1 00:00:13,560 --> 00:00:16,680 Speaker 1: Hello, and welcome to What Goes Up, a Bloomberg Weekly 2 00:00:16,720 --> 00:00:20,119 Speaker 1: Markets podcast. I'm Sara pant Zac, a reporter on the 3 00:00:20,160 --> 00:00:23,200 Speaker 1: Cross Asset team, and I'm Mike Reagan, a senior editor 4 00:00:23,239 --> 00:00:25,520 Speaker 1: on the Markets Team. This week on the show, an 5 00:00:25,560 --> 00:00:29,600 Speaker 1: American air strike kills a top Iranian commander and Iron retaliates, 6 00:00:29,760 --> 00:00:33,680 Speaker 1: Yet the market moves on with stocks again touching record highs. 7 00:00:34,360 --> 00:00:36,840 Speaker 1: Is this the right reaction or is there a reason 8 00:00:36,880 --> 00:00:41,080 Speaker 1: to worry investors are potentially a bit too comfortable and 9 00:00:41,280 --> 00:00:44,479 Speaker 1: we'll resume our tradition. The craziest thing I saw in 10 00:00:44,520 --> 00:00:46,360 Speaker 1: markets this week. We had a couple of weeks off 11 00:00:46,479 --> 00:00:48,519 Speaker 1: of the crazy things there, Sarah, I don't know if 12 00:00:48,560 --> 00:00:52,120 Speaker 1: our listeners or will forgive us for that, but it's back. 13 00:00:52,200 --> 00:00:54,680 Speaker 1: I'll say some listeners that I do know personally. I 14 00:00:54,720 --> 00:00:57,760 Speaker 1: got some nasty messages. They were a little bit upset 15 00:00:57,840 --> 00:01:01,200 Speaker 1: that we didn't know the crazy in the last couple 16 00:01:01,200 --> 00:01:03,959 Speaker 1: of episodes, So we better. I'll have some pretty good 17 00:01:03,960 --> 00:01:05,360 Speaker 1: ones to make up for this time, all right. I 18 00:01:05,360 --> 00:01:07,560 Speaker 1: got a good one. I got a good one. I 19 00:01:07,560 --> 00:01:10,920 Speaker 1: don't know about you. It might be a bit obvious, 20 00:01:10,959 --> 00:01:12,440 Speaker 1: but it's a good one. I think we'll all get 21 00:01:12,440 --> 00:01:15,199 Speaker 1: a laugh out of it. Well, hopefully our guests came 22 00:01:15,280 --> 00:01:18,560 Speaker 1: prepared for the craziest thing, but we'll talk about the 23 00:01:18,600 --> 00:01:21,240 Speaker 1: real market stuff first. And joining us first time on 24 00:01:21,240 --> 00:01:23,720 Speaker 1: the show. Very happy to have him here. John McKay, 25 00:01:23,959 --> 00:01:27,000 Speaker 1: senior market strategist at Shredder's John, Welcome to the show, 26 00:01:27,120 --> 00:01:28,959 Speaker 1: Thanks Mike. Good to be here. Good to be here, Sarah, 27 00:01:29,520 --> 00:01:32,479 Speaker 1: And returning to the show. Uh, sort of the hidden 28 00:01:32,520 --> 00:01:35,479 Speaker 1: hand of the What Goes Up Podcast? I A lot 29 00:01:35,480 --> 00:01:38,840 Speaker 1: of our crazy things actually are filtered through to us 30 00:01:39,080 --> 00:01:43,920 Speaker 1: by our Chief Crazy Thing Correspondent, uh, Vildana Hirick, who's 31 00:01:43,920 --> 00:01:47,600 Speaker 1: actually a Bloomberg cross st reporter and connoisseur of crazy things. 32 00:01:47,760 --> 00:01:50,160 Speaker 1: But I think it's because you cover bitcoin that you 33 00:01:50,240 --> 00:01:52,480 Speaker 1: have the insight on all the true crazy market stories. 34 00:01:52,560 --> 00:01:54,880 Speaker 1: Is that true? Yes? I think so. And if I 35 00:01:54,920 --> 00:01:58,040 Speaker 1: can go on and say that, I'd actually prefer to 36 00:01:58,080 --> 00:02:01,640 Speaker 1: have that title instead of my I think I think 37 00:02:01,680 --> 00:02:05,240 Speaker 1: we should make it official. Vildonna Hirich, Chief Crazy Things Correspondent. 38 00:02:06,480 --> 00:02:08,680 Speaker 1: It works well. Care for what you wish for, you know, 39 00:02:08,800 --> 00:02:11,119 Speaker 1: I mean, PR pitches can be annoying enough. If you're 40 00:02:11,240 --> 00:02:15,480 Speaker 1: Crazy Things Correspondent, they could be off the charts. But John, 41 00:02:15,520 --> 00:02:18,880 Speaker 1: let's start with you. I mean, Um, this, this tremendous 42 00:02:18,919 --> 00:02:21,400 Speaker 1: sort of risk on rally of two thousand and nineteen 43 00:02:21,680 --> 00:02:25,280 Speaker 1: is just flowed right through into two thousand and twenty, 44 00:02:25,480 --> 00:02:28,200 Speaker 1: despite all the tweets about World War three that I've 45 00:02:28,240 --> 00:02:32,120 Speaker 1: been reading. What's your take? I mean, obviously, geopolitics often 46 00:02:32,280 --> 00:02:36,320 Speaker 1: can cause uh, sort of knee jerk reactions in markets 47 00:02:36,400 --> 00:02:39,720 Speaker 1: that kind of fade almost instantly. Uh, this to me 48 00:02:39,840 --> 00:02:43,280 Speaker 1: seems like it has the potential to linger for a 49 00:02:43,280 --> 00:02:45,480 Speaker 1: little while. Is this is this a vowel event? You know? 50 00:02:45,520 --> 00:02:48,600 Speaker 1: Is this a volatility inducing event? What's going on between 51 00:02:48,600 --> 00:02:50,400 Speaker 1: the US and Iran? Is you know how long do 52 00:02:50,400 --> 00:02:53,080 Speaker 1: you sort of see this lingering in the headlines for 53 00:02:53,200 --> 00:02:56,000 Speaker 1: market people? So? Who am I to tell the markets 54 00:02:56,000 --> 00:02:58,200 Speaker 1: what to do? But it should be right. You've got 55 00:02:58,800 --> 00:03:01,800 Speaker 1: um Iran got the US going head to head. I 56 00:03:01,800 --> 00:03:04,560 Speaker 1: mean the killing of the top three, top four person 57 00:03:04,600 --> 00:03:06,440 Speaker 1: in the country, depending on who you read and who 58 00:03:06,480 --> 00:03:08,919 Speaker 1: you believe. Um And someone who had been built up 59 00:03:08,960 --> 00:03:11,400 Speaker 1: over the years is sort of a hero within that country, 60 00:03:11,880 --> 00:03:14,200 Speaker 1: resisting sort of the West, trying to get the US 61 00:03:14,240 --> 00:03:17,000 Speaker 1: out of the Middle East in general, UM and resisting 62 00:03:17,160 --> 00:03:20,360 Speaker 1: Sunni powers over there as well, and the market sell off, 63 00:03:20,600 --> 00:03:23,920 Speaker 1: and then you have the response on Tuesday night and 64 00:03:24,240 --> 00:03:26,520 Speaker 1: markets sell off, and then sort of, as you said, 65 00:03:26,560 --> 00:03:29,640 Speaker 1: everything goes back to who cares. And I'd be very 66 00:03:29,680 --> 00:03:31,320 Speaker 1: surprised if this is the end of it. I'm no 67 00:03:31,560 --> 00:03:34,399 Speaker 1: Middle East expert by any means, but it's just hard 68 00:03:34,440 --> 00:03:36,520 Speaker 1: to believe that that's the end of the sort of 69 00:03:36,560 --> 00:03:39,000 Speaker 1: tip to tattan back and forth. And if you look 70 00:03:39,000 --> 00:03:41,400 Speaker 1: back at past your political events, it tends to be 71 00:03:41,840 --> 00:03:44,720 Speaker 1: the market sort of taking things into account as uncertainty 72 00:03:44,800 --> 00:03:47,920 Speaker 1: rises and responding like you would think risk acid selling 73 00:03:47,960 --> 00:03:51,640 Speaker 1: off and safe haven's rallying. And then as peak uncertainty 74 00:03:52,120 --> 00:03:55,520 Speaker 1: um comes about, everything reverses. And I don't think we're 75 00:03:55,520 --> 00:03:58,400 Speaker 1: at peak uncertainty quite yet. So if this actually is 76 00:03:58,440 --> 00:04:00,120 Speaker 1: at the end of it, say we look at what 77 00:04:00,200 --> 00:04:02,320 Speaker 1: actually did happen over the past couple of weeks, how 78 00:04:02,600 --> 00:04:05,200 Speaker 1: different markets reacted. You had a very strong rally and 79 00:04:05,240 --> 00:04:08,320 Speaker 1: gold above six dollars a troy ounce at one point. 80 00:04:08,520 --> 00:04:11,240 Speaker 1: You also had a pretty strong rally and bonds at 81 00:04:11,240 --> 00:04:13,760 Speaker 1: one point in the Japanese yen, say you do believe 82 00:04:13,800 --> 00:04:15,360 Speaker 1: that this is going to flare up again. This is 83 00:04:15,400 --> 00:04:18,200 Speaker 1: going to come back. What is actually the right way 84 00:04:18,480 --> 00:04:21,280 Speaker 1: to go about hedging an event like this, or at 85 00:04:21,320 --> 00:04:24,040 Speaker 1: least trying to protect against some losses that might come 86 00:04:24,040 --> 00:04:27,040 Speaker 1: from US assets. Sure, so very hard to determine, right. 87 00:04:27,080 --> 00:04:29,240 Speaker 1: It's like when people ask me the question, how do 88 00:04:29,320 --> 00:04:32,680 Speaker 1: you how do you discount a political action or event? Right? 89 00:04:33,160 --> 00:04:35,240 Speaker 1: How How many of us were wrong about how Brexit 90 00:04:35,279 --> 00:04:37,280 Speaker 1: would play out over the past three years, And in hindsight, 91 00:04:37,320 --> 00:04:39,520 Speaker 1: it's easy to say, we should have known that it 92 00:04:39,560 --> 00:04:41,880 Speaker 1: would take that long to get to a point where 93 00:04:41,880 --> 00:04:44,000 Speaker 1: they actually came into an agreement, still not a final 94 00:04:44,000 --> 00:04:47,120 Speaker 1: agreement with the European Commission, but getting getting this far 95 00:04:47,160 --> 00:04:49,640 Speaker 1: along in the process. So I think you've got to 96 00:04:49,720 --> 00:04:51,520 Speaker 1: go back to the fundamentals, Right, what are you getting 97 00:04:51,560 --> 00:04:53,680 Speaker 1: paid for in terms of risk in the market. And 98 00:04:53,680 --> 00:04:56,120 Speaker 1: it's very hard at this point versus where we were 99 00:04:56,120 --> 00:04:58,240 Speaker 1: at this time last year to find an asset class 100 00:04:58,240 --> 00:05:00,360 Speaker 1: for You're like, oh, it's worth taking on the risk 101 00:05:00,440 --> 00:05:04,159 Speaker 1: given still uncertainly over trade, still uncertainty with Brexit, the 102 00:05:04,200 --> 00:05:09,000 Speaker 1: Iran US conflict potentially you know, evolving into something more serious. 