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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live

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Speaker 2: weekdays at ten am Eastern on Apple car Playing and

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Speaker 2: broyd Outo with the Bloomberg Business app. Listen on demand

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Speaker 2: wherever you get your podcasts, or watch us live on YouTube.

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Speaker 3: Let's check in on what we're doing with this market.

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Speaker 3: I'm bringing in Geena Martin Adams. I'm just going to

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Speaker 3: radio by right, the age for Bloomberg Intelligence.

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Speaker 4: Gina. I left Thursday. I don't work Fridays in the summer,

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Speaker 4: as you well know. I come back in the world.

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Speaker 4: What happened?

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Speaker 3: We left Thursday with a nice soft landing discussion, right,

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Speaker 3: you know, the markets, Maybe we'll get a little friendly pullback.

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Speaker 4: We come in today and you.

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Speaker 3: Know I've got I had the nastak off more than

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Speaker 3: a thousand points earlier this morning.

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Speaker 5: Also the last three trading days, the NASA slaw seven percent.

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Speaker 5: So this will stretch since June of twenty twenty two.

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Speaker 1: Well, I think one big thing happened, and that was

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Speaker 1: tech disappointed forecasts. I think that this has been actually

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Speaker 1: underway for more than just Friday. Friday was an exacerbation

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Speaker 1: of trends that really started a couple of weeks ago.

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Speaker 1: We wrote a note early last week and we called

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Speaker 1: it four than three hundred and forty four reasons text

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Speaker 1: stocks may struggle with high expectations because tech stock valuations

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Speaker 1: are three hundred and forty four basis points above recent

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Speaker 1: five year average. It just got to the point where

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Speaker 1: valuations were so extreme in an environment where tech stacks

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Speaker 1: were nearly faced with impossible expectations. Now, what's interesting about

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Speaker 1: the earning season is all the tech stacks beat. They

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Speaker 1: beat forecasts for second quarter earnings, but they were unable

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Speaker 1: to sustain forecasts for going forward margin growth. And they

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Speaker 1: started to talk about how much they're going to have

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Speaker 1: to spend going forward, and well, they need to cut

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Speaker 1: cap X and they're going to write size AI expectations.

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Speaker 1: And that created a tremendous amount of uncertainty that was

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Speaker 1: then exacerbated by two big macro indicators last week which

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Speaker 1: fell back to twenty twenty three low levels, which unfortunately

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Speaker 1: would suggest the manufacturing sectors sort of niscent tiny recovery

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Speaker 1: that kind of sort of emerged by March is now

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Speaker 1: could put and we're back to twenty twenty three, which

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Speaker 1: was clearly a recession in the manufacturing sector. And then

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Speaker 1: also the employment report, which you know, honestly, I'm kind

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Speaker 1: of shocked by the degree of extreme, exaggerated move that

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Speaker 1: we've had to the employment report, because all we're seeing

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Speaker 1: is slowing job growth so far and still extreme entry

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Speaker 1: into the labor force, which as a resulting in modest

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Speaker 1: uptick in the unemployment rate. But we are seeing a

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Speaker 1: slow on an average hourly earnings growth, which may cause

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Speaker 1: questions about the consumer. The other note that we wrote

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Speaker 1: last week is Amazon is entirely holding up the house

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Speaker 1: of cards of consumer discretionary. So I think that also

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Speaker 1: played out last week is when all your hopes and

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Speaker 1: dreams are on one stock and that stock cannot sustain

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Speaker 1: expectations and then the consumer outlook starts to deteriorate somewhat,

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Speaker 1: you see some real weaknesses emerge there.

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Speaker 4: And I'm glad you brought.

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Speaker 5: Up because overall, if you look at the S and P.

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Speaker 5: Five hundred, as you know, twelve percent earning growth year

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Speaker 5: over year here. But you've talked so much also about

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Speaker 5: when people want to argue about the broadening out, but

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Speaker 5: then when you're looking on the fundamental side, what you're

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Speaker 5: seeing beyond Tech, as you're seeing kind of that growth

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Speaker 5: as opposed to narrow between Tech and the rest of

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Speaker 5: the index. So what improvements are we seeing in other components.

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Speaker 1: It's actually really fascinating, and I think that this is

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Speaker 1: part of the reason, as much as it feels so painful,

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Speaker 1: this market meltdown has looked very different than the meltdown

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Speaker 1: of last fall. Remember we corrected ten percent in the

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Speaker 1: third quarter of last year as well. It seems like

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Speaker 1: a distant memory because we've had such a great pair

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Speaker 1: in stock so far, but we did have a ten

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Speaker 1: percent meltdown led by Tech, but the market's decline was

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Speaker 1: one for one with Tech. This time, Tech has doubled

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Speaker 1: the decline of the market, and so there is some

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Speaker 1: internal rotation that's quite different characterizing the twenty twenty four

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Speaker 1: tech meltdown and the overall market impact relative to twenty

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Speaker 1: twenty three. And I do think that that's because of

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Speaker 1: the cyclical the cyclicality of earnings, whereas in twenty two

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Speaker 1: twenty three when tech melted down, there was nothing to

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Speaker 1: kind of hang your hat on because the rest of

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Speaker 1: the sectors we're producing accelerating downside on earnings today that's

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Speaker 1: very different. We're actually seeing earnings growth improve so x

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Speaker 1: mag seven the four to ninety three are posting seven

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Speaker 1: percent earnings growth. It's the first positive quarter that we've

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Speaker 1: seen in more than four so starting to see some earnings.

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Speaker 1: The most fascinating part about this earning season also is guidance.

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Speaker 1: As much as I think the market narrative has been

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Speaker 1: all the companies are guiding terribly, now the reality is

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Speaker 1: that tech companies have been guiding us to expect less,

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Speaker 1: but the rest of guidance is actually net positive. We're

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Speaker 1: actually seeing positive guidance momentum emerge in the rest of

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Speaker 1: the groups. There's going to be so much confusion as

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Speaker 1: to how this plays out. If we do indeed move

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Speaker 1: into a state where we're seeing accelerated layoffs, we're seeing

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Speaker 1: much greater jobless claims emerge, and that's going to imply

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Speaker 1: that maybe we have some actual employment losses around the corner.

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Speaker 1: That's going to create a lot of confusion in this

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Speaker 1: market if we get there. But that's not where we

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Speaker 1: are right now. Where we are is actually companies outside

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Speaker 1: of tech are showing still improvement in their outlook.

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Speaker 3: We had a guest on earlier this morning that a

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Speaker 3: fund manager just flat out says his note to the

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Speaker 3: clients is by the dip.

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Speaker 4: Yeah.

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Speaker 1: Wow, listen, when you get to a VIX that's the

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Speaker 1: highest level since COVID. It's very clear that there is

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Speaker 1: panic right now in the equity market, and panic usually

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Speaker 1: results in major buying opportunities. So I completely understand that

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Speaker 1: we haven't even seen absolute nonfarm job losses yet, and

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Speaker 1: the market is already completely and totally panicked. And this

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Speaker 1: is really because tech really drove a lot of our optimism.

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Speaker 1: It was the only source of optimism. Now we're starting

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Speaker 1: to see those tech stocks melt down, and the manict

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Speaker 1: the market is completely panicked.

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Speaker 3: Although you could have bought Nvidia at the open today

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Speaker 3: at ninety two, which training at ninety eight.

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Speaker 5: Yeah, Andrew Tyler over a GP Mortgan's treat so he

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Speaker 5: made that tactical call this morning about buying the dip.

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Speaker 4: Yeah. Interesting.

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Speaker 5: Yeah, so we'll keep an eye on.

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Speaker 3: I remember being on a desk in nineteen eighty seven. Uh,

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Speaker 3: don't out pick up the phone.

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Speaker 5: Did we start right before the eighty seven crash?

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Speaker 6: Yes?

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Speaker 7: I did.

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Speaker 3: I was on the floor at eighty seven October nineteenth

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Speaker 3: so anyway, Gina, thank you so much for joinings. Really

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Speaker 3: really appreciate it. Gina Martin Adams. She is our equity

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Speaker 3: strategist for Bloomberg Intelligence. We really appreciate gatting few minus

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Speaker 3: or a times. Michael McKee joins is here and he

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Speaker 3: does all the economy stuff for Bloomberg Television.

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Speaker 5: Mike.

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Speaker 4: I left the studio Thursday.

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Speaker 3: All my discussions were soft landing, some variation of soft landing.

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Speaker 4: And then today people are talking about a recession.

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Speaker 7: Well it's only genus people.

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Speaker 8: Yeah, exactly, it's only the equity market you were talking

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Speaker 8: about nineteen eighty seven. I made a reference this morning

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Speaker 8: when I was on with to people opening the windows

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Speaker 8: down on Wall Street, and I got a note from

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Speaker 8: a trader who's been around for a while who said,

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Speaker 8: the twenty two year old sitting next to me had

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Speaker 8: no idea.

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Speaker 7: What you were talking about.

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Speaker 8: So maybe we come up with a different analogy. I said,

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Speaker 8: just a minute ago, it's it's an Emily Lettella moment

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Speaker 8: now because we got the ism services index, and now

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Speaker 8: there's another reference. Nobody she was a comedian, saiday live

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Speaker 8: who would come on and say never mind? Right, and

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Speaker 8: the services ism comes in and everything is higher, including employment,

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Speaker 8: and that was the thing that everybody worried about on Friday.

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Speaker 8: And with the ism factory orders on factory index on

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Speaker 8: Wednesday Thursday, and you know, production's up, everything is up

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Speaker 8: in that number comes in better than expected, and that's

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Speaker 8: two thirds of the economy. So soft landing might still

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Speaker 8: be in the cards. I think probably what you're seeing,

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Speaker 8: and I'm going way beyond my level of expertise, is

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Speaker 8: that Gina Martin Adams is right and that the equity

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Speaker 8: markets were overly dependent on a few stocks that then

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Speaker 8: didn't have great numbers, and you put the data on

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Speaker 8: Friday behind them, and everybody panicked, And now maybe they

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Speaker 8: don't need to.

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Speaker 5: Also this morning, when we're looking at the yield curve,

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Speaker 5: as I'm sure you saw as well, Mike, it's turning

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Speaker 5: positive for the first time since July twenty twenty two.

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Speaker 5: If you're looking at the twos tens part of that.

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Speaker 5: So isn't that something also that you would potentially want

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Speaker 5: to see as far as what that means for the

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Speaker 5: direction of the economy after it was inverted for so long.

