Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
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Speaker 3: Let's check in on what we're doing with this market.
Speaker 3: I'm bringing in Geena Martin Adams. I'm just going to
Speaker 3: radio by right, the age for Bloomberg Intelligence.
Speaker 4: Gina. I left Thursday. I don't work Fridays in the summer,
Speaker 4: as you well know. I come back in the world.
Speaker 4: What happened?
Speaker 3: We left Thursday with a nice soft landing discussion, right,
Speaker 3: you know, the markets, Maybe we'll get a little friendly pullback.
Speaker 4: We come in today and you.
Speaker 3: Know I've got I had the nastak off more than
Speaker 3: a thousand points earlier this morning.
Speaker 5: Also the last three trading days, the NASA slaw seven percent.
Speaker 5: So this will stretch since June of twenty twenty two.
Speaker 1: Well, I think one big thing happened, and that was
Speaker 1: tech disappointed forecasts. I think that this has been actually
Speaker 1: underway for more than just Friday. Friday was an exacerbation
Speaker 1: of trends that really started a couple of weeks ago.
Speaker 1: We wrote a note early last week and we called
Speaker 1: it four than three hundred and forty four reasons text
Speaker 1: stocks may struggle with high expectations because tech stock valuations
Speaker 1: are three hundred and forty four basis points above recent
Speaker 1: five year average. It just got to the point where
Speaker 1: valuations were so extreme in an environment where tech stacks
Speaker 1: were nearly faced with impossible expectations. Now, what's interesting about
Speaker 1: the earning season is all the tech stacks beat. They
Speaker 1: beat forecasts for second quarter earnings, but they were unable
Speaker 1: to sustain forecasts for going forward margin growth. And they
Speaker 1: started to talk about how much they're going to have
Speaker 1: to spend going forward, and well, they need to cut
Speaker 1: cap X and they're going to write size AI expectations.
Speaker 1: And that created a tremendous amount of uncertainty that was
Speaker 1: then exacerbated by two big macro indicators last week which
Speaker 1: fell back to twenty twenty three low levels, which unfortunately
Speaker 1: would suggest the manufacturing sectors sort of niscent tiny recovery
Speaker 1: that kind of sort of emerged by March is now
Speaker 1: could put and we're back to twenty twenty three, which
Speaker 1: was clearly a recession in the manufacturing sector. And then
Speaker 1: also the employment report, which you know, honestly, I'm kind
Speaker 1: of shocked by the degree of extreme, exaggerated move that
Speaker 1: we've had to the employment report, because all we're seeing
Speaker 1: is slowing job growth so far and still extreme entry
Speaker 1: into the labor force, which as a resulting in modest
Speaker 1: uptick in the unemployment rate. But we are seeing a
Speaker 1: slow on an average hourly earnings growth, which may cause
Speaker 1: questions about the consumer. The other note that we wrote
Speaker 1: last week is Amazon is entirely holding up the house
Speaker 1: of cards of consumer discretionary. So I think that also
Speaker 1: played out last week is when all your hopes and
Speaker 1: dreams are on one stock and that stock cannot sustain
Speaker 1: expectations and then the consumer outlook starts to deteriorate somewhat,
Speaker 1: you see some real weaknesses emerge there.
Speaker 4: And I'm glad you brought.
Speaker 5: Up because overall, if you look at the S and P.
Speaker 5: Five hundred, as you know, twelve percent earning growth year
Speaker 5: over year here. But you've talked so much also about
Speaker 5: when people want to argue about the broadening out, but
Speaker 5: then when you're looking on the fundamental side, what you're
Speaker 5: seeing beyond Tech, as you're seeing kind of that growth
Speaker 5: as opposed to narrow between Tech and the rest of
Speaker 5: the index. So what improvements are we seeing in other components.
Speaker 1: It's actually really fascinating, and I think that this is
Speaker 1: part of the reason, as much as it feels so painful,
Speaker 1: this market meltdown has looked very different than the meltdown
Speaker 1: of last fall. Remember we corrected ten percent in the
Speaker 1: third quarter of last year as well. It seems like
Speaker 1: a distant memory because we've had such a great pair
Speaker 1: in stock so far, but we did have a ten
Speaker 1: percent meltdown led by Tech, but the market's decline was
Speaker 1: one for one with Tech. This time, Tech has doubled
Speaker 1: the decline of the market, and so there is some
Speaker 1: internal rotation that's quite different characterizing the twenty twenty four
Speaker 1: tech meltdown and the overall market impact relative to twenty
Speaker 1: twenty three. And I do think that that's because of
Speaker 1: the cyclical the cyclicality of earnings, whereas in twenty two
Speaker 1: twenty three when tech melted down, there was nothing to
Speaker 1: kind of hang your hat on because the rest of
Speaker 1: the sectors we're producing accelerating downside on earnings today that's
Speaker 1: very different. We're actually seeing earnings growth improve so x
Speaker 1: mag seven the four to ninety three are posting seven
Speaker 1: percent earnings growth. It's the first positive quarter that we've
Speaker 1: seen in more than four so starting to see some earnings.
Speaker 1: The most fascinating part about this earning season also is guidance.
Speaker 1: As much as I think the market narrative has been
Speaker 1: all the companies are guiding terribly, now the reality is
Speaker 1: that tech companies have been guiding us to expect less,
Speaker 1: but the rest of guidance is actually net positive. We're
Speaker 1: actually seeing positive guidance momentum emerge in the rest of
Speaker 1: the groups. There's going to be so much confusion as
Speaker 1: to how this plays out. If we do indeed move
Speaker 1: into a state where we're seeing accelerated layoffs, we're seeing
Speaker 1: much greater jobless claims emerge, and that's going to imply
Speaker 1: that maybe we have some actual employment losses around the corner.
Speaker 1: That's going to create a lot of confusion in this
Speaker 1: market if we get there. But that's not where we
Speaker 1: are right now. Where we are is actually companies outside
Speaker 1: of tech are showing still improvement in their outlook.
Speaker 3: We had a guest on earlier this morning that a
Speaker 3: fund manager just flat out says his note to the
Speaker 3: clients is by the dip.
Speaker 4: Yeah.
Speaker 1: Wow, listen, when you get to a VIX that's the
Speaker 1: highest level since COVID. It's very clear that there is
Speaker 1: panic right now in the equity market, and panic usually
Speaker 1: results in major buying opportunities. So I completely understand that
Speaker 1: we haven't even seen absolute nonfarm job losses yet, and
Speaker 1: the market is already completely and totally panicked. And this
Speaker 1: is really because tech really drove a lot of our optimism.
Speaker 1: It was the only source of optimism. Now we're starting
Speaker 1: to see those tech stocks melt down, and the manict
Speaker 1: the market is completely panicked.
Speaker 3: Although you could have bought Nvidia at the open today
Speaker 3: at ninety two, which training at ninety eight.
Speaker 5: Yeah, Andrew Tyler over a GP Mortgan's treat so he
Speaker 5: made that tactical call this morning about buying the dip.
