Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
Speaker 1: Bloomberg Quick Takes Tim Stanovk. We're here every day bringing
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Speaker 1: search Bloomberg clovel News. Obviously, the breaking news today is
Speaker 1: that Crypto Exchange f t X filing for Chapter eleven bankruptcy.
Speaker 1: This story has moved incredibly fast. Let's bring in Crypto
Speaker 1: reporter for Bloomberg News, Olga Career if she joins us
Speaker 1: over zoom right now, Olga, I want to go back
Speaker 1: in time to last Friday. This How shocking would it
Speaker 1: be if I told you that fast forward one week
Speaker 1: f t X the Empire, It's in bankruptcy protection. Completely shocking.
Speaker 1: Last week was very quiet overall, so people worried about
Speaker 1: low volatility in the markets, and how are they changes
Speaker 1: gonna you know, make hands meet until you know something happened,
Speaker 1: And people generally said, well, nothing is going to happen
Speaker 1: now until they economy improved, so not much to expect
Speaker 1: in the next year or so, and then here we go,
Speaker 1: here we go, um olga. The latest headline here is
Speaker 1: that the f t X withdraws derivatives clearing plan from
Speaker 1: us C f TC I mean shocker coin desk is
Speaker 1: also reporting that f t x u s stop processing
Speaker 1: withdrawals midday Friday. What do you think the headlines are
Speaker 1: going to be over the next forty eight hours. Well,
Speaker 1: I think everybody's waiting to see what Sam Bankman Freed says,
Speaker 1: either on Twitter or in upcoming sort of bankruptcy fightings. Uh.
Speaker 1: It's gonna be uh interesting to see the financials as
Speaker 1: well as maybe get some commentary on what happened, what
Speaker 1: went rowing in a In a series of tweets earlier today,
Speaker 1: Sam promised sort of to describe exactly what happened. So
Speaker 1: I think a lot of people are waiting for that.
Speaker 1: It is amazing SPF just tweeting through it. I don't know,
Speaker 1: I'm thinking like wouldn't someone tell them to be like
Speaker 1: shut it down? Yeah, I would. I would log out
Speaker 1: so rarely what I log out, but probably in this situation.
Speaker 1: But Olga, let's talk a little bit about the fallout here,
Speaker 1: because we've heard a lot about contagion. I want to
Speaker 1: know where to look next. We've already seen block five
Speaker 1: for example, halting withdrawals, the shutdown of Alameda, of course,
Speaker 1: SPFS trading arm where else should we be looking? So
Speaker 1: a lot of funds uh in companies kept their funds
Speaker 1: on fds, so they will obviously be affected. A lot
Speaker 1: of companies over tweeted out or put out statement and
Speaker 1: saying we don't have much exposure, but some do and
Speaker 1: and so we'll see the ripple effects of that in
Speaker 1: the coming days. Also f t X and Alameda another
Speaker 1: company that uh SBF owned uh they had their tentacles
Speaker 1: and pretty much throughout crypto, they were investors in a
Speaker 1: lot of projects and some of these projects kept their
Speaker 1: treasuries on f t X. So but we'll see some
Speaker 1: ripple effects from that as well. So of course uh
Speaker 1: SAM was a big supporter of projects like Salona, and
Speaker 1: obviously the token is getting crushed partially because of people
Speaker 1: are still trying to figure out what they impact on
Speaker 1: Salona might be. Are there any other tokens out there
Speaker 1: that have the same kind of intricate relationship with its
Speaker 1: parent company or an exchange that could be in the
Speaker 1: same kind of spot where it was used as a
Speaker 1: loan or as called lateral, etcetera. Are there other worry
Speaker 1: spots like this? So, of course f t t the
Speaker 1: token connected to the extra ft X exchange, crashed and burned.
Speaker 1: As a result of this, it's probably going to be
Speaker 1: in the center of investigations into sort of what happened here,
Speaker 1: why and where did the money from ft X go?
Speaker 1: Um so, so that that token sort of plummeted over
Speaker 1: the last week. Um and there can be other tokens
Speaker 1: that are impacted. But you know, honestly, f t X
Speaker 1: was such a huge presence in the entire ecosystem, I
Speaker 1: think it's probably easier to name, you know, major tokens
Speaker 1: where f t X did not have much influence than
Speaker 1: the ones where where it did. Yeah, No, definitely. I
Speaker 1: mean his empire was so far reaching, and I mean
Speaker 1: one of the places that it did reach was the
Speaker 1: Salona blockchain, and it's probably not surprising that after f
Speaker 1: t T we've seen a lot of pain in the
Speaker 1: Salona token. What's the bowl case left for the Salona token,
Speaker 1: the Salona blockchain, because I mean I think Salana, I
Speaker 1: think Alameda, I think SPF Sure, that's a good question.