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Speaker 8: Well, yes, and no. People don't realize is that the

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Speaker 8: yield curve disinverts right before recessions because people are anticipating

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Speaker 8: FED action, and I think that's one of the reasons

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Speaker 8: we saw a big move. It's been slowly flattening, but

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Speaker 8: I think today it was basically the two year went

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Speaker 8: way down, the two year yield went way down, people

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Speaker 8: anticipating the FED would be cutting rates and maybe an

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Speaker 8: emergency rate cut and things like that. And right after

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Speaker 8: this ISM number came out, it went back to where

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Speaker 8: it was yesterday. So we're either slightly positive or back

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Speaker 8: to slightly disinverted. So I'm not sure that's a signal,

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Speaker 8: but there are a lot of different signals you can

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Speaker 8: point to these days one way or the other. And

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Speaker 8: I had an argument with another strategist this morning over

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Speaker 8: the Bloomberg suggesting who was suggesting the FED needs to

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Speaker 8: act now, and I thought, don't you think it probably

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Speaker 8: be good for them to wait a few days and

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Speaker 8: get a little more data and see if this is

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Speaker 8: just a panic or a real collapse. And I think

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Speaker 8: the waiting part is what the FED is going to endorse.

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Speaker 3: It just remind us how rare is it for the

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Speaker 3: FED to do an emergency like intrameding kind of rate cut.

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Speaker 8: Very rare, and they only do it when the market

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Speaker 8: stops functioning. And that's what we saw during the pandemic

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Speaker 8: in March of twenty twenty. That's what we saw in

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Speaker 8: the fall of two thousand and eight when Lehman Brothers

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Speaker 8: went out of business and we saw the market seize

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Speaker 8: up there. But there doesn't seem to be any indication

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Speaker 8: that you can't trade today. So as long as you

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Speaker 8: can trade, that's what the FED is concerned about. If

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Speaker 8: you lose money, that's your problem exactly, not theirs.

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Speaker 5: Well, you also spoke to Austin Golesby on Friday. He

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Speaker 5: spoke again this morning, but kind of unpacked for us

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Speaker 5: what he in his reaction to the jobs report, because

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Speaker 5: it seems like again they followed trends and that was

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Speaker 5: just one report.

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Speaker 8: Well, it was interesting because Goolesby has been one of

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Speaker 8: the more dubbish members of the FED, suggesting that they

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Speaker 8: needed to start the process of normalizing rates, and yet

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Speaker 8: he wouldn't really go there on Friday. He didn't want

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Speaker 8: to front run what they might do. He said, you know,

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Speaker 8: we're okay with where we are. Let's see what happens

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Speaker 8: in the rest of the data. And he had a

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Speaker 8: vote this time filling in for the vacant Cleveland seat,

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Speaker 8: and he did not dissent. He voted for the Fed

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Speaker 8: to hold rates where they were. So if one of

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Speaker 8: the biggest doves was okay with it, then probably the

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Speaker 8: rest of the Fed is going to be feeling okay

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Speaker 8: with it for the moment.

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Speaker 3: Right, all right, very good, Michael McKee, Thank you so

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Speaker 3: much for joining us. Michael McKee covers all the economics

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Speaker 3: for Bloomberg, and we appreciate getting some of his thoughts here.

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Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live

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Speaker 2: weekdays at ten am Eastern on applecard Play and Android

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Speaker 2: Auto with the Bloomberg Business app. You can also listen

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Speaker 2: live on Amazon Alexa from our flagship New York station

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Speaker 2: Just Say Alexa playing Bloomberg eleven thirty.

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Speaker 3: So just went and sitting in for Alex Steel here

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Speaker 3: for the next couple hours. Again, John was just reporting

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Speaker 3: this ism data came in better than expected. Let's go

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Speaker 3: right to that because we could use some good news here.

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Speaker 3: Steve Miller, Chair of im Services PMI, it seems Steve

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Speaker 3: some pretty solid results. What do you take away from

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Speaker 3: some of this ism data.

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Speaker 9: Yeah, we were certainly happy to see it return to

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Speaker 9: expansion territory. You know, it seems like things are moderating

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Speaker 9: in terms of terms of feedback that we're getting through

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Speaker 9: the survey. We saw from a GDP standpoint, kind of

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Speaker 9: almost dead even those that were in expansion versus those

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Speaker 9: that were in contraction, with just a slight percent but

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Speaker 9: three percent higher on the expansion side. As you see

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Speaker 9: in the number, it's just just slightly above in the

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Speaker 9: expansion range. So happy to see it's less volatile than

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Speaker 9: we've seen in the past. With last month it was

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Speaker 9: about ten percent higher a GDP represented in the contraction

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Speaker 9: territory versus expansion.

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Speaker 5: And when you're looking at the Atlanta Feds GDP now model,

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Speaker 5: obviously we know that's volatile, but still the next update

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Speaker 5: is going to come later this week, but it's around

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Speaker 5: two and a half percent for the third quarter, so

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Speaker 5: I know there's a lot of concern when we had

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Speaker 5: some of the manufacturing data lasts Thursday. Obviously the jobs

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Speaker 5: are port on Friday, but when you still have economic

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Speaker 5: growth forecasted to be pretty solid here, how do you

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Speaker 5: sort of unpack some of the latest wave of data

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Speaker 5: here and how this latest when you're looking at ISM

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Speaker 5: sort of fits into this.

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Speaker 9: Yeah, so on average for twenty twenty four, what we're

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Speaker 9: seeing is gradual expansion. The latest reading is about I

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Speaker 9: believe it's point eight percent represents about a point eight

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Speaker 9: percent increase in GDP growth. So I wouldn't be surprised

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Speaker 9: to see that kind of a growth a growth number,

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Speaker 9: but certainly what we see in our survey data on

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Speaker 9: average is continued growth in GDP.

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Speaker 3: All right, Steve, thank you so much for joining us.

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Speaker 3: Really appreciate you coming on and breaking down some of

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Speaker 3: these numbers. For Steve Miller, Chair of the ISM Services PMI,

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Speaker 3: again some better than expected services PMI fifty one point

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Speaker 3: four was the actual reading consensus was fifty one. Last

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Speaker 3: period is forty eight point eight, so a nice improvement there.

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Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live

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Speaker 2: weekdays at ten am Eastern on Apple card Playing and

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Speaker 2: Brounoto with the Bloomberg Business app. Listen on demand wherever

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Speaker 2: you get your podcast, or watch us live on YouTube.

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Speaker 3: Jess Meant and sitting in for Alextel on Paul Sweeney

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Speaker 3: here on Bloomberg Intelligence Program. We're live on a Bloomberg

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Speaker 3: Interactive Brokers studio streaming live on YouTube as well here,

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Speaker 3: and John's just talking about the ten year treasury three

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Speaker 3: point seventy five percent. We were low with three point

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Speaker 3: sixty six percent, so it's moving all around.

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Speaker 4: That's right there. Today we missed that five percent mark. Paul, Yes, exactly,

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Speaker 4: so bad, exactly all right.

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Speaker 3: Next guest Joints is here in studio making a big

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Speaker 3: trip over the pond, Chris Watling, CEO and chief market

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Speaker 3: strategist for Longview Economics based out of London. We got

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Speaker 3: him here in the big town. Chris, thanks for coming

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Speaker 3: into our studio here.

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Speaker 4: What do you make of the last several days here?

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Speaker 3: It's just been a real readjustment for the market in

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Speaker 3: terms of its outlook.

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Speaker 7: Yeah, I think it's fascinating.

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Speaker 10: I mean it seems to me we've evolved from sectu otation,

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Speaker 10: which was kind of a mid July theme, to really

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Speaker 10: we're oute to a liquidation event. And as as we

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Speaker 10: were saying just off air, it's really all about the

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Speaker 10: Bank of Japan's governor Yoida, who came out they surprised

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Speaker 10: markets with a fifteen bit hike. But then of course,

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Speaker 10: on top of that he talked about the idea that

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Speaker 10: neutral rates are a long way away, so in other words,

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Speaker 10: as a weight hiking cycle, and he's done that into

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Speaker 10: you know, we've done it's very interesting. So the Fed's

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Speaker 10: talked about cutting and we've got a bit of that

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Speaker 10: from Power last week, a bit firmer and the boj

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Speaker 10: is raising, and they've done that into two extreme positionings

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Speaker 10: in markets. Everyone was short the end and everyone was

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Speaker 10: max along the MAG seven and those both those rate cutting,

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Speaker 10: those rate cycles changing influenced that position. So it's like

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Speaker 10: we're in a giant repositioning in global markets and.

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Speaker 7: A giant liquidity event on the back of it.

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Speaker 10: So it's a lot going on. It's pretty interesting, not

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Speaker 10: to mention the macro data, which we haven't got to.

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Speaker 5: Right well, looking at the MAG seven index here in

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Speaker 5: the terminal down almost five percent a days on peace

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Speaker 5: for its worst day actually since July twenty fourth here,

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Speaker 5: so keeping close eye on that. But also you neutral

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Speaker 5: to US equities in late July, actually it was ahead

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Speaker 5: of the Federal reserves decision last Wednesday. Kind of unpack

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Speaker 5: us how you're advising clients to position, where are you

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Speaker 5: telling them to put their money and like, what would

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Speaker 5: you want to buy what would you want to sell

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Speaker 5: at this point?

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Speaker 10: Well, I think it depends on obviously your time frame.

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Speaker 10: So if you're sort of, you know, the next couple

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Speaker 10: of months, I'd just be cautious. I think markets haven't

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Speaker 10: finished their sell off today, where you know, we're in

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Speaker 10: the midst of it and there's more to come. And

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Speaker 10: generally when markets sell off this sharply, the price section

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Speaker 10: dictates you get a we test unless we get something

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Speaker 10: dramatic out of the FED in terms of you know,

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Speaker 10: inter meeting cut or very dramatic strong signaling. So so

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Speaker 10: short term I do that. In the medium term, I

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Speaker 10: think one wants to see this as an opportunity to

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Speaker 10: start moving portfolios around in terms of that global sector rotation,

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Speaker 10: So our viue is that markets have fashions. Every six

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Speaker 10: or seven years, the global sector leaderships change, and you know,

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Speaker 10: it's been tech, it's been strong, and we think it's

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Speaker 10: now starting to change.

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Speaker 7: We're coming into a rate cutting cycle.

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Speaker 10: I think we can get cyclical week acceleration in the West,

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Speaker 10: and you know, we think people should stop positioning for that.

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Speaker 10: That's smaller midcaps in the US, that's overseas equities non

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Speaker 10: US equities. So I think, I think, you know, the

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Speaker 10: headline is we're going back to the noughties in terms

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Speaker 10: of what does well, you know, I mean, it's like

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Speaker 10: back to the future all over again.

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Speaker 7: But what goes around comes around.

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Speaker 10: And I think we're going to get a consumer and

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Speaker 10: housing boom over the next one to four years across

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Speaker 10: the Western world, and that's going to change the equity

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Speaker 10: sector leadership in the global stock market.