Speaker 4: Yeah. Interesting.
Speaker 5: Yeah, so we'll keep an eye on.
Speaker 3: I remember being on a desk in nineteen eighty seven. Uh,
Speaker 3: don't out pick up the phone.
Speaker 5: Did we start right before the eighty seven crash?
Speaker 6: Yes?
Speaker 7: I did.
Speaker 3: I was on the floor at eighty seven October nineteenth
Speaker 3: so anyway, Gina, thank you so much for joinings. Really
Speaker 3: really appreciate it. Gina Martin Adams. She is our equity
Speaker 3: strategist for Bloomberg Intelligence. We really appreciate gatting few minus
Speaker 3: or a times. Michael McKee joins is here and he
Speaker 3: does all the economy stuff for Bloomberg Television.
Speaker 5: Mike.
Speaker 4: I left the studio Thursday.
Speaker 3: All my discussions were soft landing, some variation of soft landing.
Speaker 4: And then today people are talking about a recession.
Speaker 7: Well it's only genus people.
Speaker 8: Yeah, exactly, it's only the equity market you were talking
Speaker 8: about nineteen eighty seven. I made a reference this morning
Speaker 8: when I was on with to people opening the windows
Speaker 8: down on Wall Street, and I got a note from
Speaker 8: a trader who's been around for a while who said,
Speaker 8: the twenty two year old sitting next to me had
Speaker 8: no idea.
Speaker 7: What you were talking about.
Speaker 8: So maybe we come up with a different analogy. I said,
Speaker 8: just a minute ago, it's it's an Emily Lettella moment
Speaker 8: now because we got the ism services index, and now
Speaker 8: there's another reference. Nobody she was a comedian, saiday live
Speaker 8: who would come on and say never mind? Right, and
Speaker 8: the services ism comes in and everything is higher, including employment,
Speaker 8: and that was the thing that everybody worried about on Friday.
Speaker 8: And with the ism factory orders on factory index on
Speaker 8: Wednesday Thursday, and you know, production's up, everything is up
Speaker 8: in that number comes in better than expected, and that's
Speaker 8: two thirds of the economy. So soft landing might still
Speaker 8: be in the cards. I think probably what you're seeing,
Speaker 8: and I'm going way beyond my level of expertise, is
Speaker 8: that Gina Martin Adams is right and that the equity
Speaker 8: markets were overly dependent on a few stocks that then
Speaker 8: didn't have great numbers, and you put the data on
Speaker 8: Friday behind them, and everybody panicked, And now maybe they
Speaker 8: don't need to.
Speaker 5: Also this morning, when we're looking at the yield curve,
Speaker 5: as I'm sure you saw as well, Mike, it's turning
Speaker 5: positive for the first time since July twenty twenty two.
Speaker 5: If you're looking at the twos tens part of that.
Speaker 5: So isn't that something also that you would potentially want
Speaker 5: to see as far as what that means for the
Speaker 5: direction of the economy after it was inverted for so long.
Speaker 8: Well, yes, and no. People don't realize is that the
Speaker 8: yield curve disinverts right before recessions because people are anticipating
Speaker 8: FED action, and I think that's one of the reasons
Speaker 8: we saw a big move. It's been slowly flattening, but
Speaker 8: I think today it was basically the two year went
Speaker 8: way down, the two year yield went way down, people
Speaker 8: anticipating the FED would be cutting rates and maybe an
Speaker 8: emergency rate cut and things like that. And right after
Speaker 8: this ISM number came out, it went back to where
Speaker 8: it was yesterday. So we're either slightly positive or back
Speaker 8: to slightly disinverted. So I'm not sure that's a signal,
Speaker 8: but there are a lot of different signals you can
Speaker 8: point to these days one way or the other. And
Speaker 8: I had an argument with another strategist this morning over
Speaker 8: the Bloomberg suggesting who was suggesting the FED needs to
Speaker 8: act now, and I thought, don't you think it probably
Speaker 8: be good for them to wait a few days and
Speaker 8: get a little more data and see if this is
Speaker 8: just a panic or a real collapse. And I think
Speaker 8: the waiting part is what the FED is going to endorse.
Speaker 3: It just remind us how rare is it for the
Speaker 3: FED to do an emergency like intrameding kind of rate cut.
Speaker 8: Very rare, and they only do it when the market
Speaker 8: stops functioning. And that's what we saw during the pandemic
Speaker 8: in March of twenty twenty. That's what we saw in
Speaker 8: the fall of two thousand and eight when Lehman Brothers
Speaker 8: went out of business and we saw the market seize
Speaker 8: up there. But there doesn't seem to be any indication
Speaker 8: that you can't trade today. So as long as you
Speaker 8: can trade, that's what the FED is concerned about. If
Speaker 8: you lose money, that's your problem exactly, not theirs.
Speaker 5: Well, you also spoke to Austin Golesby on Friday. He
Speaker 5: spoke again this morning, but kind of unpacked for us
Speaker 5: what he in his reaction to the jobs report, because
Speaker 5: it seems like again they followed trends and that was
Speaker 5: just one report.
Speaker 8: Well, it was interesting because Goolesby has been one of
Speaker 8: the more dubbish members of the FED, suggesting that they
Speaker 8: needed to start the process of normalizing rates, and yet
Speaker 8: he wouldn't really go there on Friday. He didn't want
Speaker 8: to front run what they might do. He said, you know,
Speaker 8: we're okay with where we are. Let's see what happens
Speaker 8: in the rest of the data. And he had a
Speaker 8: vote this time filling in for the vacant Cleveland seat,
Speaker 8: and he did not dissent. He voted for the Fed
Speaker 8: to hold rates where they were. So if one of
Speaker 8: the biggest doves was okay with it, then probably the
Speaker 8: rest of the Fed is going to be feeling okay
Speaker 8: with it for the moment.
Speaker 3: Right, all right, very good, Michael McKee, Thank you so
Speaker 3: much for joining us. Michael McKee covers all the economics
Speaker 3: for Bloomberg, and we appreciate getting some of his thoughts here.
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Speaker 3: So just went and sitting in for Alex Steel here
Speaker 3: for the next couple hours. Again, John was just reporting
Speaker 3: this ism data came in better than expected. Let's go
Speaker 3: right to that because we could use some good news here.
Speaker 3: Steve Miller, Chair of im Services PMI, it seems Steve
Speaker 3: some pretty solid results. What do you take away from
Speaker 3: some of this ism data.
Speaker 9: Yeah, we were certainly happy to see it return to
Speaker 9: expansion territory. You know, it seems like things are moderating
Speaker 9: in terms of terms of feedback that we're getting through
Speaker 9: the survey. We saw from a GDP standpoint, kind of
Speaker 9: almost dead even those that were in expansion versus those
Speaker 9: that were in contraction, with just a slight percent but
Speaker 9: three percent higher on the expansion side. As you see
Speaker 9: in the number, it's just just slightly above in the
Speaker 9: expansion range. So happy to see it's less volatile than
Speaker 9: we've seen in the past. With last month it was
Speaker 9: about ten percent higher a GDP represented in the contraction
Speaker 9: territory versus expansion.
