1 00:00:00,440 --> 00:00:03,920 Speaker 1: Strap on your parachute. It's time for What Goes Up 2 00:00:04,120 --> 00:00:13,800 Speaker 1: with Sarah Ponzick and Mike Reagan. Hello and welcome to 3 00:00:13,840 --> 00:00:17,759 Speaker 1: What goes Up, a Bloomberg Weekly Markets podcast. I'm Sarah Ponza, 4 00:00:18,079 --> 00:00:20,960 Speaker 1: reporter on the Cross Asset team, and I'm Mike Reagan, 5 00:00:21,120 --> 00:00:23,759 Speaker 1: a senior editor at Bloomberg. This week on the show, 6 00:00:23,920 --> 00:00:26,800 Speaker 1: the last time our guests joined us was in early March. 7 00:00:27,280 --> 00:00:29,440 Speaker 1: The SMP five hundred had fallen a little bit more 8 00:00:29,480 --> 00:00:31,800 Speaker 1: than ten percent at the time. We were all still 9 00:00:31,840 --> 00:00:34,760 Speaker 1: in the office together and he said, in essence, belows 10 00:00:34,880 --> 00:00:39,240 Speaker 1: aren't in until DC starts to panic, will stricter social 11 00:00:39,320 --> 00:00:43,120 Speaker 1: isolation measures then took cold, stocks tumbled, and trillions and 12 00:00:43,240 --> 00:00:46,680 Speaker 1: economic stimulus came from Washington and the Fed. Now the 13 00:00:46,760 --> 00:00:49,680 Speaker 1: sp F DRED has risen more than fifty percent since, 14 00:00:49,960 --> 00:00:54,240 Speaker 1: and we'll discuss what's next for markets, fiscal and monetary policy, 15 00:00:54,880 --> 00:00:58,080 Speaker 1: and as always, will close out the episode with our tradition, 16 00:00:58,240 --> 00:01:02,000 Speaker 1: the craziest thing I saw in markets this week? Now, Sarah, 17 00:01:02,040 --> 00:01:06,520 Speaker 1: I was chatting with our chief Crazy Things correspondent, Vildonna 18 00:01:06,600 --> 00:01:10,119 Speaker 1: Hirick before this show, and she's back to giving you 19 00:01:10,160 --> 00:01:13,640 Speaker 1: exclusively all the craziest things she sees. I thought you 20 00:01:13,680 --> 00:01:15,120 Speaker 1: were going to say that she gave you one. I'm 21 00:01:15,120 --> 00:01:17,920 Speaker 1: going to say that she doubled up then and vil 22 00:01:17,920 --> 00:01:20,679 Speaker 1: Donna just needs her own show that because she's just 23 00:01:20,760 --> 00:01:24,480 Speaker 1: coming up with multiple a week. It's it's honestly pretty impressive. 24 00:01:24,760 --> 00:01:26,560 Speaker 1: And she's very proud of this when she said she 25 00:01:26,720 --> 00:01:29,479 Speaker 1: might be her best ever, So you guys should be proud. 26 00:01:29,760 --> 00:01:31,320 Speaker 1: I'm want to say that I think she knows where 27 00:01:31,319 --> 00:01:35,399 Speaker 1: her loyalty lives. Yeah, I'm just gonna break the news 28 00:01:35,440 --> 00:01:38,680 Speaker 1: to you early though that mine's better. So all right, 29 00:01:38,720 --> 00:01:43,600 Speaker 1: you proud as you want. But as you said, uh, Sarah, 30 00:01:43,720 --> 00:01:47,240 Speaker 1: this guest this week was last on the show in March, 31 00:01:47,640 --> 00:01:49,440 Speaker 1: and you know what I was thinking about recently. Do 32 00:01:49,520 --> 00:01:55,160 Speaker 1: you remember your last handshake with someone before the virus lockdown? 33 00:01:55,600 --> 00:01:58,200 Speaker 1: I really don't. Was our guest to your last hand show? 34 00:01:58,240 --> 00:01:59,920 Speaker 1: I think he was. I think he was, and I 35 00:02:00,000 --> 00:02:02,120 Speaker 1: remember when I met him and we both it's like 36 00:02:02,160 --> 00:02:04,280 Speaker 1: a reflex, you both shake hands, and then I think 37 00:02:04,320 --> 00:02:06,440 Speaker 1: we both were like, wait, maybe we shouldn't be shaking hands, 38 00:02:06,840 --> 00:02:08,639 Speaker 1: but that was that was it. He might go down 39 00:02:08,720 --> 00:02:10,840 Speaker 1: as my last hand shake ever. I'm not sure I'll 40 00:02:10,880 --> 00:02:13,519 Speaker 1: ever be comfortable enough to shake it. I don't know 41 00:02:13,560 --> 00:02:16,240 Speaker 1: if I even remember how to shake some I do 42 00:02:16,320 --> 00:02:20,960 Speaker 1: like a right kind of like a little sleep. But anyway, 43 00:02:21,080 --> 00:02:23,160 Speaker 1: very happy I'm back on the show. As you said, 44 00:02:23,160 --> 00:02:25,600 Speaker 1: he made some great calls I think in the last 45 00:02:25,600 --> 00:02:28,480 Speaker 1: time he was on in March. His name is novel 46 00:02:28,600 --> 00:02:31,960 Speaker 1: Son Noula and he is the chief macro strategist at 47 00:02:31,960 --> 00:02:36,400 Speaker 1: the hedge Fund e i A All Weather Alpha Partners NFL. 48 00:02:36,440 --> 00:02:38,480 Speaker 1: Welcome back to the show. Thank you so much for 49 00:02:38,520 --> 00:02:41,239 Speaker 1: having me again, Mike. And you know, it's always a 50 00:02:41,240 --> 00:02:43,400 Speaker 1: pleasure that chat was the last person that you shok it. 51 00:02:44,480 --> 00:02:47,960 Speaker 1: That's absolutely right. The other fun thing, yeah, it is. 52 00:02:48,040 --> 00:02:50,160 Speaker 1: It's a very it's a very special bond. We also 53 00:02:50,280 --> 00:02:53,760 Speaker 1: bonded over that episode by making fun of Luke Lukawa 54 00:02:53,919 --> 00:02:56,200 Speaker 1: pretty vigorously in that I don't think we can do 55 00:02:56,240 --> 00:02:59,280 Speaker 1: that again. He's not here to defend himself, so I 56 00:02:59,280 --> 00:03:01,440 Speaker 1: don't know I would feel bad making fun of Luke 57 00:03:01,600 --> 00:03:04,440 Speaker 1: next time. We'll try to get them back on here. 58 00:03:04,480 --> 00:03:07,359 Speaker 1: But uh, but now let's start with the big news 59 00:03:07,440 --> 00:03:10,839 Speaker 1: of the week. It was obviously Jerome Pal's speech at 60 00:03:10,880 --> 00:03:16,400 Speaker 1: the Virtual Jackson Hole summit of the Federal Reserve. Any Basically, 61 00:03:16,480 --> 00:03:19,800 Speaker 1: the headlines were that the Fed appears to be willing 62 00:03:20,360 --> 00:03:24,600 Speaker 1: to let both inflation run a little hotter than two 63 00:03:24,639 --> 00:03:27,480 Speaker 1: percent and also for the to allow the job market 64 00:03:27,560 --> 00:03:29,840 Speaker 1: to sort of get a little bit hotter. They're not 65 00:03:29,880 --> 00:03:33,279 Speaker 1: worried about the Phillips curve and sort of the the 66 00:03:33,320 --> 00:03:36,600 Speaker 1: strength of the job market, how that will affect inflation 67 00:03:36,640 --> 00:03:39,040 Speaker 1: as much as they once were. What are your sort 68 00:03:39,080 --> 00:03:43,280 Speaker 1: of main takeaways, uh from the Chairman pal speech and 69 00:03:43,360 --> 00:03:46,400 Speaker 1: sort of how it's, if at all it will influence 70 00:03:46,440 --> 00:03:49,240 Speaker 1: the way you're looking at markets going forward. Now, you 71 