Speaker 1: So a Salona was built for as a competitor for ethereum,
Speaker 1: you know, as a as a block chain to handle
Speaker 1: uh financial transactions, and of course it was handling some
Speaker 1: financial transactions for a SBFS businesses. So I guess what
Speaker 1: we'll see in the coming weeks is just how much
Speaker 1: adoption has it had outside of SBFS empire. Uh. You know,
Speaker 1: a lot of people say this is a good technology,
Speaker 1: it's it has it's a big ecosystem, it's bigger than
Speaker 1: a spf um, and b'll see how it plays out
Speaker 1: in the coming gays. Yeah exactly. I really think a
Speaker 1: lot of people probably wish that bit quindon trade over
Speaker 1: the weekend. Now at this point, thank you so much,
Speaker 1: Oga curryve joining us on f t X. That latest
Speaker 1: headline Katie that f t X with draws rid is
Speaker 1: clearing plan from us C f t C. I mean, like, yeah,
Speaker 1: I would think so, but nonetheless it is now official
Speaker 1: that that is happening. Probably would have been bigger news
Speaker 1: if they hadn't at this point. But I mean, I'm
Speaker 1: sure we're going to get more and more headlines like
Speaker 1: that over the cooming. It's like a drip feed, right
Speaker 1: because since no, It's like, if there is no regulation,
Speaker 1: then how do you sort of go after someone when
Speaker 1: there was no regulation. It's a great question. I wish
Speaker 1: I had the answer. This is Bloomberg. This is Bloomberg
Speaker 1: Business Week with Carol Messer and Bloomberg Quick Takes Tim
Speaker 1: Stinovic on Bloomberg Radio. It's time now for our Business
Speaker 1: Week segment. This is when we dive deep in when
Speaker 1: Business Week stories of the day, and this time we're
Speaker 1: talking about gaming has a hated CEO who's now crushing
Speaker 1: and crashing into the meta verse. I didn't know who
Speaker 1: the CEO was. I didn't know anything about him, but
Speaker 1: apparently his reputation is not so great. So joining us
Speaker 1: now to break this all down for us is Bloomberg
Speaker 1: News Technology and Venture capital reporter Priya Ann and Bloomberg
Speaker 1: Business Week editor Joel Weber. Joel, let's start. First of all, Hey,
Speaker 1: it's been a while haven't talked to you in a bit. Hello,
Speaker 1: it's good just to chat with you. First of all,
Speaker 1: talk me through the headline of the story and what
Speaker 1: was behind the article. So the story is written by
Speaker 1: Austin car Jason Tryer and and Priya. And this is
Speaker 1: a really interesting guy. You you you're right, not exactly
Speaker 1: a household name, except once you um here where he's been, um,
Speaker 1: you might be familiar with sort of some of his legacy.
Speaker 1: And so we're talking about John Rick Rick Tellio, who
Speaker 1: is the CEO of a company called Unity UM. And
Speaker 1: Unity is a really interesting company because not probably not
Speaker 1: a household name, but in the gaming world, UM, they
Speaker 1: are known for basically, uh, doing a platform that allows
Speaker 1: a lot of very nimble games and advertising. UM. But
Speaker 1: before he was there, he was at e a UM
Speaker 1: where he was definitely um, not loved. But one of
Speaker 1: my most favorite anecdotes from the story was, actually, you know,
Speaker 1: he's like one of these executives that can go from
Speaker 1: industry to industry. He was actually Sarah Lee Bakery. This
Speaker 1: get this the pound cake. He took it from sixty
Speaker 1: announces to twelve no longer a pound That's that's kind
Speaker 1: of one of the legacies that we ran across. But
Speaker 1: but Pria talked to us about what his legacy has
Speaker 1: been like in gaming and and sort of what his
Speaker 1: vision for the metaverse is looking like, because that's really
Speaker 1: where we tried to center this narrative. Yeah, so, actually
Speaker 1: writing the story, the metaverse conjures everything and nothing. These days,
Speaker 1: it's a hot it's a hot hot hot news space.
Speaker 1: Mark Duckerberg is very interested right naming his company meta
Speaker 1: and John Dractello is known for, uh jumping into the
Speaker 1: next big shiny thing. I mean, and he's a he's
Speaker 1: a marketing guy through and through people we spoke would
Speaker 1: phrase his marketing skills. When he was at Hagen Daz.