103 00:05:09,040 --> 00:05:11,679 Speaker 1: So where what we've been doing is saying that people 104 00:05:11,680 --> 00:05:15,119 Speaker 1: should still consideration. We think rates may rise a little 105 00:05:15,120 --> 00:05:17,120 Speaker 1: bit this year if we get a cyclical rebound, but 106 00:05:17,360 --> 00:05:19,839 Speaker 1: it's going to be constrained, and you still want to 107 00:05:19,839 --> 00:05:22,440 Speaker 1: go for those markets where you're getting at least a 108 00:05:22,480 --> 00:05:25,600 Speaker 1: better bang for your buck. Right, So we think there's 109 00:05:26,120 --> 00:05:29,440 Speaker 1: value in emerging markets, there's value in Europe, there's value 110 00:05:29,440 --> 00:05:33,520 Speaker 1: within value UM sectors within the market UM. And there's 111 00:05:33,560 --> 00:05:35,599 Speaker 1: not a lot of value in other sectors like high 112 00:05:35,640 --> 00:05:38,960 Speaker 1: yield bonds, US growth sort of growth at any price 113 00:05:39,240 --> 00:05:41,039 Speaker 1: parts of the market. So it doesn't mean you forgo 114 00:05:41,160 --> 00:05:43,520 Speaker 1: at all UM. I mean this year alone, we're only 115 00:05:43,560 --> 00:05:46,200 Speaker 1: six or seven days into it. But you obviously seeing 116 00:05:46,240 --> 00:05:48,359 Speaker 1: those parts of the market do okay, and there's a 117 00:05:48,400 --> 00:05:51,040 Speaker 1: reason for them to sell off unless things escalate significantly 118 00:05:51,080 --> 00:05:53,880 Speaker 1: between the US and Iran or some other event comes across. 119 00:05:54,000 --> 00:05:57,320 Speaker 1: But UM, you want you want to start shifting, And 120 00:05:57,360 --> 00:05:59,520 Speaker 1: that's where I would think about the market is not 121 00:05:59,560 --> 00:06:01,520 Speaker 1: trying to determine whether or not things are gonna get 122 00:06:01,560 --> 00:06:04,800 Speaker 1: significantly serious today, tomorrow, next week, between the US and Iran, 123 00:06:05,080 --> 00:06:08,000 Speaker 1: but being aware that they could and it's likely more 124 00:06:08,040 --> 00:06:10,880 Speaker 1: likely than not that they will escalate to some degree 125 00:06:11,160 --> 00:06:14,200 Speaker 1: and so shifting your portfolio a little bit. One of 126 00:06:14,240 --> 00:06:16,120 Speaker 1: the things I read in one of your notes that's 127 00:06:16,120 --> 00:06:19,640 Speaker 1: sort of stuck with me is you did say this situation, 128 00:06:19,839 --> 00:06:22,000 Speaker 1: I mean, uncertainty is one thing, and that has its 129 00:06:22,000 --> 00:06:24,720 Speaker 1: own effect on markets. I think you did right that 130 00:06:24,760 --> 00:06:27,840 Speaker 1: there is the potential to actually affect the fundamental picture 131 00:06:28,400 --> 00:06:31,479 Speaker 1: with this tension. I mean, obviously oil and oil price 132 00:06:31,560 --> 00:06:34,800 Speaker 1: shock is the most obvious one. Are there other ways 133 00:06:34,920 --> 00:06:37,680 Speaker 1: that the fundamental picture could be affected? I mean, I 134 00:06:37,800 --> 00:06:41,760 Speaker 1: Ran is somewhat sort of quarantined economically from the rest 135 00:06:41,839 --> 00:06:44,680 Speaker 1: of the world, but how could this sort of contagion 136 00:06:44,800 --> 00:06:48,159 Speaker 1: spread to its other markets? So, look, oil is the 137 00:06:48,160 --> 00:06:50,760 Speaker 1: most obvious one. It's the easiest one to other discount, right, 138 00:06:50,839 --> 00:06:53,760 Speaker 1: A supply driven shocked to oil prices up to eighty bucks, 139 00:06:53,760 --> 00:06:57,159 Speaker 1: maybe eighty five bucks, some in that area will constrained amount. 