Speaker 1: This is Bloomberg Business Week. I'm Karl Masser and I'm
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Speaker 1: YouTube search Bloomberg Global News. Alright, pretty, here is my
Speaker 1: hot take of the day, and it's a courteysy of
Speaker 1: our next guest. Stock prices are down, Treasury yields are down,
Speaker 1: oil prices are down, Corporate credit spreads are wider, the
Speaker 1: dollar exchange rate is higher. This is a recession trade.
Speaker 1: There's no other way to call it. Neil, data partner
Speaker 1: and head of economic research Renaissance Macro Research, joins us
Speaker 1: on the phone from New York City, and Neil, you
Speaker 1: put it perfectly. Even somebody like me can kind of
Speaker 1: put it all together. Here is this something that's been
Speaker 1: building for a while here. How do you think about
Speaker 1: recessions and and at risk markets? Well, I mean I think, um,
Speaker 1: you know, we're seeing uh significant continue to repricing in
Speaker 1: the in the in the financial markets, right, I mean
Speaker 1: you know you said it right there. There's no other
Speaker 1: way of describing what's going on. And you know, I
Speaker 1: think a lot of this is just um, you know,
Speaker 1: a function really of a FED guidance, right, and um,
Speaker 1: you know I think the FED is getting um, you know,
Speaker 1: frankly less data dependent, less data dependent, right, I mean,
Speaker 1: in other in other words, in other words, they're hiking
Speaker 1: aggressively even when the data I think is moving that
Speaker 1: should be leading them in a direction to not be
Speaker 1: doing that. Why do you think they're doing that? Is
Speaker 1: it just the political fear the backlash from the markets
Speaker 1: in terms of being quote unquote behind the curve? Um? Well,
Speaker 1: I think that they were so wrong on the on
Speaker 1: the transitory inflation view, right, that they almost need to
Speaker 1: be sure that inflation has turned a corner before they
Speaker 1: start pivoting off their current their current policy path. And
Speaker 1: certainly the FAIDS rhetoric has been increasingly hawkish, right, I mean, um,
Speaker 1: you know they're all in on price stability. Um. I
Speaker 1: think the big the big story in the last week
Speaker 1: is just how their their assessment of risk management has changed, right.
Speaker 1: I mean so in the beginning, it was, you know,
Speaker 1: they basically have two choices, right, two doors that they
Speaker 1: could walk through, both with pretty bad choices. On the
Speaker 1: one one door behind door number one is a recession, right,
Speaker 1: that's a mistake. Behind door number two, let inflation expectations
Speaker 1: go higher, and face with those two choices. The said
Speaker 1: saying that they'll go through door number one, which is
Speaker 1: the recession. It's like the lesser of two evils from
Speaker 1: their perspectives. And so I think that's what's changed, is
Speaker 1: that they're they're they're they're sort of assessment of risk management. Um,
Speaker 1: they would much rather, um, have a recession to bring
Speaker 1: inflation under control than the alternative, which is not getting
Speaker 1: doing enough and allowing inflation expectations to keep drifting higher. Well,
Speaker 1: inflation expected just keep drifting higher. But I have to ask, simply,
Speaker 1: it kind of sounds like, on the one hand, there's
Speaker 1: this narrative out there that this is quite literally Chairman
Speaker 1: Powell's vulgaresque moment. But then again. We spoke to Anita Markowska,
Speaker 1: of Jeffries's chief economists there just a few minutes ago
Speaker 1: Bloomber Television. She said, well, actually, we don't even need
Speaker 1: to see that. We might not even be there yet.
Speaker 1: Can you explain just the wide range here of outcomes
Speaker 1: that you're seeing. Well, I mean, as you know, if
Speaker 1: you put two economists in the room, you're you're lucky
Speaker 1: six opinions. So um, I mean I think that probably
Speaker 1: goes some way. Um um too too. I mean I
Speaker 1: think part part of this is just what we're seeing.