Speaker 1: At one point he recruited director of Magic Um to
Speaker 1: make their shops into unforgettable tasting events that celebrate the
Speaker 1: experience of being alive. So this is someone who really
Speaker 1: jumps into things when he's interested. And um at Unity
Speaker 1: he has been talking up the metaverse as well and
Speaker 1: all the applications in and outside of gaming that his
Speaker 1: company can help different sorts of clients with UM. We
Speaker 1: did finding reporting out this story that there were plenty
Speaker 1: of examples that he shared with our reporting team that
Speaker 1: later on when we went to the customers, they said
Speaker 1: they were exaggerated, you know, they were like, we don't
Speaker 1: actually use Unity for these things. So that was a
Speaker 1: bit interesting in terms of the strategy there to share
Speaker 1: those kinds of examples with us. But Unity is is
Speaker 1: best known as the company that you might not have
Speaker 1: heard of that put all those ads into the mobile
Speaker 1: games that you play that some people might consider a
Speaker 1: little bit spammy. So one question is like, if we
Speaker 1: do get to this world where we're all in the metaverse,
Speaker 1: it does seem like if Unity is a part of
Speaker 1: that future, we can probably say with at least some
Speaker 1: degree of likelihood that ads are going to be part
Speaker 1: of that world too. If you if you thought you
Speaker 1: couldn't have more ads in your world, just wait for
Speaker 1: this digital world to take over your life. Oh, many
Speaker 1: would say that this whole metaverse employ is just a
Speaker 1: cash grab, but we think about Mark Zuckerberg going big
Speaker 1: on the metaverse. Uh, it isn't too far a stretch
Speaker 1: to say that shareholders haven't loved that, if you could
Speaker 1: just look at the stock price for that. But how
Speaker 1: is it going over at Unity? What is the response
Speaker 1: been like from investors? From employees or they on board.
Speaker 1: Well for Unity, you know, they're a bad projects that
Speaker 1: have started. They've had projects that have stopped the company
Speaker 1: and CEO addressed to staff in an internal memo before
Speaker 1: our story published saying, you know, UM, projects start and stop. UM,
Speaker 1: they don't always complete themselves. UM. You know this is
Speaker 1: something that's at early stages. So it definitely is early
Speaker 1: days to the Metaverse, and we don't quite know yet
Speaker 1: what is going to happen there. UM. But the question
Speaker 1: this week is, you know, with all the layoffs at Meta,
Speaker 1: what's going to happen with other companies that are also
Speaker 1: operating in the metaverse space or trying to writ I mean,
Speaker 1: what's going to come of all these heavy, heavy investments. Um,
Speaker 1: when we're already starting to see that many companies, perhaps
Speaker 1: over higher got too excited. Okay, so there's the challenges
Speaker 1: of actually building the metaverse and and what that looks
Speaker 1: like and what those applications are could look like. I'd
Speaker 1: like to come back to that. But the other thing
Speaker 1: that UM was was pretty juicy in the story was
Speaker 1: you know, there's there's also the what what Ricky Tellio
Speaker 1: is like in real life? So would you guys learn
Speaker 1: on that front. You Yeah, John Riccotello is UM controversial
Speaker 1: for for several reasons, one being that he is not known.
Speaker 1: He has known for for sometimes really catching people in
Speaker 1: unexpected ways during meetings. And you know, if you get
Speaker 1: his attention and you hold his attention, great, If you don't,
Speaker 1: you're gonna hear about it in ways that some people
Speaker 1: can find unpleasant. Um. You know, sometimes they're shouting, sometimes
Speaker 1: there's some really brushed talk going on. And then notably,
Speaker 1: John held a meeting a couple of years ago in
Speaker 1: his office where he shared with staff in the a
Speaker 1: dream of their office that he had been dating the
Speaker 1: head of HR at the company. And that made that
Speaker 1: made a number of employees we spoke with uncomfortable because
Speaker 1: you know, who do you report any personnel issues too?
Speaker 1: If the head of DHR is dating the CEO UM
Speaker 1: the company said that he had reported his relationship to
Speaker 1: the board, that it was above water. Um that out
Speaker 1: of HR lets just Brown eventually less the company and
Speaker 1: they've since married. Um. But it did strike a lot
Speaker 1: of folks as something unconventional and less not great taste
Speaker 1: in some employees. Now, okay, well it's interesting, right, So Okay,
Speaker 1: back to the metaverse. UM, when you know, what could
Speaker 1: this look like? To give him just a little bit
Speaker 1: of credit for like what you know, this is the
Speaker 1: future future getting to the future sometimes a little bumpy,
Speaker 1: but best case scenario, what is Unity potentially look like?
