is you've had what is typically happens after that

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Speaker 1: kind of market event. I agree with that, But then

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Speaker 1: how do you discern a reflex rally within the gloom

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Speaker 1: of a bear market from the opportunity of making all

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Speaker 1: for out one year, five years, ten years. I mean,

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Speaker 1: most of our people are day trading three weeks in

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Speaker 1: and out at time. On the TV show, we talked

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Speaker 1: about what what you know? I guess the media, people

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Speaker 1: like me, investors got wrong over the last ten years.

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Speaker 1: And that's not using extraordinary weakness to take advantage of

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Speaker 1: as long as credit is okay. Credit is okay and

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Speaker 1: actually good unless you invert the YO curve. So so

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Speaker 1: the point is that we would like sometimes the markets

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Speaker 1: not telling you anything. People like me come on all

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Speaker 1: the time, the markets down and it's telling you that. No,

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Speaker 1: it's not, it's telling you what. They're more sellers than buyers.

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Speaker 1: At a time where there was no support structure for

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Speaker 1: the market. The fed took away the regulators took away

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Speaker 1: the ability for banks to buy stocks into weakness via

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Speaker 1: the vocal rule. The there's no uptick rule on shorting,

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Speaker 1: so the momentum algorithmic funds can just keep pressing the

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Speaker 1: downs line as the momentum picks up. There's no specialist

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Speaker 1: and market makers because the decimalization. So the bottom line

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Speaker 1: is who is your buyer into what I call is

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Speaker 1: a whoosh, and that creates these buying opportunities that are

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Speaker 1: extraordinary over the last I've been so wrong three times

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Speaker 1: this cycle. Near term. I didn't think in two thousand

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Speaker 1: eleven you were going to crack. I didn't think in

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Speaker 1: two thousand sixteen you were going to crack like that.

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Speaker 1: But I want to and similar to this one, you

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Speaker 1: don't want to get negative on those cracks and lects.

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Speaker 1: Credit shuts down. Let's let's talk about that. You've mentioned

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Speaker 1: credit a couple of times. Now, do you mean the

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Speaker 1: credit market would you mean the provision of credit? Both? Both?

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Speaker 1: I means from right now because in December also credit

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Speaker 1: was really soft just in terms of the credit market,

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Speaker 1: and it's been extraordinary. Art st class strategist who is

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Speaker 1: also on Bloomberg is um. Brian Reynolds keep pointing out

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Speaker 1: to you are accelerating the new issuance of corporate credit.

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Speaker 1: It's been you're not only you're making up for this

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Speaker 1: slowdown in December. So John Farrell discovered this, INDs he

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Speaker 1: was way out on this last week usually speed. I

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Speaker 1: can whether you guys have been nice to me nice

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Speaker 1: right now? What time is being nice? Because he's tired. Well,

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Speaker 1: the junk bond markets come back, the primary issuance has

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Speaker 1: picked up a little bit, and from what I've seen

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Speaker 1: so far this month, pretty much everything that has come

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Speaker 1: to market has performed really one of the secondary market

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Speaker 1: as well, but the issuance is still pretty small tiny.

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Speaker 1: We're coming off a base where we have no issuance

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Speaker 1: whatsoever in December. So I see it as an encouraging sign.

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Speaker 1: I'm just wondering whether it's enough to say the coast

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Speaker 1: is clear. It's if if you and I in time

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Speaker 1: can get alone, if the listeners driving their car can

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Speaker 1: go to the bank or call up the rocket mortgage

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Speaker 1: and get alone, then credits not shut down. If companies

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Speaker 1: can come to market, And so Brian pointed out the

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Speaker 1: Charter communication Charter Communication issued debt a couple of weeks

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Speaker 1: ago and there was excessive demand. It was oversubscribed. You're

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Speaker 1: not seeing undersubscribed sale of debt you're buying. You're seeing

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Speaker 1: oversubscribe buying of corporate credit. It and we're just in credit, tom.

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Speaker 1: This one worries me though, And it's not corporate credit

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Speaker 1: in America. It's the Eurozone right now. Record demand last

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Speaker 1: week for Spain, record demand the week before for Italy.