Speaker 1: I think is a flaw in the FED sort of
Speaker 1: expectations management strategy, right, I mean they kind of you know,
Speaker 1: they work their expectations, they try to guide the financial markets,
Speaker 1: and you know the idea, I guess is to like
Speaker 1: have the meetings essentially be sort of like foregone conclusion
Speaker 1: by the time they meet, right, I mean that's already
Speaker 1: precedentsly just do whatever the market. I just think that
Speaker 1: there there are so many moving part between each meeting,
Speaker 1: So why would you um, you know, play that play
Speaker 1: that game. So I just you know, I just think
Speaker 1: that you know, to me, this is supposed to be
Speaker 1: a dated dependent institution, right, and Um. One of the
Speaker 1: problems with expectations management is that, UM, you know you
Speaker 1: used sort of this sort of forward guidance you know
Speaker 1: a person they had been taking, is that you kind
Speaker 1: of lock yourself into a path that becomes difficult to undo. Uh.
Speaker 1: And and I think that's that's happened to some extent, Right,
Speaker 1: I mean, they're going seventies went seventies five in June.
Speaker 1: They're they're gonna go seventy five in July. And what's
Speaker 1: the off ramp uh in September fifty basis points. And remember,
Speaker 1: I mean I think this is important for your viewers
Speaker 1: to understand the sets forecast will likely be revised down
Speaker 1: in September, both for core, both for inflation and for
Speaker 1: GDP growth. UM. And they're still hiking, you know, relatively
Speaker 1: aggressively despite that. So if it looks like they're they're
Speaker 1: not data dependent, I think that's a big problem for
Speaker 1: the markets. UM, and that to me is increasingly what
Speaker 1: looks like is going to happen. Neil, about thirty seconds
Speaker 1: here you mentioned inflation expectations. You're looking at break evens here,
Speaker 1: five years, ten years, even to year break evens. They
Speaker 1: it looks at least chart wise, but they've peaked. Does
Speaker 1: that mean inflation is peaked? I mean I think inflation
Speaker 1: has peaked. Um, you know, certainly core inflation has peaked. Um.
Speaker 1: But I do think that, um, you know, part of
Speaker 1: this is just the recession trade, right, I mean, um,
Speaker 1: you know, growth expectations are declining, so if course inflation
Speaker 1: expectations will fall. The question is what does the FED
Speaker 1: do about this? Do they you know, do they take
Speaker 1: the off ramp or not? And if they don't, then
Speaker 1: we can expect these most to continue. Oh boy, alright,
Speaker 1: very tough act there for our freder Reserve. Let's see
Speaker 1: how it plays out. Neil Datta, partner and head of
Speaker 1: economic research Renaissance Macro Research is the firm, joining us
Speaker 1: on the phone from New York City. Again. He's calling
Speaker 1: this what we're seeing on our screens the recession trade.
Speaker 1: You got asset prices decline, you got oil prices declining,
Speaker 1: the dollar higher. It kind of looks a lot like
Speaker 1: a recession. And that's what Neil Datta feels like we're
Speaker 1: seeing right now. You're listening to Bloomberg Business Week with
Speaker 1: Carol Messer and Bloomberg Quick takes Tim Stinovic on Bloomberg Radio.
Speaker 1: We highlighted last week the current edition of Bloomberg business
Speaker 1: Week is their heist edition, where's all kinds of stories
Speaker 1: of skullduggery and thievery, and we've got a good one
Speaker 1: today from that edition. Simon Van's Island Would, freelance reporter
Speaker 1: for Bloomberg Business Week, joined us on the phone from
Speaker 1: New York City. Simon talked to us about this lawyer guy,
Speaker 1: the lottery lawyer. What's this scam? Okay? So, first of all,
Speaker 1: glad to be here. Uh, well, let's soften it before
Speaker 1: we get into calling it a scam because he is
Speaker 1: going on trial in about two weeks, so we have
Speaker 1: to say alleged with him, although he has some co
Speaker 1: conspirators who I'll get into, who have all played guilty
Speaker 1: and so scammy indeed just looks essentially. The lottery lawyer
Speaker 1: is a guy named Jason Kurwind, and he cornered a
Speaker 1: niche market of the legal world by representing newly minted
Speaker 1: power Ball and Megan Millions winners. And so he traveled
Speaker 1: on the Today's Show or all over the internet basically
Speaker 1: saying if you've won money and you're bewildered and you've
Speaker 1: no idea what to do with it. Called me, I'm
Speaker 1: your guy. And you know, as some of your listeners
Speaker 1: may know, a lot of a lottery winners are not
Speaker 1: financially sophisticated and a blowing at all. I feel like
Speaker 1: they've got to give it to friends or family or whatever.