Speaker 5: And when you're looking at the Atlanta Feds GDP now model,
Speaker 5: obviously we know that's volatile, but still the next update
Speaker 5: is going to come later this week, but it's around
Speaker 5: two and a half percent for the third quarter, so
Speaker 5: I know there's a lot of concern when we had
Speaker 5: some of the manufacturing data lasts Thursday. Obviously the jobs
Speaker 5: are port on Friday, but when you still have economic
Speaker 5: growth forecasted to be pretty solid here, how do you
Speaker 5: sort of unpack some of the latest wave of data
Speaker 5: here and how this latest when you're looking at ISM
Speaker 5: sort of fits into this.
Speaker 9: Yeah, so on average for twenty twenty four, what we're
Speaker 9: seeing is gradual expansion. The latest reading is about I
Speaker 9: believe it's point eight percent represents about a point eight
Speaker 9: percent increase in GDP growth. So I wouldn't be surprised
Speaker 9: to see that kind of a growth a growth number,
Speaker 9: but certainly what we see in our survey data on
Speaker 9: average is continued growth in GDP.
Speaker 3: All right, Steve, thank you so much for joining us.
Speaker 3: Really appreciate you coming on and breaking down some of
Speaker 3: these numbers. For Steve Miller, Chair of the ISM Services PMI,
Speaker 3: again some better than expected services PMI fifty one point
Speaker 3: four was the actual reading consensus was fifty one. Last
Speaker 3: period is forty eight point eight, so a nice improvement there.
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
Speaker 2: weekdays at ten am Eastern on Apple card Playing and
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Speaker 2: you get your podcast, or watch us live on YouTube.
Speaker 3: Jess Meant and sitting in for Alextel on Paul Sweeney
Speaker 3: here on Bloomberg Intelligence Program. We're live on a Bloomberg
Speaker 3: Interactive Brokers studio streaming live on YouTube as well here,
Speaker 3: and John's just talking about the ten year treasury three
Speaker 3: point seventy five percent. We were low with three point
Speaker 3: sixty six percent, so it's moving all around.
Speaker 4: That's right there. Today we missed that five percent mark. Paul, Yes, exactly,
Speaker 4: so bad, exactly all right.
Speaker 3: Next guest Joints is here in studio making a big
Speaker 3: trip over the pond, Chris Watling, CEO and chief market
Speaker 3: strategist for Longview Economics based out of London. We got
Speaker 3: him here in the big town. Chris, thanks for coming
Speaker 3: into our studio here.
Speaker 4: What do you make of the last several days here?
Speaker 3: It's just been a real readjustment for the market in
Speaker 3: terms of its outlook.
Speaker 7: Yeah, I think it's fascinating.
Speaker 10: I mean it seems to me we've evolved from sectu otation,
Speaker 10: which was kind of a mid July theme, to really
Speaker 10: we're oute to a liquidation event. And as as we
Speaker 10: were saying just off air, it's really all about the
Speaker 10: Bank of Japan's governor Yoida, who came out they surprised
Speaker 10: markets with a fifteen bit hike. But then of course,
Speaker 10: on top of that he talked about the idea that
Speaker 10: neutral rates are a long way away, so in other words,
Speaker 10: as a weight hiking cycle, and he's done that into
Speaker 10: you know, we've done it's very interesting. So the Fed's
Speaker 10: talked about cutting and we've got a bit of that
Speaker 10: from Power last week, a bit firmer and the boj
Speaker 10: is raising, and they've done that into two extreme positionings
Speaker 10: in markets. Everyone was short the end and everyone was
Speaker 10: max along the MAG seven and those both those rate cutting,
Speaker 10: those rate cycles changing influenced that position. So it's like
Speaker 10: we're in a giant repositioning in global markets and.
Speaker 7: A giant liquidity event on the back of it.
Speaker 10: So it's a lot going on. It's pretty interesting, not
Speaker 10: to mention the macro data, which we haven't got to.
Speaker 5: Right well, looking at the MAG seven index here in
Speaker 5: the terminal down almost five percent a days on peace
Speaker 5: for its worst day actually since July twenty fourth here,
Speaker 5: so keeping close eye on that. But also you neutral
Speaker 5: to US equities in late July, actually it was ahead
Speaker 5: of the Federal reserves decision last Wednesday. Kind of unpack
Speaker 5: us how you're advising clients to position, where are you
Speaker 5: telling them to put their money and like, what would
Speaker 5: you want to buy what would you want to sell
Speaker 5: at this point?
Speaker 10: Well, I think it depends on obviously your time frame.
Speaker 10: So if you're sort of, you know, the next couple
Speaker 10: of months, I'd just be cautious. I think markets haven't
Speaker 10: finished their sell off today, where you know, we're in
Speaker 10: the midst of it and there's more to come. And
Speaker 10: generally when markets sell off this sharply, the price section
Speaker 10: dictates you get a we test unless we get something
Speaker 10: dramatic out of the FED in terms of you know,
Speaker 10: inter meeting cut or very dramatic strong signaling. So so
Speaker 10: short term I do that. In the medium term, I
Speaker 10: think one wants to see this as an opportunity to
Speaker 10: start moving portfolios around in terms of that global sector rotation,
Speaker 10: So our viue is that markets have fashions. Every six
Speaker 10: or seven years, the global sector leaderships change, and you know,
Speaker 10: it's been tech, it's been strong, and we think it's
Speaker 10: now starting to change.
Speaker 7: We're coming into a rate cutting cycle.
Speaker 10: I think we can get cyclical week acceleration in the West,
Speaker 10: and you know, we think people should stop positioning for that.
Speaker 10: That's smaller midcaps in the US, that's overseas equities non
Speaker 10: US equities. So I think, I think, you know, the
Speaker 10: headline is we're going back to the noughties in terms
Speaker 10: of what does well, you know, I mean, it's like
Speaker 10: back to the future all over again.
Speaker 7: But what goes around comes around.
Speaker 10: And I think we're going to get a consumer and
Speaker 10: housing boom over the next one to four years across
Speaker 10: the Western world, and that's going to change the equity
Speaker 10: sector leadership in the global stock market.
Speaker 3: Look at that de Vic's here, it's up about nineteen
Speaker 3: points to just north of forty two. It was up
Speaker 3: to a level of sixty five earlier this morning, just
Speaker 3: blowing out like crazy.
Speaker 4: Does that tell you that panic is out there earlier today?
Speaker 10: Well, it's definitely panic, isn't there. I mean, sixty is
Speaker 10: a big I mean I remember when I started in
Speaker 10: this business, if it went over twenty, you thought it
Speaker 10: was a big number, and then of course that's all changed.