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Speaker 1: We had an Irish sale this this month as well,

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Speaker 1: which was four times I was subscribed. And then this

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Speaker 1: morning the headline dropped across the Bloomberg Greece is coming

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Speaker 1: back to market. All these things are happening TOM at

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Speaker 1: a time when the picture of the Eurozone isn't getting better,

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Speaker 1: it's getting worse. Okay, But how does that money flow

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Speaker 1: into the equity market to get to your record high?

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Speaker 1: If you take all of the different avenues that can

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Speaker 1: buy stacks in the US mutual funds ETF past, it's

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Speaker 1: the only is it financial? Is it financial engineering? Well?

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Speaker 1: If you did, critics would so know because if you

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Speaker 1: didn't have any tape. The one thing that the bearers

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Speaker 1: got wrong in two thousands sixteen is they thought that

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Speaker 1: was a peak in the profit margins of corporate America.

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Speaker 1: And the only thing that is peak profit margins in

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Speaker 1: corporate America is when you have a total tap line

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Speaker 1: sustainable failure. The tap line has been owing, it's not

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Speaker 1: been shrinking. Now it's gonna slow. There's what investor is

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Speaker 1: going to have to get used to is do you

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Speaker 1: buis stocks that are up when the data is getting worse?

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Speaker 1: Because the dat is going to get worse. We haven't

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Speaker 1: had any. Now we're going to get a slow a

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Speaker 1: bit with the government reopen, but it's gonna remember you're

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Speaker 1: gonna be getting data from the fourth quarter which wasn't

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Speaker 1: exactly hot in terms of the market. Sonny Y kind

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Speaker 1: of cool agenacy Chief Market st Stewart Patrick. Where that's

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Speaker 1: with a console on foreign relations, the Sovereignty Wars was

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Speaker 1: an important book a year ago, still important. I'm reconciling

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Speaker 1: America with its future, Stewart Patrick. If we look at

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Speaker 1: the Sovereignty Wars right now and we look at the

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Speaker 1: many battles America's having a foreign policy. I go to

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Speaker 1: your chapter six of year book, which is stopped the world.

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Speaker 1: I want to get off is that the US approach. Yes,

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Speaker 1: I think in many cases it is certainly the case

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Speaker 1: for integration to the global economy. I think there's been

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Speaker 1: a widespread sense that some of the arrangements that the

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Speaker 1: United States is uh championed and defended for many years

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Speaker 1: just simply aren't working for the United States. That goes

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Speaker 1: for a lot of other institutions as well, like the

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Speaker 1: United Nations or NATO, etcetera. But it's really coming home

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Speaker 1: in trade, where you see obviously the the abrogation of

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Speaker 1: the Transpacific Partnership, huge preference for bilateralism and dealing with China,

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Speaker 1: and then great great attacks on the World Trade Organization,

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Speaker 1: even even the threat of of conceivably walking away from

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Speaker 1: the w t O. Within news to news to do

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Speaker 1: this moment, there's all the upset, I know, we got

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Speaker 1: the shutdown, Venezuela, etcetera. What support does the President of

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Speaker 1: the United States have for his approach? I haven't really

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Speaker 1: seen that measured the number of Americans who believe in

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Speaker 1: his more assertive approach. How large just that audience, you know,

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Speaker 1: I think it's a roughly equivalent to his base, which

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Speaker 1: is about a third of Americans. They can expand the

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Speaker 1: base from there, No, you can't. Uh. And and you know,

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Speaker 1: there has been a number of poll There's been polls

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Speaker 1: from the Chicago Council on Global Affairs, from a number

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Speaker 1: of other organizations that suggests that, you know, Americans tend

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Speaker 1: to be relatively pragmatically internationalists. They want um, they want

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Speaker 1: the world to do its fair share as well, So

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Speaker 1: they don't want to be the policeman of the world,

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Speaker 1: but they certainly look at things internationally and multilaterally. They

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Speaker 1: want they want to do things cooperatively, and they understand

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Speaker 1: that global problems require cooperative solutions. But there is a

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Speaker 1: a significant minority of American electorate that really takes what

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Speaker 1: the historian Walt Walter Russell Mead called the jackson Ian

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Speaker 1: approach to foreign policy, and that is largely insular, largely

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Speaker 1: or highly nationalist. And it has that sort of it'll

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Speaker 1: it's willing to lash out with a don't tread on

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Speaker 1: me for a ferocity if the United States get stung.

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Speaker 1: But by and large, it likes to keep to itself.