Speaker 1: And so this guy takes advantage of this opening. He
Speaker 1: is alleged to basically have squandered over a hundred million
Speaker 1: dollars from some of the bigger lottery winners in recent
Speaker 1: history on a variety of colorful schemes. And that's that's
Speaker 1: sort of the top line of it. So how did
Speaker 1: he get caught here? Um? So that's a great question
Speaker 1: because there's these overlapping criminal schemes that, um that are
Speaker 1: I played here. So there was a I think that
Speaker 1: probably it's there's a Ponzi scheme involved, and so we
Speaker 1: don't really need to explain why the Ponzi schemes involved. Basically,
Speaker 1: a guy purporting to be a jeweler in Long Island
Speaker 1: was saying he could get massive returns on jeweler I
Speaker 1: think like the uncut gems out of Sandler movie, but
Speaker 1: like in Long Island. He ends up getting pinched for
Speaker 1: with the Ponzi scheme, and that Ponzi scheme overlaps the
Speaker 1: water lawyer that guy, So the Ponzi scheme jeweler guy
Speaker 1: ends up becoming a confidential informant and starts wire tapping
Speaker 1: calls involved with a lottery lawyer, and that I think
Speaker 1: ends up topping some those other people start flipping. There's
Speaker 1: wire taps up the wazoo in this call in this case. Uh.
Speaker 1: And eventually they would let down and they figure out
Speaker 1: that the water aller has been been losing money on
Speaker 1: behalf of the people they're supposed to be managing, you know,
Speaker 1: their money and growing it, not you know, throwing it
Speaker 1: down the toilet. What are some of the quote unquote investments, uh,
Speaker 1: that these folks made on behalf of their clients. Because
Speaker 1: it seems to me, I always say to myself when
Speaker 1: I see somebody on the TV screen holding up that
Speaker 1: big check for I would just buy treasuries treasuries and
Speaker 1: go to sleep. They do. So this is the irony.
Speaker 1: So these guys, they, you know, the varying levels of financialistication.
Speaker 1: But so one of his big winners in the biggest
Speaker 1: single lottery winner of all time, meaning she won. She
Speaker 1: was a South Carolina woman who kept her identity private
Speaker 1: one point five billion dollars backpot and before tax, and
Speaker 1: she said to him, please invest conservatively, and he was like, surchure. Sure.
Speaker 1: Turns out that one of the bigger investment schemes was
Speaker 1: something called the Merchant Cash Advanced Business in. Some buddies
Speaker 1: in Long Island got into mc AS and what that is.
Speaker 1: It's it's almost like kind of gray area legal loan sharking,
Speaker 1: highly extracted loans, incredibly high interest rates up to it's
Speaker 1: for people with bad credit, deathperate for cash, maybe they
Speaker 1: have criminal history, who knows, very popular kind of gray
Speaker 1: area industry here in New York State. He decides this
Speaker 1: would be a great investment scheme. Uh. The guys he
Speaker 1: ends up parting with, their total crooks, one of them
Speaker 1: one of whose grandfather was the head boss of the
Speaker 1: Colombo crime things. Yeah, and so that's maybe not the guy.
Speaker 1: I don't know if he googled him or not, but like,
Speaker 1: that might not be the guy you want to get
Speaker 1: in business with. And so that that money starts disappearing
Speaker 1: for a combination of reasons. One the grandson of the
Speaker 1: mob boss plus the other guy. Uh, they start kind
Speaker 1: of raiding the accounts, like, hey, we deserve a car,
Speaker 1: like we didn't win the lottery. One of these guys
Speaker 1: deserve all the money. So they start rating it. Then
Speaker 1: they start investing what ends up being the Ponzi scheme,
Speaker 1: which so they lose all of it. And then this
Speaker 1: is a kicker to try to get the money back.
