WEBVTT - Citi's Dirk Willer on How You Know When the Bubble Is Over 0:00:02.720 --> 0:00:15.880 Bloomberg Audio Studios, Podcasts, radio News. 0:00:18.680 --> 0:00:21.720 Hello and welcome to another episode of The Odd Lots Podcast. 0:00:21.760 --> 0:00:24.120 I'm Jill Wisenthal and I'm Tracy Alloway. 0:00:24.239 --> 0:00:26.720 Tracy, Market's getting interesting again. 0:00:26.920 --> 0:00:28.360 I love interesting markets. 0:00:28.400 --> 0:00:28.639 We do. 0:00:28.960 --> 0:00:31.880 We always say we're long volatility. That's right here at 0:00:31.880 --> 0:00:35.560 the Odd Lots Podcast. All financial journalists are long volatility. 0:00:35.600 --> 0:00:37.440 I guess yes. I mean you can actually see it 0:00:37.479 --> 0:00:41.760 in the listeners and readership numbers. Our traffic follows the. 0:00:41.760 --> 0:00:46.400 Vin there's some bad incentives. Yeah, perhaps perhaps, but if 0:00:46.440 --> 0:00:48.120 it bleeds at leads. I mean they've been saying this 0:00:48.120 --> 0:00:49.000 about the news forever. 0:00:49.120 --> 0:00:49.479 Yeah. 0:00:49.520 --> 0:00:53.840 So at the moment, we are recording this on Friday, November. 0:00:53.520 --> 0:00:55.160 Fourteenth, at ten oh seven am. 0:00:55.280 --> 0:00:56.760 Yeah, we have to say that we have to be 0:00:56.840 --> 0:00:59.880 very specific because things are changing so fast. At the moment, 0:01:00.120 --> 0:01:02.400 the S and P five hundred is down like zero 0:01:02.440 --> 0:01:05.560 point seven percent, but it was down more than one 0:01:05.600 --> 0:01:08.240 percent earlier, and then yesterday it fell, you know, one 0:01:08.240 --> 0:01:11.920 point eight percent. So this is a pretty substantial slide. 0:01:11.959 --> 0:01:13.840 And of course it comes at a time when people 0:01:13.880 --> 0:01:18.800 were already worried about things like tech valuations and the 0:01:18.840 --> 0:01:20.400 possibility of an AI bubble. 0:01:20.560 --> 0:01:23.479 Totally. The US DOC market has had a phenomenal year, 0:01:23.640 --> 0:01:25.920 and this is all kind of minor in the grand 0:01:25.959 --> 0:01:29.200 scheme of things, but some of the moves haven't been 0:01:29.240 --> 0:01:32.360 that minor for some big things. It is some of 0:01:32.400 --> 0:01:35.399 the most volatile period since April. Really, I mean, it's 0:01:35.440 --> 0:01:37.440 kind of been a smooth rite up since the end 0:01:37.480 --> 0:01:40.120 of April or the middle of April, whenever that bottom. 0:01:40.319 --> 0:01:42.839 There's just a lot going on questions about the FED. 0:01:43.200 --> 0:01:46.080 Gold interestingly had a massive year, and it also is 0:01:46.120 --> 0:01:48.200 selling off, so that sort of raises the question about 0:01:48.200 --> 0:01:52.920 what's been driving gold Bitcoin getting absolutely clobbered. Of course, 0:01:52.960 --> 0:01:54.920 you know, it's sort of a glorified tech stock and 0:01:55.000 --> 0:01:58.440 the way it trades, so many interesting things, so many 0:01:58.440 --> 0:02:00.600 market winners fading a little bit. 0:02:01.080 --> 0:02:04.040 You know, it was really interesting this morning. For a second, 0:02:04.600 --> 0:02:07.480 bonds weren't really doing anything. They weren't rallying, And so 0:02:07.720 --> 0:02:09.600 if you can't go into gold, if you can't go 0:02:09.639 --> 0:02:11.840 into bonds, if everything's selling off at the same time, 0:02:11.880 --> 0:02:12.800 that seems kind of worried. 