140 00:06:57,160 --> 00:07:00,400 Speaker 1: It will constrain cap as, oil importing con trees a 141 00:07:00,400 --> 00:07:03,840 Speaker 1: lot throughout Asia. Obviously, the US is relatively oil independent 142 00:07:03,920 --> 00:07:07,440 Speaker 1: these days, but Europe as well will struggle in that scenario, 143 00:07:07,920 --> 00:07:11,480 Speaker 1: especially given expectations for a rebound this year. So you know, 144 00:07:11,560 --> 00:07:13,560 Speaker 1: what is the economic knock gonna affect it? Sort of 145 00:07:13,600 --> 00:07:16,560 Speaker 1: depends how long oil stays at those prices, depends how 146 00:07:17,040 --> 00:07:19,440 Speaker 1: significantly higher it moves from these levels. But I think 147 00:07:19,480 --> 00:07:21,560 Speaker 1: that's the most obvious knock on effect. We've gone through 148 00:07:21,600 --> 00:07:24,520 Speaker 1: a full year of uncertainty, right trade war with China? 149 00:07:24,560 --> 00:07:26,360 Speaker 1: When's it going to be resolved? Where we're going to 150 00:07:26,440 --> 00:07:28,640 Speaker 1: reach a deal? We're not going to reach a deal. Um, 151 00:07:28,760 --> 00:07:30,320 Speaker 1: they've got the votes of Brexit. They don't have the 152 00:07:30,360 --> 00:07:32,640 Speaker 1: votes of Brexit. And on and on and on, um, 153 00:07:32,720 --> 00:07:35,400 Speaker 1: and now you just add another element to it. So far, 154 00:07:36,240 --> 00:07:39,160 Speaker 1: only five six business days or some business days into 155 00:07:39,160 --> 00:07:41,320 Speaker 1: this year. So far, so far it appears like around 156 00:07:41,360 --> 00:07:43,000 Speaker 1: US is not going to be a big issue. But 157 00:07:43,360 --> 00:07:45,760 Speaker 1: be very surprised if it didn't come back to haunts 158 00:07:45,840 --> 00:07:49,160 Speaker 1: at some point, Phil Donna, I'm wondering what the investors 159 00:07:49,200 --> 00:07:51,920 Speaker 1: you talked to, uh say about this. I know what 160 00:07:52,000 --> 00:07:55,559 Speaker 1: the bitcoin people say. They price a by bitcoin because 161 00:07:55,600 --> 00:08:00,680 Speaker 1: of this, but a lot of love and making the 162 00:08:00,760 --> 00:08:03,440 Speaker 1: argument that it's a safe haven asset, which is a 163 00:08:03,440 --> 00:08:06,440 Speaker 1: tricky argument. Hoddle has hold on for dear life. It's 164 00:08:06,440 --> 00:08:08,840 Speaker 1: an acronym that's actually used in the in the community. 165 00:08:09,560 --> 00:08:19,360 Speaker 1: Is wait though? Is that a misspelling there? I think, hold, 166 00:08:21,640 --> 00:08:24,000 Speaker 1: but are are the you know, the the let's say 167 00:08:24,040 --> 00:08:27,280 Speaker 1: that non crypto investors you talked to UH sounding a 168 00:08:27,320 --> 00:08:29,680 Speaker 1: similar message to John. You know what is kind of 169 00:08:29,720 --> 00:08:33,480 Speaker 1: the consensus, the zeitgeist out there. The consensus for the 170 00:08:33,520 --> 00:08:36,720 Speaker 1: most part has been that investors are just simply looking 171 00:08:36,720 --> 00:08:40,960 Speaker 1: at fundamentals. They're looking forward to the fourth quarter earning season. 172 00:08:41,360 --> 00:08:44,600 Speaker 1: They're looking at what FED speakers are saying for for now, 173 00:08:44,640 --> 00:08:46,880 Speaker 1: They're saying, let's just wait and see how this actually 174 00:08:46,880 --> 00:08:50,160 Speaker 1: plays out. It does seem like things have calmed down 175 00:08:50,160 --> 00:08:53,160 Speaker 1: a bit after President Trump made some announcements saying that 176 00:08:53,200 --> 00:08:57,080 Speaker 1: Iran seems to be standing down. So instead they're focusing 177 00:08:57,080 --> 00:08:59,360 Speaker 1: on things that they can actually analyze and look at 178 00:08:59,440 --> 00:09:03,160 Speaker 1: instead of worrying about potentially how this could escalate. So 179 00:09:03,360 --> 00:09:06,040 Speaker 1: Vildanna mentioned the fundamentals, UH, and a lot of people 180 00:09:06,080 --> 00:09:08,160 Speaker 1: do say, Okay, well, we're going to get a rebounded 181 00:09:08,200 --> 00:09:10,800 Speaker 1: economic growth. As we start to get into the earning season, 182 00:09:10,800 --> 00:09:12,520 Speaker 1: we're going to see that we're going to get positive 183 00:09:12,520 --> 00:09:16,480 Speaker 1: profit growth. But something that I have started to hear 184 00:09:16,520 --> 00:09:19,400 Speaker 1: more worries about is actually the valuation picture. Granted, you 185 00:09:19,440 --> 00:09:22,160 Speaker 1: have extremely low interest rates, but now if you look 186 00:09:22,160 --> 00:09:24,560 Speaker 1: at a measure of the four pe ratio on the 187 00:09:24,679 --> 00:09:29,160 Speaker 1: sp we're about highs that match the highs of the cycle. 