Speaker 1: They learn about another guy who actually is an alleged
Speaker 1: member of the New York City mob but for a
Speaker 1: different family, the Genevaise family, who says this is the
Speaker 1: beginning of the pandemic. Now he says, I've got something
Speaker 1: called Ppe and I'm gonna make a ton of money
Speaker 1: on it. And then that's the final way of the
Speaker 1: losing money. There's there's a lot of layers to the story. Clearly,
Speaker 1: let's add one more. Talk to us about Cheddar Capital. Yeah,
Speaker 1: so Cheddar Capital ridiculous name and if you google it,
Speaker 1: like you, this is the name of a business, Uh,
Speaker 1: you can't even find it. It's like there's that vanity
Speaker 1: fair website called Cheddar and then there's the cheese and
Speaker 1: it's like, is this even a real thing? Cheddar was
Speaker 1: one of the merchan cash advanced businesses that he was
Speaker 1: putting a lot of the lottery winner's money in. And
Speaker 1: I think at the beginning it's possible that this was
Speaker 1: such an extractive and lucrative industry actually, um, that they
Speaker 1: were making a fair amount of money on it. Uh,
Speaker 1: it's just that it seemed to have been terribly mismanaged.
Speaker 1: Um so Cheddar. Once the Cheddar money started allegedly disappearing,
Speaker 1: Um that that toppled bunch of other dominoes which led
Speaker 1: us down the road. I was just telling you about.
Speaker 1: So Simon, there are four kind of main characters in
Speaker 1: your story here, but the lottery lawyer, and three of
Speaker 1: them have already pled guilty in their waiting sentencing. But
Speaker 1: the lottery lawyer himself, he's going to trial, right, give
Speaker 1: us a sense of the timing one once that can occur,
Speaker 1: How do you what's the expectation about how that might
Speaker 1: play out? Yeah, So the trials in um New York
Speaker 1: Southern District in about a week. I think jury selection
Speaker 1: is like in a week. Um. The looks like um
Speaker 1: at least a couple of co conspirators will testify against him,
Speaker 1: his own brother in law, who's a very careful, colorful character.
Speaker 1: He's a cosmetic surgeon in Long Island, UH called Scott Bleier,
Speaker 1: who's handle on Instagram is Dr b Fixen and definitely
Speaker 1: worth a look if you're on Instagram. He will be
Speaker 1: testifying apparently against his own brother in law and a
Speaker 1: whole separate aspect of this. I would say this, between
Speaker 1: all the words I talked to and people are involved
Speaker 1: in the case, everyone is shocked at this guy. A
Speaker 1: lot lawyers even going to trial. He was fired from
Speaker 1: his law firm, Risken Rattler, which is based on Long Island,
Speaker 1: as soon as the allegations hit that the wire tops
Speaker 1: are incriminating. There's three other guys who played guilty. Um,
Speaker 1: but his lawyer, I think he my guest is he's
Speaker 1: trying to clear his name because even if he if
Speaker 1: he takes a pleas I don't think he's worried. He's
Speaker 1: never gonna work again. And his whole reputation was based
Speaker 1: on integrity, right, I'm gonna help you manage your money.
Speaker 1: I'm the good guy. And his record was spotless until then.
Speaker 1: He seemed like a family guy. He just seemed pretty
Speaker 1: milk toast. I think he's going to Hell Mary to
Speaker 1: try to clear his name, and the lawyers, basically, I think,
Speaker 1: are going to argue that he himself was scammed by
Speaker 1: his co conspirators, that he invested money in a bench
Speaker 1: of that bunch of bad schemes and it wasn't in fault.
Speaker 1: The problem is that he, unbeknownst to the allegedly unbeknownst
Speaker 1: to the winners, was taking a cut of the investment
Speaker 1: in terms of in like these things like Cheddar, capital
Speaker 1: of these businesses, and was allegedly spending it on you know,
Speaker 1: classic cliches like sax fist avenue, uh an suv like
Speaker 1: name that of stuff, and so might be a tall
Speaker 1: hurdle for them to get an acquittal. All right, are
Speaker 1: you gonna? Are you gonna follow the trial? I have
Speaker 1: to committed. All right, We'll have you back when we
Speaker 1: get to get some kind of resolution there to the trial.