0:02:12.880 --> 0:02:15.560 Well, this is really interesting and probably needs to be 0:02:15.639 --> 0:02:18.400 discussed more. But you're absolutely right. I think yields on 0:02:18.440 --> 0:02:22.720 the tenure were actually up yesterday, November thirteenth. In the 0:02:22.800 --> 0:02:25.520 last week I was looking at the work function on 0:02:25.520 --> 0:02:27.880 the Bloomberg terminal. Odds of a December rate cut have 0:02:27.960 --> 0:02:30.280 come in quite a bit. It's closer to a coin flip. 0:02:30.320 --> 0:02:32.760 A week ago is sixty six percent. There have been 0:02:32.800 --> 0:02:36.720 some speeches from some of the FMC members talking about 0:02:36.880 --> 0:02:39.400 you know, they're uncertain, and part of the reason were 0:02:39.440 --> 0:02:41.320 uncertain because we've had so little data. I guess we're 0:02:41.320 --> 0:02:42.960 going to start getting data again now that. 0:02:42.919 --> 0:02:45.000 The although it's still going to be messy. 0:02:44.760 --> 0:02:47.640 It's still going to be super messy. You know, Understanding 0:02:47.680 --> 0:02:49.280 the economy in real time is hard in the best 0:02:49.280 --> 0:02:51.640 of times. It's really hard when there's no data, and 0:02:51.680 --> 0:02:54.639 then it's really hard when the data that does come 0:02:54.680 --> 0:02:56.800 out is going to be driven by the lack of 0:02:57.200 --> 0:03:00.000 government employment, which then make the data even more ambiguos. 0:03:00.280 --> 0:03:03.000 So a million questions, very interesting moment in a very 0:03:03.000 --> 0:03:05.040 interesting year for markets. We sort of got to get 0:03:05.040 --> 0:03:06.360 a better understanding of what's going on. 0:03:06.520 --> 0:03:08.240 Can I say one more thing before we get to 0:03:08.280 --> 0:03:10.560 our guest, which is I think part of the discussion 0:03:10.560 --> 0:03:12.639 at the FED. We're kind of getting very circular here 0:03:12.639 --> 0:03:14.960 because I suspect what's happening is, yes, the FED is 0:03:15.000 --> 0:03:18.720 worried about inflation, so some FOMC members are getting a 0:03:18.720 --> 0:03:21.680 little bit more hawkish in their speech. I think they're 0:03:21.720 --> 0:03:26.360 worried about AI bubble possibilities and valuations as well. And 0:03:26.400 --> 0:03:29.600 the longer they heat right slow, the longer this goes on, 0:03:29.760 --> 0:03:32.120 and then maybe the mess is even bigger when they 0:03:32.120 --> 0:03:33.920 eventually have to clean it up totally. 0:03:34.000 --> 0:03:36.600 All kinds of crosswinds, yea to speak well. Anyway, I'm 0:03:36.680 --> 0:03:38.800 very excited to say that we do indeed have the 0:03:38.800 --> 0:03:41.640 perfect guest, someone we've never had on the show before, 0:03:41.680 --> 0:03:43.440 but very excited to talk to him. We're going to 0:03:43.480 --> 0:03:45.440 be speaking with Dirk Villa. He is the head of 0:03:45.560 --> 0:03:48.920 Global macro strategy at City. He brought us a book 0:03:48.920 --> 0:03:52.240 to that he co authored, Trading Fixed Income and FX 0:03:52.480 --> 0:03:53.600 and Emerging Markets. 0:03:53.920 --> 0:03:55.800 It's going to be useful in the US, I know. 0:03:55.960 --> 0:03:59.000 That's the thing. It's like suddenly all these em veterans like, 0:03:59.080 --> 0:04:01.880 let's tell you how some of these things really works. So, Derek, 0:04:01.960 --> 0:04:04.160 thank you so much for coming on the podcast. 0:04:04.200 --> 0:04:06.320 Great to be here. Thanks for the invite to ask. 0:04:06.160 --> 0:04:08.400 You a question. If you went back, say a month 0:04:08.440 --> 0:04:11.640 ago or a month and a half ago, you're talking 0:04:11.640 --> 0:04:14.680 to clients, et cetera. Did you ever encounter a single bear? 0:04:15.600 --> 0:04:17.719 I mean, I'm trafficking more among the macro people than 0:04:17.760 --> 0:04:20.160 the equity folks, sure, and the macro guys always half 0:04:20.160 --> 0:04:22.880 class empty, right, So that you did find some bears, 0:04:23.279 --> 0:04:25.920 and I would say, actually only a few weeks ago 0:04:26.279 --> 0:04:29.600 that disappeared because there was a really strong buying into 0:04:29.680 --> 0:04:33.760 the center, really right, So meaning November and December have 0:04:33.920 --> 0:04:39.320 exceptionally positive seasonality always, and they've even better seasonality risk 0:04:39.440 --> 0:04:42.960 and risk and exactly. So I think the bears that 0:04:43.040 --> 0:04:46.000 we found disappeared over the last few weeks. So maybe 0:04:46.400 --> 0:04:48.840 just at the wrong time you value, but that's how 0:04:48.880 --> 0:04:49.440 it goes. 0:04:49.279 --> 0:04:53.000 Right, Yeah, How do you officially measure sentiment in this market? 