Speaker 10: But sixty is undoubtedly a big number, very very rarely
Speaker 10: to get above that. So I think very short term
Speaker 10: what people want to watch is do you get a
Speaker 10: bullish keydo reversal in markets today? You know, obviously the
Speaker 10: voting below the lows to their close above levels that
Speaker 10: they saw on Friday. I mean, it seems a long
Speaker 10: stretch from here, but still a few more hours of trading.
Speaker 10: This market is very volatile. It can move along very quickly.
Speaker 10: But look, most sell offs happen in three or five waves.
Speaker 10: So we've had wave one. We're going to get a
Speaker 10: Willie Fraley. If you're a trader at some stage over
Speaker 10: the course of this week, you want to get involved
Speaker 10: in that. On alongside, when you're.
Speaker 5: Talking to your clients, what are some of their top
Speaker 5: questions right now?
Speaker 10: Well, I mean I haven't talked to many today because
Speaker 10: I think the questions might have changed over the last
Speaker 10: twelve eighteen hours.
Speaker 7: But no, I mean we've been, we've been.
Speaker 10: You know, the big question has really been when you
Speaker 10: get out of the MAC seven, and I think that's
Speaker 10: becoming increasingly obvious. And of course I think the really
Speaker 10: big question will be, now, has the psychology really broken
Speaker 10: in that sector? Is this genuinely the top on a
Speaker 10: relative basis for the MAG seven? I would definitely argue
Speaker 10: it is because it happened on July the eleventh, on
Speaker 10: that CPI day when we changed better inflation and so on,
Speaker 10: and better therefore interest rate outlook for the FED. But look,
Speaker 10: I mean, there are you know, there are tons of questions.
Speaker 10: People are going to be asking about this liquidity out
Speaker 10: of Japan. They're going to be asking about neutral weights
Speaker 10: in Japan, what is your aid to mean? And we're
Speaker 10: going to be looking for FED, FED and other central
Speaker 10: bankers to accelerate their weight cutting torque.
Speaker 7: I think I'm glad.
Speaker 5: You brought up July eleventh, the CPI day when we
Speaker 5: got that last report for the month of June, because
Speaker 5: if you look at the flows data, a lot of
Speaker 5: that rotation. Of course, people were talking so much about
Speaker 5: small caps last month, but now they're coming under pressure.
Speaker 5: But those kind of income driven type proxy bond like sectors.
Speaker 5: If you're thinking about utilities, real estate, a lot of
Speaker 5: flows going into that. Even last week, if you counted
Speaker 5: both of those sectors with Bloomberg Intelligence data, it was
Speaker 5: close to about a billion dollars going into those two sectors.
Speaker 5: And then if you looked at technology, there was a
Speaker 5: little bit of a bid for the buy that did
Speaker 5: there's around three hundred million that wouldn't that sector. But
Speaker 5: when you're thinking about the bond proxy type corners of
Speaker 5: the market, I mean, are we still clearly seeing rotation.
Speaker 5: It's just rotations now continuing to move. If you're pulling
Speaker 5: up at those expectations for when rate cuts could potentially have.
Speaker 10: Yeah, I mean, you know, markets set off, you go defensive,
Speaker 10: you go bomb boxes.
Speaker 7: That's that's what you do, that's where you go and hide.
Speaker 10: So you know, generally, I think I always think of
Speaker 10: the market as cyclicals, defensives, and long duration growth. And
Speaker 10: you know, there's an argument you go defensive before you
Speaker 10: go into the cyclicals. But yeah, it's no wonder we're
Speaker 10: seeing that. And I think that three hundred million into
Speaker 10: tech is probably they're probably regrading every penny of.
Speaker 4: That right now.
Speaker 10: But yeah, look, I mean I travel around the world
Speaker 10: talking to investors. Over the last six months, every single
Speaker 10: man and his dog has owned in video and now
Speaker 10: every single man and his dog is probably selling it
Speaker 10: if they haven't already.
Speaker 5: So so is the buying opportunity then well, there is
Speaker 5: stuck like that.
Speaker 10: I mean, if you if you look at tech in
Speaker 10: two thousand when it had its major T and T peak,
Speaker 10: the sector de weighted relative to the market until twenty fourteen,
Speaker 10: which didn't mean you didn't not buy it for fourteen years,
Speaker 10: but it just means don't be too quick so outside
Speaker 10: Sorry sorry, I was going to say that is the
Speaker 10: absolute key question here for an equent investor.
Speaker 7: Has the psychology in the MAKES seven change?
Speaker 10: Is global equity sect sector leadership changing at this moment?
Speaker 7: That is the crux.
Speaker 3: Well, there's argued in me that if tech doesn't lead
Speaker 3: this market, this market doesn't go anywhere that tech is
Speaker 3: by definition market cap wise, has to be a leader.
Speaker 10: Well that's absolutely right in the US, but outside the
Speaker 10: US not so Globally the market can be led by
Speaker 10: other stuff.
Speaker 7: But you're right, the US will really really struggle with that.
Speaker 3: At the European I'm just looking at the European markets,
Speaker 3: you know, selling off today as well here.
Speaker 10: Of course, But interestingly, in the first two weeks of
Speaker 10: the tech sell off you're held up really nicely. So
Speaker 10: you know, these things have phases. We're now into the
Speaker 10: liquidation phase, so you've got to sell everything. Gold's selling off.
Speaker 4: Yeah, and you don't have an in the European markets.
Speaker 4: The the tech exposure that they have in US mark
Speaker 4: not where it changes the treating dynamics, the evaluation exactly.
Speaker 7: The sectors are very different. We have ASML. But that's
Speaker 7: about it really. I like SAP too. I like SAP.
Speaker 10: Yes we are a couple, but it's pretty thin exactly
Speaker 10: that you have the I mean the European companies to
Speaker 10: have that exposure to China to a greater ease.
Speaker 7: They do, yeah, they do.
Speaker 10: We love Spanish mid caps just to go really Spanish. Okay,
Speaker 10: no one's talked about Spain for fifteen years. But the
Speaker 10: pigs are coming back. Okay, pigs about you remember the
Speaker 10: pigs in the noughties. Yeah, they're coming back. It goes around,
Speaker 10: comes around.
Speaker 4: Very good, Chris Wilding. Actually we're going to keep you
Speaker 4: for a little bit.
Speaker 3: So all right, so as you travel around here, are
Speaker 3: you talking about European equities more than US equities?
Speaker 7: The folks this year we've started talking about European equities
Speaker 7: and UK as well. UK. I mean, I don't know.
Speaker 10: How much you've seen of our riots over the weekend,
Speaker 10: so maybe people are a little off the UK at
Speaker 10: the moment. But actually that you know, the UK is
Speaker 10: a very interesting opportunity because we're going to get it.
Speaker 10: We're going to get a consumer and housing boom. There's
Speaker 10: going to be great earnings growth it's a cheap market.
Speaker 10: I would argue we have political stability. It doesn't quite
Speaker 10: feel like that in the last few days. Maybe maybe
Speaker 10: our riots haven't hit your news wise, I don't know,
Speaker 10: but it's been pretty brutal in the UK over the weekend.