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Speaker 1: It likes to have freedom of action, and it likes

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Speaker 1: to protect its constitution. And that's a very very powerful

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Speaker 1: constituency and that's who the president is speaking to Stuart,

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Speaker 1: You've written recently in the World Politics Review, the liberal

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Speaker 1: world order is dying. What comes next? What does come next? Well?

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Speaker 1: I think that's Um, it's it's dying in a number

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Speaker 1: of ways because the president is, as I said, has

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Speaker 1: sort of been reneging on a number of different international

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Speaker 1: institutions that have been the in a sense of the

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Speaker 1: matrix that has held up international order and also has

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Speaker 1: retreated on on on support for a democratic human rights

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Speaker 1: around the world. Have been very selective about it. What

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Speaker 1: comes next, I think is a much less normatively deep world.

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Speaker 1: I guess what I would say is more along the

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Speaker 1: lines of sort of a concert of Europe of the

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Speaker 1: nineteenth century, where you know, there's this some some effort

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Speaker 1: to have great powers have either spheres of influence or

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Speaker 1: or or agreements on sort of small, small, excuse me,

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Speaker 1: on basic issues of international order. But there's not a

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Speaker 1: whole lot of effort to try to be the custodian

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Speaker 1: of world order like the United States did for decades

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Speaker 1: a century. Stuart, we used to having a hegemonic power. Um,

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Speaker 1: will it be one? On? Who will it be? I

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Speaker 1: don't think there will be. I think it's you know,

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Speaker 1: I don't think China. I think China will aspire to

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Speaker 1: hegemony in East Asia, but it doesn't have a universalistic vision.

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Speaker 1: Most would be hedgemon's have have some sort of a

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Speaker 1: universalistic vision, whether it's you know, the Seviet Union with

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Speaker 1: with Marxist Leninism. But China doesn't have that, and it's

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Speaker 1: not it's it's indicative in the fact that it doesn't

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Speaker 1: really have It has some partners around the world, but

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Speaker 1: it doesn't have allies around the world. Uh, it doesn't

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Speaker 1: have you know, it's out. It has a sort of

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Speaker 1: a traditional great power of view of itself. I think

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Speaker 1: the same thing is true of Russia. And I think actually,

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Speaker 1: um Donald Trump would like to make the United States

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Speaker 1: similar to that way, so it will be it's sort

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Speaker 1: of getting away from the tradition of American exceptionalism. You

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Speaker 1: get back towards just a multipolar balance of power. I

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Speaker 1: don't see a hedge amon on the horizon. Stuart Patrick,

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Speaker 1: this is the Council Foreign Relations. Weird advantaged by Shannon O'Neill.

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Speaker 1: You're Latin American expert on Friday. As we considered Venezuela's

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Speaker 1: been consider it are for years here as a fractured government,

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Speaker 1: but now we're more so. Stewart Patrick, give us your

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Speaker 1: thoughts after a weekend thinking and reading on Venezuela. What

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Speaker 1: is the appropriate approach? I think the appropriate approaches is

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Speaker 1: one that is as much as possible multilateral. Obviously there's

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Speaker 1: some limitations with that. The Secretary Pompeo went to the

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Speaker 1: UN Security Council and there of course was stymied by

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Speaker 1: the Russians within the Security councils, so they would certainly

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Speaker 1: veto any sort of enforcement action. He has also been

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Speaker 1: trying to rally the Organization of American States, which has

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Speaker 1: been good, and there's sort of a coalition approach developing

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Speaker 1: where it's not just the United States throwing its weight

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Speaker 1: around an hemisphere. But you've got obviously the UK, You've

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Speaker 1: got Canada, but you've also got important Latin American countries

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Speaker 1: like Argentina and Brazil, the and Colombia that are really

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Speaker 1: on record as recognizing Um the opposition leader there. And

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Speaker 1: then of course you've got the Europeans. The EU initially

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Speaker 1: was resistant, but now it looks like the Germans, the French,

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Speaker 1: and the Spaniards are all going to a record nice

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Speaker 1: Juan guayid As as the de facto president, a legitimate

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Speaker 1: president of Venezuela. So I think that's the way to

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Speaker 1: go forward. The difficulty is there aren't a whole lot

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Speaker 1: of instruments. One of them might be uh. Certainly financially

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Speaker 1: one could declare Venezuela a a state supporter of terrorism,

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Speaker 1: even probably a more easy easily would be able to

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Speaker 1: uh to declare it an international criminal enterprise UH. And

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Speaker 1: then of course there would be efforts to try to

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Speaker 1: get the opposition leader to have control over the revenue

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Speaker 1: streams from SITGO and the Petro lest of Venezuela. Sir Patrick,

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Speaker 1: thank you so much with the consul on Foreign relationships.