0:04:53.040 --> 0:04:56.760 I'm always curious because obviously everyone has different methodologies, but 0:04:57.080 --> 0:05:01.040 sentiment seems quite key. When you're talking about a ball 0:05:01.120 --> 0:05:04.880 run that's really driven by tech stocks and this AI narrative, 0:05:05.120 --> 0:05:06.960 the story becomes so important. 0:05:07.400 --> 0:05:10.040 It's actually really key to this because if you were 0:05:10.120 --> 0:05:12.120 to say, listen, this is the top of a bubble 0:05:12.160 --> 0:05:15.240 or something, you'd have to see really really into the 0:05:15.360 --> 0:05:18.839 ztic sentiment and we never quite saw that. My favorite 0:05:18.839 --> 0:05:22.960 indicator is because the polls indicated stands for positioning and 0:05:23.200 --> 0:05:26.120 various other things, and that is something that we put 0:05:26.120 --> 0:05:28.760 out and that worked really really well this year and 0:05:28.839 --> 0:05:31.280 actually the last five years for that matter, and that 0:05:31.440 --> 0:05:34.800 never went into territory that really told us to be cautious. 0:05:35.080 --> 0:05:37.400 We do a bunch of surveys, so we survey all 0:05:37.400 --> 0:05:41.360 the big asset allocators worth the futrillion in asset under management, 0:05:41.880 --> 0:05:45.840 and they never got as bullish on US equities because 0:05:46.320 --> 0:05:50.400 after April there was a big move outside of US equities, 0:05:50.400 --> 0:05:54.440 as you know, and they never really fully jumped into 0:05:54.480 --> 0:05:56.640 the US equity market as much as they went outside 0:05:56.680 --> 0:05:58.400 of the US. So we always thought, you know what, 0:05:59.240 --> 0:06:02.599 there are certain stories here that definitely remind us of 0:06:02.640 --> 0:06:05.480 two thousand of a bubble, and on our definition, actually 0:06:05.920 --> 0:06:08.479 it is a bubble, but it's not close to the 0:06:08.560 --> 0:06:12.560 end of it. And one missing component was really the 0:06:12.560 --> 0:06:15.320 sentiment that never got as extreme on our measures. 0:06:15.560 --> 0:06:18.000 We're definitely going to get more into the bubbles, especially 0:06:18.000 --> 0:06:20.120 the two thousands. But before that, I want to ask, 0:06:20.400 --> 0:06:24.200 how do you square I guess non frenzied sentiment with 0:06:24.520 --> 0:06:28.160 the amount of announcements that we're getting from companies. We're 0:06:28.200 --> 0:06:31.279 joking on the podcast that every day while we're recording 0:06:31.320 --> 0:06:34.039 this in studio, we get a new headline that, you know, 0:06:34.120 --> 0:06:37.040 Anthropic is going to spend fifty billion on data centers, 0:06:37.160 --> 0:06:39.479 or someone else is going to spend one hundred billion. 0:06:39.520 --> 0:06:40.520 It just goes on and on. 0:06:41.160 --> 0:06:42.800 Yes, that is, It's very true. 0:06:42.839 --> 0:06:46.000 I mean, I think the market is starting to question 0:06:46.080 --> 0:06:47.920 those numbers a little bit. Right when the Oracle deal 0:06:48.000 --> 0:06:51.039 came out, for example, the stock jumped. Guess what, We're 0:06:51.040 --> 0:06:53.160 back to where we were before the deal was announced. 0:06:53.480 --> 0:06:56.280 So I think there is a certain sense of skepticism 0:06:56.440 --> 0:06:59.359 a party because some people think they've seen all that before, right, 0:06:59.480 --> 0:07:01.320 and people bullish. I'm not telling you they're bearish. 