Speaker 10: But yeah, we're talking a lot about European UK, even
Speaker 10: some of the emerging markets, but not in this liquidation event.
Speaker 10: This is when you pick them up on weekdays. In
Speaker 10: this liquidation event, if you're you know, one, two, three,
Speaker 10: four year investor, it's going to be a really interesting
Speaker 10: four year.
Speaker 7: It's been very different from the last five to fifteen.
Speaker 3: Really, So what do you tell people that walk up
Speaker 3: to this market and see this kind of volatility here?
Speaker 3: What do you telling those folks that this is maybe
Speaker 3: perhaps of a part of a reasonable correction, or.
Speaker 4: Is just something else gone on?
Speaker 10: Well, I think I mean to be honest, it depends
Speaker 10: on their timeframe and whether a trade or an investor.
Speaker 10: But what I think the really important thing here is this,
Speaker 10: you know, just look at the end. The end tells
Speaker 10: you everything. The short positioning, it's the carry trade currency.
Speaker 10: Everyone's been the short end long Brazilian or Mexican currencies
Speaker 10: on long that mag seven or whatever it is, you
Speaker 10: fund out at the end, so you're getting killed at
Speaker 10: the moment.
Speaker 7: So this is very much a liquidity event.
Speaker 10: Short term, it'll burn through, hopefully the central banks will
Speaker 10: turn up, and then you start picking out what you
Speaker 10: want for the next twelve eighteen months. And that is
Speaker 10: when we think about this movingto cyclicals and move overseas
Speaker 10: or into mid and small caps.
Speaker 5: So what's the next big sort of event that you're
Speaker 5: keeping your eyes on? Because obviously we have Jackson Holtz
Speaker 5: until later this month, but we'll have a ton of
Speaker 5: different FED speakers coming out, and then still a lot
Speaker 5: of consumer related earnings in the US this week.
Speaker 10: There's a ton of stuff going on, isn't it. Even
Speaker 10: though it's August, there's no going on holiday. Luckily I've
Speaker 10: been so I don't have to worry about it. But yeah,
Speaker 10: I mean I think are we going to get an
Speaker 10: into meeting cut? I think that really depends on how
Speaker 10: much financial conditions titan and the price action in markets.
Speaker 10: What is the market pricing in Are we going to
Speaker 10: potentially get fifty as the market probably priced in fifty
Speaker 10: for the next meeting already. I don't know I'm out
Speaker 10: of date to mows but but yeah, I mean, I
Speaker 10: think all of that is critical. The data is critical.
Speaker 10: Ism services Today was very interesting for the soft landing.
Speaker 3: On Kim yep kim in better than expected. Hey, Chris,
Speaker 3: thanks for joining us here. Chris Watling, he's the CEO,
Speaker 3: chief market strategist for Longview Economics based in London, but
Speaker 3: he's doing his US tour here because we worked during
Speaker 3: the month of August unlikes.
Speaker 4: I'm just laid it out Friday.
Speaker 6: So appreciate it.
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 2: live on Amazon Alexa from our flagship New York station
Speaker 2: Just Say Alexa playing Bloomberg eleven thirty.
Speaker 3: Jess Meant sitting in for Alex Deel on Paul Sweeney.
Speaker 3: We're live here in our Bloomberg Interactive Brooker's Studio, or
Speaker 3: streaming live on YouTube as well as you can hit
Speaker 3: over to YouTube dot com search Bloomberg pot. I mean,
Speaker 3: who reports earnings on a Saturday. Only Warren Buffey could
Speaker 3: do that at Berkshire Hathaway. I was not paying attention
Speaker 3: whatsoever on the Jersey shore, but somebody who was paying
Speaker 3: attention to Matt Palozoli. He's the senior analyst covers all
Speaker 3: the insurance geeks for Bloomberg Intelligence. He joins us here
Speaker 3: in our Bloomberg Interactive Broker Studio. So what'd you learn
Speaker 3: from Berkshire. I'm guessing more cash and even more cash, more.
Speaker 7: Cash and even more cash.
Speaker 11: So the big story was really them selling half of
Speaker 11: their Apple shares. We had mentioned in our earnings preview
Speaker 11: note that we thought they might lighten the stake a
Speaker 11: little bit more. I didn't expect them to be this much,
Speaker 11: but that was the big story coming out of it.
Speaker 5: And why was this like what ended up being the
Speaker 5: kind of cause for them to want to pull back
Speaker 5: in Triumpid's tag.
Speaker 11: Sure, just so we had mentioned also they kind of
Speaker 11: telegraphed a little bit that they were probably going to
Speaker 11: sell more at their annual meeting in May. Buffett had
Speaker 11: warned about tax rates going up potentially in the future
Speaker 11: and maybe taking some gains off the table. Tim Cook
Speaker 11: was actually sitting there and the audience was kind of funny,
Speaker 11: and that they had sold I think it was like
Speaker 11: ten to thirteen percent of their holdings at that time,
Speaker 11: and they got questions on it, and it just seemed
Speaker 11: body language wise that they would be selling a little more.
Speaker 11: So I think tax rates, he if it's been a
Speaker 11: little weary on exposure to China for some company. So
Speaker 11: I think those two played a big role.
Speaker 5: And actually had mentioned to you before when we're off air,
Speaker 5: kind of trying to pick your brain because Apple if
Speaker 5: just for people to remind them it was underperformed the
Speaker 5: S and P five hundred tremendously in the first quarter.
Speaker 5: It was one of its worst quarters relative to the index,
Speaker 5: probably like the fourth or fifth worse since the dot
Speaker 5: com bubble burst. But then it bottomed in April and
Speaker 5: has been up close to thirty percent since then, and
Speaker 5: so the S and P five hundred that span has
Speaker 5: only been up about four percent. So you were saying
Speaker 5: you didn't think even just the rally that we've seen
Speaker 5: was as much of a factor either as far as
Speaker 5: why they turned their stick.
Speaker 7: Yeah, I don't think so.
Speaker 11: I mean, more buff it's not out there trying to
Speaker 11: time the market one way or another. And you know,
Speaker 11: he looks at these stock investments as if he's, you know,
Speaker 11: buying the company. So he also said at the annual
Speaker 11: meeting he expected Apple to be their biggest holding at
Speaker 11: the end of this year. It still is, so, I mean,
Speaker 11: it was that stock was about forty percent of their
Speaker 11: portfolio before this move. So I'm not surprised to see
Speaker 11: him take some concentration of how much.
Speaker 3: Cash did they have at Berkshire Hathway today and so
Speaker 3: any any ideas what they might do with it.
Speaker 11: Always a tough one, Paul. It's I think at a
Speaker 11: two hundred and seventy eight billion dollars, which I thought
Speaker 11: was a mistake when I first saw it because they
Speaker 11: were at like less than two hundred before the sale
Speaker 11: of the Apples like brought in a lot of cash.
Speaker 11: Higher interest rates have taken a lot of pressure off
Speaker 11: them holding cash. I was calculating that just a simple
Speaker 11: after tax return on the cash would help their earnings
Speaker 11: by at least five percent next year, right, so just holding.