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Speaker 3: Look at that de Vic's here, it's up about nineteen

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Speaker 3: points to just north of forty two. It was up

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Speaker 3: to a level of sixty five earlier this morning, just

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Speaker 3: blowing out like crazy.

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Speaker 4: Does that tell you that panic is out there earlier today?

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Speaker 10: Well, it's definitely panic, isn't there. I mean, sixty is

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Speaker 10: a big I mean I remember when I started in

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Speaker 10: this business, if it went over twenty, you thought it

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Speaker 10: was a big number, and then of course that's all changed.

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Speaker 10: But sixty is undoubtedly a big number, very very rarely

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Speaker 10: to get above that. So I think very short term

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Speaker 10: what people want to watch is do you get a

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Speaker 10: bullish keydo reversal in markets today? You know, obviously the

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Speaker 10: voting below the lows to their close above levels that

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Speaker 10: they saw on Friday. I mean, it seems a long

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Speaker 10: stretch from here, but still a few more hours of trading.

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Speaker 10: This market is very volatile. It can move along very quickly.

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Speaker 10: But look, most sell offs happen in three or five waves.

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Speaker 10: So we've had wave one. We're going to get a

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Speaker 10: Willie Fraley. If you're a trader at some stage over

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Speaker 10: the course of this week, you want to get involved

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Speaker 10: in that. On alongside, when you're.

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Speaker 5: Talking to your clients, what are some of their top

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Speaker 5: questions right now?

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Speaker 10: Well, I mean I haven't talked to many today because

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Speaker 10: I think the questions might have changed over the last

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Speaker 10: twelve eighteen hours.

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Speaker 7: But no, I mean we've been, we've been.

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Speaker 10: You know, the big question has really been when you

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Speaker 10: get out of the MAC seven, and I think that's

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Speaker 10: becoming increasingly obvious. And of course I think the really

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Speaker 10: big question will be, now, has the psychology really broken

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Speaker 10: in that sector? Is this genuinely the top on a

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Speaker 10: relative basis for the MAG seven? I would definitely argue

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Speaker 10: it is because it happened on July the eleventh, on

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Speaker 10: that CPI day when we changed better inflation and so on,

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Speaker 10: and better therefore interest rate outlook for the FED. But look,

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Speaker 10: I mean, there are you know, there are tons of questions.

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Speaker 10: People are going to be asking about this liquidity out

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Speaker 10: of Japan. They're going to be asking about neutral weights

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Speaker 10: in Japan, what is your aid to mean? And we're

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Speaker 10: going to be looking for FED, FED and other central

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Speaker 10: bankers to accelerate their weight cutting torque.

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Speaker 7: I think I'm glad.

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Speaker 5: You brought up July eleventh, the CPI day when we

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Speaker 5: got that last report for the month of June, because

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Speaker 5: if you look at the flows data, a lot of

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Speaker 5: that rotation. Of course, people were talking so much about

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Speaker 5: small caps last month, but now they're coming under pressure.

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Speaker 5: But those kind of income driven type proxy bond like sectors.

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Speaker 5: If you're thinking about utilities, real estate, a lot of

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Speaker 5: flows going into that. Even last week, if you counted

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Speaker 5: both of those sectors with Bloomberg Intelligence data, it was

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Speaker 5: close to about a billion dollars going into those two sectors.

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Speaker 5: And then if you looked at technology, there was a

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Speaker 5: little bit of a bid for the buy that did

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Speaker 5: there's around three hundred million that wouldn't that sector. But

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Speaker 5: when you're thinking about the bond proxy type corners of

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Speaker 5: the market, I mean, are we still clearly seeing rotation.

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Speaker 5: It's just rotations now continuing to move. If you're pulling

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Speaker 5: up at those expectations for when rate cuts could potentially have.

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Speaker 10: Yeah, I mean, you know, markets set off, you go defensive,

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Speaker 10: you go bomb boxes.

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Speaker 7: That's that's what you do, that's where you go and hide.

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Speaker 10: So you know, generally, I think I always think of

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Speaker 10: the market as cyclicals, defensives, and long duration growth. And

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Speaker 10: you know, there's an argument you go defensive before you

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Speaker 10: go into the cyclicals. But yeah, it's no wonder we're

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Speaker 10: seeing that. And I think that three hundred million into

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Speaker 10: tech is probably they're probably regrading every penny of.

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Speaker 4: That right now.

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Speaker 10: But yeah, look, I mean I travel around the world

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Speaker 10: talking to investors. Over the last six months, every single

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Speaker 10: man and his dog has owned in video and now

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Speaker 10: every single man and his dog is probably selling it

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Speaker 10: if they haven't already.

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Speaker 5: So so is the buying opportunity then well, there is

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Speaker 5: stuck like that.

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Speaker 10: I mean, if you if you look at tech in

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Speaker 10: two thousand when it had its major T and T peak,

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Speaker 10: the sector de weighted relative to the market until twenty fourteen,

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Speaker 10: which didn't mean you didn't not buy it for fourteen years,

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Speaker 10: but it just means don't be too quick so outside

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Speaker 10: Sorry sorry, I was going to say that is the

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Speaker 10: absolute key question here for an equent investor.

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Speaker 7: Has the psychology in the MAKES seven change?

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Speaker 10: Is global equity sect sector leadership changing at this moment?

438
00:21:23,240 --> 00:21:24,080
Speaker 7: That is the crux.

439
00:21:24,280 --> 00:21:26,679
Speaker 3: Well, there's argued in me that if tech doesn't lead

440
00:21:26,720 --> 00:21:29,800
Speaker 3: this market, this market doesn't go anywhere that tech is

441
00:21:29,800 --> 00:21:32,720
Speaker 3: by definition market cap wise, has to be a leader.

442
00:21:33,080 --> 00:21:35,879
Speaker 10: Well that's absolutely right in the US, but outside the

443
00:21:36,000 --> 00:21:38,719
Speaker 10: US not so Globally the market can be led by

444
00:21:38,720 --> 00:21:39,200
Speaker 10: other stuff.

445
00:21:39,200 --> 00:21:41,600
Speaker 7: But you're right, the US will really really struggle with that.

446
00:21:41,840 --> 00:21:44,200
Speaker 3: At the European I'm just looking at the European markets,

447
00:21:44,280 --> 00:21:46,840
Speaker 3: you know, selling off today as well here.

448
00:21:46,800 --> 00:21:49,119
Speaker 10: Of course, But interestingly, in the first two weeks of

449
00:21:49,160 --> 00:21:52,119
Speaker 10: the tech sell off you're held up really nicely. So

450
00:21:52,359 --> 00:21:54,320
Speaker 10: you know, these things have phases. We're now into the

451
00:21:54,320 --> 00:21:57,480
Speaker 10: liquidation phase, so you've got to sell everything. Gold's selling off.

452
00:21:57,680 --> 00:21:59,639
Speaker 4: Yeah, and you don't have an in the European markets.

453
00:21:59,720 --> 00:22:01,680
Speaker 4: The the tech exposure that they have in US mark

454
00:22:01,760 --> 00:22:04,840
Speaker 4: not where it changes the treating dynamics, the evaluation exactly.

455
00:22:04,920 --> 00:22:07,400
Speaker 7: The sectors are very different. We have ASML. But that's

456
00:22:07,440 --> 00:22:10,639
Speaker 7: about it really. I like SAP too. I like SAP.

457
00:22:11,440 --> 00:22:16,479
Speaker 10: Yes we are a couple, but it's pretty thin exactly

458
00:22:16,480 --> 00:22:18,119
Speaker 10: that you have the I mean the European companies to

459
00:22:18,119 --> 00:22:20,680
Speaker 10: have that exposure to China to a greater ease.

460
00:22:20,720 --> 00:22:21,600
Speaker 7: They do, yeah, they do.

461
00:22:21,720 --> 00:22:26,000
Speaker 10: We love Spanish mid caps just to go really Spanish. Okay,

462
00:22:26,200 --> 00:22:28,800
Speaker 10: no one's talked about Spain for fifteen years. But the

463
00:22:28,920 --> 00:22:31,480
Speaker 10: pigs are coming back. Okay, pigs about you remember the

464
00:22:31,520 --> 00:22:34,840
Speaker 10: pigs in the noughties. Yeah, they're coming back. It goes around,

465
00:22:34,840 --> 00:22:35,639
Speaker 10: comes around.

466
00:22:35,520 --> 00:22:38,159
Speaker 4: Very good, Chris Wilding. Actually we're going to keep you

467
00:22:38,200 --> 00:22:38,680
Speaker 4: for a little bit.

468
00:22:38,840 --> 00:22:41,760
Speaker 3: So all right, so as you travel around here, are

469
00:22:41,800 --> 00:22:45,680
Speaker 3: you talking about European equities more than US equities?

470
00:22:45,960 --> 00:22:48,840
Speaker 7: The folks this year we've started talking about European equities

471
00:22:48,880 --> 00:22:51,280
Speaker 7: and UK as well. UK. I mean, I don't know.

472
00:22:51,200 --> 00:22:53,159
Speaker 10: How much you've seen of our riots over the weekend,

473
00:22:53,240 --> 00:22:54,960
Speaker 10: so maybe people are a little off the UK at

474
00:22:55,000 --> 00:22:57,680
Speaker 10: the moment. But actually that you know, the UK is

475
00:22:57,720 --> 00:23:00,720
Speaker 10: a very interesting opportunity because we're going to get it.

476
00:23:00,760 --> 00:23:02,880
Speaker 10: We're going to get a consumer and housing boom. There's

477
00:23:02,920 --> 00:23:05,080
Speaker 10: going to be great earnings growth it's a cheap market.

478
00:23:05,320 --> 00:23:07,880
Speaker 10: I would argue we have political stability. It doesn't quite

479
00:23:07,880 --> 00:23:11,280
Speaker 10: feel like that in the last few days. Maybe maybe

480
00:23:11,320 --> 00:23:13,359
Speaker 10: our riots haven't hit your news wise, I don't know,

481
00:23:13,480 --> 00:23:16,240
Speaker 10: but it's been pretty brutal in the UK over the weekend.

482
00:23:16,280 --> 00:23:19,600
Speaker 10: But yeah, we're talking a lot about European UK, even

483
00:23:19,600 --> 00:23:22,720
Speaker 10: some of the emerging markets, but not in this liquidation event.

484
00:23:22,760 --> 00:23:25,439
Speaker 10: This is when you pick them up on weekdays. In

485
00:23:25,480 --> 00:23:27,760
Speaker 10: this liquidation event, if you're you know, one, two, three,

486
00:23:27,800 --> 00:23:29,959
Speaker 10: four year investor, it's going to be a really interesting

487
00:23:30,000 --> 00:23:30,320
Speaker 10: four year.