00:03:49,240 --> 00:03:51,040 Speaker 1: know what, if you don't mind, I'll start by taking 72 00:03:51,080 --> 00:03:54,080 Speaker 1: us back to our last podcast actually and when you know, 73 00:03:54,440 --> 00:03:57,720 Speaker 1: the view I kind of presented was social distancing is 74 00:03:57,720 --> 00:04:02,360 Speaker 1: going to be a big deal to well economic momentum, 75 00:04:02,400 --> 00:04:07,120 Speaker 1: and it's gonna require massive fiscal and monetary coordination in 76 00:04:07,240 --> 00:04:11,440 Speaker 1: order to reflate assets to kind of provide the the 77 00:04:11,560 --> 00:04:16,120 Speaker 1: income replacement and the market backstops um. So for for 78 00:04:16,160 --> 00:04:18,560 Speaker 1: the for the global markets to weather the storm, however 79 00:04:18,600 --> 00:04:21,960 Speaker 1: long it takes. We definitely got exactly that. You know, 80 00:04:22,000 --> 00:04:24,240 Speaker 1: we got trillions of dollars of fiscal spending, and we 81 00:04:24,320 --> 00:04:27,560 Speaker 1: had a FED that you know, was already along its 82 00:04:27,600 --> 00:04:31,200 Speaker 1: path of its strategic policy review. That motivation behind that 83 00:04:31,279 --> 00:04:34,680 Speaker 1: in the first place was to rethink, to rethink, are 84 00:04:34,720 --> 00:04:39,760 Speaker 1: we short circuiting recoveries without necessarily needing to? And I 85 00:04:39,800 --> 00:04:43,679 Speaker 1: think that the market had already been starting to condition 86 00:04:43,680 --> 00:04:46,240 Speaker 1: towards that. COVID, like I did with a lot of 87 00:04:46,240 --> 00:04:49,560 Speaker 1: other trends, really accelerated it and kind of pulled it 88 00:04:49,600 --> 00:04:52,360 Speaker 1: all forward, and we got to a point where, you know, 89 00:04:52,920 --> 00:04:56,960 Speaker 1: curves are very flat, very little yield left, and you know, 90 00:04:57,200 --> 00:05:00,600 Speaker 1: the market basically saying, you know, the Fed's not gonna 91 00:05:00,600 --> 00:05:02,599 Speaker 1: get gonna get in front of this or get ahead 92 00:05:02,600 --> 00:05:05,159 Speaker 1: of this. They're gonna let it run. I consider that 93 00:05:05,279 --> 00:05:08,600 Speaker 1: kind of chopping off the left tail of the distribution 94 00:05:09,200 --> 00:05:14,080 Speaker 1: of both inflation and just generally growth. However, the question becomes, 95 00:05:14,120 --> 00:05:18,080 Speaker 1: can be FED also open up the right tail. We've 96 00:05:18,200 --> 00:05:21,880 Speaker 1: chopped off the left hail and distribution, we've limited deflation risk, 97 00:05:22,000 --> 00:05:24,920 Speaker 1: we've we've prevented market crashes, and we've provided an income 98 00:05:24,960 --> 00:05:29,120 Speaker 1: replacement from the substitution. But can it actually ignite at 99 00:05:29,160 --> 00:05:31,000 Speaker 1: the right tail? Can it open up the right tail? 100 00:05:31,480 --> 00:05:34,080 Speaker 1: I think that this seat by a chair. Powell at 101 00:05:34,160 --> 00:05:37,320 Speaker 1: Jackson Hole was kind of just more so the codification 102 00:05:38,279 --> 00:05:41,200 Speaker 1: of what the trend that's been kind of being priced 103 00:05:41,200 --> 00:05:43,440 Speaker 1: in over the course of the last several months, if 104 00:05:43,480 --> 00:05:46,400 Speaker 1: not even longer than that. And so now I think 105 00:05:46,400 --> 00:05:48,240 Speaker 1: that this is kind of an event where a lot 106 00:05:48,279 --> 00:05:51,640 Speaker 1: of folks like me are saying, Okay, I can kind 107 00:05:51,680 --> 00:05:54,400 Speaker 1: of book my fed trades, I can kind of you know, 108 00:05:54,480 --> 00:05:56,760 Speaker 1: that trade is kind of over, and now my my 109 00:05:56,960 --> 00:06:01,440 Speaker 1: narrative shifts towards what can open up the kit. So 110 00:06:01,480 --> 00:06:04,400 Speaker 1: then what can possibly open the right tail? And I 111 00:06:04,400 --> 00:06:07,120 Speaker 1: think just the fact that we are talking about right 112 00:06:07,160 --> 00:06:10,440 Speaker 1: tail risk right now at the point of where we 113 00:06:10,480 --> 00:06:12,120 Speaker 1: are and what we've seen happen in markets over the 114 00:06:12,200 --> 00:06:15,400 Speaker 1: last couple of months is just pretty amazing. Yeah, you know, 115 00:06:15,480 --> 00:06:17,640 Speaker 1: it's funny because I've had of you for a long 116 00:06:17,760 --> 00:06:20,120 Speaker 1: time that a lot of our economic outcomes are ultimately 117 00:06:20,160 --> 00:06:23,920 Speaker 1: follows the choices because the things that typically would constrain 118 00:06:24,440 --> 00:06:28,400 Speaker 1: massive discial spending, massive redistribution, massive subsidies, all these types 119 00:06:28,440 --> 00:06:31,360 Speaker 1: of things typically what constrains as inflation. So if you're 120 00:06:31,360 --> 00:06:34,840 Speaker 1: in a structurally disinflation disinflationary regime, as we have been 121 00:06:34,839 --> 00:06:37,760 Speaker 1: in for decades, perhaps like the lion share of my life, 122 00:06:37,760 --> 00:06:40,320 Speaker 1: how you fat it really is up being a policy choice, 123 00:06:40,360 --> 00:06:42,160 Speaker 1: Like you can decide if you want, if you want 124 00:06:42,240 --> 00:06:45,039 Speaker 1: freepers unemployment, there's a policy cocktail I can get you 125 00:06:45,040 --> 00:06:47,400 Speaker 1: there three four seven employment. So the idea is that 126 00:06:47,640 --> 00:06:50,880 Speaker 1: the in order to open up the right tail, you 127 00:06:50,960 --> 00:06:53,680 Speaker 1: continue to do what we've been doing. Everyone's kind of surprised, 128 00:06:54,160 --> 00:06:57,600 Speaker 1: um that the combination of the Cares Act plus the 129 00:06:57,760 --> 00:07:00,600 Speaker 1: FED promising it wouldn't use the CARES as a reason 130 00:07:00,600 --> 00:07:03,159 Speaker 1: to short circuit the recovery of the Cares Act, the 131 00:07:03,160 --> 00:07:06,080 Speaker 1: fact that we have monetary christal coordination and fiscal dominance, 132 00:07:06,320 --> 00:07:07,800 Speaker 1: it's not surprising to me that it was able to 133 00:07:07,800 --> 00:07:11,000 Speaker 1: reflate the economy, and a surpris us so well, Um, 134 00:07:11,040 --> 00:07:12,400 Speaker 1: there's a lot of places where it could have done 135 00:07:12,480 --> 00:07:15,200 Speaker 1: much better, and there's a lot of big issues that remain, 136 00:07:15,360 --> 00:07:17,680 Speaker 1: and you know, the whole k shaped recovery idea I 137 00:07:17,680 --> 00:07:20,920 Speaker 1: think as alien, but generally speaking, I think it succeeded. 