Speaker 4: It will be okay.
Speaker 11: You know, they bought it big steak and shove. That
Speaker 11: would be an interesting, mega, mega deal and not really
Speaker 11: predicting that would happen, but just seeing that, I mean,
Speaker 11: I think the next deal buff It does probably something
Speaker 11: we don't even really understand what it is, like, you know,
Speaker 11: makes unique parts for some materials or something like that.
Speaker 5: It's interesting too because at a certain point they're holding
Speaker 5: an Apple was so big that it took up basically
Speaker 5: half of its portfolios. So for in your kind of view,
Speaker 5: does it make sense to make a move like that, Yeah.
Speaker 11: I mean, you know, I don't know if anyone wants
Speaker 11: to have one stock makeup you know, half of their
Speaker 11: their portfolio. You know, he had said he would love
Speaker 11: to have owned the whole company at one point or something.
Speaker 11: You know, it does seem like he was worried about
Speaker 11: global economic situation. I think the timing of this is
Speaker 11: just kind of a coincidence. Why everything imploding today and
Speaker 11: this happening. Also keep in mind Bank of America was
Speaker 11: also their second biggest holding them and selling a lot
Speaker 11: of that in the third quarter, So I do think
Speaker 11: he's really looking at concentration.
Speaker 3: So some reporting, I think it was in the Times
Speaker 3: about Bill Gates and Warren Buffett relationship maybe not as
Speaker 3: tight as before, any thoughts there.
Speaker 11: So what has been happening is Buffett's part of the
Speaker 11: Giving Pledge where he gives away a bunch of his
Speaker 11: his wealth over time.
Speaker 4: And I am not on you to spend every least dollar.
Speaker 11: I'm not either, I don't have enough wealth to give away.
Speaker 11: So but he was giving a lot of his money
Speaker 11: annually to the Bill Gates Foundation. What happened, I don't
Speaker 11: remember when it was. I think it was probably the
Speaker 11: end of last year. He had announced that when he
Speaker 11: passes away that his children are going to inherit the
Speaker 11: shares in a foundation to be used for charity. I
Speaker 11: think before that the buffet found the Gates Foundation was
Speaker 11: I don't know if it was official, but was at
Speaker 11: least thought was going to get some of that. I
Speaker 11: don't know about the relationship between the two of them.
Speaker 11: I just know that that is the case. And I
Speaker 11: think you know he's given tens of billions to the
Speaker 11: Gates Foundation over time.
Speaker 7: Anyway.
Speaker 5: What about insurance, because I always think about the insurance
Speaker 5: companies in relation to obviously Warren Buffett. If you look
Speaker 5: at that group though in the S and P five
Speaker 5: hundred down about three percent today but up fifteen percent
Speaker 5: year to date, what kind of view do we have
Speaker 5: as far as how he viewsed that particular core of
Speaker 5: the market.
Speaker 11: Yeah, So insurance is kind of the engine that drives
Speaker 11: the float for Berkshire Hathaway.
Speaker 7: They have a.
Speaker 11: Primary insurance business, They have a reinsurance business, and they
Speaker 11: have the auto insurance business, which is Geico. These companies
Speaker 11: as a whole, and Buffett obviously loves that industry. They
Speaker 11: made a big play in flight last year, which doesn't
Speaker 11: look seem.
Speaker 4: Like they read it. And today hurricane hitting.
Speaker 11: So hurricane we have a note down on Hurricane Debbie.
Speaker 11: Not really a big deal for the insurance companies, will
Speaker 11: be very minimal for Berkshire Hathaway, if any impact on
Speaker 11: them as a whole. But for the group we seem
Speaker 11: to be hitting maybe pek Arowi's maybe this year and
Speaker 11: next year. The valuations generally peak before the roe s do,
Speaker 11: so it seems like less rosy times ahead from a
Speaker 11: fundamental standpoint for the insurance companies. But I'm Buffett hasn't
Speaker 11: been hasn't changed his view on insurance at all.
Speaker 4: All right, Matthew, thank you so much for joining us.
Speaker 3: Matt Palizola, Senior Alice covering all the property and casualty
Speaker 3: insures for Bloomberg Intelligence, joining us live here in a
Speaker 3: Bloomberg Interactive Brokers Studio Warren Buffett in the Berkshire Hathaway.
Speaker 4: Folks reporting earnings over the weekend.
Speaker 3: Again, huge cash haul, and for those of us on
Speaker 3: Wall Street, we're just like, how do you ever deploy that?
Speaker 4: I don't know how you ever deploy that?
Speaker 5: I know.
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 4: Markotsoft two point four percent, the S and P four hundred.
Speaker 3: So a lot of folks are saying is a natural,
Speaker 3: healthy pullback in what is otherwise a pretty solid market.
Speaker 3: We're just the beginning of something more on the downside.
Speaker 3: People trying to get a sense there. What's going on?
Speaker 3: Carol Pepper, founder and CEO of Pepper International, joins us
Speaker 3: from New York via zoom. Carol, what are you hearing
Speaker 3: from your clients? What are you telling your clients on
Speaker 3: a day like today, We've had a big move to markets.
Speaker 12: Yeah, I'm telling my clients keep calm and carry on.
Speaker 12: This is a little bit of a pullback, but not unexpected.
Speaker 12: When Warren Buffett went and sold hath this Apple position, that.
Speaker 13: Made people nervous.
Speaker 12: But frankly, the fundamentals have not changed the fact that
Speaker 12: there's a slight correction. Nothing will go up every single
Speaker 12: day forever into infinity, and if you think that it will,
Speaker 12: then you shouldn't be in the stock market because it
Speaker 12: never does that.
Speaker 13: But you have to look at long term trends.
Speaker 12: Over time, growth stocks and particularly the Magnificent Seven.
Speaker 13: Have done extremely well.
Speaker 12: Should there be occasional pullback, yes, but does that mean
Speaker 12: that we're in serious trouble.
Speaker 6: No.
Speaker 12: So if you hold these stocks and you're nervous right now,
Speaker 12: this is not the time to sell. Obviously, even the
Speaker 12: plunge from this morning has paired back its losses. Some
Speaker 12: of this was the fact that a lot of the
Speaker 12: traders are on vacation, so whoever is in the market
Speaker 12: is moving things around much more than they normally would
Speaker 12: when it would not be in the middle of August.
Speaker 5: What are the top questions you're getting from your clients.
Speaker 13: Well, obviously people wonder is this the beginning of the end?
Speaker 13: Have we run as far as we should. Should we
Speaker 13: be pulling everything back?
Speaker 12: And again I manage money for people with over one
Speaker 12: hundred million dollars who are who have single family offices,
Speaker 12: and we make bets, not unlike Warren Buffett, not that
Speaker 12: I was as good as him, but we make bets
Speaker 12: for multiple generations.
Speaker 13: So again, if you.
Speaker 12: Look over the last five or ten years, how much
Speaker 12: has growth and check in the US outperformed everybody else.