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Speaker 1: Really can't say enough, folks about the sharpness of his

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Speaker 1: read the sovereignty wars UH quite important on the path

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Speaker 1: forward for us, whatever your opinion, Diane Swant Grant Thornton.

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Speaker 1: Right now, Diane, let's take advantage of your affiliation with

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Speaker 1: the statistics animals at the National Association for Business Economics.

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Speaker 1: Do you have a confidence that all this back data

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Speaker 1: is going to come out and it's going to be

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Speaker 1: on plan or are you preparing for a readjustment of

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Speaker 1: your view of all this data that didn't appear. Well,

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Speaker 1: that's a good question. I think we're going to see

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Speaker 1: a lot of data that confirmed that the fourth quarter

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Speaker 1: was still on solid footing. It will come out in

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Speaker 1: data dumps and um as. They said, they're they're just

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Speaker 1: getting back to work now and figuring out what they

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Speaker 1: can catch up on quickly. And they got to get

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Speaker 1: the components of GDP. We didn't even get retail sales.

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Speaker 1: We didn't get new home sales twice. We didn't get

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Speaker 1: construction spending, we didn't get through with goods orders. All

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Speaker 1: of those things have, okay, put together before we can

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Speaker 1: even know what GDP was. But we need to know

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Speaker 1: what GDP was in the fourth quart Okay, thank you.

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Speaker 1: But does that mean that if we look at, say,

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Speaker 1: just to pick on one beast, the Atlanta Fed GDP

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Speaker 1: now number, is it a vowed statistic or are they

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Speaker 1: guessing too well, they're guessing too I mean, we haven't

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Speaker 1: had a lot of data to influence us numbers. So

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Speaker 1: you know, all of us are sitting out there trying

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Speaker 1: to adjust our d statistics. It's Monday, it's without a

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Speaker 1: lot of data, so we're doing it off of more

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Speaker 1: of the qualitative data than actually the quantitative data. And

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Speaker 1: that's what's really hard, because the qualitative data is you know,

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Speaker 1: it usually fills in the colors inside the lines of

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Speaker 1: the hard data, and right now we don't have the

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Speaker 1: hard lines to color in, Diane. A lot of people

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Speaker 1: are focused on inventories more con Stanley pointing out this

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Speaker 1: morning that they think there will be a payback of

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Speaker 1: a pull forward to have the Harris during the third quarter,

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Speaker 1: and do you see that happening to, Diane. That's one

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Speaker 1: of the things we're going to be really watching closely

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Speaker 1: for because we do know, um, there was this pull

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Speaker 1: ahead in stockpiling, and that's what we're gonna be watching

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Speaker 1: very closely for. Again, we didn't get that data either,

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Speaker 1: and so we're sort of operating and avoid right now,

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Speaker 1: which the feed's not going to get out of before

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Speaker 1: their meeting, and they're going to have to acknowledge that

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Speaker 1: the shutdown has blurred their view in terms of what's

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Speaker 1: going on. And I think for this FED meeting and

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Speaker 1: we do have our first press there after it, we're

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Speaker 1: actually going to see j Powell. He's a quick learner,

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Speaker 1: UM say less rather than more because frankly there's not

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Speaker 1: a lot to say. You hope he's a quick learner.

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Speaker 1: For a couple of months to clarify, you know, he

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Speaker 1: brought out that with ben in and and and Janet.

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Speaker 1: He brought out that piece of paper and read it.