188 00:09:30,120 --> 00:09:33,680 Speaker 1: Can we continue to stay at this point, especially should 189 00:09:33,679 --> 00:09:38,080 Speaker 1: earnings not come in where they're expected right now? If 190 00:09:38,120 --> 00:09:41,360 Speaker 1: interest rates at least remain low, I would be shocked 191 00:09:41,360 --> 00:09:44,320 Speaker 1: if we stayed in and at these levels. If interesting, 192 00:09:44,360 --> 00:09:46,920 Speaker 1: even if interest rates remain blow if we don't get 193 00:09:46,920 --> 00:09:49,680 Speaker 1: the earnings coming through. So you could make the argument 194 00:09:49,679 --> 00:09:52,080 Speaker 1: with low interest rates if we get what consensus is 195 00:09:52,120 --> 00:09:54,520 Speaker 1: pricing in is roughly nine percent earnings growth this year. 196 00:09:54,520 --> 00:09:55,960 Speaker 1: That number has come down a little bit over the 197 00:09:56,000 --> 00:09:58,880 Speaker 1: last three months or so. Uh. We we think that 198 00:09:58,920 --> 00:10:01,120 Speaker 1: would be a struggle for companies to generate that kind 199 00:10:01,120 --> 00:10:03,760 Speaker 1: of earnings this year. We could be surprised to the upside, 200 00:10:03,800 --> 00:10:06,040 Speaker 1: but you know, it plays out almost every single year. 201 00:10:06,080 --> 00:10:10,400 Speaker 1: Analysts project the number that the market never beats. Um, 202 00:10:10,800 --> 00:10:13,200 Speaker 1: there might be an exception there somewhere, so come back 203 00:10:13,240 --> 00:10:15,800 Speaker 1: and get me if there is, but it's very unlikely. 204 00:10:15,880 --> 00:10:18,840 Speaker 1: So it's all based on far out later in the year. 205 00:10:19,040 --> 00:10:21,760 Speaker 1: Correct a rebound in the second half of this year quarter. 206 00:10:21,880 --> 00:10:24,800 Speaker 1: Right now, we're seeing estimates for four earnings growth. I mean, 207 00:10:24,920 --> 00:10:28,600 Speaker 1: quite the turnaround from what we saw, so I would 208 00:10:28,600 --> 00:10:32,040 Speaker 1: be surprised if you don't get some multiple contraction this year. 209 00:10:32,040 --> 00:10:34,360 Speaker 1: We all know last year was about multiple expansion, and 210 00:10:34,440 --> 00:10:36,760 Speaker 1: rightly so, we were trading at roughly fourteen times at 211 00:10:36,760 --> 00:10:39,719 Speaker 1: the beginning of the year. We got no earnings growth, right, 212 00:10:39,760 --> 00:10:43,320 Speaker 1: so it was all a um, a rebound and expectations 213 00:10:43,360 --> 00:10:46,439 Speaker 1: of it, perhaps a cyclical rebound this year and maybe 214 00:10:46,480 --> 00:10:48,400 Speaker 1: some degree of certainty around some of the issues that 215 00:10:48,400 --> 00:10:50,840 Speaker 1: have plagued the market last year. UM, But you don't 216 00:10:50,880 --> 00:10:52,800 Speaker 1: get that benefit this year, right You had the FED 217 00:10:52,840 --> 00:10:55,280 Speaker 1: cutting rates three times last year. The Fed's on hold. Now. 218 00:10:55,640 --> 00:10:57,880 Speaker 1: Granted they're doing a lot of pushing a lot of liquidity, 219 00:10:57,880 --> 00:10:59,960 Speaker 1: and we can discuss that as another topic into the 220 00:11:00,040 --> 00:11:04,440 Speaker 1: market and maybe that non quee or quei and air quotes, um, 221 00:11:04,840 --> 00:11:07,120 Speaker 1: whatever you want to call it. We're on a podcast 222 00:11:07,120 --> 00:11:11,200 Speaker 1: and now I can see. But nonetheless, maybe that is 223 00:11:11,720 --> 00:11:14,560 Speaker 1: um something that we need to take into account as 224 00:11:14,800 --> 00:11:16,920 Speaker 1: doublished policy by the Fed. But they're not going to 225 00:11:17,000 --> 00:11:19,680 Speaker 1: do that forever either. So what's the tail wing? Do 226 00:11:19,720 --> 00:11:22,280 Speaker 1: you have to push the market? Maintain the market at 227 00:11:22,320 --> 00:11:24,680 Speaker 1: current levels, or push it higher? And it's really really 228 00:11:24,679 --> 00:11:27,400 Speaker 1: hard to find one. Yeah, it's such a raging debate 229 00:11:27,480 --> 00:11:30,280 Speaker 1: whether or not it's QUEI or not que. I mean, 230 00:11:30,400 --> 00:11:32,800 Speaker 1: bottom line is you have the FED spot what almost 231 00:11:32,840 --> 00:11:36,920 Speaker 1: half a trillion dollars worth of bills. But one thing 232 00:11:37,000 --> 00:11:39,680 Speaker 1: I would sort of question you want is you know 233 00:11:39,880 --> 00:11:41,560 Speaker 1: they're not going to do that forever. I have a 234 00:11:41,559 --> 00:11:44,400 Speaker 1: feeling they are. I like, you know this, this supply 235 00:11:44,440 --> 00:11:46,640 Speaker 1: of treasuries is not going anywhere, right, I mean, we've 236 00:11:46,640 --> 00:11:50,280 Speaker 1: got these massive deficits for