Speaker 1: Best cass scenario for them would be UNIT is involved
Speaker 1: in creating these these digital worlds already right, um and
Speaker 1: helping the creators monetize them. And UM, in the best
Speaker 1: case world, they'll be involved that and what John calls
Speaker 1: uh sort of like the three D digital world, which
Speaker 1: which is the metaverse as we've been saying, UM. And
Speaker 1: so you know, they see themselves as if this thing
Speaker 1: really take soft, they'll be front and center in helping
Speaker 1: to build those spaces and help people monetize them. Um.
Speaker 1: And and as we know on the Internet, ads are
Speaker 1: a huge portion of you know, how people make money UM,
Speaker 1: and they see themselves as really capitalizing on that. At
Speaker 1: the same time, they're looking at, you know, applications that
Speaker 1: and they've touted applications to our reporting team that aren't
Speaker 1: necessarily even related to things like games. For example, they
Speaker 1: said an architecture firm was using their help to design
Speaker 1: a stadium alright, guys, we've gotta leave it there. Thank
Speaker 1: you to Joel Webber and prey on on on one
Speaker 1: of gaming's most heated executives, crashing the metaverse. You can
Speaker 1: find that in the latest issue of Bloomberg Business Week.
Speaker 1: And this is Bloomberg Business Week on Bloomberg Radio. You're
Speaker 1: listening to Bloomberg Business Week with Carol Messer and Bloomberg
Speaker 1: Quick Takes Tim Stinovic on Bloomberg Radio. Let's get back
Speaker 1: to crypto. It's my favorite topic. It's the story of
Speaker 1: the day f t X filing for Chapter eleven bankruptcy.
Speaker 1: We're going to dive into that with Timothy Totally. He
Speaker 1: is chief executive officer at zell Core Technologies. That's a
Speaker 1: multi asset ecosystem that helps investors navigate all major exchanges
Speaker 1: and blockchains. Timothy joins us on zoom from Boston. And
Speaker 1: when we think about the events of this week, I've
Speaker 1: heard it described as a Lehman event in n Ron moment.
Speaker 1: I've heard some describe it as an extinction event. Timothy,
Speaker 1: how would you describe it? Well, thanks for having me on.
Speaker 1: I think I would. I would probably describe it as
Speaker 1: a lot of short term pain, but long term it's
Speaker 1: it's going to get blockchain back to where it was
Speaker 1: supposed to be right, which is a really high level
Speaker 1: of transparency, and to eliminate a lot of this counterparty
Speaker 1: dealings that were behind you know, closed room arrangements, and
Speaker 1: that's this isn't yet another example of that happening. Um.
Speaker 1: I think the other big issues are relates to FTX
Speaker 1: and and Alameda Research. They participated in somewhere in the
Speaker 1: neighborhood of three companies invested in three D companies either
Speaker 1: directly or they held their treasuries. So there's gonna be
Speaker 1: a lot of impact here both in these projects. And
Speaker 1: the other thing is there's a lot of counterparty. Uh,
Speaker 1: the biggest counterparties to most of these exchanges are other exchanges.
Speaker 1: So wouldn't surprise me next week to see another shoe
Speaker 1: to drop. What would that shoe look like? Like? How
Speaker 1: do we know where the contagion actually might end? I
Speaker 1: mean you might say, oh, well, people should have known
Speaker 1: the risks, but even Scaramucci was like, I feel duped,
Speaker 1: I feel betrayed. Yeah, I don't. I wouldn't even want
Speaker 1: to speculate to guess where other exchanges but I'll just
Speaker 1: give you example. And by the way, I don't think
Speaker 1: either one of these are exchanges are in trouble binance
Speaker 1: and coin based, but the biggest counterparties of each one
Speaker 1: of those is each other. So uh, there's more transactions
Speaker 1: between each other than anybody else. So I would probably
Speaker 1: look at other places, other exchanges that have in the
Speaker 1: past had a lot of historical transaction has been big
Speaker 1: counterparties of FTX, and so, I mean, one of the
Speaker 1: pushbacks that I've seen is that you know, this is
Speaker 1: what happens when you trust a centralized exchange. This is
Speaker 1: supposed to be decentralized finance. There's not supposed to be
Speaker 1: this level of interconnection centrality. I mean, where do you
Speaker 1: fall on that I don't know. Is this is this
Speaker 1: sort of revealing the promise of defy as a myth
Speaker 1: or would you probably not go that far? I would
Speaker 1: say it's reviewed. I think this is probably the biggest misnomer.
Speaker 1: These centralized exchanges are traditional finance with a crypto mask.