488
00:23:30,320 --> 00:23:34,160
Speaker 7: It's been very different from the last five to fifteen.

489
00:23:34,200 --> 00:23:36,600
Speaker 3: Really, So what do you tell people that walk up

490
00:23:36,640 --> 00:23:39,480
Speaker 3: to this market and see this kind of volatility here?

491
00:23:39,480 --> 00:23:42,480
Speaker 3: What do you telling those folks that this is maybe

492
00:23:42,560 --> 00:23:45,399
Speaker 3: perhaps of a part of a reasonable correction, or.

493
00:23:45,400 --> 00:23:46,240
Speaker 4: Is just something else gone on?

494
00:23:46,720 --> 00:23:48,840
Speaker 10: Well, I think I mean to be honest, it depends

495
00:23:48,880 --> 00:23:51,199
Speaker 10: on their timeframe and whether a trade or an investor.

496
00:23:51,280 --> 00:23:53,240
Speaker 10: But what I think the really important thing here is this,

497
00:23:53,400 --> 00:23:55,600
Speaker 10: you know, just look at the end. The end tells

498
00:23:55,600 --> 00:23:59,200
Speaker 10: you everything. The short positioning, it's the carry trade currency.

499
00:23:59,240 --> 00:24:04,240
Speaker 10: Everyone's been the short end long Brazilian or Mexican currencies

500
00:24:04,240 --> 00:24:06,359
Speaker 10: on long that mag seven or whatever it is, you

501
00:24:06,480 --> 00:24:08,679
Speaker 10: fund out at the end, so you're getting killed at

502
00:24:08,680 --> 00:24:09,080
Speaker 10: the moment.

503
00:24:09,200 --> 00:24:11,280
Speaker 7: So this is very much a liquidity event.

504
00:24:11,359 --> 00:24:14,720
Speaker 10: Short term, it'll burn through, hopefully the central banks will

505
00:24:14,760 --> 00:24:16,760
Speaker 10: turn up, and then you start picking out what you

506
00:24:16,800 --> 00:24:19,080
Speaker 10: want for the next twelve eighteen months. And that is

507
00:24:19,080 --> 00:24:22,600
Speaker 10: when we think about this movingto cyclicals and move overseas

508
00:24:22,640 --> 00:24:23,840
Speaker 10: or into mid and small caps.

509
00:24:24,160 --> 00:24:26,520
Speaker 5: So what's the next big sort of event that you're

510
00:24:26,600 --> 00:24:28,720
Speaker 5: keeping your eyes on? Because obviously we have Jackson Holtz

511
00:24:28,840 --> 00:24:30,680
Speaker 5: until later this month, but we'll have a ton of

512
00:24:30,680 --> 00:24:32,879
Speaker 5: different FED speakers coming out, and then still a lot

513
00:24:32,880 --> 00:24:35,000
Speaker 5: of consumer related earnings in the US this week.

514
00:24:35,280 --> 00:24:37,040
Speaker 10: There's a ton of stuff going on, isn't it. Even

515
00:24:37,040 --> 00:24:39,400
Speaker 10: though it's August, there's no going on holiday. Luckily I've

516
00:24:39,400 --> 00:24:42,120
Speaker 10: been so I don't have to worry about it. But yeah,

517
00:24:42,160 --> 00:24:43,919
Speaker 10: I mean I think are we going to get an

518
00:24:43,920 --> 00:24:47,000
Speaker 10: into meeting cut? I think that really depends on how

519
00:24:47,080 --> 00:24:50,639
Speaker 10: much financial conditions titan and the price action in markets.

520
00:24:51,480 --> 00:24:53,680
Speaker 10: What is the market pricing in Are we going to

521
00:24:53,720 --> 00:24:56,920
Speaker 10: potentially get fifty as the market probably priced in fifty

522
00:24:56,960 --> 00:24:59,440
Speaker 10: for the next meeting already. I don't know I'm out

523
00:24:59,480 --> 00:25:05,159
Speaker 10: of date to mows but but yeah, I mean, I

524
00:25:05,160 --> 00:25:07,800
Speaker 10: think all of that is critical. The data is critical.

525
00:25:07,840 --> 00:25:10,800
Speaker 10: Ism services Today was very interesting for the soft landing.

526
00:25:10,600 --> 00:25:13,440
Speaker 3: On Kim yep kim in better than expected. Hey, Chris,

527
00:25:13,440 --> 00:25:15,560
Speaker 3: thanks for joining us here. Chris Watling, he's the CEO,

528
00:25:15,880 --> 00:25:19,560
Speaker 3: chief market strategist for Longview Economics based in London, but

529
00:25:19,600 --> 00:25:23,520
Speaker 3: he's doing his US tour here because we worked during

530
00:25:23,520 --> 00:25:24,800
Speaker 3: the month of August unlikes.

531
00:25:26,280 --> 00:25:30,680
Speaker 4: I'm just laid it out Friday.

532
00:25:30,400 --> 00:25:31,360
Speaker 6: So appreciate it.

533
00:25:32,760 --> 00:25:36,639
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live

534
00:25:36,720 --> 00:25:39,760
Speaker 2: weekdays at ten am Eastern on Apple card Play and

535
00:25:39,760 --> 00:25:43,040
Speaker 2: Android Auto with the Bloomberg Business. You can also listen

536
00:25:43,160 --> 00:25:46,240
Speaker 2: live on Amazon Alexa from our flagship New York station

537
00:25:46,640 --> 00:25:49,639
Speaker 2: Just Say Alexa playing Bloomberg eleven thirty.

538
00:25:50,880 --> 00:25:53,760
Speaker 3: Jess Meant sitting in for Alex Deel on Paul Sweeney.

539
00:25:53,760 --> 00:25:56,000
Speaker 3: We're live here in our Bloomberg Interactive Brooker's Studio, or

540
00:25:56,040 --> 00:25:57,679
Speaker 3: streaming live on YouTube as well as you can hit

541
00:25:57,720 --> 00:26:00,640
Speaker 3: over to YouTube dot com search Bloomberg pot. I mean,

542
00:26:00,680 --> 00:26:05,440
Speaker 3: who reports earnings on a Saturday. Only Warren Buffey could

543
00:26:05,440 --> 00:26:09,200
Speaker 3: do that at Berkshire Hathaway. I was not paying attention

544
00:26:09,359 --> 00:26:12,440
Speaker 3: whatsoever on the Jersey shore, but somebody who was paying

545
00:26:12,440 --> 00:26:15,280
Speaker 3: attention to Matt Palozoli. He's the senior analyst covers all

546
00:26:15,280 --> 00:26:18,000
Speaker 3: the insurance geeks for Bloomberg Intelligence. He joins us here

547
00:26:18,040 --> 00:26:20,840
Speaker 3: in our Bloomberg Interactive Broker Studio. So what'd you learn

548
00:26:20,880 --> 00:26:25,040
Speaker 3: from Berkshire. I'm guessing more cash and even more cash, more.

549
00:26:24,880 --> 00:26:25,879
Speaker 7: Cash and even more cash.

550
00:26:25,920 --> 00:26:28,560
Speaker 11: So the big story was really them selling half of

551
00:26:28,600 --> 00:26:33,159
Speaker 11: their Apple shares. We had mentioned in our earnings preview

552
00:26:33,200 --> 00:26:35,680
Speaker 11: note that we thought they might lighten the stake a

553
00:26:35,720 --> 00:26:38,359
Speaker 11: little bit more. I didn't expect them to be this much,

554
00:26:38,400 --> 00:26:40,119
Speaker 11: but that was the big story coming out of it.

555
00:26:40,560 --> 00:26:43,800
Speaker 5: And why was this like what ended up being the

556
00:26:44,240 --> 00:26:46,120
Speaker 5: kind of cause for them to want to pull back

557
00:26:46,119 --> 00:26:46,880
Speaker 5: in Triumpid's tag.

558
00:26:47,080 --> 00:26:50,439
Speaker 11: Sure, just so we had mentioned also they kind of

559
00:26:50,440 --> 00:26:52,240
Speaker 11: telegraphed a little bit that they were probably going to

560
00:26:52,320 --> 00:26:56,240
Speaker 11: sell more at their annual meeting in May. Buffett had

561
00:26:56,280 --> 00:26:59,640
Speaker 11: warned about tax rates going up potentially in the future

562
00:26:59,800 --> 00:27:02,800
Speaker 11: and maybe taking some gains off the table. Tim Cook

563
00:27:02,880 --> 00:27:04,960
Speaker 11: was actually sitting there and the audience was kind of funny,

564
00:27:04,960 --> 00:27:06,399
Speaker 11: and that they had sold I think it was like

565
00:27:06,440 --> 00:27:09,439
Speaker 11: ten to thirteen percent of their holdings at that time,

566
00:27:10,080 --> 00:27:12,280
Speaker 11: and they got questions on it, and it just seemed

567
00:27:12,440 --> 00:27:15,160
Speaker 11: body language wise that they would be selling a little more.

568
00:27:15,160 --> 00:27:18,520
Speaker 11: So I think tax rates, he if it's been a

569
00:27:18,560 --> 00:27:21,399
Speaker 11: little weary on exposure to China for some company. So

570
00:27:21,440 --> 00:27:23,000
Speaker 11: I think those two played a big role.

571
00:27:23,280 --> 00:27:26,520
Speaker 5: And actually had mentioned to you before when we're off air,

572
00:27:26,600 --> 00:27:29,560
Speaker 5: kind of trying to pick your brain because Apple if

573
00:27:29,640 --> 00:27:32,080
Speaker 5: just for people to remind them it was underperformed the

574
00:27:32,200 --> 00:27:34,320
Speaker 5: S and P five hundred tremendously in the first quarter.

575
00:27:34,480 --> 00:27:36,439
Speaker 5: It was one of its worst quarters relative to the index,

576
00:27:37,040 --> 00:27:38,720
Speaker 5: probably like the fourth or fifth worse since the dot

577
00:27:38,760 --> 00:27:42,119
Speaker 5: com bubble burst. But then it bottomed in April and

578
00:27:42,200 --> 00:27:44,520
Speaker 5: has been up close to thirty percent since then, and

579
00:27:44,600 --> 00:27:46,239
Speaker 5: so the S and P five hundred that span has

580
00:27:46,280 --> 00:27:49,320
Speaker 5: only been up about four percent. So you were saying

581
00:27:49,359 --> 00:27:51,520
Speaker 5: you didn't think even just the rally that we've seen

582
00:27:51,640 --> 00:27:53,359
Speaker 5: was as much of a factor either as far as

583
00:27:53,359 --> 00:27:54,280
Speaker 5: why they turned their stick.

584
00:27:54,480 --> 00:27:55,119
Speaker 7: Yeah, I don't think so.