as as far as the 237 00:11:50,320 --> 00:11:52,520 Speaker 1: eye can see. Are they sort of caught in a 238 00:11:52,600 --> 00:11:55,880 Speaker 1: trap of this this repou type of situation. So I 239 00:11:56,000 --> 00:11:57,680 Speaker 1: what I struggle with I agree with you in the 240 00:11:57,720 --> 00:12:00,120 Speaker 1: sense that if they pull back right the minute at 241 00:12:00,160 --> 00:12:03,880 Speaker 1: the FED says we're gonna start reducing um the activity 242 00:12:03,880 --> 00:12:05,600 Speaker 1: in the repair market. We're going to remove some of 243 00:12:05,640 --> 00:12:08,520 Speaker 1: these facilities. Look at if you if you really want 244 00:12:08,520 --> 00:12:10,400 Speaker 1: ton eyebrow raise and take a look at the balance 245 00:12:10,440 --> 00:12:13,040 Speaker 1: sheet graph, which basically was declining until the middle of 246 00:12:13,160 --> 00:12:15,839 Speaker 1: last year, bottomed around three point six trillion, now is 247 00:12:15,880 --> 00:12:19,360 Speaker 1: back over four trillion dollars um. So if they continue 248 00:12:19,400 --> 00:12:21,880 Speaker 1: going down this path, where does it end? Right, It's 249 00:12:21,880 --> 00:12:23,400 Speaker 1: got to end at some point they've got to wean 250 00:12:23,480 --> 00:12:25,000 Speaker 1: the market off it. And I think they're gonna try 251 00:12:25,000 --> 00:12:26,640 Speaker 1: and do that when they think that the market is 252 00:12:26,679 --> 00:12:29,720 Speaker 1: able to withstand a reduction in that liquidity. But I 253 00:12:29,720 --> 00:12:31,840 Speaker 1: think because I think that liquidity was a huge piece 254 00:12:32,000 --> 00:12:34,720 Speaker 1: of the rally last year, right, And you know, obviously 255 00:12:35,240 --> 00:12:37,280 Speaker 1: you try to think, well, what could go wrong with 256 00:12:37,320 --> 00:12:40,440 Speaker 1: all this liquidity being added? Uh? You know, obviously the 257 00:12:40,440 --> 00:12:43,360 Speaker 1: econ one on one argument would be, well, it's gonna 258 00:12:43,480 --> 00:12:46,080 Speaker 1: trigger inflation. Uh, you know, that's going to sort of 259 00:12:46,280 --> 00:12:48,920 Speaker 1: force the Fed's hand. But boy, that people have been 260 00:12:48,960 --> 00:12:51,880 Speaker 1: saying that for years about all of this. Um, is 261 00:12:51,960 --> 00:12:54,439 Speaker 1: this the time where where that could really happen? I 262 00:12:55,400 --> 00:12:57,560 Speaker 1: highly doubt it. We just haven't seen it yet. The 263 00:12:58,280 --> 00:13:01,000 Speaker 1: you know, I've had some people will say to me, well, 264 00:13:01,120 --> 00:13:03,559 Speaker 1: the way they're measuring inflation is completely wrong. Right, there 265 00:13:03,600 --> 00:13:06,679 Speaker 1: is inflation, and healthcare is inflation, and education show all. 266 00:13:06,679 --> 00:13:08,520 Speaker 1: There's deflation in the car I buy today. I got 267 00:13:08,520 --> 00:13:11,679 Speaker 1: a lot more bang from my box, my phone, my fridge, um, 268 00:13:11,760 --> 00:13:16,000 Speaker 1: things like that. But yeah, asset price is coming down, 269 00:13:16,120 --> 00:13:18,960 Speaker 1: but there is no So far, we haven't seen real 270 00:13:19,120 --> 00:13:21,760 Speaker 1: labor inflation. We've seen some, but I wouldn't call it 271 00:13:21,880 --> 00:13:25,960 Speaker 1: scary inflation enough to push rates significantly higher. So I'd 272 00:13:26,000 --> 00:13:27,640 Speaker 1: be very surprised if all of a sudden this year 273 00:13:27,679 --> 00:13:29,520 Speaker 1: this was the year that had happened, especially given the 274 00:13:29,520 --> 00:13:31,480 Speaker 1: growth rates that we're projecting around the world, which are 275 00:13:31,559 --> 00:13:34,440 Speaker 1: roughly two point six two point seven percent for global growth. 276 00:13:34,720 --> 00:13:36,520 Speaker 1: Obviously better in e M than d M, but it's 277 00:13:36,559 --> 00:13:38,960 Speaker 1: not like we're not growing gang busters this year. So 278 00:13:39,040 --> 00:13:41,360 Speaker 1: inflation not so much a concern with the liquidity being 279 00:13:41,400 --> 00:13:43,440 Speaker 1: pumped into the system, but what about the idea of 280 00:13:43,440 --> 00:13:46,880 Speaker 1: people being pushed out further on the risk spectrum. So 281 00:13:46,920 --> 00:13:49,160 Speaker 1: that gets back to the discussion we were just having 282 00:13:49,200 --> 00:13:51,480 Speaker 1: about can the market move higher? And that's why I've 283 00:13:51,480 --> 00:13:54,040 Speaker 1: struggled to see it moving higher right um. It's sort 284 