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Speaker 1: And how many times did you say patients in his

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Speaker 1: recent speech? And no precurse precourse, you know, set on

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Speaker 1: interest rates, So he and you know that. I think flexibility,

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Speaker 1: All those things show how much of a quick learner

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Speaker 1: he is. And I actually think the food was already

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Speaker 1: there if you look at the minutes, they were already

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Speaker 1: there in November. Diana, word on Q one, if you

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Speaker 1: can even if we had all the economic data available

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Speaker 1: to us, why do we find it so difficult to

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Speaker 1: read America in Q one? Well, you know, clearly the

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Speaker 1: shutdown is one issue, the collateral damage of it, and

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Speaker 1: we're in you know, we're in record culled territory going

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Speaker 1: into Chicago right now, you can't move. The unusually bad

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Speaker 1: weather is another factor that's going to complicate it. So

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Speaker 1: I'm in a half percent. But this is really hard,

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Speaker 1: and it's made the black Hawks even worse than they

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Speaker 1: already are. Diane, to John's really important point, there's an

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Speaker 1: oddity about Q one. How to increase taxes affect g

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Speaker 1: d P and Q one That Big C is seventy

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Speaker 1: of the economy and a lot of people have to

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Speaker 1: revisit FICA and all that in the first quarter. Is

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Speaker 1: that why we see a damp in Q one as

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Speaker 1: a general rule? We do. We know Q one has

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Speaker 1: a seasonality problem. It does seem to sump in consumption.

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Speaker 1: But worse yet is this year many people thinking they're

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Speaker 1: going to get a big tax refund didn't withhold enough.

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Speaker 1: In fact, many of the big tax companies did deal

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Speaker 1: with the digital clients are actually training their personnel to

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Speaker 1: be compassionate so that people don't get too angry when

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Speaker 1: they don't get the refunds that they think they're going

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Speaker 1: to get. And that's really where the real sticking point is.

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Speaker 1: I think on this one, not only do you have

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Speaker 1: those issues, but you're in a larger issue of people

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Speaker 1: not getting the refense they thought. Dane, we've got a

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Speaker 1: race here to our John Tucker who goes to compassionate

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Speaker 1: CPAs New Jersey. How compassionate is your CPA this year?

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Speaker 1: John Tucker, I almost kicked the dog. Um. Yeah, that

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Speaker 1: on radio said I almost I wouldn't kick bus I

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Speaker 1: fell about violence towards animals, that we will come back.

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Speaker 1: I am not the beneficiary of the tax cuts. We

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Speaker 1: have a moment of silence from John Tucker, a moment

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Speaker 1: of silence for Biscuit, Paul Sweeney Toime Keane the Bloomberg

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Speaker 1: Interactive Broker Studios, and we now we speak with dean

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Speaker 1: current of macro risk ad Isiser's on volatility, and I

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Speaker 1: do want to say folks that arguably it is the

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Speaker 1: most intense research report that we see. It is beyond Matthew.

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Speaker 1: It is beyond Greek letters deemed translate the arcane gamma,

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Speaker 1: vega and theta of your newsletter into the King's English.

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Speaker 1: What do we learn from volatility right now? Well, when

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Speaker 1: we get into those uh those derivatives like gamma, we're

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Speaker 1: really talking about rates of change and the speed with

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Speaker 1: which things are moving. And um, I think you can

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Speaker 1: translate that back into the more fundamental UH portfolio strategists

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Speaker 1: world by just looking at the daily swings in the SMP.

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Speaker 1: So just a quick bit of context. Um over a

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Speaker 1: one month period, we we peeked out in terms of

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Speaker 1: the severity of the SMP level of realized volatility we

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Speaker 1: peeked out at UM. That's almost two percent per day.

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Speaker 1: That's how you have to uh that that's the amount

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Speaker 1: of motion you need to get to a we're back

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Speaker 1: down to eighteen percent uh, and that's that's likely headed

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Speaker 1: lower still because you know, what we're doing is looking

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Speaker 1: in the rear view mirror and we're still picking up

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Speaker 1: on a couple of days towards the end of two

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Speaker 1: thousand and eighteen that we're extremely volatile UM. And so

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Speaker 1: you know, you're left trying to evaluate is the cost

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Speaker 1: of an option a good deal or not? And when

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Speaker 1: we do that, we're really looking at the magnitude of

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Speaker 1: these swings UM, and then whether they're sustainable going forward.

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Speaker 1: So UM, right now two months implied volatility, which is

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Speaker 1: a metric for cost, is right around fifteen UM. And

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Speaker 1: I think that's pretty fair. I don't think that's either

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Speaker 1: way too high or way too low. I think it's uh,

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Speaker 1: it's a reasonable number to reflect an increased level of uncertainty.