Speaker 1: Um they're the same old thing where they have their
Speaker 1: own proprietary database where they track what they owe you
Speaker 1: and what they owe other parties. Um, that's not what
Speaker 1: blockchain and defy was intended to be. It's that the
Speaker 1: blockchain technology is for the first time at scale to
Speaker 1: have the technology for you to have a one on
Speaker 1: one relationship directly to your assets. So I think this
Speaker 1: is very good for DEFY and crypto and the long run.
Speaker 1: You know, our company believes strongly in non custodian self custody,
Speaker 1: and so this is another validation as to why I
Speaker 1: believe it's the right way to go and that on
Speaker 1: chain processing is is the way to go. Most of
Speaker 1: the problems with FTX have been as a result of
Speaker 1: off chain processing. So at the end of the day,
Speaker 1: do these kind of exchanges become thanks do they compend
Speaker 1: brokerage firms? Like? Is that what it's eventually going to
Speaker 1: have to in some ways look like? I think it's
Speaker 1: gonna be a hybrid environment where you have both defied
Speaker 1: decentralized organization and some kind of centralized but they're gonna
Speaker 1: have to be regulated. And the reality is, you know, uh,
Speaker 1: these central efed changes in crypto today are very there
Speaker 1: anomalous to the exchanges that we all think of today, Fidelity,
Speaker 1: Schwab or whoever. It's just that the ladder are very
Speaker 1: regulated by you know, US entities and international entities. That's
Speaker 1: not the case with crypto. So we're gonna have to
Speaker 1: move to more more regulations. But uh, defy and self
Speaker 1: custody is going to be a big part of the future.
Speaker 1: Let's talk about institutions and whether this really scares away
Speaker 1: sort of the trad five players, because again, if I
Speaker 1: go back to a year ago, I've found myself wanting
Speaker 1: to go back in time often this week. But let's
Speaker 1: go back to a year ago. We were close to
Speaker 1: a record high on bitcoin, and if I think about
Speaker 1: the rallying cry of the bulls at that time, it
Speaker 1: was sort of this institutional embrace. You know, we saw
Speaker 1: the launch of the first US Bitcoin futures e t
Speaker 1: F that was supposed to usher in a whole class
Speaker 1: of investors who had never really been able to get
Speaker 1: access to the crypto industry before. But I mean, after
Speaker 1: the events of the past week, the past few months,
Speaker 1: the summer, you know, you think back to what we
Speaker 1: saw with three Hours Capital even I mean, is it
Speaker 1: have you seen any indication that institutions are rattled here
Speaker 1: and they're not coming back? Um? I don't think so.
Speaker 1: If you look at what's happened in the last ninety days.
Speaker 1: In particular, I think institutions committed to being all in UM.
Speaker 1: I think we just get we get hung up on
Speaker 1: these um UH the volatility of this asset class, in
Speaker 1: particular about the it's the technology that's gonna win the
Speaker 1: day at the end of the day, and crypto often
Speaker 1: refer to it as we're in the first inning of
Speaker 1: the uh, the first batter of the first inning of
Speaker 1: the game. You wouldn't pick finance as a use case
Speaker 1: if you had choice, right, we are right. There's plenty
Speaker 1: of other use cases and that's why I think traditional
Speaker 1: finance will move here. UM. It's a much more economical
Speaker 1: solution for them UM. And and they're showing that over
Speaker 1: the last ninety days in particular, you know, whether it's
Speaker 1: Fidelity offering direct trading to their customers, etcetera. I don't
Speaker 1: think they're going away. I think we've gotta live with there.
Speaker 1: Timothy Telly, CEO of zel Core joining us there and
Speaker 1: the collapse of f t X, what it means where
Speaker 1: they broader industry kind of women get our feet out
Speaker 1: from under us of this crisis. This is Bloomberg, this
Speaker 1: is Bloomberg Business Week with Carol Messer and Bloomberg Quick
Speaker 1: Takes Tim Stinovic on Bloomberg Radio less than fifteen minutes
Speaker 1: to the closer. Trading on an insanely wild week here
Speaker 1: in the United States. You have the SMP continuing it's
Speaker 1: rally up by about full one percentage point, the NASTACK
Speaker 1: up two percentage points. We had the biggest rally in
Speaker 1: stocks yesterday that we've seen in two years. We were
Speaker 1: able to build on that. You had you mish you
Speaker 1: know see Michigan Sentiment Index lower than estimated, inflation expectations
Speaker 1: a little bit higher, yet stocks were able to continue.