138 00:07:21,040 --> 00:07:23,560 Speaker 1: And if that type of fiscal impulse would return into 139 00:07:23,600 --> 00:07:25,920 Speaker 1: something that was a little bit more durable, something that 140 00:07:26,000 --> 00:07:29,360 Speaker 1: was a little a little bit more not necessarily contingent 141 00:07:29,440 --> 00:07:34,320 Speaker 1: upon crisis, and the FED continued to establish it's an 142 00:07:34,360 --> 00:07:38,160 Speaker 1: implemented promise to not short circuit uh those impulses. And 143 00:07:38,160 --> 00:07:39,880 Speaker 1: then I don't see why we couldn't open up the 144 00:07:39,960 --> 00:07:42,440 Speaker 1: right tail. I don't anticipate us being able to open 145 00:07:42,560 --> 00:07:45,640 Speaker 1: up inflationary risk to the point where its spires on itself. 146 00:07:45,920 --> 00:07:48,600 Speaker 1: In my opinion, getting to you know, three or four 147 00:07:48,680 --> 00:07:52,760 Speaker 1: percent inflation uh seven eight percent nominal girth to me 148 00:07:53,520 --> 00:07:56,040 Speaker 1: um is likely to be just basically a politic choice. 149 00:07:56,080 --> 00:07:58,440 Speaker 1: And and and that's why I think that these markets 150 00:07:58,440 --> 00:08:02,280 Speaker 1: are so politically driven, They're so connected to politics that 151 00:08:02,400 --> 00:08:06,040 Speaker 1: they used to be, because policy is driving everything. And 152 00:08:06,480 --> 00:08:09,440 Speaker 1: we may have kind of crossed the rubicon um in Nicona. 153 00:08:27,440 --> 00:08:29,880 Speaker 1: You know, it seems like we have seen a little 154 00:08:29,880 --> 00:08:33,360 Speaker 1: bit of steepening in the treasury yield curve even before 155 00:08:33,360 --> 00:08:36,640 Speaker 1: the Jackson whole speech, picking up somewhat after that. Is 156 00:08:36,679 --> 00:08:38,960 Speaker 1: it a no brainer to think that steepening trend is 157 00:08:38,960 --> 00:08:41,640 Speaker 1: gonna continue, or you know, will the FED to have 158 00:08:41,720 --> 00:08:44,600 Speaker 1: something to say about that down the road at some point? 159 00:08:44,600 --> 00:08:47,560 Speaker 1: I mean, is I guess is the notion of potential 160 00:08:47,640 --> 00:08:50,520 Speaker 1: yield curve control from the Fed? Is that idea dead 161 00:08:50,640 --> 00:08:51,920 Speaker 1: right now? Do you think or do you think it 162 00:08:52,000 --> 00:08:54,560 Speaker 1: could be a topic we're talking about again in the future. 163 00:08:55,200 --> 00:08:57,079 Speaker 1: So everyone I talked you think I'm crazy with my 164 00:08:57,120 --> 00:09:04,480 Speaker 1: answer to this, But the idea is, especially on the show, 165 00:09:04,960 --> 00:09:08,120 Speaker 1: I've been talking about yield for control type of policy sinceeding, 166 00:09:08,160 --> 00:09:10,559 Speaker 1: before the boj Ample bent to the I always kind 167 00:09:10,559 --> 00:09:12,920 Speaker 1: of brought it back to the World War Two for 168 00:09:13,040 --> 00:09:15,480 Speaker 1: the fifties analog in the United States, and I think 169 00:09:15,480 --> 00:09:17,800 Speaker 1: it's still remains salient. Um. The way I would frame 170 00:09:17,840 --> 00:09:19,760 Speaker 1: my answer to your question would be to say that 171 00:09:20,120 --> 00:09:22,720 Speaker 1: I think it's likely that if this type of dawn 172 00:09:22,800 --> 00:09:25,800 Speaker 1: market action were to continue and persist, I wouldn't be 173 00:09:25,880 --> 00:09:30,640 Speaker 1: surprised if the FED in September Epilepsy decided to do 174 00:09:30,720 --> 00:09:32,960 Speaker 1: something along the lines of saying, either we're gonna upsize 175 00:09:33,040 --> 00:09:35,400 Speaker 1: QUI or we're going to shift the composition of QUI 176 00:09:35,520 --> 00:09:38,040 Speaker 1: toward long end purchases. You know, what's the point of 177 00:09:38,040 --> 00:09:40,680 Speaker 1: buying the two years? What's the point of a point 178 00:09:40,679 --> 00:09:42,880 Speaker 1: of buying the five year when you know those are 179 00:09:43,240 --> 00:09:45,720 Speaker 1: you know, the Defense Promising Unit, they're basically just trading 180 00:09:45,840 --> 00:09:48,719 Speaker 1: as funds, right, So UM, I would be surprised to 181 00:09:48,760 --> 00:09:51,960 Speaker 1: see them come in with some sort of balance sheet 182 00:09:51,960 --> 00:09:55,439 Speaker 1: policy to signal to the market that nope, you know, 183 00:09:55,640 --> 00:09:58,760 Speaker 1: we're even even the little bit that we've stepen. No, 184 00:09:58,960 --> 00:10:00,960 Speaker 1: we're not going to allow it to I think in 185 00:10:01,040 --> 00:10:02,959 Speaker 1: order to get a yield care control type of policy, 186 00:10:03,040 --> 00:10:05,559 Speaker 1: or yield caps or anything along those lines, I think 187 00:10:05,600 --> 00:10:08,000 Speaker 1: the impetus for that, and then the backdrop required for 188 00:10:08,040 --> 00:10:12,280 Speaker 1: that would be a structural shift that the market used 189 00:10:12,320 --> 00:10:15,439 Speaker 1: as a as a reason to challenge the Fed. Stands. 190 00:10:15,679 --> 00:10:17,840 Speaker 1: For example, if we were to get a very big 191 00:10:17,880 --> 00:10:21,840 Speaker 1: fiscal package with signs that it would be quite durable 192 00:10:21,880 --> 00:10:24,800 Speaker 1: and not just you know, a one time thing turning 193 00:10:24,800 --> 00:10:27,000 Speaker 1: into a two time thing, but like this is the 194 00:10:27,000 --> 00:10:29,120 Speaker 1: new normal, you know, the first thing traders would do 195 00:10:29,120 --> 00:10:30,880 Speaker 1: is they would sell the long in the market, you know, 196 00:10:31,320 --> 00:10:33,760 Speaker 1: of the bond market and um. If they were to 197 00:10:33,800 --> 00:10:37,079 Speaker 1: do that enough, then the Fed likely step in and say, actually, 198 00:10:37,080 --> 00:10:39,439 Speaker 1: we're going to make sure that all this spending is 199 00:10:39,520 --> 00:10:42,480 Speaker 1: finance at a specific level. The other potential scenario along 200 00:10:42,480 --> 00:10:44,480 Speaker 1: these lines would be if we got some sort of 201 00:10:44,960 --> 00:10:48,280 Speaker 1: um surprise on the vaccine front. There's a lot of 202 00:10:48,280 --> 00:10:51,720 Speaker 1: political impulses occurring on both sides right now, so you know, 203 00:10:51,720 --> 00:10:55,360 Speaker 1: there's probably higher than usual risk of UM kind of 204 00:10:55,360 --> 00:11:00,240 Speaker 1: like a politically finessed vaccine headline to hit prel action, 205 00:11:00,640 --> 00:11:04,000 Speaker 1: so you know, a big fiscal package or a vaccine, 206 00:11:04,160 --> 00:11:07,400 Speaker 1: both of those things could be the impetus for folks 207 00:11:07,400 --> 00:11:11,320 Speaker 1: in the market to just sell the long end and if, if, 208 00:11:11,440 --> 00:11:14,040 Speaker 1: if it were to feed on itself. That's the window 209 00:11:14,200 --> 00:11:16,880 Speaker 1: and that's the preconditions I think required for the FED 210 00:11:16,960 --> 00:11:19,600 Speaker 1: to step in with something like yielder control, because that's 211 00:11:19,640 --> 00:11:22,400 Speaker 1: the moment where it's most needed, that's the moment where 212 00:11:22,400 --> 00:11:25,360 Speaker 1: it's the most effective, and that's the moment where the 213 00:11:25,400 --> 00:11:29,920 Speaker 1: FED is establishing the most credibility with that policy without 214 00:11:30,000 --> 00:11:32,760 Speaker 1: taking the risk of you know, we're preempting it and 215 00:11:32,760 --> 00:11:34,240 Speaker 1: by the time we need it, we have to do 216 00:11:34,240 --> 00:11:36,160 Speaker 1: it again, and we have to kind of establish some 217 00:11:36,240 --> 00:11:38,680 Speaker 1: sort of novel credibility and you know that, you know, 218 00:11:38,880 --> 00:11:41,160 Speaker 1: mon tery policy is a weird gain. It's similar, you know, 219 00:11:41,240 --> 00:11:43,199 Speaker 1: it's similar to just like how money works for generally, 220 00:11:43,559 --> 00:11:47,920 Speaker 1: it really depends on credibility and signaling. I disagree with 221 00:11:48,559 --> 00:11:51,480 Speaker 1: the way some folks frame you know, credibility and inflation 222 00:11:51,480 --> 00:11:55,160 Speaker 1: fighting or whatever. If you have structurally distiflationary regimes, the 223 00:11:55,240 --> 00:11:57,959 Speaker 1: credibility needs to be on the other side. But if 224 00:11:58,000 --> 00:12:00,640 Speaker 1: we see a backup and yields, that's that's significant, and 225 00:12:00,679 --> 00:12:04,160 Speaker 1: it's driven by some sort of regime ship, whether it's 226 00:12:04,200 --> 00:12:07,440 Speaker 1: fiscal quality or a vaccine, that would be the type 227 00:12:07,440 --> 00:12:10,600 Speaker 1: of window where I think that we could see yield curtetical. 228 00:12:10,679 --> 00:12:13,760 Speaker 1: I do think that the FED would ultimately signal a 229 00:12:13,760 --> 00:12:15,560 Speaker 1: willingness to go down that route if we were to 230 00:12:15,559 --> 00:12:18,440 Speaker 1: see the bond market back up that part. So you 231 00:12:18,480 --> 00:12:20,920 Speaker 1: mentioned fiscal but clearly, at least of now, we don't 232 00:12:20,960 --> 00:12:23,520 Speaker 1: have a fiscal four package yet. The FED has made 233 00:12:23,559 --> 00:12:25,760 Speaker 1: it very very clear that they're on the market side 234 00:12:25,840 --> 00:12:28,360 Speaker 1: lower for longer, they'll let both inflation in the labor 235 00:12:28,400 --> 00:12:33,120 Speaker 1: market run hot. How much pressure then does that put 236 00:12:33,240 --> 00:12:36,200 Speaker 1: on the fiscal side of the equation, And how do 237 00:12:36,240 --> 00:12:39,440 Speaker 1: you think about those risks or the risk that maybe 238 00:12:39,679 --> 00:12:43,800 Speaker 1: we don't get another trillion dollar fiscal package, or is 239 00:12:43,840 --> 00:12:47,280 Speaker 1: that outcome just so far fetched that people just won't 240 00:12:47,280 --> 00:12:50,360 Speaker 1: even believe that that won't happen. The way the FED 241 00:12:50,480 --> 00:12:56,240 Speaker 1: has realigned and recalibrated its policy has essentially been a 242 00:12:56,320 --> 00:12:58,720 Speaker 1: move a move away from being kind of a shock 243 00:12:58,800 --> 00:13:03,439 Speaker 1: absorber or counter say focal to being procyclical, by which 244 00:13:03,480 --> 00:13:07,959 Speaker 1: I mean this usually if stocks go down, real yields 245 00:13:07,960 --> 00:13:12,040 Speaker 1: will fall because folks are expecting the fat. You know, ease, 246 00:13:12,440 --> 00:13:15,040 Speaker 1: if socks go up, real yelds go up. So sorry 247 00:13:15,040 --> 00:13:18,800 Speaker 1: about my dog left, because you know, folks are expecting Okay, 248 00:13:18,840 --> 00:13:23,360 Speaker 1: this reflects possibility for the FAT to start tightening policy 249 00:13:23,600 --> 00:13:26,840 Speaker 1: because we are in like a clause I tagged environment 250 00:13:26,920 --> 00:13:30,040 Speaker 1: and nominally yields. It becomes the case that the FED 251 00:13:30,120 --> 00:13:34,320 Speaker 1: policy becomes procyclical because as markets rise and as growth 252 00:13:34,360 --> 00:13:37,680 Speaker 1: increases break even as an inflation rise, which means real 253 00:13:37,760 --> 00:13:42,319 Speaker 1: yields fall, which means that effectively, as things are good 254 00:13:42,360 --> 00:13:45,800 Speaker 1: in the economy and markets, financial conditions become even looser. 255 00:13:46,240 --> 00:13:49,720 Speaker 1: And they actually they further feed that welcome for the 256 00:13:49,720 --> 00:13:52,120 Speaker 1: first time. In the show novels Dog he got a 257 00:13:52,120 --> 00:13:58,920 Speaker 1: new puppy, everyone, classic quarantine purchase. I'm gonna get my 258 00:13:59,000 --> 00:14:02,720 Speaker 1: dog down here to bark back at them. Sorry about that, guys, 259 00:14:02,800 --> 00:14:06,240 Speaker 1: but yeah, So you know, as markets and as upside 260 00:14:06,240 --> 00:14:09,840 Speaker 1: outcomes occur in markets and the economy, financial conditions actually 261 00:14:09,880 --> 00:14:12,000 Speaker 1: become a looser. And the same thing works in rehearse 262 00:14:12,080 --> 00:14:15,480 Speaker 1: where if there are downside risks to the markets or 263 00:14:15,520 --> 00:14:19,400 Speaker 1: the economy, break even small and it really yields tightened, 264 00:14:19,600 --> 00:14:23,080 Speaker 1: they go up, which tightens financial conditions. So really the 265 00:14:23,200 --> 00:14:26,560 Speaker 1: FED is in a position where it's become more of 266 00:14:26,600 --> 00:14:30,680 Speaker 1: a post cyclical driver, and it becomes very important for 267 00:14:30,720 --> 00:14:34,960 Speaker 1: fiscal policy to utilize that space, because if we have 268 00:14:35,040 --> 00:14:38,800 Speaker 1: fiscal cliffs and such, and you know, people start selling 269 00:14:38,840 --> 00:14:42,640 Speaker 1: break even and start betting on lower equation, then real 270 00:14:42,680 --> 00:14:46,720 Speaker 1: borrowing costs actually rise, which exacerbates the issue. And to 271 00:14:46,800 --> 00:14:49,320 Speaker 1: the question of what's going to happen and how do 272 00:14:49,400 --> 00:14:51,440 Speaker 1: the markets that do it? I think the way the 273 00:14:51,480 --> 00:14:54,080 Speaker 1: market have been thinking through it is you know, look, 274 00:14:54,160 --> 00:14:56,720 Speaker 1: you know personally at COVID, which really moved the odds 275 00:14:56,760 --> 00:15:00,560 