00:13:54,040 --> 00:13:56,520 Speaker 1: of a you've got nowhere else to go right now. 285 00:13:56,600 --> 00:13:58,720 Speaker 1: So there's no asset class out there on the equity 286 00:13:58,760 --> 00:14:01,520 Speaker 1: side that's screamingly cheap. Are asset classes that are relatively 287 00:14:01,600 --> 00:14:03,959 Speaker 1: cheaper than others. E M is cheap to d M, 288 00:14:04,120 --> 00:14:06,400 Speaker 1: Europe is cheap to the US, but they're all either 289 00:14:07,000 --> 00:14:09,920 Speaker 1: at best long term at their long term average forward 290 00:14:09,960 --> 00:14:13,240 Speaker 1: ps um maybe slightly rich to that. Whether the US 291 00:14:13,360 --> 00:14:15,480 Speaker 1: is much richer than that. So I think it's more 292 00:14:15,480 --> 00:14:18,320 Speaker 1: about money moving around the market a little bit, and 293 00:14:18,600 --> 00:14:23,000 Speaker 1: that liquidity probably causing capital flows into areas that have 294 00:14:23,040 --> 00:14:24,880 Speaker 1: been left behind. And then at some point the FED 295 00:14:24,920 --> 00:14:27,240 Speaker 1: pulls back and everything pulls back. Is just how high 296 00:14:27,280 --> 00:14:29,000 Speaker 1: are you when they stop pulling back? Right? So we 297 00:14:29,040 --> 00:14:30,760 Speaker 1: had Chris Harvey of Wills far Go on our most 298 00:14:30,800 --> 00:14:33,080 Speaker 1: recent episode, and he said that he believes that in 299 00:14:33,120 --> 00:14:34,760 Speaker 1: the first half of year Old likely at a correction 300 00:14:34,760 --> 00:14:37,040 Speaker 1: and it could be driven by the FED finally saying, 301 00:14:37,080 --> 00:14:39,360 Speaker 1: you know what, we can't continue to keep growing our 302 00:14:39,400 --> 00:14:42,280 Speaker 1: balance sheet. I want to get your sense, though, is 303 00:14:42,320 --> 00:14:45,280 Speaker 1: there any way to actually measure or get a sense 304 00:14:45,480 --> 00:14:49,600 Speaker 1: of how much balance sheet growth actually affects the stock market. 305 00:14:49,600 --> 00:14:52,520 Speaker 1: I've seen a couple of statistics being thrown around, like, oh, 306 00:14:52,560 --> 00:14:55,280 Speaker 1: for every percentage point that the balance sheet has gone up, 307 00:14:55,800 --> 00:14:57,320 Speaker 1: the S and P has gone up one percent, And 308 00:14:57,360 --> 00:14:59,160 Speaker 1: then other people shoot back and say, hey, look, the 309 00:14:59,160 --> 00:15:01,160 Speaker 1: sample sides is so small. It really hasn't been that 310 00:15:01,240 --> 00:15:03,480 Speaker 1: long yet. Um, but is there a way to get 311 00:15:03,480 --> 00:15:07,480 Speaker 1: an idea of how this liquidity is actually getting put 312 00:15:07,560 --> 00:15:11,160 Speaker 1: into the stock market? So you're asking the wrong person 313 00:15:11,240 --> 00:15:13,520 Speaker 1: for that. One. I don't know, I'd be uh, you know, 314 00:15:13,560 --> 00:15:15,320 Speaker 1: I'd be giving you a wild guess. But I think 315 00:15:15,360 --> 00:15:19,120 Speaker 1: there's a there's a clear correlation between the FED saying 316 00:15:19,160 --> 00:15:22,040 Speaker 1: they're going to do something doublish, so the signaling effect 317 00:15:22,160 --> 00:15:24,880 Speaker 1: and then the actual effect of putting those policies into 318 00:15:24,920 --> 00:15:28,160 Speaker 1: place with a reaction in equity markets moving higher. So 319 00:15:28,680 --> 00:15:31,120 Speaker 1: I don't know what the right you know, relationship between 320 00:15:31,120 --> 00:15:33,440 Speaker 1: percentage increase and the balance sheet is, or the number 321 00:15:33,480 --> 00:15:36,040 Speaker 1: of times they cut rates, but it's a clear effect 322 00:15:36,120 --> 00:15:39,520 Speaker 1: on asset prices, and at some point we're going to 323 00:15:39,600 --> 00:15:41,480 Speaker 1: have to pay the price for that. And I'm not 324 00:15:41,520 --> 00:15:43,280 Speaker 1: suggesting by any means that means we go through a 325 00:15:43,280 --> 00:15:47,240 Speaker 1: bare market, but a five tent correction um at some 326 00:15:47,280 --> 00:15:49,120 Speaker 1: point over the next year or so. It's certainly a 327 00:15:49,120 --> 00:15:52,480 Speaker 1: reasonable possibility. Just the fungible nature of money. You know, 328 00:15:52,560 --> 00:15:55,840 Speaker 1: they're they're they're adding x billion in it's you know 329 00:15:56,760 --> 00:15:59,560 Speaker 1: somewhere else is exactly it has to you know, money. 330 00:15:59,600 --> 00:16:01,680 Speaker 1: Someone one said this to me, and it's a great analogy. 