585
00:27:55,160 --> 00:27:57,280
Speaker 11: I mean, more buff it's not out there trying to

586
00:27:57,320 --> 00:28:00,480
Speaker 11: time the market one way or another. And you know,

587
00:28:00,560 --> 00:28:04,520
Speaker 11: he looks at these stock investments as if he's, you know,

588
00:28:04,560 --> 00:28:07,280
Speaker 11: buying the company. So he also said at the annual

589
00:28:07,320 --> 00:28:10,240
Speaker 11: meeting he expected Apple to be their biggest holding at

590
00:28:10,280 --> 00:28:13,359
Speaker 11: the end of this year. It still is, so, I mean,

591
00:28:13,880 --> 00:28:16,280
Speaker 11: it was that stock was about forty percent of their

592
00:28:16,280 --> 00:28:19,560
Speaker 11: portfolio before this move. So I'm not surprised to see

593
00:28:19,600 --> 00:28:21,480
Speaker 11: him take some concentration of how much.

594
00:28:21,359 --> 00:28:24,040
Speaker 3: Cash did they have at Berkshire Hathway today and so

595
00:28:24,160 --> 00:28:26,160
Speaker 3: any any ideas what they might do with it.

596
00:28:27,040 --> 00:28:29,679
Speaker 11: Always a tough one, Paul. It's I think at a

597
00:28:29,720 --> 00:28:32,720
Speaker 11: two hundred and seventy eight billion dollars, which I thought

598
00:28:32,720 --> 00:28:35,680
Speaker 11: was a mistake when I first saw it because they

599
00:28:35,680 --> 00:28:40,120
Speaker 11: were at like less than two hundred before the sale

600
00:28:40,160 --> 00:28:43,680
Speaker 11: of the Apples like brought in a lot of cash.

601
00:28:44,520 --> 00:28:46,760
Speaker 11: Higher interest rates have taken a lot of pressure off

602
00:28:46,760 --> 00:28:50,640
Speaker 11: them holding cash. I was calculating that just a simple

603
00:28:50,720 --> 00:28:54,120
Speaker 11: after tax return on the cash would help their earnings

604
00:28:54,120 --> 00:28:57,640
Speaker 11: by at least five percent next year, right, so just holding.

605
00:28:57,360 --> 00:28:58,120
Speaker 4: It will be okay.

606
00:28:59,120 --> 00:29:00,960
Speaker 11: You know, they bought it big steak and shove. That

607
00:29:00,960 --> 00:29:04,160
Speaker 11: would be an interesting, mega, mega deal and not really

608
00:29:04,200 --> 00:29:07,480
Speaker 11: predicting that would happen, but just seeing that, I mean,

609
00:29:08,520 --> 00:29:11,240
Speaker 11: I think the next deal buff It does probably something

610
00:29:11,480 --> 00:29:14,120
Speaker 11: we don't even really understand what it is, like, you know,

611
00:29:14,800 --> 00:29:18,440
Speaker 11: makes unique parts for some materials or something like that.

612
00:29:18,800 --> 00:29:21,640
Speaker 5: It's interesting too because at a certain point they're holding

613
00:29:21,680 --> 00:29:24,040
Speaker 5: an Apple was so big that it took up basically

614
00:29:24,040 --> 00:29:27,160
Speaker 5: half of its portfolios. So for in your kind of view,

615
00:29:27,200 --> 00:29:29,720
Speaker 5: does it make sense to make a move like that, Yeah.

616
00:29:29,600 --> 00:29:31,520
Speaker 11: I mean, you know, I don't know if anyone wants

617
00:29:31,520 --> 00:29:34,160
Speaker 11: to have one stock makeup you know, half of their

618
00:29:34,200 --> 00:29:39,000
Speaker 11: their portfolio. You know, he had said he would love

619
00:29:39,040 --> 00:29:40,960
Speaker 11: to have owned the whole company at one point or something.

620
00:29:41,520 --> 00:29:45,560
Speaker 11: You know, it does seem like he was worried about

621
00:29:45,680 --> 00:29:49,520
Speaker 11: global economic situation. I think the timing of this is

622
00:29:49,600 --> 00:29:52,720
Speaker 11: just kind of a coincidence. Why everything imploding today and

623
00:29:52,800 --> 00:29:56,400
Speaker 11: this happening. Also keep in mind Bank of America was

624
00:29:56,400 --> 00:29:58,440
Speaker 11: also their second biggest holding them and selling a lot

625
00:29:58,480 --> 00:30:00,840
Speaker 11: of that in the third quarter, So I do think

626
00:30:00,880 --> 00:30:02,280
Speaker 11: he's really looking at concentration.

627
00:30:03,720 --> 00:30:06,120
Speaker 3: So some reporting, I think it was in the Times

628
00:30:06,280 --> 00:30:09,479
Speaker 3: about Bill Gates and Warren Buffett relationship maybe not as

629
00:30:09,520 --> 00:30:12,200
Speaker 3: tight as before, any thoughts there.

630
00:30:12,240 --> 00:30:15,920
Speaker 11: So what has been happening is Buffett's part of the

631
00:30:15,960 --> 00:30:19,160
Speaker 11: Giving Pledge where he gives away a bunch of his

632
00:30:19,160 --> 00:30:20,720
Speaker 11: his wealth over time.

633
00:30:20,640 --> 00:30:22,760
Speaker 4: And I am not on you to spend every least dollar.

634
00:30:23,200 --> 00:30:25,840
Speaker 11: I'm not either, I don't have enough wealth to give away.

635
00:30:25,920 --> 00:30:29,320
Speaker 11: So but he was giving a lot of his money

636
00:30:29,360 --> 00:30:33,120
Speaker 11: annually to the Bill Gates Foundation. What happened, I don't

637
00:30:33,120 --> 00:30:34,440
Speaker 11: remember when it was. I think it was probably the

638
00:30:34,520 --> 00:30:38,440
Speaker 11: end of last year. He had announced that when he

639
00:30:38,480 --> 00:30:42,920
Speaker 11: passes away that his children are going to inherit the

640
00:30:42,960 --> 00:30:45,640
Speaker 11: shares in a foundation to be used for charity. I

641
00:30:46,640 --> 00:30:50,160
Speaker 11: think before that the buffet found the Gates Foundation was

642
00:30:51,240 --> 00:30:53,000
Speaker 11: I don't know if it was official, but was at

643
00:30:53,080 --> 00:30:54,840
Speaker 11: least thought was going to get some of that. I

644
00:30:54,880 --> 00:30:57,040
Speaker 11: don't know about the relationship between the two of them.

645
00:30:57,080 --> 00:31:00,880
Speaker 11: I just know that that is the case. And I

646
00:31:00,960 --> 00:31:03,440
Speaker 11: think you know he's given tens of billions to the

647
00:31:03,440 --> 00:31:04,880
Speaker 11: Gates Foundation over time.

648
00:31:04,920 --> 00:31:05,280
Speaker 7: Anyway.

649
00:31:05,640 --> 00:31:08,720
Speaker 5: What about insurance, because I always think about the insurance

650
00:31:08,720 --> 00:31:12,239
Speaker 5: companies in relation to obviously Warren Buffett. If you look

651
00:31:12,280 --> 00:31:13,560
Speaker 5: at that group though in the S and P five

652
00:31:13,640 --> 00:31:16,120
Speaker 5: hundred down about three percent today but up fifteen percent

653
00:31:16,280 --> 00:31:18,040
Speaker 5: year to date, what kind of view do we have

654
00:31:18,160 --> 00:31:20,360
Speaker 5: as far as how he viewsed that particular core of

655
00:31:20,360 --> 00:31:20,760
Speaker 5: the market.

656
00:31:20,880 --> 00:31:23,479
Speaker 11: Yeah, So insurance is kind of the engine that drives

657
00:31:23,520 --> 00:31:25,040
Speaker 11: the float for Berkshire Hathaway.

658
00:31:25,600 --> 00:31:26,600
Speaker 7: They have a.

659
00:31:26,560 --> 00:31:30,000
Speaker 11: Primary insurance business, They have a reinsurance business, and they

660
00:31:30,000 --> 00:31:34,240
Speaker 11: have the auto insurance business, which is Geico. These companies

661
00:31:34,280 --> 00:31:37,840
Speaker 11: as a whole, and Buffett obviously loves that industry. They

662
00:31:37,920 --> 00:31:40,480
Speaker 11: made a big play in flight last year, which doesn't

663
00:31:40,480 --> 00:31:41,200
Speaker 11: look seem.

664
00:31:41,040 --> 00:31:43,400
Speaker 4: Like they read it. And today hurricane hitting.

665
00:31:43,520 --> 00:31:46,240
Speaker 11: So hurricane we have a note down on Hurricane Debbie.

666
00:31:46,760 --> 00:31:49,000
Speaker 11: Not really a big deal for the insurance companies, will

667
00:31:49,040 --> 00:31:52,720
Speaker 11: be very minimal for Berkshire Hathaway, if any impact on

668
00:31:52,760 --> 00:31:56,440
Speaker 11: them as a whole. But for the group we seem

669
00:31:56,480 --> 00:31:58,920
Speaker 11: to be hitting maybe pek Arowi's maybe this year and

670
00:31:59,000 --> 00:32:02,680
Speaker 11: next year. The valuations generally peak before the roe s do,

671
00:32:02,960 --> 00:32:06,200
Speaker 11: so it seems like less rosy times ahead from a

672
00:32:06,200 --> 00:32:10,040
Speaker 11: fundamental standpoint for the insurance companies. But I'm Buffett hasn't

673
00:32:10,080 --> 00:32:13,120
Speaker 11: been hasn't changed his view on insurance at all.

674
00:32:13,400 --> 00:32:15,040
Speaker 4: All right, Matthew, thank you so much for joining us.

675
00:32:15,040 --> 00:32:18,080
Speaker 3: Matt Palizola, Senior Alice covering all the property and casualty

676
00:32:18,120 --> 00:32:21,120
Speaker 3: insures for Bloomberg Intelligence, joining us live here in a

677
00:32:21,120 --> 00:32:25,800
Speaker 3: Bloomberg Interactive Brokers Studio Warren Buffett in the Berkshire Hathaway.

678
00:32:25,840 --> 00:32:27,400
Speaker 4: Folks reporting earnings over the weekend.

679
00:32:27,440 --> 00:32:29,800
Speaker 3: Again, huge cash haul, and for those of us on

680
00:32:29,880 --> 00:32:33,520
Speaker 3: Wall Street, we're just like, how do you ever deploy that?

681
00:32:33,960 --> 00:32:35,600
Speaker 4: I don't know how you ever deploy that?

682
00:32:35,680 --> 00:32:36,000
Speaker 5: I know.