0:07:01.320 --> 0:07:04.560 I'm just telling you they're not as excited as you 0:07:04.640 --> 0:07:05.560 might have expected. 0:07:05.680 --> 0:07:07.600 Just watching the price action, I think that is more 0:07:07.880 --> 0:07:11.320 than us here and the actually none of the indicators 0:07:11.320 --> 0:07:14.200 suggests that. I mean you, I'm sure everyone has their 0:07:14.240 --> 0:07:17.000 own favorite, but it's really very rare to find one 0:07:17.000 --> 0:07:19.360 that tells you, you know what, this is in line with 0:07:19.400 --> 0:07:20.800 what you've seen at other market tops. 0:07:21.240 --> 0:07:23.160 You know what, since we've never had you on the 0:07:23.200 --> 0:07:25.840 podcast before and you know, the author of a book 0:07:25.880 --> 0:07:28.160 on and you have a great job global head of 0:07:28.200 --> 0:07:30.600 macro Strategy City. What do you give us the sixty 0:07:30.640 --> 0:07:33.280 second background of what you do and how you got here, 0:07:33.320 --> 0:07:35.680 like what's your job? And yeah, okay, how'd you land here? 0:07:36.240 --> 0:07:36.440 Yeah? 0:07:36.480 --> 0:07:40.040 I came over to the US in ninety nine. Essentially 0:07:40.040 --> 0:07:43.120 it's joining a macro hedg fund. We traded back then 0:07:43.400 --> 0:07:45.960 and again right now. Actually, I think it's all about 0:07:46.040 --> 0:07:48.200 the bubble. That's the single biggest call. Everything else will 0:07:48.200 --> 0:07:50.920 fall into place. Whenever the bubble bursts, the dollar weekends, 0:07:50.960 --> 0:07:53.240 the FED rates will go to zero on maybe not 0:07:53.280 --> 0:07:56.640 quite to zero, but you could AGGRESSI effect. So everything 0:07:56.880 --> 0:07:58.080 that's what you have to focus on. 0:07:58.400 --> 0:08:00.200 And so even though I joined. 0:08:00.160 --> 0:08:03.200 The hedge fund back then as an em specialist, very 0:08:03.240 --> 0:08:05.680 quickly I looked into companies because we really had to 0:08:05.680 --> 0:08:08.960 figure out when is this dot com bubble over? And 0:08:09.000 --> 0:08:11.320 then we you know, we traded very successfully actually the 0:08:11.760 --> 0:08:14.400 run up and the run down, although I would say 0:08:14.560 --> 0:08:17.920 it's way very hard to trade a beer market because 0:08:17.960 --> 0:08:20.080 these bear market valies are really quite vicious, and so 0:08:20.120 --> 0:08:21.520 in the end, all the money was made being long 0:08:21.560 --> 0:08:24.440 fixed in come rather than being short equities, but broady speaking, 0:08:24.480 --> 0:08:28.120 that was me shifting from emerging markets to global macro, 0:08:28.160 --> 0:08:28.520 if you like. 0:08:29.040 --> 0:08:29.880 But then I went back. 0:08:29.800 --> 0:08:32.720 To the buyside party because you know, the particular hedge 0:08:32.720 --> 0:08:34.880 fund never became as poolish again on the bull market, 0:08:35.240 --> 0:08:37.440 having been successful bearish for a long time. 0:08:37.800 --> 0:08:41.640 So people are cursed by good luck getting bear markets 0:08:41.720 --> 0:08:44.360 right and then ver rare haunted by that for the 0:08:44.360 --> 0:08:45.400 rest of their career. 0:08:45.559 --> 0:08:46.880 Very rare, very rare. 0:08:47.440 --> 0:08:51.160 But yeah, So at Citybank, I covered emerging markets for 0:08:51.160 --> 0:08:53.840 a long long time and switched back to global macro 0:08:53.960 --> 0:08:56.600 a few years ago. And and as you can imagine, 0:08:57.000 --> 0:09:01.600 it's mostly speaking to hedge fund clients, to some money clients, 0:09:01.640 --> 0:09:04.880 some corporates. What we do a bit differently is that 0:09:05.040 --> 0:09:07.480 I have a big quant team, So essentially we back 0:09:07.520 --> 0:09:09.800 test everything under the sun, at least to get your 0:09:09.800 --> 0:09:12.040 price right. Things are always lightly different, but I think 0:09:12.080 --> 0:09:13.760 it's very important to have the right prize, and that's 0:09:13.760 --> 0:09:15.680 what the back tests give you. So we have a 0:09:15.679 --> 0:09:20.120 big quant effort, be a very trade sort of aggressive 0:09:20.160 --> 0:09:22.600 and putting a lot of trades out and Martin carefully 0:09:23.240 --> 0:09:25.839 and and I have a bigger major market angle than most, 0:09:25.880 --> 0:09:28.600 which I still think is extremely helpful in this environment. 