Speaker 1: Simon van Zylon would freelance reporter for Bloomberg business Week,
Speaker 1: joining us on the phone from New York City. His story.
Speaker 1: Simon story is featured in the Heist issue of Business
Speaker 1: Week magazine that's available in news stands, on the Bloomberg
Speaker 1: and at Bloomberg dot com slash business Week. Apparently that
Speaker 1: is the Heist issue is an annual issue for Business Week,
Speaker 1: widely anticipated for all the crazy stories that are reported,
Speaker 1: take up dealing mostly with financial Canary. So good, good
Speaker 1: stuff there. This is Bloomberg. This is Bloomberg Business Week
Speaker 1: with Carol Messer and Bloomberg Quick Takes Tim Stinovic on
Speaker 1: Bloomberg Radio. All right, pretty remember this Archegos management story
Speaker 1: from a few months back, Bill Lang and those guys
Speaker 1: the Bella, etcetera. Yes, lost, like you know, jillions of dollars,
Speaker 1: twenty billion dollars in a matter of days. It seems
Speaker 1: like billion. I'm sorry, twenty billion dollars. Well, he's got
Speaker 1: he's got a lot of legal problems. He's got criminal issues.
Speaker 1: Now he's got former employees suing him saying what about
Speaker 1: my bonus? I didn't steal any money. Greg Farrell, investigative
Speaker 1: reporter for the Legal Enforcement Team from Bloomberg News Joints,
Speaker 1: is live here on our Bloomberg Interactor Broker Studio. Greg,
Speaker 1: this guy's got a lot of legal issues. It just
Speaker 1: seemed to be mounting up. Now he's got employees coming
Speaker 1: back and saying you gotta pay me my bonus. Is
Speaker 1: that a thing? Yes, So today's lawsuit is from one
Speaker 1: former employee, but I guess I would guess he represents
Speaker 1: a number of others or others will join him because
Speaker 1: the same thing happened to him, to them that they
Speaker 1: were guaranteed any money they put into their deferred comp
Speaker 1: program over a period of several years would never go
Speaker 1: below par, would be backstopped, etcetera, and only have a
Speaker 1: blow up in March of last year. I have to ask, though,
Speaker 1: I mean, well, let's start with Paul here, actually, because
Speaker 1: I have to ask about the bonus dynamic. I want
Speaker 1: my bonus and I want it all, and I wanted
Speaker 1: in cash. I mean same. But but you've listen, you've
Speaker 1: worked on Wall Street for ages UM, and I have
Speaker 1: to ask about how this perhaps bonus structure is different
Speaker 1: from from some of the banks. Yeah, it goes one
Speaker 1: of two ways. One is you just on a completely
Speaker 1: discretionary bonus and it could be zero or any number
Speaker 1: above that it's not a negative number, which is another
Speaker 1: whole whole issue. Or you're on under a count contract
Speaker 1: and you only five million dollar guaranteed bonus, maybe even
Speaker 1: plus expercent of the fees I bring in something structured
Speaker 1: like that. But when there's a case of fraud, as
Speaker 1: in this potential and potentially in this case, what's the play?
Speaker 1: Is my call? If I'm the employee, I just say, hey,
Speaker 1: I didn't do anything wrong. Why can't I get my
Speaker 1: money back? That's one elemented. Another element is that this
Speaker 1: is a good time for form employees to graph for
Speaker 1: room because Bill Warring has been charged criminally, so that
Speaker 1: bolsters the case is at the U. S Attorney Manhattan
Speaker 1: has already accused Bill Wang and another top executive of
Speaker 1: criminal behavior. This will support in a civil suit like this.
Speaker 1: But then you get to the question of let's say
Speaker 1: he wins, where's the money? Is their money? And also
Speaker 1: the value the purported value of the deferred comp program
Speaker 1: was was like five million dollars as of you know,
Speaker 1: end of Was that a real number or was that
Speaker 1: the result of a lot of the same gamesmanship that
Speaker 1: Wang was accused of, you know, uh pulling off in
Speaker 1: the two years that led to the implosion. So Greg,
Speaker 1: what does he have to do to get rid of
Speaker 1: these charges? Is just a matter of paying them their bonuses?