683
00:32:37,720 --> 00:32:41,640
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live

684
00:32:41,720 --> 00:32:45,200
Speaker 2: weekdays at ten am Eastern on applecard Play and Android

685
00:32:45,240 --> 00:32:48,040
Speaker 2: Auto with the Bloomberg Business Act. You can also listen

686
00:32:48,160 --> 00:32:51,240
Speaker 2: live on Amazon Alexa from our flagship New York station,

687
00:32:51,600 --> 00:32:56,160
Speaker 2: Just say Alexa Play, Bloomberg eleven thirty.

688
00:32:56,080 --> 00:32:58,320
Speaker 4: Markotsoft two point four percent, the S and P four hundred.

689
00:32:58,320 --> 00:33:00,720
Speaker 3: So a lot of folks are saying is a natural,

690
00:33:00,800 --> 00:33:03,760
Speaker 3: healthy pullback in what is otherwise a pretty solid market.

691
00:33:04,280 --> 00:33:07,440
Speaker 3: We're just the beginning of something more on the downside.

692
00:33:07,640 --> 00:33:09,480
Speaker 3: People trying to get a sense there. What's going on?

693
00:33:09,640 --> 00:33:13,200
Speaker 3: Carol Pepper, founder and CEO of Pepper International, joins us

694
00:33:13,360 --> 00:33:16,200
Speaker 3: from New York via zoom. Carol, what are you hearing

695
00:33:16,240 --> 00:33:18,760
Speaker 3: from your clients? What are you telling your clients on

696
00:33:19,000 --> 00:33:21,960
Speaker 3: a day like today, We've had a big move to markets.

697
00:33:22,760 --> 00:33:25,840
Speaker 12: Yeah, I'm telling my clients keep calm and carry on.

698
00:33:26,160 --> 00:33:29,840
Speaker 12: This is a little bit of a pullback, but not unexpected.

699
00:33:29,920 --> 00:33:34,080
Speaker 12: When Warren Buffett went and sold hath this Apple position, that.

700
00:33:34,000 --> 00:33:35,040
Speaker 13: Made people nervous.

701
00:33:35,760 --> 00:33:40,200
Speaker 12: But frankly, the fundamentals have not changed the fact that

702
00:33:40,440 --> 00:33:43,600
Speaker 12: there's a slight correction. Nothing will go up every single

703
00:33:43,680 --> 00:33:46,680
Speaker 12: day forever into infinity, and if you think that it will,

704
00:33:47,240 --> 00:33:49,400
Speaker 12: then you shouldn't be in the stock market because it

705
00:33:49,520 --> 00:33:50,400
Speaker 12: never does that.

706
00:33:50,560 --> 00:33:52,480
Speaker 13: But you have to look at long term trends.

707
00:33:52,560 --> 00:33:56,560
Speaker 12: Over time, growth stocks and particularly the Magnificent Seven.

708
00:33:56,920 --> 00:33:58,160
Speaker 13: Have done extremely well.

709
00:33:58,200 --> 00:34:01,600
Speaker 12: Should there be occasional pullback, yes, but does that mean

710
00:34:01,640 --> 00:34:02,959
Speaker 12: that we're in serious trouble.

711
00:34:03,240 --> 00:34:03,400
Speaker 6: No.

712
00:34:03,920 --> 00:34:07,080
Speaker 12: So if you hold these stocks and you're nervous right now,

713
00:34:07,200 --> 00:34:10,680
Speaker 12: this is not the time to sell. Obviously, even the

714
00:34:10,719 --> 00:34:13,799
Speaker 12: plunge from this morning has paired back its losses. Some

715
00:34:13,840 --> 00:34:15,920
Speaker 12: of this was the fact that a lot of the

716
00:34:15,920 --> 00:34:18,640
Speaker 12: traders are on vacation, so whoever is in the market

717
00:34:18,719 --> 00:34:22,279
Speaker 12: is moving things around much more than they normally would

718
00:34:22,320 --> 00:34:24,920
Speaker 12: when it would not be in the middle of August.

719
00:34:25,360 --> 00:34:27,759
Speaker 5: What are the top questions you're getting from your clients.

720
00:34:29,120 --> 00:34:32,200
Speaker 13: Well, obviously people wonder is this the beginning of the end?

721
00:34:32,600 --> 00:34:34,200
Speaker 13: Have we run as far as we should. Should we

722
00:34:34,280 --> 00:34:35,400
Speaker 13: be pulling everything back?

723
00:34:35,480 --> 00:34:37,759
Speaker 12: And again I manage money for people with over one

724
00:34:37,840 --> 00:34:41,520
Speaker 12: hundred million dollars who are who have single family offices,

725
00:34:41,960 --> 00:34:44,960
Speaker 12: and we make bets, not unlike Warren Buffett, not that

726
00:34:45,040 --> 00:34:46,720
Speaker 12: I was as good as him, but we make bets

727
00:34:46,760 --> 00:34:48,080
Speaker 12: for multiple generations.

728
00:34:48,120 --> 00:34:49,520
Speaker 13: So again, if you.

729
00:34:49,480 --> 00:34:52,040
Speaker 12: Look over the last five or ten years, how much

730
00:34:52,080 --> 00:34:55,560
Speaker 12: has growth and check in the US outperformed everybody else.

731
00:34:56,160 --> 00:34:58,880
Speaker 12: AI is the new entrant into the tech scene. It

732
00:34:58,920 --> 00:35:02,680
Speaker 12: will continue to perform. Will there be moments like now

733
00:35:02,719 --> 00:35:05,760
Speaker 12: and maybe the market enthusiasm god ahead of the reality

734
00:35:05,800 --> 00:35:08,359
Speaker 12: where the price should be. Yes, But does that mean

735
00:35:08,360 --> 00:35:09,719
Speaker 12: that it's going to plunge to zero?

736
00:35:10,120 --> 00:35:10,200
Speaker 6: No?

737
00:35:11,080 --> 00:35:12,680
Speaker 13: Are we having a dot com crash?

738
00:35:12,800 --> 00:35:12,880
Speaker 1: No?

739
00:35:13,200 --> 00:35:17,920
Speaker 12: Why because there's actual earnings underneath these stock.

740
00:35:17,680 --> 00:35:21,080
Speaker 13: Prices, whereas in the dot com day there was nothing underneath.

741
00:35:21,120 --> 00:35:21,680
Speaker 13: It was all air.

742
00:35:22,280 --> 00:35:25,920
Speaker 12: So for that reason, I tell people, yes, it looks scary, No,

743
00:35:26,040 --> 00:35:29,080
Speaker 12: don't do anything. This is a typical August doldrums, you know,

744
00:35:29,120 --> 00:35:30,960
Speaker 12: buy the news, sell the news kind.

745
00:35:30,840 --> 00:35:33,560
Speaker 13: Of market movement that we see almost every summer.

746
00:35:35,120 --> 00:35:38,200
Speaker 3: So where should people if they maybe want to look

747
00:35:38,239 --> 00:35:40,680
Speaker 3: for some values here in a market that that's pulled

748
00:35:40,719 --> 00:35:41,439
Speaker 3: back a little bit.

749
00:35:42,040 --> 00:35:44,640
Speaker 4: Where are you suggesting they go first again?

750
00:35:44,800 --> 00:35:47,680
Speaker 12: If you're underweight in tech, Depending on your own weights,

751
00:35:47,719 --> 00:35:49,680
Speaker 12: this is a great time to get into tech. If

752
00:35:49,719 --> 00:35:51,920
Speaker 12: you want to get in. Having the price draw up

753
00:35:51,920 --> 00:35:54,839
Speaker 12: five or ten percent terrific. Get in now. If you're

754
00:35:54,840 --> 00:35:58,120
Speaker 12: not in there, if you're not wanting to kind of

755
00:35:58,560 --> 00:36:00,640
Speaker 12: test or bat when things are going to move one

756
00:36:00,840 --> 00:36:02,719
Speaker 12: direction to the other, just sit in cash, let us

757
00:36:02,719 --> 00:36:05,360
Speaker 12: settle out for a couple of days, and then proceed

758
00:36:05,440 --> 00:36:08,360
Speaker 12: in an ornerly fashion as usual with your investment program.

759
00:36:08,520 --> 00:36:11,560
Speaker 12: So I'm telling people just to remain calm. I don't

760
00:36:11,600 --> 00:36:13,759
Speaker 12: think this is the beginning of the end. I don't

761
00:36:13,760 --> 00:36:16,720
Speaker 12: think Warren Buffett was doing something sinister. I do believe

762
00:36:16,800 --> 00:36:19,120
Speaker 12: him what he said. It was a tax move on

763
00:36:19,160 --> 00:36:21,320
Speaker 12: his part to sell half of his Apple position.

764
00:36:22,280 --> 00:36:25,120
Speaker 13: So you know, just calm down, everybody. It's going to

765
00:36:25,160 --> 00:36:25,680
Speaker 13: be fine.

766
00:36:26,120 --> 00:36:28,640
Speaker 5: When you have the ten year last week's sliding below

767
00:36:28,760 --> 00:36:32,000
Speaker 5: four percent for the first time since earlier this year

768
00:36:32,000 --> 00:36:35,840
Speaker 5: in February, and then you have obviously income kind of

769
00:36:35,920 --> 00:36:40,400
Speaker 5: driven type bond proxy sectors, utilities roots that were taking

770
00:36:40,400 --> 00:36:42,520
Speaker 5: in a large amount of the inflows, especially since that

771
00:36:42,600 --> 00:36:45,720
Speaker 5: CPI report on July eleventh, as well as last week

772
00:36:46,000 --> 00:36:48,960
Speaker 5: when we saw the sell off accelerate the last few days.

773
00:36:49,520 --> 00:36:53,360
Speaker 5: Are you putting money or suggesting clients put money in

774
00:36:53,400 --> 00:36:56,120
Speaker 5: those particular corners of the market that would obviously benefit

775
00:36:56,360 --> 00:36:57,120
Speaker 5: from rate cuts.

776
00:36:57,840 --> 00:36:59,759
Speaker 13: Yeah, I mean, I do think the right cuts are coming.

777
00:37:00,080 --> 00:37:01,759
Speaker 12: I hope that we will go back to having at

778
00:37:01,840 --> 00:37:04,520
Speaker 12: least two rate cuts this year, maybe September and November.

779
00:37:05,080 --> 00:37:06,240
Speaker 13: So certainly, if you're.

780
00:37:06,160 --> 00:37:09,319
Speaker 12: Underweight your fixed income and you've been just relying on

781
00:37:09,560 --> 00:37:12,319
Speaker 12: you know, good positions in your cash accounts, those rates

782
00:37:12,360 --> 00:37:14,840
Speaker 12: are going to go down, so perhaps the time to

783
00:37:14,920 --> 00:37:17,520
Speaker 12: consider getting into bonds a little bit. But again, you

784
00:37:17,560 --> 00:37:20,759
Speaker 12: can never time exactly when that's going to happen. Well,

785
00:37:20,800 --> 00:37:23,320
Speaker 12: you hit it exactly, No, who may hit it exactly?