0:09:29.320 --> 0:09:31.520 So since you've been around for a while, let's talk 0:09:31.520 --> 0:09:34.480 about the two thousands dot com bubble or nineteen ninety 0:09:34.520 --> 0:09:38.319 nine two thousand dot com bubble. Obviously people are using 0:09:38.400 --> 0:09:40.840 that as an analogy for this period of time. But 0:09:40.960 --> 0:09:44.240 we had someone in our discord actually shout out to 0:09:44.280 --> 0:09:49.280 Burflyer asking, yeah, asking whether or not people were talking 0:09:49.280 --> 0:09:52.480 about dot com stocks tech stocks being in a bubble 0:09:52.720 --> 0:09:56.360 the way people are talking about AI stocks tech stocks 0:09:56.400 --> 0:09:59.920 being in a bubble. Now, what's your experience? You know 0:10:00.120 --> 0:10:01.200 more than twenty years ago. 0:10:01.679 --> 0:10:04.120 Back then it was even clearer than now. I mean, 0:10:04.120 --> 0:10:06.439 if you remember NaSTA when the fifty percent. 0:10:06.240 --> 0:10:10.120 In Q four, Yeah, and. 0:10:10.520 --> 0:10:12.880 I remember some stories and we had some analyst pictures 0:10:12.920 --> 0:10:15.640 all the time. So there was an analyst for Nokia 0:10:15.720 --> 0:10:17.640 who said, don't worry that we need more than one 0:10:17.679 --> 0:10:21.320 hundred percent cell phone penetration in the world because Petsville 0:10:21.720 --> 0:10:23.160 were cell phone like. 0:10:24.760 --> 0:10:26.200 It wasn't wrong, but. 0:10:27.800 --> 0:10:31.400 So you get My favorite pitch was for Akamai, where 0:10:31.480 --> 0:10:34.880 when analyst said, you know what, the reason why the 0:10:34.920 --> 0:10:37.800 company will do well is the only three people who 0:10:37.920 --> 0:10:41.960 understand the formula. That's that's basically at the base of it, 0:10:42.000 --> 0:10:44.719 and all three works for akama So I don't worry and. 0:10:44.720 --> 0:10:46.320 No worry about it. We knew it. 0:10:46.600 --> 0:10:49.960 It's literally there's just no one who could ever replicate 0:10:50.000 --> 0:10:52.600 this technology because only three people who could build it, 0:10:52.600 --> 0:10:54.400 and they got it right. 0:10:54.640 --> 0:10:58.400 These type of things happened back then, and of course 0:10:58.440 --> 0:11:00.599 not to pick on Akamai, but it know it. It 0:11:00.760 --> 0:11:02.600 went up from I don't know thirty to three hundred 0:11:02.679 --> 0:11:04.760 after the IPO and back to one. 0:11:05.080 --> 0:11:07.959 You know this is yah. Yeah, these type of things happened, which. 0:11:07.880 --> 0:11:09.360 That was one of the more legit companies. 0:11:09.440 --> 0:11:10.560 Yeah you know that exists. 0:11:10.880 --> 0:11:13.240 Yeah I don't Yeah, I'm not covering them or anything, 0:11:13.280 --> 0:11:14.400 so I don't comment. 0:11:14.440 --> 0:11:15.560 But yeah, yeah, yeah. 0:11:15.880 --> 0:11:18.240 This reminds me of what you always say, Joe, things 0:11:18.280 --> 0:11:20.360 can always get crazier, right, Yeah. 0:11:20.480 --> 0:11:22.800 Yeah, it really does feel like you see some event, 0:11:23.040 --> 0:11:24.920 you know, like there was that you know what I 0:11:24.920 --> 0:11:27.599 was thinking about when Jensen wan I think it was 0:11:27.600 --> 0:11:30.000 about a year ago now, maybe nine months ago. Remember 0:11:30.080 --> 0:11:33.760 he signed a woman's brat, right, remember, and everyone's like, oh, 0:11:33.800 --> 0:11:36.320 this has got to be the top, right, because that's 0:11:36.320 --> 0:11:40.800 just one of those things. A semiconductor top signed, that's right. 