Speaker 1: Uh their rally also significant as you had the Bloomberg
Speaker 1: Dollar Index being able to drop again. Um, euro was stronger,
Speaker 1: every G ten currency was stronger, the dollar really taking
Speaker 1: it on the chin. Is this a real reversal that
Speaker 1: we're finally seeing in the markets. Yes, I know we
Speaker 1: have crypto crashing, I know we have f t X,
Speaker 1: and that's one huge story. But the other is are
Speaker 1: we finally going to see a FED that's going to
Speaker 1: pair back those rate hikes or is the market in
Speaker 1: a bit of a fake out. So let's get more
Speaker 1: on this with Ryan Dietrich, the chief market strategist over
Speaker 1: at the Carson Group. Ryan, what do you think the
Speaker 1: market is pricing in right now with the kind of
Speaker 1: moves that we've seen over the last forty eight hours. Yeah, guys,
Speaker 1: First of all, things are having in happy veterans date everybody,
Speaker 1: So listen, listen this historic move. I mean, here's something
Speaker 1: to think about, guys. Assuming the SUPs up one percent
Speaker 1: today and I know we're close, there's could be four
Speaker 1: straight Friday's the SMP gained that's never happened in history. Okay,
Speaker 1: we've got a lot of these never happened in history
Speaker 1: type of deal, just yesterday's five bounce. But here's what
Speaker 1: we think right Sure, short term overbought after this rally,
Speaker 1: but we are optimistic. We made another major market low
Speaker 1: in October. Six of the last seventeen bear markets ended
Speaker 1: in October. This could be another one. And again, expectations
Speaker 1: are so low that any good news like we saw
Speaker 1: yesterday can continue to kind of push this beach ball higher,
Speaker 1: push this speech ball higher. Could do like that. It's
Speaker 1: a bit more cheerful than some of the phrases we
Speaker 1: normally here, like dead cat bounce, that's one of my
Speaker 1: least favorite bear market rally. A lot of animals. Nice,
Speaker 1: get a beach ball in there, But I mean, talk
Speaker 1: to us about that. Is it one of those horrible phrases.
Speaker 1: Are we just pushing this speech ball higher temporarily or
Speaker 1: they're still loads to be plumbed in the remainder of
Speaker 1: two Now, Yeah, we're optimistic that the lowds been made.
Speaker 1: Like I said, you know, you think about it. November
Speaker 1: the month where now is the best month last ten years,
Speaker 1: the best month in nineteen fifty. We know December historically strong.
Speaker 1: Those are just seasonality things. But let's take a second
Speaker 1: here and think about this. This is a mid term year.
Speaker 1: Mid term years tend to bottom late in the year.
Speaker 1: This one probably bottom in October twelfth, in our opinion,
Speaker 1: one year off those lows. The SMP going back to
Speaker 1: World War Two is higher thirty percent on average, a
Speaker 1: year off the mid two year lows. So we're about
Speaker 1: ten percent off the lows right now. Ballpark. Um. You know,
Speaker 1: I think it's just important for investors to know if
Speaker 1: we made a new load like we think we did,
Speaker 1: there could be some decent, real, real decent opportunities the
Speaker 1: rest of this year and into next year. So here's
Speaker 1: I'm trying to understand where no one is saying that
Speaker 1: the Fed is done with their hiking cycle. But we
Speaker 1: feel that if they go to five percent in the
Speaker 1: terminal rate, they just get there slower. That that justifies
Speaker 1: the kind of move that we're seeing. Yeah. Different, that's
Speaker 1: a difficult question. But here's how we see it. Fifteen
Speaker 1: months ago, the Fed saw like one rate hike this year.
Speaker 1: All right, we know what's happened. I'm not saying the
Speaker 1: other Fed's perfect. I'm just saying the Fed is not perfect.
Speaker 1: They're not infallible. The Fed got awfully hawk ish. The
Speaker 1: Fed isn't always right on these things. We think the
Speaker 1: markets priced in so much hawky ignish all these cuts,
Speaker 1: I'm sorry, all these hikes. And yesterday's inflation data with
Speaker 1: car use cars down ten percent, the largest monthly drop
Speaker 1: ever in rents. These are things that are saying, listen,
Speaker 1: inflation is gonna start likely coming back sooner or more
Speaker 1: than people think. That could give the Fed, the Fed,
Speaker 1: you know, leeway not to be so wildly aggressive. And again,
Speaker 1: maybe one more hike com you know, this year, maybe
Speaker 1: fifty basis points, and they take a look around and realize,
Speaker 1: you know, maybe things are okay. We gave the patient
Speaker 1: a lot of medicine, and inflation is indeed coming back down. Okay,
Speaker 1: let's say things really are okay, Ryan, and inflation really
Speaker 1: has crusted. The FED maybe can take its foot off
Speaker 1: the pedal, maybe sooner rather than layer later. What is
Speaker 1: the biggest beneficiary of that when you look cross asset? Yeah, well,
Speaker 1: I mean, I think easy to answer stocks. I mean,
Speaker 1: you really you think about it. I mean, we had
Speaker 1: a twenty five per cent bear market, right you look
Speaker 1: at let's look at D two for a second. Eighty two,
Speaker 1: there was a twenty seven percent bear market in twenty
Speaker 1: months as soon as inflation started the roll over back
Speaker 1: in late eighty two. Within three and a half months,
Speaker 1: the SMP made new highs. Now, we're not saying we're
Speaker 1: gonna make new highs in three and a half months
Speaker 1: this time, but we are saying, you know that that
Speaker 1: things are really beaten down and in the economy, we
Speaker 1: don't do a recession, right the consumers so strong, earnings
Speaker 1: aren't great, but they're still saying, not a recession. You know,
Speaker 1: the market has priced in a recession in a lot
Speaker 1: of places and housing is in a recession, but the
Speaker 1: rest of the economy is not in our view, and
Speaker 1: we think again the consumers strong says, hey, your average
Speaker 1: bear market without a recession pulled back. We just pulled back.