Speaker 1: Right now? This is not a priority. Criminal charges are
Speaker 1: always a priority because you could spend the rest of
Speaker 1: his life in prison leal hassles and you know, chase
Speaker 1: the money, you know, whether or not I'll pay you.
Speaker 1: That's completely secondary. So this is not good news for
Speaker 1: Bill Wang. But the the important thing, the thing that
Speaker 1: really threatens him in his CFO with the criminal charges
Speaker 1: of a few months ago, there is a concern or
Speaker 1: I don't know this, but it's possible that you know,
Speaker 1: prosecutors don't always prosecute everything that someone allegedly did wrong,
Speaker 1: only the things they can identify. If this gets the
Speaker 1: attention of criminal prosecutors and expands leads to an expansion
Speaker 1: of the case, that would be trouble. But at least
Speaker 1: as of now, this is uh definitely a secondary matter
Speaker 1: in terms of Bill Wang. You know, civil is just
Speaker 1: not this, it's not a serious as criminal. What's the
Speaker 1: status of his criminal uh situation with the government is
Speaker 1: or an expectation for a timeline a plea deal or
Speaker 1: a timeline to actually going to trial the way So
Speaker 1: there's already been at least one hearing on this, and
Speaker 1: there's gonna be another hearing in August. I think it's
Speaker 1: expected that A. I don't think there'll be a wee deal.
Speaker 1: They both in the CFO Patrick Alligan, through their lawyers,
Speaker 1: you know, planned to fight this um. Secondly, I think
Speaker 1: given the complexity of this and the fact that we're
Speaker 1: now in the summer and nothing's really going to happen
Speaker 1: until September, suggests that in the complicated like this, if
Speaker 1: there's a trial, it will be next year. That's not
Speaker 1: a guarantee, but you know, ballpark figure it will probably
Speaker 1: be next year. And it's his defense, I didn't do it.
Speaker 1: There's two defenses, so good question. The main charges against
Speaker 1: Bill Wang and Pat Halligan from two months ago were
Speaker 1: one market manipulation and two lying to the banks. Um.
Speaker 1: In terms of the defense of market manipulation, you know,
Speaker 1: that's you know, there's a lot of gray area there
Speaker 1: because you know, yes, he didn't let each bank, each
Speaker 1: counterparty know what he was playing to do, but he
Speaker 1: was trading openly. He was trading in stocks he liked,
Speaker 1: trying to get their value up, as any investor does.
Speaker 1: So I think there's gonna be a robust argument as
Speaker 1: to whether or not market manipulation, you know, can be proved. However,
Speaker 1: it's a federal lot to lie to banks, and that's
Speaker 1: going to be much more you know, I wouldn't say
Speaker 1: slam dunk, but a much easier case for federal prosecutors
Speaker 1: to make is that you can't lie to banks, even
Speaker 1: if you didn't cheat them and they didn't lose money,
Speaker 1: you cannot make a false representationation to them. And that's
Speaker 1: going to be a much more difficult challenge for both
Speaker 1: those guys to to defend against fascinating stuff. Thirty seconds.
Speaker 1: Has someone else gone through these kind of proceedings before
Speaker 1: any kind of precedent here? No, I think the this
Speaker 1: bill waging the criminal case is highly unusual. The market
Speaker 1: manipulation theory. That's why I think this could get interesting
Speaker 1: in court, and that he might be able to mount
Speaker 1: He's got a very good lawyer, a legitimate defense, so
Speaker 1: you know, uh it really is you know, uh, whang
Speaker 1: is sort of a one off, right, all right, good stuff,
Speaker 1: Gregg Farrell, Thank you so much for joining us. Greig Farrell,
Speaker 1: investigative reporter for the legal enforcement team from Bloomberg News
Speaker 1: during us here in our Bloomberg Interactor Broker Studio Journal.
Speaker 1: Yeah but you let me drive. Oh no, no, no no, no, honey,
Speaker 1: please I drive. It's a good question. Drive this good
Speaker 1: drive to the globe. Well dry up on Bluebird Radio.