0:11:41.679 --> 0:11:44.760 You know, it's like why a CEO of semiconductor company 0:11:44.800 --> 0:11:47.800 getting like legit rock star treatment and how much is 0:11:47.800 --> 0:11:50.000 in video up since then? Setting aside some of the 0:11:50.040 --> 0:11:53.800 recent wobbles, there is no point where you can definitively say, oh, 0:11:53.880 --> 0:11:57.000 this is the people, right, There's always it could always 0:11:57.000 --> 0:11:57.439 get weirder. 0:11:57.520 --> 0:11:59.840 Yeah. You know what gives me sleepless nights is actually 0:12:00.200 --> 0:12:02.559 that the two thousand episode is not the right benchmark, right, 0:12:02.559 --> 0:12:04.880 because if you use two thousand, you could say. 0:12:04.760 --> 0:12:06.600 Everything's fine, Yeah, everything fine, very bad. 0:12:06.679 --> 0:12:08.439 But of course not every bubble has to get as 0:12:08.480 --> 0:12:10.800 crazy as the two thousand one, you know. I mean 0:12:11.240 --> 0:12:14.080 it wasn't extreme even by bubble standards, so that is 0:12:14.120 --> 0:12:16.440 a bit of a risk if you focus too much 0:12:16.480 --> 0:12:17.000 on that one. 0:12:17.080 --> 0:12:21.040 Do you have a preferred historical analogy for our current period? 0:12:21.440 --> 0:12:23.560 And I do think two thousand is probably the closest, 0:12:23.600 --> 0:12:26.360 just because it was also very tech heavy and it 0:12:26.440 --> 0:12:29.240 had a big CAPEX built out attached to it, so 0:12:29.320 --> 0:12:30.040 that makes it good. 0:12:30.080 --> 0:12:31.559 I mean, the nineteen twenty nine mines. 0:12:31.440 --> 0:12:33.719 Of All the Mother of All Bubbles, if you like, 0:12:34.040 --> 0:12:37.720 and that was about you know, like cars and electrification 0:12:37.960 --> 0:12:43.240 and consumer gadgets and appliances rather, so you could use that, 0:12:43.520 --> 0:12:45.040 and that is actually the one that people used in 0:12:45.040 --> 0:12:47.360 two thousands. So you always go one bubble back if 0:12:47.400 --> 0:12:50.280 you like to make your case and to argue maybe 0:12:50.280 --> 0:12:53.000 why things can go very crazy. But I think here 0:12:53.040 --> 0:12:54.480 the many things at rhyme. 0:13:10.440 --> 0:13:13.240 So one thing that Tracy brought up in the intro, 0:13:13.320 --> 0:13:17.200 which is very important, is that rates in the recent 0:13:17.280 --> 0:13:20.080 days haven't come down that much. Today they're down a 0:13:20.120 --> 0:13:23.760 little bit, but by and large it's not like treasuries 0:13:23.800 --> 0:13:26.600 have been this great life preserver when the rest of 0:13:26.600 --> 0:13:29.439 your portfolio isn't working. In fact, actually right now and 0:13:29.679 --> 0:13:32.319 doing time stamps again, we're back at four point one one. 0:13:32.360 --> 0:13:35.080 We were down at four point h six earlier round nine. 0:13:35.320 --> 0:13:37.760 So even that once again we don't see this bid 0:13:37.840 --> 0:13:40.719 into treasuries. Rates are sort of down overall for the 0:13:40.800 --> 0:13:42.760 year a little bit, but there's not this desire to 0:13:42.760 --> 0:13:44.560 grab them talk to us about what's going on in 0:13:44.559 --> 0:13:44.920 that space. 0:13:45.200 --> 0:13:47.480 I think the reason is that a lot of the 0:13:47.520 --> 0:13:49.760 bullishness of the last three weeks was based on one 0:13:50.280 --> 0:13:53.640 simple statement is saying, listen, we're building a bubble and 0:13:53.679 --> 0:13:57.319 the FED is cutting into that. That never happened before it, right, 0:13:57.440 --> 0:14:00.360 And obviously in two thousand the hike behind the seventy 0:14:00.360 --> 0:14:03.040 five bass points, they hiked fifty basis points after the 0:14:03.080 --> 0:14:04.880 bubble had already beaked. So I mean, you know, they 0:14:05.360 --> 0:14:06.719 and they had inflation that it was not. 0:14:06.720 --> 0:14:07.400 Without any reason. 