Speaker 1: for the presidential election odds um and pull ing, and 276 00:15:00,600 --> 00:15:03,600 Speaker 1: then we have these protests and some interesting actions by 277 00:15:03,600 --> 00:15:07,000 Speaker 1: certain police departments, which then coincided with the odds for 278 00:15:07,000 --> 00:15:09,320 Speaker 1: the Senate shifting as well. And you know, now everyone 279 00:15:09,400 --> 00:15:12,080 Speaker 1: that talks about blue wave right like because of that, 280 00:15:12,160 --> 00:15:15,080 Speaker 1: I think that the markets basically saying, even if they 281 00:15:15,120 --> 00:15:17,680 Speaker 1: want to play games on fiscal polity right now, we'll 282 00:15:17,720 --> 00:15:20,680 Speaker 1: basically get the hero's Act in February much so, you know, 283 00:15:20,760 --> 00:15:23,600 Speaker 1: it's just like a window of uncertainty. But like, because 284 00:15:23,640 --> 00:15:25,640 Speaker 1: there's something on the other side to look at, I'm 285 00:15:25,680 --> 00:15:27,920 Speaker 1: gonna be buying in depth, which means that deep of 286 00:15:27,920 --> 00:15:30,080 Speaker 1: a depth to buy when I think can change that. 287 00:15:30,400 --> 00:15:32,040 Speaker 1: There's a few things I can change that. And I 288 00:15:32,120 --> 00:15:34,080 Speaker 1: think the closer we get to the election without without 289 00:15:34,080 --> 00:15:36,680 Speaker 1: a deal, I think the bigger the risk becomes along 290 00:15:36,760 --> 00:15:39,360 Speaker 1: these lines. But yeah, you know, if if fiscal policy 291 00:15:39,400 --> 00:15:41,800 Speaker 1: doesn't follow through, then you know, a lot of what 292 00:15:41,840 --> 00:15:43,520 Speaker 1: the FED is doing isn't really gonna be able to 293 00:15:43,560 --> 00:15:46,640 Speaker 1: be effective. A lot of the Fed's effectiveness comes from 294 00:15:46,680 --> 00:15:50,560 Speaker 1: accommodating fiscal policy. It is necessarily igniting effectiveness of it zone. 295 00:15:50,840 --> 00:15:54,160 Speaker 1: So without that fiscal polity, the potency and efficacy of 296 00:15:54,240 --> 00:15:58,240 Speaker 1: the FEDS decisions is much lower. And actually the strategic 297 00:15:58,240 --> 00:16:01,480 Speaker 1: shift could actually work a reverse because of this protocolcality 298 00:16:01,520 --> 00:16:03,840 Speaker 1: element I'm talking about. Do we get that, I don't know. 299 00:16:04,160 --> 00:16:06,440 Speaker 1: I've always kind of been like, internally, we've been have 300 00:16:06,640 --> 00:16:08,920 Speaker 1: of the view that it's likely to be the case 301 00:16:09,000 --> 00:16:13,400 Speaker 1: that President Trump would prefer to have a big fiscal 302 00:16:13,440 --> 00:16:17,400 Speaker 1: package that's much better time for the election Um, you know, 303 00:16:17,960 --> 00:16:21,600 Speaker 1: and I think that how Speaker Felosi recognized that and 304 00:16:21,720 --> 00:16:24,480 Speaker 1: that was part of the cocktail reasons why she passed 305 00:16:24,480 --> 00:16:27,120 Speaker 1: the Heroes Act in the House in May, and you know, 306 00:16:27,640 --> 00:16:30,960 Speaker 1: very early on, aiming for a late summer deal that 307 00:16:31,000 --> 00:16:32,960 Speaker 1: gets through the Center as well. And then we had 308 00:16:33,000 --> 00:16:35,360 Speaker 1: these you know, the Executive Action and like all this 309 00:16:35,480 --> 00:16:39,240 Speaker 1: fiscal drama and games and back and forth. But ultimately, 310 00:16:39,280 --> 00:16:41,160 Speaker 1: I do think, you know, everyone has an incentive to 311 00:16:41,200 --> 00:16:43,920 Speaker 1: get something done. Um, and well we probably will see 312 00:16:43,960 --> 00:16:46,920 Speaker 1: something get done. Is it the case that, so, Sarah, 313 00:16:47,000 --> 00:16:49,880 Speaker 1: you asked me, does what Jeff Powell is saying does 314 00:16:49,960 --> 00:16:56,560 Speaker 1: defense approach? Do all these things pressure Congress into acting fiscally? Maybe? 315 00:16:57,000 --> 00:16:59,640 Speaker 1: I think that probably what pressures Congress a lot more 316 00:16:59,640 --> 00:17:02,040 Speaker 1: than that would be the markets on the electoral cycle. 317 00:17:02,160 --> 00:17:05,080 Speaker 1: So you know, if if we if the market decides, 318 00:17:05,440 --> 00:17:08,879 Speaker 1: you know, my friend marked out one of his favorite 319 00:17:08,880 --> 00:17:11,120 Speaker 1: phrases that he uses, which I think is very salient 320 00:17:11,200 --> 00:17:13,919 Speaker 1: and insightful, is the market is very prone to quote 321 00:17:14,280 --> 00:17:18,520 Speaker 1: belated overreactions. So if we get a belated overreaction to 322 00:17:19,119 --> 00:17:21,959 Speaker 1: these kind of rolling fiscal cliffs, the market can go 323 00:17:22,040 --> 00:17:24,200 Speaker 1: probe for a fiscal foot strike. I'm sure it will 324 00:17:24,240 --> 00:17:27,320 Speaker 1: find it and then we'll get the deal. Otherwise it 325 00:17:27,359 --> 00:17:30,320 Speaker 1: becomes a game of electoral politics. And so you know, 326 00:17:30,640 --> 00:17:33,280 Speaker 1: I wouldn't be surprised if you know, I don't know 327 00:17:33,359 --> 00:17:37,280 Speaker 1: where we see a random pre election vaccine pump at 328 00:17:37,280 --> 00:17:41,080 Speaker 1: the same time as around my stimulus package, you know, 329 00:17:41,240 --> 00:17:43,560 Speaker 1: like and like just like a very well juiced pump 330 00:17:43,640 --> 00:18:04,320 Speaker 1: into the election. Fascinating what you said, because I think 331 00:18:04,359 --> 00:18:07,120 Speaker 1: a lot of people and myself included, as we got 332 00:18:07,160 --> 00:18:10,400 Speaker 1: into August, you know, it became sort of vacation season 333 00:18:10,600 --> 00:18:13,640 Speaker 1: in Washington, d C. And then we had the political 334 00:18:14,240 --> 00:18:16,720 Speaker 1: conventions where you knew nothing was going to get done. 335 00:18:17,200 --> 00:18:19,960 Speaker 1: I had really expected sort of a tantrum in markets 336 00:18:20,000 --> 00:18:23,879 Speaker 1: over the fact that there wasn't a physical package ready 337 00:18:23,920 --> 00:18:26,320 Speaker 1: to be signed. So you're you're thinking, is that the 338 00:18:26,359 --> 00:18:31,040 Speaker 1: markets sort of looking through that into a blue sweep, 339 00:18:31,080 --> 00:18:34,120 Speaker 1: a blue wave, and that we will get that Heroes Act, 340 00:18:34,119 --> 00:18:36,320 Speaker 1: which is what it's like three times the size of 341 00:18:36,359 --> 00:18:39,800 Speaker 1: what the latest GOP fiscal package was. That three you know, 342 00:18:39,840 --> 00:18:43,359 Speaker 1: three trillion verses one trillion. That's fascinating to me. I 343 00:18:43,400 --> 00:18:48,440 Speaker 1: wonder though, you know, it's a long time between November 344 00:18:48,480 --> 00:18:52,960 Speaker 1: and inauguration time in January, and I wonder what could 345 00:18:53,000 --> 00:18:55,399 Speaker 1: go wrong in that period, you know, is is it 346 00:18:55,480 --> 00:18:59,840 Speaker 1: safe to assume some political theater that could possibly create 347 00:18:59,880 --> 00:19:03,239 Speaker 1: some volatility? Do you think? Just similar to you, I 348 00:19:03,320 --> 00:19:06,760 Speaker 1: was sitting there in July and August being like, really, 349 00:19:06,800 --> 00:19:09,000 Speaker 1: the market just don't care about this, you know, I 350 00:19:09,160 --> 00:19:14,320 Speaker 1: certainly I was certainly positioned for them to care about it, 351 00:19:14,359 --> 00:19:16,879 Speaker 1: and you know, we have to make um some adjustments, 352 00:19:16,920 --> 00:19:20,200 Speaker 1: and thankfully, you know, we were disciplined to our process 353 00:19:20,200 --> 00:19:23,560 Speaker 1: and it worked out um quite well. But yeah, like 354 00:19:23,640 --> 00:19:27,200 Speaker 1: I was also very surprised about that. And and by 355 00:19:27,240 --> 00:19:30,399 Speaker 1: the way, because of that, I run the risk inherently 356 00:19:30,440 --> 00:19:34,080 Speaker 1: of of ex post front to rationalize the market move. 357 00:19:34,400 --> 00:19:37,119 Speaker 1: But I do think that there's something to the notion 358 00:19:37,200 --> 00:19:39,680 Speaker 1: of why do I care if I know that we're 359 00:19:39,680 --> 00:19:43,159 Speaker 1: going to get a massive package coming in February and 360 00:19:43,200 --> 00:19:45,400 Speaker 1: if that goes well, then like what's to stop them 361 00:19:45,400 --> 00:19:48,040 Speaker 1: from continuing this? And that's an utter regime ship, you know. 362 00:19:48,160 --> 00:19:49,960 Speaker 1: So I think I probably played at least a little 363 00:19:49,960 --> 00:19:52,119 Speaker 1: bit of a role to your matter question. You know, 364 00:19:52,600 --> 00:19:56,159 Speaker 1: how quickly we normalized post pandemic and how quickly and 365 00:19:56,240 --> 00:19:59,359 Speaker 1: how long and how durably we're able to maintain this 366 00:19:59,400 --> 00:20:03,119 Speaker 1: new fiscal regime. Whether President Trump is re elected or not, 367 00:20:03,760 --> 00:20:06,800 Speaker 1: whoever on the losing side will, in different ways and 368 00:20:06,800 --> 00:20:09,960 Speaker 1: in different magnitudes have some sort of feeling of contesting 369 00:20:10,000 --> 00:20:12,240 Speaker 1: the election. And if it does end up being a 370 00:20:12,320 --> 00:20:14,760 Speaker 1: lane duck period, I think it's an even bigger political 371 00:20:14,840 --> 00:20:17,359 Speaker 1: risk because you know, there's a lot of things that 372 00:20:17,400 --> 00:20:20,480 Speaker 1: can be done, especially on the geopolitical front, that might 373 00:20:20,520 --> 00:20:25,040 Speaker 1: not be you know, the typical normal handover period during 374 00:20:25,040 --> 00:20:29,159 Speaker 1: a late duct period between election inauguration, the distribution of 375 00:20:29,200 --> 00:20:32,600 Speaker 1: probabilities changes so much, you know, especially if we get 376 00:20:32,640 --> 00:20:35,960 Speaker 1: a fiscal package or a vaccine before the election, irrespective 377 00:20:36,000 --> 00:20:38,520 Speaker 1: of how effective it is, or irrespective of it if 378 00:20:38,560 --> 00:20:42,439 Speaker 1: it won't through the right regulatory channels. You know, if 379 00:20:42,720 --> 00:20:44,879 Speaker 1: Maderna wants to get a vaccine now and says they 380 00:20:44,920 --> 00:20:48,760 Speaker 1: got to phase three and President Trump's administration wants to 381 00:20:48,800 --> 00:20:52,359 Speaker 1: do an emergency use authorization, I mean, I don't know 382 00:20:52,400 --> 00:20:56,359 Speaker 1: if that's like koshert but like they'll probably try, and 383 00:20:56,680 --> 00:21:00,000 Speaker 1: that will probably matter to the markets, to the rather discourse. 384 00:21:00,000 --> 00:21:01,400 Speaker 1: And then the reason I bring that up, it's because 385 00:21:01,440 --> 00:21:04,560 Speaker 1: if we get this well timed fiscal package were a 386 00:21:04,560 --> 00:21:08,600 Speaker 1: well timed vaccine headline, then I'm sure folks will start 387 00:21:09,359 --> 00:21:12,800 Speaker 1: re calibrating the the electoral odds of President Trump as 388 00:21:12,840 --> 00:21:15,720 Speaker 1: well as the GOP the Senate. And you know, if 389 00:21:15,760 --> 00:21:18,520 Speaker 1: that were to occur, then suddenly a lot of things 390 00:21:18,520 --> 00:21:21,879 Speaker 1: start changing. Do we get a President Trump and a 391 00:21:22,000 --> 00:21:24,000 Speaker 1: Democratic Senate? Do we get a blue sweep? Do we 392 00:21:24,000 --> 00:21:26,960 Speaker 1: get a red sweep? The point being there that the 393 00:21:27,000 --> 00:21:30,480 Speaker 1: distribution of probabilistic outcomes, why it is, we have more 394 00:21:30,520 --> 00:21:34,040 Speaker 1: outcomes that are that are within the range of probably plausible, 395 00:21:34,440 --> 00:21:37,720 Speaker 1: and in that scenario that's like definitionally higher volatility. There's 396 00:21:37,800 --> 00:21:41,200 Speaker 1: there's more scenarios that need gonna be considered. Um So 397 00:21:41,320 --> 00:21:44,240 Speaker 1: I absolutely believe that, Like you know, again, it's the 398 00:21:44,520 --> 00:21:46,840 Speaker 1: sequencing is kind of like get to the point where 399 00:21:46,880 --> 00:21:50,359 Speaker 1: the where the FED is understood and priced in, then 400 00:21:51,119 --> 00:21:53,879 Speaker 1: you shift to the regime of fiscal and MACS, and 401 00:21:53,920 --> 00:21:56,760 Speaker 1: then you shift to the regime and narrative of political 402 00:21:56,840 --> 00:21:59,439 Speaker 1: risk and what can happen in that window. I don't know. 403 00:21:59,640 --> 00:22:03,320 Speaker 1: I mean, it's you know, I can try to be imaginative, 404 00:22:03,800 --> 00:22:05,840 Speaker 1: but the broader point is like we all need to 405 00:22:05,840 --> 00:22:09,720 Speaker 1: be imaginative about that window irrespective of like what things 406 00:22:09,680 --> 00:22:12,120 Speaker 1: you're looking like going into the election or even coming 407 00:22:12,119 --> 00:22:14,879 Speaker 1: out of it, and so, and that means it's likely 408 00:22:14,920 --> 00:22:18,680 Speaker 1: to be the case of vultility. The electoral vultility extends 409 00:22:18,720 --> 00:22:20,960 Speaker 1: past the election, unlike most times. And that's one of 410 00:22:21,000 --> 00:22:22,920 Speaker 1: the reasons that, like, if you look at the term 411 00:22:23,000 --> 00:22:25,959 Speaker 1: structure of the VIX, you know you have the typical 412 00:22:26,640 --> 00:22:30,720 Speaker 1: electoral king election king quote unquote, where you know, the vix, 413 00:22:30,920 --> 00:22:33,639 Speaker 1: the implied Ford vix pops in November and then kind 414 00:22:33,640 --> 00:22:36,160 Speaker 1: of starts to come back down because of the election risks. 