Speaker 12: AI is the new entrant into the tech scene. It
Speaker 12: will continue to perform. Will there be moments like now
Speaker 12: and maybe the market enthusiasm god ahead of the reality
Speaker 12: where the price should be. Yes, But does that mean
Speaker 12: that it's going to plunge to zero?
Speaker 6: No?
Speaker 13: Are we having a dot com crash?
Speaker 1: No?
Speaker 12: Why because there's actual earnings underneath these stock.
Speaker 13: Prices, whereas in the dot com day there was nothing underneath.
Speaker 13: It was all air.
Speaker 12: So for that reason, I tell people, yes, it looks scary, No,
Speaker 12: don't do anything. This is a typical August doldrums, you know,
Speaker 12: buy the news, sell the news kind.
Speaker 13: Of market movement that we see almost every summer.
Speaker 3: So where should people if they maybe want to look
Speaker 3: for some values here in a market that that's pulled
Speaker 3: back a little bit.
Speaker 4: Where are you suggesting they go first again?
Speaker 12: If you're underweight in tech, Depending on your own weights,
Speaker 12: this is a great time to get into tech. If
Speaker 12: you want to get in. Having the price draw up
Speaker 12: five or ten percent terrific. Get in now. If you're
Speaker 12: not in there, if you're not wanting to kind of
Speaker 12: test or bat when things are going to move one
Speaker 12: direction to the other, just sit in cash, let us
Speaker 12: settle out for a couple of days, and then proceed
Speaker 12: in an ornerly fashion as usual with your investment program.
Speaker 12: So I'm telling people just to remain calm. I don't
Speaker 12: think this is the beginning of the end. I don't
Speaker 12: think Warren Buffett was doing something sinister. I do believe
Speaker 12: him what he said. It was a tax move on
Speaker 12: his part to sell half of his Apple position.
Speaker 13: So you know, just calm down, everybody. It's going to
Speaker 13: be fine.
Speaker 5: When you have the ten year last week's sliding below
Speaker 5: four percent for the first time since earlier this year
Speaker 5: in February, and then you have obviously income kind of
Speaker 5: driven type bond proxy sectors, utilities roots that were taking
Speaker 5: in a large amount of the inflows, especially since that
Speaker 5: CPI report on July eleventh, as well as last week
Speaker 5: when we saw the sell off accelerate the last few days.
Speaker 5: Are you putting money or suggesting clients put money in
Speaker 5: those particular corners of the market that would obviously benefit
Speaker 5: from rate cuts.
Speaker 13: Yeah, I mean, I do think the right cuts are coming.
Speaker 12: I hope that we will go back to having at
Speaker 12: least two rate cuts this year, maybe September and November.
Speaker 13: So certainly, if you're.
Speaker 12: Underweight your fixed income and you've been just relying on
Speaker 12: you know, good positions in your cash accounts, those rates
Speaker 12: are going to go down, so perhaps the time to
Speaker 12: consider getting into bonds a little bit. But again, you
Speaker 12: can never time exactly when that's going to happen. Well,
Speaker 12: you hit it exactly, No, who may hit it exactly?
Speaker 12: Are the program traders not human beings. It's impossible to
Speaker 12: outtrade this market, so you can't be that smart. But
Speaker 12: if you've been sitting in very high cash shields and
Speaker 12: you're worried about you know where cash shields are going
Speaker 12: to go, which is down when they start cutting the rates.
Speaker 12: And yes, it may not be a bad time to
Speaker 12: put a little bit more into bonds, but timing that
Speaker 12: date is still going to be tough about.
Speaker 4: I don't know if you have any views on crypto,
Speaker 4: but that's been whacked.
Speaker 3: All over the place today, with a bitcoin off about
Speaker 3: eight percent today.
Speaker 12: Yeah, well again, there's fear days and there's greed days.
Speaker 12: On fear days, everything that looks risky quote unquote goes down.
Speaker 12: So crypto is considered a risky or a growthy asset.
Speaker 12: So of course it's been hit. But I know a
Speaker 12: lot of people who are buying massive amounts of crypto
Speaker 12: right now, particularly overseas. I work with a lot of
Speaker 12: international families, and there's a lot of reason why people
Speaker 12: are starting to substitute crypto in some cases for their
Speaker 12: own currency or using crypto to move money around the world.
Speaker 12: So that's going to continue to happen. For people that
Speaker 12: are hoarding crypto, this is a great day. They can
Speaker 12: go out and buy some more and they all would
Speaker 12: project within two months it'll be back up into the sixties,
Speaker 12: maybe back to sixty five.
Speaker 3: All right, Carol, thank you so much for joining us.
Speaker 3: Always appreciate getting your thoughts. Kyle Pepper, founder and CEO
Speaker 3: of Pepper intern National.
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Speaker 6: So let's talk.
Speaker 4: Come on these here, let's get the latest. There's a
Speaker 4: lot going on. Miami.
Speaker 3: Mike mcgloan, Senior Commodity strategis from Bloomberg Intelligence. Droorte Is
Speaker 3: are on zoom from Miami, Florida. Mike, what's your commodity
Speaker 3: call today? When everybody's probably saying what is going on
Speaker 3: out there? In financial markets?
Speaker 14: We're seeing sell what you gotta and not what you
Speaker 14: wanna and that's really affecting. It's typically you've seen this
Speaker 14: happen in the past. When beta goes down in this velocity,
Speaker 14: you sell what you have to have. So that really
Speaker 14: started this weekend. Bitcoin broke blows sixty thousand. How were
Speaker 14: there on Saturday and then broke through there on Sundays?
Speaker 14: That was your indication. We'll start with the world's most
Speaker 14: significant leading indicator. And there's a lot of people who
Speaker 14: speculated it. So that was like people had to sell
Speaker 14: that because they need to raise capital.
Speaker 6: You're seeing in gold.
Speaker 14: That really started similar beginning of two thousand and eight
Speaker 14: when we had the financial crisis. The significance of things
Speaker 14: like gold and copper going down is they're perfect goddess sellers,
Speaker 14: but the gold will probably do better. The thing is
Speaker 14: manage money in that position. Speculators are way long gold
Speaker 14: for a reason because it's a bull market, so they're
Speaker 14: liquidating some of that, but I think it's more likely
Speaker 14: to cover.
Speaker 6: And the difference the is crude oil. Crudel's hanging in there.
Speaker 14: It's only down one percent on a day like today,
Speaker 14: it'd typically be down more than it has to be
Speaker 14: five hundred. But we know there's geopolitical tensions, you know, escalating,
Speaker 14: and a lot of the future's positions were way sold
Speaker 14: out about a month ago, so Crudel is not way
Speaker 14: overweight long like gold is. So that's where you've seen
Speaker 14: some of the greater I think pressure on goal at
Speaker 14: least for today, but in the long term as this
Speaker 14: resolves itself, we see that if beta is clearly making
Speaker 14: a little bit of a high, and volatil he's making
Speaker 14: a bit of a bottom.