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Speaker 1: But with the reality that to keep swing of the

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Speaker 1: magnitude that we had is just it's very difficult historically

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Speaker 1: to see that sustain itself. So how much of the

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Speaker 1: volatility that you are seeing in the marketplace is coming

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Speaker 1: from macro transit or macro areas, whether it's China or Brexit,

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Speaker 1: And how do you recommend your client's kind of position

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Speaker 1: their portfolios for that those those macro risks. Yeah, there's

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Speaker 1: plenty of macro, but there's also some micro to what

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Speaker 1: one might argue that the and we always try to

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Speaker 1: disentangle what what's happening right the market participants are almost

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Speaker 1: hopelessly in need of a narrative to explain the why

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Speaker 1: of things UM. And so we've seen a pretty healthy

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Speaker 1: mix of macro UM. That's things like the you know,

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Speaker 1: slow down in the Chinese economy. UM, you know, some

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Speaker 1: of the trade talks. UH. You might argue that some

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Speaker 1: of the policy stuff with government dysfunction might be contributing

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Speaker 1: in some way of alatility. But there's micro too. There's

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Speaker 1: earnings reports that have been a source of war e

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Speaker 1: UH for investors. UM. I step back and I look

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Speaker 1: at the violence of the moves in the in Q

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Speaker 1: four and try to disentangle that relative to UM the

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Speaker 1: slowdown in the economy, and that's a tough one to square.

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Speaker 1: I think you wind up ultimately concluding that there is

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Speaker 1: a fragility in markets. Maybe this is just typical of

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Speaker 1: late cycle where money just got yanked from risk. If

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Speaker 1: you look at, for example, outflows from the h Y

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Speaker 1: g UH, there was a velocity of those outflows that

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Speaker 1: we haven't seen before. Um So, to answer your question,

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Speaker 1: some of it's macro, some of its micro and then

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Speaker 1: maybe this is just a little tautological, but some of

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Speaker 1: it's just flows. Money got yanked and then it got

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Speaker 1: stuffed right back in uh. And that's what That's how

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Speaker 1: you get to such a big draw down and then

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Speaker 1: such a big reversal in a hurry. And then of

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Speaker 1: course you also have the policy quote response, which are

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Speaker 1: the soothing words from Jerome Powell or trying to undo

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Speaker 1: the fumble that he made very quickly puts you bought

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Speaker 1: on the video really paid off. You can take the

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Speaker 1: rest of the year off absolutely upset. So you know, so, Dean,

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Speaker 1: I mean, how much you know when you think about

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Speaker 1: that that fourth quarter, particularly December, do you think the

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Speaker 1: markets just got it wrong, that it overshoot on the downside,

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Speaker 1: recession talk, all this and then that volatility, given what

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Speaker 1: we've seen in January, I think that's probably the case.

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Speaker 1: But again, we sort of talked ourselves into this narrative

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Speaker 1: that the economy must be slowing so dramatically or else

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Speaker 1: asset prices wouldn't have done what they did. And I

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Speaker 1: just our firm, Accarisk Advisors, We study asset prices and

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Speaker 1: those can become dislodged, sometimes for lengthy periods of time,

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Speaker 1: from the underlying fundamentals. Um. We all hear the stories

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Speaker 1: about credit market fragility, liquidity, and I think that expressed itself. Uh,

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Speaker 1: you know quite a bit, Dean, very quickly here before

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Speaker 1: I let you go. The average for the VIX is

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Speaker 1: nine twenty. Where's the new average? Where does a pro

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Speaker 1: like you set at decades decades long? What is it

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Speaker 1: now sixteen? Or is it even lower? Yeah? So I

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Speaker 1: think the learning process is um is one that occurs

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Speaker 1: over time. So two seventeen, the low and the VIX

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Speaker 1: kind of it was about ten. That was your floor.

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Speaker 1: Two thousand and eighteen the floor was twelve, And I

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Speaker 1: think two thousand nineteen your floor is fourteen. Is okay,

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Speaker 1: So I think a trading range around that, around that

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Speaker 1: low Dean current, Thank you so much, mac Rorisk Advises.

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Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast, Subscribe and

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00:25:38,720 --> 00:25:44,040
Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast

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Speaker 1: the podcast. You can always catch us worldwide. I'm Bloomberg

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