786
00:37:23,360 --> 00:37:27,120
Speaker 12: Are the program traders not human beings. It's impossible to

787
00:37:27,160 --> 00:37:30,040
Speaker 12: outtrade this market, so you can't be that smart. But

788
00:37:30,120 --> 00:37:32,560
Speaker 12: if you've been sitting in very high cash shields and

789
00:37:32,600 --> 00:37:35,680
Speaker 12: you're worried about you know where cash shields are going

790
00:37:35,719 --> 00:37:38,080
Speaker 12: to go, which is down when they start cutting the rates.

791
00:37:38,080 --> 00:37:39,799
Speaker 12: And yes, it may not be a bad time to

792
00:37:39,920 --> 00:37:42,200
Speaker 12: put a little bit more into bonds, but timing that

793
00:37:42,320 --> 00:37:44,800
Speaker 12: date is still going to be tough about.

794
00:37:44,920 --> 00:37:46,440
Speaker 4: I don't know if you have any views on crypto,

795
00:37:46,520 --> 00:37:47,520
Speaker 4: but that's been whacked.

796
00:37:47,239 --> 00:37:49,920
Speaker 3: All over the place today, with a bitcoin off about

797
00:37:49,920 --> 00:37:50,720
Speaker 3: eight percent today.

798
00:37:51,960 --> 00:37:55,040
Speaker 12: Yeah, well again, there's fear days and there's greed days.

799
00:37:55,160 --> 00:37:58,560
Speaker 12: On fear days, everything that looks risky quote unquote goes down.

800
00:37:58,640 --> 00:38:01,880
Speaker 12: So crypto is considered a risky or a growthy asset.

801
00:38:02,360 --> 00:38:04,160
Speaker 12: So of course it's been hit. But I know a

802
00:38:04,160 --> 00:38:06,480
Speaker 12: lot of people who are buying massive amounts of crypto

803
00:38:06,600 --> 00:38:09,759
Speaker 12: right now, particularly overseas. I work with a lot of

804
00:38:09,800 --> 00:38:12,640
Speaker 12: international families, and there's a lot of reason why people

805
00:38:12,680 --> 00:38:15,799
Speaker 12: are starting to substitute crypto in some cases for their

806
00:38:15,800 --> 00:38:18,720
Speaker 12: own currency or using crypto to move money around the world.

807
00:38:18,920 --> 00:38:22,480
Speaker 12: So that's going to continue to happen. For people that

808
00:38:22,560 --> 00:38:24,560
Speaker 12: are hoarding crypto, this is a great day. They can

809
00:38:24,560 --> 00:38:26,680
Speaker 12: go out and buy some more and they all would

810
00:38:26,680 --> 00:38:29,360
Speaker 12: project within two months it'll be back up into the sixties,

811
00:38:29,680 --> 00:38:31,040
Speaker 12: maybe back to sixty five.

812
00:38:31,640 --> 00:38:33,360
Speaker 3: All right, Carol, thank you so much for joining us.

813
00:38:33,360 --> 00:38:36,279
Speaker 3: Always appreciate getting your thoughts. Kyle Pepper, founder and CEO

814
00:38:36,320 --> 00:38:37,760
Speaker 3: of Pepper intern National.

815
00:38:39,280 --> 00:38:43,200
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live

816
00:38:43,280 --> 00:38:46,800
Speaker 2: weekdays at ten am Eastern on applecar Play and Android

817
00:38:46,800 --> 00:38:49,600
Speaker 2: Auto with the Bloomberg Business app. You can also listen

818
00:38:49,719 --> 00:38:52,799
Speaker 2: live on Amazon Alexa from our flagship New York station.

819
00:38:53,160 --> 00:38:56,879
Speaker 2: Just say Alexa play Bloomberg eleven thirty.

820
00:38:57,360 --> 00:38:57,839
Speaker 6: So let's talk.

821
00:38:57,880 --> 00:38:59,239
Speaker 4: Come on these here, let's get the latest. There's a

822
00:38:59,239 --> 00:39:01,160
Speaker 4: lot going on. Miami.

823
00:39:01,239 --> 00:39:04,600
Speaker 3: Mike mcgloan, Senior Commodity strategis from Bloomberg Intelligence. Droorte Is

824
00:39:04,640 --> 00:39:09,239
Speaker 3: are on zoom from Miami, Florida. Mike, what's your commodity

825
00:39:09,280 --> 00:39:11,560
Speaker 3: call today? When everybody's probably saying what is going on

826
00:39:11,600 --> 00:39:12,880
Speaker 3: out there? In financial markets?

827
00:39:14,200 --> 00:39:17,200
Speaker 14: We're seeing sell what you gotta and not what you

828
00:39:17,360 --> 00:39:20,960
Speaker 14: wanna and that's really affecting. It's typically you've seen this

829
00:39:21,000 --> 00:39:23,560
Speaker 14: happen in the past. When beta goes down in this velocity,

830
00:39:23,560 --> 00:39:25,239
Speaker 14: you sell what you have to have. So that really

831
00:39:25,239 --> 00:39:28,759
Speaker 14: started this weekend. Bitcoin broke blows sixty thousand. How were

832
00:39:28,800 --> 00:39:30,800
Speaker 14: there on Saturday and then broke through there on Sundays?

833
00:39:30,880 --> 00:39:33,239
Speaker 14: That was your indication. We'll start with the world's most

834
00:39:33,239 --> 00:39:35,480
Speaker 14: significant leading indicator. And there's a lot of people who

835
00:39:35,560 --> 00:39:38,120
Speaker 14: speculated it. So that was like people had to sell

836
00:39:38,160 --> 00:39:39,640
Speaker 14: that because they need to raise capital.

837
00:39:39,880 --> 00:39:40,960
Speaker 6: You're seeing in gold.

838
00:39:41,000 --> 00:39:44,040
Speaker 14: That really started similar beginning of two thousand and eight

839
00:39:44,120 --> 00:39:47,680
Speaker 14: when we had the financial crisis. The significance of things

840
00:39:47,680 --> 00:39:50,920
Speaker 14: like gold and copper going down is they're perfect goddess sellers,

841
00:39:50,960 --> 00:39:53,080
Speaker 14: but the gold will probably do better. The thing is

842
00:39:53,440 --> 00:39:56,440
Speaker 14: manage money in that position. Speculators are way long gold

843
00:39:56,480 --> 00:39:58,239
Speaker 14: for a reason because it's a bull market, so they're

844
00:39:58,400 --> 00:40:00,480
Speaker 14: liquidating some of that, but I think it's more likely

845
00:40:00,480 --> 00:40:00,879
Speaker 14: to cover.

846
00:40:01,360 --> 00:40:04,400
Speaker 6: And the difference the is crude oil. Crudel's hanging in there.

847
00:40:04,440 --> 00:40:06,919
Speaker 14: It's only down one percent on a day like today,

848
00:40:06,920 --> 00:40:08,640
Speaker 14: it'd typically be down more than it has to be

849
00:40:08,640 --> 00:40:12,799
Speaker 14: five hundred. But we know there's geopolitical tensions, you know, escalating,

850
00:40:13,280 --> 00:40:16,120
Speaker 14: and a lot of the future's positions were way sold

851
00:40:16,120 --> 00:40:18,759
Speaker 14: out about a month ago, so Crudel is not way

852
00:40:18,800 --> 00:40:21,000
Speaker 14: overweight long like gold is. So that's where you've seen

853
00:40:21,080 --> 00:40:23,560
Speaker 14: some of the greater I think pressure on goal at

854
00:40:23,640 --> 00:40:25,799
Speaker 14: least for today, but in the long term as this

855
00:40:26,680 --> 00:40:29,960
Speaker 14: resolves itself, we see that if beta is clearly making

856
00:40:29,960 --> 00:40:31,759
Speaker 14: a little bit of a high, and volatil he's making

857
00:40:31,800 --> 00:40:32,680
Speaker 14: a bit of a bottom.

858
00:40:32,920 --> 00:40:35,960
Speaker 6: Gold would be one of the primary beneficiaries, and.

859
00:40:35,960 --> 00:40:39,120
Speaker 5: Looking over at the crude oil market WTI for those

860
00:40:39,239 --> 00:40:43,400
Speaker 5: US features falling to around seventy three dollars a barrel.

861
00:40:43,800 --> 00:40:46,799
Speaker 5: As far as what it could be coming ahead here

862
00:40:46,880 --> 00:40:49,840
Speaker 5: when you're talking about looking at the commodity space, what

863
00:40:49,880 --> 00:40:51,720
Speaker 5: do you think this tells us more kind of broadly

864
00:40:51,800 --> 00:40:54,560
Speaker 5: about the economy and the potential direction here for the

865
00:40:54,640 --> 00:40:55,440
Speaker 5: US stock market.

866
00:40:56,280 --> 00:40:59,439
Speaker 14: Well, it's deflationary forces. And I'm glad you went there,

867
00:41:00,160 --> 00:41:02,200
Speaker 14: because I've been writing about this for a little too long,

868
00:41:02,239 --> 00:41:05,479
Speaker 14: but particularly this year. Kimmani's basically predicted this with gold

869
00:41:05,520 --> 00:41:09,040
Speaker 14: going up and all commodities go down, going down. The

870
00:41:09,080 --> 00:41:11,439
Speaker 14: Bloomer COMMANDI INEX on a one year basis is down

871
00:41:11,480 --> 00:41:14,160
Speaker 14: six percent, and the SMB five hundred on a one

872
00:41:14,200 --> 00:41:16,080
Speaker 14: year basis is up about twenty one percent.

873
00:41:16,120 --> 00:41:18,880
Speaker 6: That's one year. That's signs of deflation forces.

874
00:41:18,880 --> 00:41:21,520
Speaker 14: And I think what's happening is those auto correlation forces

875
00:41:21,520 --> 00:41:24,080
Speaker 14: and commodities they go down because they go up, are

876
00:41:24,120 --> 00:41:27,480
Speaker 14: trickling down to other assets. So I don't see this

877
00:41:27,520 --> 00:41:29,440
Speaker 14: as something as a one off. It looks like it's

878
00:41:29,560 --> 00:41:32,000
Speaker 14: just getting started. And then you tilt over. Why, Well,

879
00:41:32,000 --> 00:41:35,120
Speaker 14: here's one good indication the ten note yield in China's

880
00:41:35,160 --> 00:41:38,440
Speaker 14: two point one five percent. That's compared to three point

881
00:41:38,440 --> 00:41:40,640
Speaker 14: seventy nine in the US. So China's heading towards a

882
00:41:40,640 --> 00:41:44,320
Speaker 14: pretty severe deflationary recession if you watch their bond yields.