Speaker 6: Gold would be one of the primary beneficiaries, and.
Speaker 5: Looking over at the crude oil market WTI for those
Speaker 5: US features falling to around seventy three dollars a barrel.
Speaker 5: As far as what it could be coming ahead here
Speaker 5: when you're talking about looking at the commodity space, what
Speaker 5: do you think this tells us more kind of broadly
Speaker 5: about the economy and the potential direction here for the
Speaker 5: US stock market.
Speaker 14: Well, it's deflationary forces. And I'm glad you went there,
Speaker 14: because I've been writing about this for a little too long,
Speaker 14: but particularly this year. Kimmani's basically predicted this with gold
Speaker 14: going up and all commodities go down, going down. The
Speaker 14: Bloomer COMMANDI INEX on a one year basis is down
Speaker 14: six percent, and the SMB five hundred on a one
Speaker 14: year basis is up about twenty one percent.
Speaker 6: That's one year. That's signs of deflation forces.
Speaker 14: And I think what's happening is those auto correlation forces
Speaker 14: and commodities they go down because they go up, are
Speaker 14: trickling down to other assets. So I don't see this
Speaker 14: as something as a one off. It looks like it's
Speaker 14: just getting started. And then you tilt over. Why, Well,
Speaker 14: here's one good indication the ten note yield in China's
Speaker 14: two point one five percent. That's compared to three point
Speaker 14: seventy nine in the US. So China's heading towards a
Speaker 14: pretty severe deflationary recession if you watch their bond yields.
Speaker 14: And I am and I think that's what's happening, and
Speaker 14: it's happening global leafs, so kmmandi's have basically been predicting this.
Speaker 14: I think we're just seeing a little bit of trickle
Speaker 14: down from the stock market that's way elevating. I'll end
Speaker 14: with this the Bloomberg the sorry, the two hundred day
Speaker 14: move in on WTI crew oil is about seventy eight.
Speaker 6: Dollars a bill a barrel, and that's tilted lower.
Speaker 14: We're right now about seventy three the two hundred day
Speaker 14: moving average on the S and P five hundred, it's
Speaker 14: five thousand, and the SMB five index is about five
Speaker 14: two hundred.
Speaker 6: We're just potentially going to revert there. And commodities were.
Speaker 14: Kind of a good indicator for that, and bitcoin was
Speaker 14: one of the quickest indicators I think for what's happening.
Speaker 3: So for WTI crude oil, let's just continue there. Mike,
Speaker 3: is it a supply issue driving this pullback here, or
Speaker 3: demand or maybe a little bit of both.
Speaker 6: All the above.
Speaker 14: The first thing I have to remember is the key
Speaker 14: force that pressured crude el since the peak in two
Speaker 14: thousand and eight is that the excess of supplying demand
Speaker 14: out of the US and Cana is accelerating. It's about
Speaker 14: six million barrels a day. In two thousand and eight,
Speaker 14: it was a deficit about ten million barrels a day.
Speaker 14: That's about what you see from that increasing excess of
Speaker 14: spare capacity out of Opex. So see the bad trend there,
Speaker 14: and prices remaining high because of geopolitical tensions are keeping
Speaker 14: that force intact.
Speaker 6: Meaning the cost of production in.
Speaker 14: US is around fifty five dollars a barrel and candidates
Speaker 14: around sixty dollars of barrel, So you keep prices above
Speaker 14: those levels, they'll just produce more and it's reducing demand.
Speaker 14: Diesel demand in this country is in a downward recessionary trajectory,
Speaker 14: and I hear it's the same in some of the
Speaker 14: other countries, most notably China, are just harder to measure.
Speaker 6: So that's the problems you.
Speaker 14: Political tensions are keeping in elevator, and then's just going
Speaker 14: to be pushing back towards its cost of production US
Speaker 14: if all the rules of economics apply.
Speaker 6: So I'll give you one example.
Speaker 14: The number one measure of heat, electricity and fertilizing this country.
Speaker 6: Natural gas has already done that.
Speaker 14: It dropped to and earlier in the year the levels
Speaker 14: that were first traded in nineteen ninety.
Speaker 6: Corn has already done it.
Speaker 14: Corn has dropped to a level of first traded in
Speaker 14: two thousand and I'm sorry, nineteen seventy four, back down
Speaker 14: to four hours of bushel.
Speaker 6: So this is just.
Speaker 14: Normal commodities, but it's deflationary because they went up too much.
Speaker 14: The question is how normal is for stock market baaltile
Speaker 14: at the bottom and stock marks go down, then that's
Speaker 14: what really precious crude aiut when it goes. When stocks
Speaker 14: go down like this, it'll bring down crude and copper.
Speaker 5: Another corner that you keep a close eye on is
Speaker 5: trollium futures. So you were talking about in a note
Speaker 5: recently how managed money, when you're looking at the hedge
Speaker 5: fund positions in particular, are set up for a bear market.
Speaker 5: And then obviously, when you were pointing out to how
Speaker 5: the stock market mean reversion might be a particular deciding factor.
Speaker 5: What does this mean now moving forward, now that you're
Speaker 5: seeing stocks under pressure here.
Speaker 6: Yeah, so I think that's part of the main reason.
Speaker 14: Despite the you know, the eminent attacks and more violence
Speaker 14: in the Middle East, which might curtail supply, despite that
Speaker 14: overhanging the market, Crudell's going down and despite the market
Speaker 14: has really sold out. You mentioned from futures, it's going
Speaker 14: down partly because beta is going down. It's the power
Speaker 14: of beta. When the stock market goes down like this,
Speaker 14: it's all that matters. So this is something that's really
Speaker 14: been a great indicator this year. If you watch these
Speaker 14: speculative speculative futures traders, when they get way too long,
Speaker 14: usually it's when the market peaks, and that's what happened
Speaker 14: this year.
Speaker 6: And when they sell out.
Speaker 14: They typically don't get short petroleum futures, but when they
Speaker 14: sell out the levels that are basically flat, it typically
Speaker 14: marks the bottom. That's what happened this year, and now
Speaker 14: we're kind of in that range. Just watch the next
Speaker 14: key level. So in our next key step to and
Speaker 14: WGI crewdel there's like a line of sand support around
Speaker 14: seventy thousand. I think it's a matter of time. It
Speaker 14: follows that it goes below that level. A natural gas
Speaker 14: has done it, Corn has done it, but right now
Speaker 14: it's keeping it elevated. His futures are basically sold out.
Speaker 14: We kind of have to reset those positions, and those
Speaker 14: geopolitical tensions are keeping things somewhat elevated.
Speaker 4: All right, Mike, Great Twitter force, Really appreciate it.
Speaker 3: Mike mcglow, Senior commodity strategist, Bloomberg Intelligence, zooming in from
Speaker 3: somehow he scammed this Miami, Florida.
Speaker 4: I don't get it. But he is a winner.
Speaker 3: He is a net winner during this whole global relocation,
Speaker 3: that is for sure.
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