415 00:22:36,440 --> 00:22:40,320 Speaker 1: But unlike most years, it remains a little bit elevated 416 00:22:40,359 --> 00:22:43,399 Speaker 1: even past the election. I think that makes sense. In fact, 417 00:22:43,400 --> 00:22:46,080 Speaker 1: I would argue that that window between the election inauguration. 418 00:22:46,480 --> 00:22:49,320 Speaker 1: I would actually argue that Ford volatility is cheap because 419 00:22:49,359 --> 00:22:52,760 Speaker 1: there's just so many scenarios that can materialize in that window. 420 00:22:52,800 --> 00:22:56,240 Speaker 1: And some of them are great, you know, um like uh, 421 00:22:56,400 --> 00:22:58,400 Speaker 1: there's a right tail too, not just the left til 422 00:22:58,480 --> 00:23:00,720 Speaker 1: right um. And some of them are really bad. And 423 00:23:00,800 --> 00:23:03,840 Speaker 1: so the uncertainty along those lines, I think that's going 424 00:23:03,880 --> 00:23:07,280 Speaker 1: to be where all the all the focus ships to 425 00:23:08,000 --> 00:23:11,200 Speaker 1: the moment we get a fiscal package and or a 426 00:23:11,280 --> 00:23:15,360 Speaker 1: vaccine pump, because that will be the moment where everyone 427 00:23:15,400 --> 00:23:20,040 Speaker 1: who's been trading in anticipation for these things is like, Okay, 428 00:23:20,160 --> 00:23:22,800 Speaker 1: it's baked in. I'm gonna do what the Fed traders 429 00:23:23,280 --> 00:23:26,440 Speaker 1: did on Jackson whole day. I'm gonna book by trades, 430 00:23:26,520 --> 00:23:28,240 Speaker 1: i gonna book by Fed trades, I'm gonna book by 431 00:23:28,240 --> 00:23:30,960 Speaker 1: Fiscal trades, and a book by VACS trades, and and 432 00:23:31,200 --> 00:23:34,760 Speaker 1: just the price action because of that can start to read, 433 00:23:35,000 --> 00:23:37,200 Speaker 1: you know, narratives follow price, so that can start to 434 00:23:37,280 --> 00:23:40,320 Speaker 1: recalibrate and reframe the narratives in the market towards this 435 00:23:40,440 --> 00:23:43,080 Speaker 1: political risk. And I do think that that window is 436 00:23:43,119 --> 00:23:45,760 Speaker 1: going to be rite with political risk and likely also 437 00:23:45,840 --> 00:23:49,200 Speaker 1: rife with marketing autility, probably the likeliest window for us 438 00:23:49,200 --> 00:23:52,720 Speaker 1: to see real market of all autility. Since Koder sounds 439 00:23:52,720 --> 00:23:55,320 Speaker 1: like a fun end of the year, right, yeah, fun, 440 00:23:55,720 --> 00:23:57,760 Speaker 1: it's fun. It's fun for me and fun for you 441 00:23:58,760 --> 00:24:01,400 Speaker 1: because I'm a trader and you either journalists, but hey, 442 00:24:01,400 --> 00:24:04,520 Speaker 1: everybody else. But it's that time, I believe. Is it 443 00:24:04,640 --> 00:24:08,000 Speaker 1: that time? It is that time? Stand clear of the 444 00:24:08,080 --> 00:24:12,479 Speaker 1: craziest things we saw in markets this week. Alright, Sarah, 445 00:24:13,720 --> 00:24:16,760 Speaker 1: what did you and vill Donna come up with this week. 446 00:24:17,119 --> 00:24:18,960 Speaker 1: Well vill Donna came up with it. But I'm really 447 00:24:18,960 --> 00:24:21,920 Speaker 1: going to have to amp this up to make it 448 00:24:22,000 --> 00:24:25,959 Speaker 1: seem crazier maybe than it is. It is pretty crazy, though, 449 00:24:26,000 --> 00:24:30,240 Speaker 1: I will say so. The AP reported that KFC Kentucky 450 00:24:30,280 --> 00:24:36,560 Speaker 1: Fried Chicken is temporarily suspending its tagline. It's very popular 451 00:24:36,640 --> 00:24:40,760 Speaker 1: tagline known as quote unquote finger looking good. And the 452 00:24:40,800 --> 00:24:43,240 Speaker 1: reason that they're doing this I kild you not is. 453 00:24:43,280 --> 00:24:47,919 Speaker 1: They say it is quote the most inappropriate slogan for 454 00:24:49,200 --> 00:24:53,040 Speaker 1: end quote due to the coronavirus um. So because of 455 00:24:53,080 --> 00:24:56,400 Speaker 1: the coronavirus, they don't want people licking their fingers after eating. 456 00:24:56,480 --> 00:24:59,879 Speaker 1: Kentucky Fried Chicken completely changed their slogan, at least for 457 00:25:00,000 --> 00:25:01,800 Speaker 1: the time being. And of course Young Brands is the 458 00:25:01,840 --> 00:25:04,199 Speaker 1: owner of CAF So what is It's like, wipe on 459 00:25:04,240 --> 00:25:06,840 Speaker 1: your shirt? Good, now, wipe your fingers on your What 460 00:25:06,880 --> 00:25:09,480 Speaker 1: are you supposed to do? Not? Not even wipe on 461 00:25:09,480 --> 00:25:11,320 Speaker 1: your shirt. It's like run to the nearest bathroom, wash 462 00:25:11,320 --> 00:25:15,280 Speaker 1: your hands for twenty seconds, singing the ABC all right, 463 00:25:15,400 --> 00:25:18,280 Speaker 1: that's pretty good, that's pretty good. I'll give you mine. 464 00:25:18,359 --> 00:25:21,359 Speaker 1: Kind of funny, I believe not ful? Is is striking 465 00:25:21,400 --> 00:25:24,920 Speaker 1: out on crazy things. But in your honor not I've 466 00:25:24,920 --> 00:25:27,880 Speaker 1: got one, uh for you. I think you'll like this 467 00:25:27,920 --> 00:25:30,840 Speaker 1: one as a hip hop Before you continue, Mike, before 468 00:25:30,840 --> 00:25:34,359 Speaker 1: you continue. You know when you asked me, like, what's 469 00:25:34,400 --> 00:25:36,359 Speaker 1: crazy a the market right now, it's like, you know, 470 00:25:37,440 --> 00:25:39,240 Speaker 1: give me a shark, give a ticker. I'll tell you. 471 00:25:39,240 --> 00:25:43,520 Speaker 1: You know, it's the whole thing. That's true. That's true. 472 00:25:43,640 --> 00:25:46,560 Speaker 1: It's hard to differentiate anymore from from the normal things 473 00:25:46,560 --> 00:25:48,600 Speaker 1: in the But please continue, Mike, and I love I 474 00:25:48,600 --> 00:25:51,280 Speaker 1: love the segue on about hip hop. You know for sure. 475 00:25:52,080 --> 00:25:57,040 Speaker 1: Yea sonos hip hop aficionado and Southern bees. Sarah will 476 00:25:57,040 --> 00:25:58,919 Speaker 1: tell you why. When I look at market stories, I 477 00:25:58,960 --> 00:26:02,560 Speaker 1: like all the alternative asset classes and this is about 478 00:26:02,600 --> 00:26:06,480 Speaker 1: as alternative as it gets. Southebys in September is gonna 479 00:26:06,520 --> 00:26:12,440 Speaker 1: hold its first auction of hip hop related memorabilia and 480 00:26:12,560 --> 00:26:17,000 Speaker 1: items and sort of the main attraction of this auction is, 481 00:26:17,560 --> 00:26:21,960 Speaker 1: if you remember back, it's way back in Biggie Smalls. 