Speaker 1: Crazy intra day of trading is how I'll put it.
Speaker 1: I started the day here with greedy and the markets
Speaker 1: were looking down a couple of percent, and here we
Speaker 1: had the sp flat. We even got a one and
Speaker 1: a half percent increase on NASTAC. That is what I
Speaker 1: call intra day volatility. How does the professionals, how do
Speaker 1: they view this type of alatility? Sylvia Tablonski, chief investment
Speaker 1: officer of Defiance ETS, joins us on the phone from
Speaker 1: New York City. So, Sylvia, when you see price action
Speaker 1: like today again down big now trying to claw our
Speaker 1: way back to positive territory, what do you take away
Speaker 1: from that type of price movement? Hi? Actually great to
Speaker 1: be here today. Um. Look, I think intraday volatility in
Speaker 1: day chaos is another good way of putting it. I
Speaker 1: think at you know, what we're seeing now is is
Speaker 1: just sort of everything um coming to a t here, Right,
Speaker 1: We've had these headwinds that are you know, feeling sort
Speaker 1: of obvious to us. Um. We've been worried about inflation,
Speaker 1: you know, being worse than than we expected. Turned out
Speaker 1: it wasn't transient. UM, it hasn't come down as quickly
Speaker 1: as we thought it would. There were supply chain issues
Speaker 1: which haven't fully resolved, geopolitics, aggressive FED, UM. You know,
Speaker 1: all of these, all of these things have have been
Speaker 1: things that we were talking about, and you know, lo
Speaker 1: and behold that they have now hit the market and
Speaker 1: we have all three major indices in UM you know,
Speaker 1: bear market correction correction territory. So what I think is
Speaker 1: happening now though, is that you know, you're starting to
Speaker 1: get a rethink amongst investors, you know, because we have
Speaker 1: had these massive corrections, but in conjunction with that, we've
Speaker 1: also had reduction hiring, less spending on corporate and personal levels. UM.
Speaker 1: You know, some of the stuff is showing up in
Speaker 1: the commodity prices softening a little bit. So you know,
Speaker 1: I think in the nearest term we get that range
Speaker 1: found volatility. But investors that you know, have been waiting
Speaker 1: for something might be thinking, you know, we can't call
Speaker 1: the bottom here, but is it possible that the market
Speaker 1: has done some of the work for the FED, and
Speaker 1: is it possible that putting that first dollar to work
Speaker 1: makes sense here? Sylvia. Are we still in a dynamic
Speaker 1: where the FED is almost rewarded I would, I would say,
Speaker 1: or seen as doing its job if the markets drop
Speaker 1: the idea here being that the FED put that's been
Speaker 1: I think a staple of the markets for let's call
Speaker 1: it two years since March, the evaporation of that FED put.
Speaker 1: Is that still the badge of honor that it perhaps
Speaker 1: was three or four months ago? Great question, and I
Speaker 1: think I think that there's there's been more of a
Speaker 1: separation now, which is which is perhaps what the FED wanted.
Speaker 1: But I feel like, you know, another way to look
Speaker 1: at it is to say that in terms of, you know,
Speaker 1: that last inflation number coming in, and if acting with
Speaker 1: SEF and you know, starting to see the easing and
Speaker 1: things like jobs softening, a job demands softening a little bit,
Speaker 1: commodity softening a little bit. You know, we haven't seen
Speaker 1: it in the numbers yet, but if if you sort
Speaker 1: of look at it day by day, it is starting
Speaker 1: to take a little bit lower um and all three
Speaker 1: you know, industries pulling back in a major way. UM.