0:14:07.440 --> 0:14:10.600 But for sure, it's very unusual for the FED to 0:14:10.640 --> 0:14:14.160 cut into a bubble, and that was a great both thesis. 0:14:14.240 --> 0:14:15.800 And so now we're doubting that a little bit, right, 0:14:15.840 --> 0:14:18.200 I mean, so they are basically having a feed that 0:14:18.280 --> 0:14:19.160 might be more hawkish. 0:14:19.200 --> 0:14:22.720 December went to fifty to fifty essentially, and so if. 0:14:22.560 --> 0:14:25.840 You remove that plank of the argument, value should be 0:14:25.840 --> 0:14:28.560 all in inequity, it has consequences, right, And so we 0:14:28.680 --> 0:14:31.000 warbled a little bit for that reason. But I mean 0:14:31.040 --> 0:14:33.480 I would also remember, I mean, the hiked one hundred 0:14:33.520 --> 0:14:35.600 and seventy five basis points before the bubble peaked in 0:14:35.640 --> 0:14:38.240 two thousand, right, So will it be the end of 0:14:38.280 --> 0:14:40.640 the equitiable market if the FED doesn't go I mean, 0:14:40.840 --> 0:14:42.200 I doubt it. 0:14:42.640 --> 0:14:44.640 Talk to us a little bit about these doubts that 0:14:44.680 --> 0:14:47.680 are creeping in for December. I mean, we're truly in 0:14:47.680 --> 0:14:50.240 a fog for multiple reasons. Because even if we had 0:14:50.280 --> 0:14:54.119 government data. I'm sure the conditions plenty of different crosswinds. 0:14:54.160 --> 0:14:56.560 We don't have the government data, but like one thing 0:14:56.600 --> 0:14:58.800 we do seem to know is that hiring has been 0:14:59.200 --> 0:15:01.200 very weak and so fourth and several of the months 0:15:01.240 --> 0:15:03.800 almost certainly that would be the case for October and 0:15:03.840 --> 0:15:06.600 November if we had clear indications on it. What is 0:15:06.720 --> 0:15:09.320 the reluctance right now? Why is it a coin flip? 0:15:09.560 --> 0:15:09.720 Yeah? 0:15:09.760 --> 0:15:12.120 I mean well, I think the single biggest thing is, 0:15:12.160 --> 0:15:13.520 of course, all the comments were getting out of the 0:15:13.560 --> 0:15:16.400 FED right, and we had you know that, the tweet 0:15:17.160 --> 0:15:18.920 earlier this week, and so in the end, if you 0:15:18.960 --> 0:15:21.200 try to forecast the FAT, you better listen to what 0:15:21.240 --> 0:15:21.720 you're saying. 0:15:22.200 --> 0:15:26.240 They were exactly given the weakness, so that I think 0:15:26.360 --> 0:15:28.440 the question is of course all about the job right. 0:15:28.440 --> 0:15:30.240 The reason is a job market inflation. 0:15:30.480 --> 0:15:32.720 You can argue maybe tele inflation were not tr up 0:15:32.760 --> 0:15:35.480 so far it has been way benign. Some FAT members 0:15:35.520 --> 0:15:37.960 believe it's s throwing up, some others don't. But I 0:15:37.960 --> 0:15:40.640 think the main crux of the question is the job market. 0:15:40.640 --> 0:15:41.760 How week is it now? 0:15:41.800 --> 0:15:44.000 The Dalla's FAT put a paper out arguing that if 0:15:44.040 --> 0:15:48.120 you get slightly negative net migration. The break even NFP 0:15:48.480 --> 0:15:51.680 is thirty k. If you get slightly positive net migration 0:15:51.840 --> 0:15:54.920 sixty k, so that that is somewhere the range where 0:15:54.920 --> 0:15:57.560 these days and FP should come in without there being 0:15:57.600 --> 0:15:59.600 a problem. Right, So if you if, then if p 0:15:59.760 --> 0:16:04.960 press and of course September we know is somewhat artificially strong. October, 0:16:05.120 --> 0:16:07.760 if we get it, would be artificially weak due to 0:16:07.880 --> 0:16:12.040 the government buyouts. November is a really interesting one that 0:16:12.120 --> 0:16:14.280 might have a bit of an impact from the shutdown 0:16:14.360 --> 0:16:16.400 and so forth, so that may really clean one. Maybe 0:16:16.400 --> 0:16:17.880 we have to dad even longer. But let's say we 0:16:17.960 --> 0:16:20.720 take November is as good as it gets for now. 0:16:21.080 --> 0:16:24.520 So if that is below thirty, there'll be a cut, right, 0:16:24.560 --> 0:16:27.880 If it's below sixty, there'll be probably no cut. It's 0:16:27.960 --> 0:16:30.960 somewhere in between. They'll find it out. But without that data, 0:16:31.040 --> 0:16:35.080 it's just hard to you know, reassure the market yes. 0:16:34.960 --> 0:16:36.320 There'll be a cut, or no, there won't be. 0:16:36.360 --> 0:16:38.960 So the job market data will be very, very important. 0:16:39.320 --> 0:16:41.840 We've got a lot of alternative data sources. Of course, 0:16:41.880 --> 0:16:44.000 in the meantime, by be wading, they were a bit 0:16:44.040 --> 0:16:46.640 on the weakish side. So that's why the city call 0:16:46.720 --> 0:16:49.920 is actually for a cut, I mean the noises out 0:16:49.920 --> 0:16:52.520 of there from seever certainly a little bit all over 0:16:52.560 --> 0:16:53.880 the place, so it's not that obvious. 0:16:54.160 --> 0:16:56.520 Yeah, and a lot can still change between now and 0:16:56.600 --> 0:16:59.960 the meeting. Okay, so if everyone I mean I realized, 0:17:00.120 --> 0:17:02.280 not everyone agrees it's a bubble. But for the sake 0:17:02.320 --> 0:17:04.840 of this argument, let's say we all know it's a bubble. 0:17:06.280 --> 0:17:09.200 It seems like one of the things that happened, especially 0:17:09.200 --> 0:17:12.480 since the financial crisis, is people stopped running away from 0:17:12.520 --> 0:17:15.919 bubbles and started running into them, right, and so everyone 0:17:15.960 --> 0:17:18.080 wants to make money very very quickly. So if you 0:17:18.119 --> 0:17:21.879 see the line continuously going up, you just join the party, 0:17:22.720 --> 0:17:25.400 and everyone assumes that they are smart enough to time 0:17:25.480 --> 0:17:27.760 the top of the bubble and get out at the 0:17:27.840 --> 0:17:31.119 right point. What's your take on how long this is 0:17:31.160 --> 0:17:33.800 actually going to go on for and what are you 0:17:33.880 --> 0:17:36.920 looking at in terms of actually spotting that top other 0:17:36.960 --> 0:17:38.720 than sentiment, which we spoke a bit about. 0:17:38.840 --> 0:17:43.399 Yeah, it's a big question actually even inside city USC strategists. 0:17:42.840 --> 0:17:45.320 It's the cost believe me that it's a bubble. 0:17:45.359 --> 0:17:48.919 But we have a definition, so'll you know, we cannet 0:17:49.080 --> 0:17:51.600 do something. So the definition for us is it's a 0:17:51.640 --> 0:17:54.040 little bit like the GMO one, which is essentially saying 0:17:54.160 --> 0:17:57.040 something goes up more than two standard deviations against the 0:17:57.080 --> 0:17:59.480 long term trend. In real terms, we call it a bubble, right, 0:18:00.040 --> 0:18:01.560 and then whenever you have a big sell off, you 0:18:01.560 --> 0:18:03.480 restart the clock, because when you have a big sell of, 0:18:03.600 --> 0:18:06.639 you essentially the sentiment goes to zero, and so you 0:18:06.680 --> 0:18:07.399 have to rebuild it. 0:18:07.760 --> 0:18:08.520 And on that. 0:18:08.359 --> 0:18:11.840 Framework we end up bubble territory sort of, I guess 0:18:11.920 --> 0:18:14.800 in May June of this year. And when you do that, 0:18:15.160 --> 0:18:17.400 the interesting thing about it is, as you point out, 0:18:17.440 --> 0:18:19.440 it goes up. So once you end up oup the territory, 0:18:19.480 --> 0:18:20.360 you're supposed. 0:18:20.000 --> 0:18:20.439 To buy it. 0:18:21.440 --> 0:18:24.200 And the only time and that didn't happen was nineteen 0:18:24.280 --> 0:18:24.800 twenty nine. 0:18:24.840 --> 0:18:25.840 It went straight down. 0:18:26.080 --> 0:18:27.920