482 00:26:22,359 --> 00:26:24,240 Speaker 1: It was just a few days before he died. He 483 00:26:24,359 --> 00:26:29,399 Speaker 1: did a photo shoot, uh for Rap Pages magazine in 484 00:26:29,520 --> 00:26:33,200 Speaker 1: which the photographer wanted to portray him as the King 485 00:26:33,240 --> 00:26:36,960 Speaker 1: of New York. So somewhere he got this really cheap 486 00:26:37,200 --> 00:26:40,919 Speaker 1: plastic crown and put it on Biggie's head. Some pretty 487 00:26:40,920 --> 00:26:43,480 Speaker 1: famous photos came out of it. He did, he said 488 00:26:43,480 --> 00:26:45,080 Speaker 1: he it made him look like the Burger King. He 489 00:26:45,119 --> 00:26:49,520 Speaker 1: didn't like it anyway. This is the highlight of Southeby's 490 00:26:49,640 --> 00:26:54,240 Speaker 1: first hip hop auction in September. And he guess, Sarah, not, 491 00:26:54,640 --> 00:26:57,320 Speaker 1: what would you guess that the estimated sale price of 492 00:26:57,359 --> 00:26:59,840 Speaker 1: this crown is no. If I'm gonna let you go first, 493 00:27:00,480 --> 00:27:04,720 Speaker 1: h I might go higher. Yeah, I might up it 494 00:27:04,760 --> 00:27:06,959 Speaker 1: to two fifty Why not you you're like prices, right, 495 00:27:07,000 --> 00:27:12,680 Speaker 1: You're gonna go hundred and fifty one. They're saying they're 496 00:27:12,680 --> 00:27:15,320 Speaker 1: putting a ballpark estimate of two hundred to three hundred 497 00:27:15,320 --> 00:27:18,520 Speaker 1: thousand dollars for this crown. It is signed on the 498 00:27:18,560 --> 00:27:22,040 Speaker 1: inside by both Biggie and the photographer. But here's what 499 00:27:22,119 --> 00:27:26,600 Speaker 1: I think is crazy. Elsewhere in this auction twenty two 500 00:27:27,080 --> 00:27:32,439 Speaker 1: handwritten and signed love letters from none other than a 501 00:27:32,520 --> 00:27:36,679 Speaker 1: sixteen year old Tupac Shakur to a woman named Kathy 502 00:27:36,760 --> 00:27:39,520 Speaker 1: Lowe who was his high school sweetheart back in Baltimore 503 00:27:39,560 --> 00:27:45,320 Speaker 1: back in the day. So two handwritten love letters, including 504 00:27:45,359 --> 00:27:49,000 Speaker 1: one It's It's adorable, it says Tupac hearts Cathy with 505 00:27:49,040 --> 00:27:53,760 Speaker 1: the heart you know, all signed, all all original, Some 506 00:27:53,840 --> 00:27:57,080 Speaker 1: include some verses, some poetry from Tupac. What do you 507 00:27:57,119 --> 00:28:01,000 Speaker 1: think higher? Lower than Biggie's Crown? I personally, I would 508 00:28:01,000 --> 00:28:03,320 Speaker 1: say lower. I could see you doing much more with 509 00:28:03,359 --> 00:28:06,399 Speaker 1: Biggie's crown than just twenty two love letters. I'll be 510 00:28:06,480 --> 00:28:08,879 Speaker 1: there from Tupac lying around, but I'd have to say low. 511 00:28:09,000 --> 00:28:11,600 Speaker 1: But you're but you'd like to wear the crown out 512 00:28:11,840 --> 00:28:16,679 Speaker 1: on the town and stuff stars obviously, how about you? 513 00:28:16,720 --> 00:28:19,520 Speaker 1: What what's your what's your price? Is right? Bid for 514 00:28:19,520 --> 00:28:23,560 Speaker 1: for Tupac letters? You know, I would guess lower, But 515 00:28:23,800 --> 00:28:26,199 Speaker 1: if it were lower, I would try arbitrage in the difference, 516 00:28:26,600 --> 00:28:31,920 Speaker 1: because that's it's much lower than estimating love letters at 517 00:28:31,960 --> 00:28:34,960 Speaker 1: sixty thousand to eighty thousand. I think there's a little 518 00:28:34,960 --> 00:28:38,560 Speaker 1: East Coast bias going on in the pricing here from Southebes, 519 00:28:38,920 --> 00:28:40,360 Speaker 1: you know what, Like, I think we need to hit 520 00:28:40,400 --> 00:28:43,640 Speaker 1: up South Beast because I wonder how much my high 521 00:28:43,640 --> 00:28:46,720 Speaker 1: school jazz and hip hop instrumentals would go for right now. 522 00:28:47,280 --> 00:28:49,120 Speaker 1: I hope they would get a little bit close to 523 00:28:49,120 --> 00:28:52,200 Speaker 1: the love letters at least maybe I could. Maybe I 524 00:28:52,200 --> 00:28:54,480 Speaker 1: could pay for my Blue matterminal for a year or something. 525 00:28:54,520 --> 00:28:56,640 Speaker 1: You know, let's do it. Let's get them in the auction. 526 00:28:56,680 --> 00:28:58,680 Speaker 1: We'll get him in the auction. I expect you to 527 00:28:58,680 --> 00:29:03,360 Speaker 1: bid in this auction. Novel. I next thing, you know, 528 00:29:03,560 --> 00:29:06,800 Speaker 1: Mike's gonna see. Mike's gonna see a headline. It's gonna 529 00:29:06,960 --> 00:29:10,120 Speaker 1: say your name wins out the auction at Stubbs. The 530 00:29:10,160 --> 00:29:11,720 Speaker 1: next time we have you on, yes, you will be 531 00:29:12,040 --> 00:29:19,200 Speaker 1: uh wearing the crown and reading. I would love that 532 00:29:19,240 --> 00:29:21,600 Speaker 1: more than anything. And by the way, last saw real 533 00:29:21,680 --> 00:29:24,040 Speaker 1: quick my puppy that I recently got that we were 534 00:29:24,040 --> 00:29:27,080 Speaker 1: talking about. His name is Nas, named after Nas, the 535 00:29:27,120 --> 00:29:29,520 Speaker 1: rapper from Queensbridge who has a who has an album 536 00:29:29,680 --> 00:29:32,040 Speaker 1: came out which came out this week. So, you know, 537 00:29:32,840 --> 00:29:35,320 Speaker 1: much respect to my East Coast rappers as well. But 538 00:29:35,720 --> 00:29:41,880 Speaker 1: where's the love for tuplock right now? But I think 539 00:29:42,200 --> 00:29:46,920 Speaker 1: they need a West Coast auction house for handle well. 540 00:29:46,960 --> 00:29:49,640 Speaker 1: I feel like we could talk about hip hop for days. 541 00:29:49,640 --> 00:29:51,960 Speaker 1: I don't know if you definitely could, but not ful Sonala, 542 00:29:52,080 --> 00:29:53,920 Speaker 1: thanks us so much for joining us on the show 543 00:29:54,000 --> 00:29:56,360 Speaker 1: this week. Always a pleasure. Guys, thank you so much 544 00:29:56,400 --> 00:30:06,840 Speaker 1: for having me until next time. What Goes Up will 545 00:30:06,880 --> 00:30:10,160 Speaker 1: be back next week. Until then, you can find us 546 00:30:10,160 --> 00:30:13,400 Speaker 1: on the Bloomberg Terminal, website and app, or wherever you 547 00:30:13,440 --> 00:30:16,000 Speaker 1: get your podcasts. 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