Speaker 1: You know, markets again tend to do some of the
Speaker 1: work for the FED. So so I think that the
Speaker 1: market is sort of pricing in that the economy is
Speaker 1: perhaps on its way into a small recession, a large recession,
Speaker 1: some sort of correction. So so to that effect, I think,
Speaker 1: you know, we might be close to an end at
Speaker 1: least in pain in terms of the amount of frost
Speaker 1: that has been taken off of the market. SOFA. One
Speaker 1: of the many reasons we're like chatting with you is
Speaker 1: you often time disclose kind of what you're doing in
Speaker 1: the market. And I see here in your notes that
Speaker 1: you bought some Delta stock. Now that can't be because
Speaker 1: the smooth travel we're experiencing here in the US this summer,
Speaker 1: is this, you know, just a really leveraged reopening play
Speaker 1: for you. Yeah, it's uh, it's it's probably a terrible
Speaker 1: experience to us fly that from these guys these days.
Speaker 1: But you know, what I think is interesting about the
Speaker 1: airlines is if you look at the T s A numbers.
Speaker 1: You know, we heard a report today that this weekend
Speaker 1: was essentially a record um in terms of travel. So
Speaker 1: and we've also seen you know, the data and the
Speaker 1: members in terms of m consumer spending sort of lightened
Speaker 1: up in the area of goods and it went over
Speaker 1: to services. And they've had this you know, thirty percent
Speaker 1: plus level of inflation you know UM in the presidency
Speaker 1: slash price appreciation that they have been able to price
Speaker 1: onto the consumer. So I I think that, you know,
Speaker 1: to your point is a good way to put it into.
Speaker 1: It's a sort of a leveled bet on on the
Speaker 1: reopen trade that I think is going to UM play
Speaker 1: off in the next couple of the next couple of
Speaker 1: earnings or parts. And you know, the Delta CEO came
Speaker 1: on and said that they're they're seeing it right. They're
Speaker 1: almost back to pre pandemic levels. UM. Some some days
Speaker 1: they had higher bookings and pre pandemic levels and they
Speaker 1: increased their UM operating margin outlook, and UM increase their
Speaker 1: sort of revenue outlook. So so I think that in
Speaker 1: terms of like, you know, sort of where do you
Speaker 1: go now, UM, it's it's it's a price that's certainly
Speaker 1: been hammered enough, but it's got some opside in the
Speaker 1: short term. So I did double in Delta UM as
Speaker 1: well as some semi conductors in tech. Well, speaking of
Speaker 1: semi conductors in particular, Paul and I were discussing a
Speaker 1: story earlier of the US dissuading or trying to dissuade
Speaker 1: a SML, the Dutch semi conductor maker, to give some
Speaker 1: of their technology, some of their really uh sought after
Speaker 1: machine making technology sects basically for chips to China. Sar.
Speaker 1: I'm losing my words here, but basically it's such a
Speaker 1: complicated story, and it kind of seems like there's this
Speaker 1: narrative still going on in the background of Biden administration
Speaker 1: trying to bring on some of that chip capacity back
Speaker 1: into the state and away from China squared, the chip story,
Speaker 1: the inflationary story, with the geopolitics of it all for us. Yeah.
Speaker 1: So so I think UM in terms of what's going
Speaker 1: on in terms of bringing you know, bringing chip production
Speaker 1: factories UM on shore, I think that, you know, if
Speaker 1: I look like far far out, because I just think
Speaker 1: it's take a really long time to actually play out.
Speaker 1: You know, that ends up being a win for companies
Speaker 1: like um intels for example. But in terms of just
Speaker 1: just sort of separating that and geopolitics, I just look
Speaker 1: at semi conductors as UM almost consumer staples in the
Speaker 1: in terms of you know, our feature innovation technology, whether
Speaker 1: it's five G, whether it's electric vehicles, artificial intelligence, machine learning,
Speaker 1: you know, metaverse, web three, UM, your new coffee baker
Speaker 1: or whatever it might be. It it requires a chip.
Speaker 1: And I just think that you know, UM hit to
Speaker 1: a lot of these names that have loads of calok
Speaker 1: in the video, I mean roads of cash on the
Speaker 1: bound sheet, well run companies. UM, they're good places to be.
Speaker 1: I think it should takes time to get you know,
Speaker 1: performance back all right, Sylvia, good stuff. We always appreciate
Speaker 1: chatting with you. Sylvia Jablonski, Chief Investment Officer, Defiance E
Speaker 1: t F S joining us on the phone from New
Speaker 1: York City. Here. Thanks for listening to Bloomberg Business Week.
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