Speaker 1: It didn't feel average at all. Unaware, but if you
Speaker 1: look at history, maybe it was if the rally like
Speaker 1: we had off COVID lows and just catching our breath
Speaker 1: now and again there's those strong seasonals with the Fed's
Speaker 1: gonna be more dublish with an economy better than expected.
Speaker 1: Maybe you know, stocks are still the place to be
Speaker 1: going up all month. That's our that's our cakes. So
Speaker 1: where so what's over price the risk esson that you
Speaker 1: want to buy. Yeah, well, we still don't like the
Speaker 1: large cap tech names that come on with you guys
Speaker 1: for a while, saying that those are the biggest ones
Speaker 1: that are bouncing. We need stick with some of those cyclicals,
Speaker 1: your industrial holes, right, your healthcare, your energy names, some
Speaker 1: of the some of the names that kind of brought
Speaker 1: you to the to the dance, so to speak. And
Speaker 1: also small caps, just small caps did not violate their
Speaker 1: June lows in October. There's some relative strength. They're they're
Speaker 1: really cheap relative to large and there's a lot more
Speaker 1: of them, right, there's a lot more stocks going up
Speaker 1: now than there were over the summer, which is good.
Speaker 1: So cyclical value and small caps are two areas we've
Speaker 1: liked and continue to like into next year. Okay, that's
Speaker 1: what you like. What don't you like? What's ugly here? Yeah? Well,
Speaker 1: always stick with bonds. I mean how bonds by bounce
Speaker 1: a little bit here, but I mean we still think
Speaker 1: this this this inflation that's here, rates a little higher,
Speaker 1: potentially could stick around a little longer. So we still
Speaker 1: say maybe avoid you know, kind of avoid bonds here,
Speaker 1: and you know, things like gold and some of those
Speaker 1: areas we're not. We don't like some of those more
Speaker 1: pure defensive plays. Again, we think really equities are the best.
Speaker 1: You don't want to pick up a little bit of
Speaker 1: yield on the tenure for ten years over pretty juicy.
Speaker 1: I mean yeah, well, now you're right. And again we're
Speaker 1: not saying outright avoid bonds or just at the money
Speaker 1: that we run for our advisors here we at Carson Group,
Speaker 1: we are we're just still underweight fixed income relative two stocks.
Speaker 1: We think stocks do a lot better than four percent
Speaker 1: The next in years. It's the best way to put it. Well,
Speaker 1: what about if we do get that FED pause, maybe
Speaker 1: even a FED pivot over the coming year, then would
Speaker 1: you buy bonds? What would what would change your attitude? Yeah, well,
Speaker 1: the way we have our bond structure right now, we've
Speaker 1: shortened up duration right now. Maybe if we did get
Speaker 1: a FED pivot, you could short you can expand your
Speaker 1: duration a little bit. Maybe don't quite go to twenty
Speaker 1: of your treasuries, but ten your treasuries are kind of
Speaker 1: you know, kind of how we would how we do it.
Speaker 1: But but still I think we just still think the
Speaker 1: opportunity lies in inequities the next twelve months. Here, what
Speaker 1: do you do with energy? Right now? It's had such
Speaker 1: an amazing run. It doesn't seem to want to go
Speaker 1: anywhere anytime soon. What do you do? Yeah, maybe you
Speaker 1: can finally catch its breath right after the huge rally
Speaker 1: that it's had. But I'll put it like this, we
Speaker 1: still like energy. Any pullbacks, we'd buy it. Here's what
Speaker 1: I like about it. It It makes up about five if
Speaker 1: the SMP five It was over ten of the SMP
Speaker 1: five hundred back in two thousand eight. This trend only
Speaker 1: for two years now energies, maybe less than two years.