883
00:41:44,640 --> 00:41:47,239
Speaker 14: And I am and I think that's what's happening, and

884
00:41:47,280 --> 00:41:50,920
Speaker 14: it's happening global leafs, so kmmandi's have basically been predicting this.

885
00:41:51,360 --> 00:41:53,200
Speaker 14: I think we're just seeing a little bit of trickle

886
00:41:53,280 --> 00:41:56,239
Speaker 14: down from the stock market that's way elevating. I'll end

887
00:41:56,239 --> 00:41:59,279
Speaker 14: with this the Bloomberg the sorry, the two hundred day

888
00:41:59,280 --> 00:42:03,400
Speaker 14: move in on WTI crew oil is about seventy eight.

889
00:42:03,200 --> 00:42:05,799
Speaker 6: Dollars a bill a barrel, and that's tilted lower.

890
00:42:05,840 --> 00:42:08,400
Speaker 14: We're right now about seventy three the two hundred day

891
00:42:08,480 --> 00:42:10,640
Speaker 14: moving average on the S and P five hundred, it's

892
00:42:10,640 --> 00:42:13,319
Speaker 14: five thousand, and the SMB five index is about five

893
00:42:13,680 --> 00:42:14,160
Speaker 14: two hundred.

894
00:42:14,200 --> 00:42:17,759
Speaker 6: We're just potentially going to revert there. And commodities were.

895
00:42:17,719 --> 00:42:19,840
Speaker 14: Kind of a good indicator for that, and bitcoin was

896
00:42:19,880 --> 00:42:22,400
Speaker 14: one of the quickest indicators I think for what's happening.

897
00:42:22,760 --> 00:42:25,719
Speaker 3: So for WTI crude oil, let's just continue there. Mike,

898
00:42:26,200 --> 00:42:28,960
Speaker 3: is it a supply issue driving this pullback here, or

899
00:42:29,000 --> 00:42:30,520
Speaker 3: demand or maybe a little bit of both.

900
00:42:30,960 --> 00:42:31,560
Speaker 6: All the above.

901
00:42:31,880 --> 00:42:33,759
Speaker 14: The first thing I have to remember is the key

902
00:42:33,760 --> 00:42:35,879
Speaker 14: force that pressured crude el since the peak in two

903
00:42:35,920 --> 00:42:38,320
Speaker 14: thousand and eight is that the excess of supplying demand

904
00:42:38,400 --> 00:42:41,280
Speaker 14: out of the US and Cana is accelerating. It's about

905
00:42:41,320 --> 00:42:43,200
Speaker 14: six million barrels a day. In two thousand and eight,

906
00:42:43,200 --> 00:42:45,279
Speaker 14: it was a deficit about ten million barrels a day.

907
00:42:45,560 --> 00:42:48,279
Speaker 14: That's about what you see from that increasing excess of

908
00:42:48,320 --> 00:42:50,959
Speaker 14: spare capacity out of Opex. So see the bad trend there,

909
00:42:51,200 --> 00:42:54,880
Speaker 14: and prices remaining high because of geopolitical tensions are keeping

910
00:42:55,080 --> 00:42:56,920
Speaker 14: that force intact.

911
00:42:56,960 --> 00:42:58,480
Speaker 6: Meaning the cost of production in.

912
00:42:58,560 --> 00:43:01,320
Speaker 14: US is around fifty five dollars a barrel and candidates

913
00:43:01,360 --> 00:43:03,520
Speaker 14: around sixty dollars of barrel, So you keep prices above

914
00:43:03,520 --> 00:43:06,320
Speaker 14: those levels, they'll just produce more and it's reducing demand.

915
00:43:06,440 --> 00:43:09,760
Speaker 14: Diesel demand in this country is in a downward recessionary trajectory,

916
00:43:09,760 --> 00:43:10,920
Speaker 14: and I hear it's the same in some of the

917
00:43:10,960 --> 00:43:13,720
Speaker 14: other countries, most notably China, are just harder to measure.

918
00:43:14,000 --> 00:43:15,080
Speaker 6: So that's the problems you.

919
00:43:15,160 --> 00:43:17,400
Speaker 14: Political tensions are keeping in elevator, and then's just going

920
00:43:17,440 --> 00:43:19,600
Speaker 14: to be pushing back towards its cost of production US

921
00:43:19,600 --> 00:43:21,760
Speaker 14: if all the rules of economics apply.

922
00:43:21,840 --> 00:43:22,960
Speaker 6: So I'll give you one example.

923
00:43:23,160 --> 00:43:26,359
Speaker 14: The number one measure of heat, electricity and fertilizing this country.

924
00:43:26,480 --> 00:43:27,719
Speaker 6: Natural gas has already done that.

925
00:43:27,880 --> 00:43:30,680
Speaker 14: It dropped to and earlier in the year the levels

926
00:43:30,719 --> 00:43:33,000
Speaker 14: that were first traded in nineteen ninety.

927
00:43:33,200 --> 00:43:34,239
Speaker 6: Corn has already done it.

928
00:43:34,280 --> 00:43:36,200
Speaker 14: Corn has dropped to a level of first traded in

929
00:43:36,239 --> 00:43:40,200
Speaker 14: two thousand and I'm sorry, nineteen seventy four, back down

930
00:43:40,239 --> 00:43:41,320
Speaker 14: to four hours of bushel.

931
00:43:41,520 --> 00:43:42,319
Speaker 6: So this is just.

932
00:43:42,400 --> 00:43:46,040
Speaker 14: Normal commodities, but it's deflationary because they went up too much.

933
00:43:46,360 --> 00:43:49,640
Speaker 14: The question is how normal is for stock market baaltile

934
00:43:49,680 --> 00:43:52,040
Speaker 14: at the bottom and stock marks go down, then that's

935
00:43:52,040 --> 00:43:54,240
Speaker 14: what really precious crude aiut when it goes. When stocks

936
00:43:54,239 --> 00:43:56,280
Speaker 14: go down like this, it'll bring down crude and copper.

937
00:43:57,239 --> 00:43:59,799
Speaker 5: Another corner that you keep a close eye on is

938
00:44:00,120 --> 00:44:02,920
Speaker 5: trollium futures. So you were talking about in a note

939
00:44:02,960 --> 00:44:05,680
Speaker 5: recently how managed money, when you're looking at the hedge

940
00:44:05,680 --> 00:44:09,120
Speaker 5: fund positions in particular, are set up for a bear market.

941
00:44:09,200 --> 00:44:11,759
Speaker 5: And then obviously, when you were pointing out to how

942
00:44:11,800 --> 00:44:15,280
Speaker 5: the stock market mean reversion might be a particular deciding factor.

943
00:44:15,680 --> 00:44:17,680
Speaker 5: What does this mean now moving forward, now that you're

944
00:44:17,680 --> 00:44:19,280
Speaker 5: seeing stocks under pressure here.

945
00:44:19,840 --> 00:44:21,600
Speaker 6: Yeah, so I think that's part of the main reason.

946
00:44:21,640 --> 00:44:25,520
Speaker 14: Despite the you know, the eminent attacks and more violence

947
00:44:25,560 --> 00:44:28,920
Speaker 14: in the Middle East, which might curtail supply, despite that

948
00:44:29,000 --> 00:44:32,520
Speaker 14: overhanging the market, Crudell's going down and despite the market

949
00:44:32,520 --> 00:44:34,680
Speaker 14: has really sold out. You mentioned from futures, it's going

950
00:44:34,719 --> 00:44:36,840
Speaker 14: down partly because beta is going down. It's the power

951
00:44:36,880 --> 00:44:38,640
Speaker 14: of beta. When the stock market goes down like this,

952
00:44:38,920 --> 00:44:41,359
Speaker 14: it's all that matters. So this is something that's really

953
00:44:41,360 --> 00:44:43,479
Speaker 14: been a great indicator this year. If you watch these

954
00:44:43,760 --> 00:44:47,399
Speaker 14: speculative speculative futures traders, when they get way too long,

955
00:44:47,520 --> 00:44:49,360
Speaker 14: usually it's when the market peaks, and that's what happened

956
00:44:49,360 --> 00:44:49,719
Speaker 14: this year.

957
00:44:49,880 --> 00:44:50,960
Speaker 6: And when they sell out.

958
00:44:51,120 --> 00:44:54,319
Speaker 14: They typically don't get short petroleum futures, but when they

959
00:44:54,360 --> 00:44:56,600
Speaker 14: sell out the levels that are basically flat, it typically

960
00:44:56,680 --> 00:44:59,160
Speaker 14: marks the bottom. That's what happened this year, and now

961
00:44:59,200 --> 00:45:00,759
Speaker 14: we're kind of in that range. Just watch the next

962
00:45:00,800 --> 00:45:03,360
Speaker 14: key level. So in our next key step to and

963
00:45:03,520 --> 00:45:06,640
Speaker 14: WGI crewdel there's like a line of sand support around

964
00:45:06,680 --> 00:45:09,080
Speaker 14: seventy thousand. I think it's a matter of time. It

965
00:45:09,120 --> 00:45:12,280
Speaker 14: follows that it goes below that level. A natural gas

966
00:45:12,280 --> 00:45:15,400
Speaker 14: has done it, Corn has done it, but right now

967
00:45:15,520 --> 00:45:18,439
Speaker 14: it's keeping it elevated. His futures are basically sold out.

968
00:45:18,480 --> 00:45:20,839
Speaker 14: We kind of have to reset those positions, and those

969
00:45:20,840 --> 00:45:23,680
Speaker 14: geopolitical tensions are keeping things somewhat elevated.

970
00:45:23,960 --> 00:45:26,440
Speaker 4: All right, Mike, Great Twitter force, Really appreciate it.

971
00:45:26,480 --> 00:45:31,680
Speaker 3: Mike mcglow, Senior commodity strategist, Bloomberg Intelligence, zooming in from

972
00:45:31,719 --> 00:45:33,840
Speaker 3: somehow he scammed this Miami, Florida.

973
00:45:33,960 --> 00:45:35,560
Speaker 4: I don't get it. But he is a winner.

974
00:45:35,560 --> 00:45:37,759
Speaker 3: He is a net winner during this whole global relocation,

975
00:45:38,520 --> 00:45:39,840
Speaker 3: that is for sure.

976
00:45:40,200 --> 00:45:44,719
Speaker 2: This is the Bloomberg Intelligence Podcast, available on Apples, Spotify,

977
00:45:44,920 --> 00:45:47,840
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978
00:45:47,920 --> 00:45:51,520
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979
00:45:51,640 --> 00:45:55,000
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980
00:45:55,160 --> 00:45:58,319
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981
00:45:58,400 --> 00:46:01,839
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