Speaker 1: Energy has been going up relative to tech. You tend
Speaker 1: to get these trends that last years. And I know
Speaker 1: that sounds odd to a lot of people, but the
Speaker 1: truth is these trends can last. So again, energy, it's
Speaker 1: had a heck of a run. The least think gets
Speaker 1: longer term next couple of years. It could still be
Speaker 1: a group that could do quite well. You know. I
Speaker 1: gotta say, it's interesting to hear that you're bullish on
Speaker 1: energy when you marry that with your inflation view, that
Speaker 1: maybe we have seen the crest, because usually I think
Speaker 1: of energy as an inflation hedge. But maybe that's too simplistic.
Speaker 1: Maybe I'm revealing myself here. No, you're right, I mean
Speaker 1: there's there's a little bit of that there. And you
Speaker 1: guys talked about the dollar a minute ago, right, I
Speaker 1: mean we've all seen it, right, the dollar has had
Speaker 1: a huge pullback. You know if the dollar pulls back, well,
Speaker 1: what tends to benefit from those areas well? It is
Speaker 1: your more materials and your potential energy. And honestly, of gold,
Speaker 1: I said, we're not crazy about gold, but historically that
Speaker 1: could do a little better. But a weaker dollar could
Speaker 1: help material and energy for sure. Um, talk to me
Speaker 1: a little bit about how you're understanding the next two months.
Speaker 1: I heard that you said November tends to be good,
Speaker 1: et cetera. How much of the price action that we're
Speaker 1: going to see over the next eight weeks is going
Speaker 1: to be the end of year book squaring. I mean
Speaker 1: sort of rather than fundamental, we're just building on any
Speaker 1: momentum because people got to sell the stuff by the stuff,
Speaker 1: show their investors that they all this stuff. Yeah, well
Speaker 1: it could be a good deal of that. That's a
Speaker 1: great point because again, you know, in earlier in the
Speaker 1: middle of October, you know, when the market was down,
Speaker 1: nobody on dequities in right, we saw to put the
Speaker 1: call ratio something like twenty year highs and puts the
Speaker 1: call ratio as you look at how people are positioned.
Speaker 1: Nobody was expecting an interview rally. Now we're getting some
Speaker 1: of it, and they're absolutely could be that chase kind
Speaker 1: of to the finish line. And you honestly kind of
Speaker 1: see that a lot of times. And then then with
Speaker 1: the FED that likely its pivoting with some better inflation data.
Speaker 1: All of it kind of adds up to uh, potentially
Speaker 1: you stock you know, a good deal higher than they
Speaker 1: are right now by the time you know the New
Speaker 1: Year's ball drops, Ryan, we haven't had a minute or
Speaker 1: so left. I cannot let you go without asking about
Speaker 1: crypto and some shape or form. I'm not gonna ask
Speaker 1: for your bitcoin price target. But when you think about
Speaker 1: the events of the past week, do you see any
Speaker 1: spillover effects into traditional markets? Well, I'll tell you we
Speaker 1: did two days ago, or guess to the election day
Speaker 1: on Tuesday. We saw some of that. But I'll tell
Speaker 1: you what you know. If you'd have told me that
Speaker 1: socks are having their best week since June with the
Speaker 1: disaster that we've seen with crypto this week, I don't
Speaker 1: know if I would have believed you. But that's what's
Speaker 1: happening right that's telling us the risk risk assets, specifically
Speaker 1: equities are doing well and they're shaking off this extreme
Speaker 1: negativity in crypto, and that's uh. I think it's one
Speaker 1: more positive sign for investors to think that the lows
Speaker 1: indeed like their introrequities. Real quick, what are you watching
Speaker 1: next week? What's gonna be a catalyst here for you? Oh? Gee,
Speaker 1: it's kind of We're heading into the end of earning
Speaker 1: season and you know, I guess we're gonna start thinking
Speaker 1: about eating some turkey. So it's hopefully we just catch
Speaker 1: our breath. Honestly, after this big rally, we're gonna see
Speaker 1: is how much of the rally we give back? Right,
Speaker 1: we just kind of hang tough and catch our breath.
Speaker 1: And historically the ladder half of Novembers when things are
Speaker 1: historically stronger. So let's just catch our breath. Next week,
Speaker 1: are ready some turkey and within to your rally will continue.
Speaker 1: That sounds like a great plan. I'm going to take
Speaker 1: you up on that. Thanks for listening to Bloomberg Business Week.
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