331 00:16:02,240 --> 00:16:05,160 Speaker 1: Um is it's like water, right, Um, If you've ever 332 00:16:05,440 --> 00:16:07,840 Speaker 1: seen water, a wave crash on the beach, it moves 333 00:16:07,920 --> 00:16:10,240 Speaker 1: up and it actually goes much further than you ever think. 334 00:16:10,280 --> 00:16:12,960 Speaker 1: You see that reflected in the sand, um, and that's 335 00:16:13,000 --> 00:16:15,360 Speaker 1: exactly what's happening with the Fed in there, and you know, 336 00:16:15,640 --> 00:16:18,520 Speaker 1: buying treasury bells. That pushes people out of the rest spectrum. 337 00:16:18,560 --> 00:16:21,360 Speaker 1: And as long as there's nothing major going wrong with 338 00:16:21,520 --> 00:16:24,080 Speaker 1: either the economy or politics, or you know, some major 339 00:16:24,120 --> 00:16:26,760 Speaker 1: event in the market, there's no reason for the equity 340 00:16:26,840 --> 00:16:45,440 Speaker 1: stuff going up. Vol Donna, I want to bring you 341 00:16:45,480 --> 00:16:47,200 Speaker 1: in here, you know. Sorry, I asked Hildana what she 342 00:16:47,240 --> 00:16:48,640 Speaker 1: wanted to talk on in in the podcast, and you know, 343 00:16:48,720 --> 00:16:52,160 Speaker 1: she said, she said, none of your business. I got. 344 00:16:53,360 --> 00:16:56,280 Speaker 1: I thought you were trying to get my craziest thing 345 00:16:56,280 --> 00:17:02,560 Speaker 1: out her thing. Would I do that? But there's one 346 00:17:02,600 --> 00:17:06,320 Speaker 1: story you had that I know you worked on. Vldonna 347 00:17:06,480 --> 00:17:08,880 Speaker 1: was the trooper here throughout the holidays when the rest 348 00:17:08,920 --> 00:17:11,399 Speaker 1: of us were eating and drinking and being merry, and 349 00:17:11,560 --> 00:17:14,440 Speaker 1: Voldanna was doing all the work. Um. And one story 350 00:17:14,440 --> 00:17:17,080 Speaker 1: you worked on that caught my attention was all of 351 00:17:17,119 --> 00:17:21,000 Speaker 1: the flows going into sort of very risky e T 352 00:17:21,200 --> 00:17:24,000 Speaker 1: F s levered up ETF T. Talk a little bit 353 00:17:24,040 --> 00:17:26,280 Speaker 1: about what that. You know, what are some of the 354 00:17:26,280 --> 00:17:29,720 Speaker 1: products that you saw, um, a lot of money pouring 355 00:17:29,760 --> 00:17:32,520 Speaker 1: into at the start of the year. Because this, I 356 00:17:32,560 --> 00:17:36,000 Speaker 1: think kind of gets to the idea of the either 357 00:17:36,040 --> 00:17:40,080 Speaker 1: complacency or euphoria in the market. It does get into 358 00:17:40,119 --> 00:17:43,919 Speaker 1: that idea because as the Iran tensions were escalating over 359 00:17:43,960 --> 00:17:46,840 Speaker 1: the past couple of days, we actually saw money coming 360 00:17:46,880 --> 00:17:50,639 Speaker 1: into an industrial zt F for example, some money flowing 361 00:17:50,680 --> 00:17:53,920 Speaker 1: into energy, so people were sort of positioning trying to 362 00:17:53,960 --> 00:17:57,240 Speaker 1: take advantage of any escalations. But on the other hand, 363 00:17:57,359 --> 00:18:00,480 Speaker 1: this is where the complacency part comes in. We actually 364 00:18:00,520 --> 00:18:02,800 Speaker 1: saw money come out of g l D, which is 365 00:18:02,800 --> 00:18:05,720 Speaker 1: the largest gold et F so not so much you 366 00:18:05,760 --> 00:18:08,240 Speaker 1: would think that people would go into that if as 367 00:18:08,240 --> 00:18:11,480 Speaker 1: a safe haven asset, and we actually saw money coming out. 368 00:18:12,080 --> 00:18:14,399 Speaker 1: And I'll say, as it relates to leveraged funds. So 369 00:18:14,560 --> 00:18:18,440 Speaker 1: Sundale Research, you can also call him sentiment trader Jason 370 00:18:18,480 --> 00:18:22,200 Speaker 1: Goldford over there, he tracks money going into leverage gtfs. 371 00:18:22,200 --> 00:18:25,360 Speaker 1: He has his own index and will leverage long products 372 00:18:25,440 --> 00:18:28,199 Speaker 1: versus leverage short products. And they found that at the 373 00:18:28,280 --> 00:18:31,800 Speaker 1: end of ten also into this year, we've seen flows 374 00:18:31,840 --> 00:18:36,440 Speaker 1: into leverage long products absolutely surging, and then flows for 375 00:18:36,640 --> 00:18:39,879 Speaker 1: leverage short products are coming out of the market. At 376 00:18:39,880 --> 00:18:42,520 Speaker 1: the same time, you can point to statistics like short 377 00:18:42,560 --> 00:18:47,840 Speaker 1: interest on spy completely evaporating. John. When you see statistics 378 00:18:47,880 --> 00:18:50,159 Speaker 1: like this, or you see behaviors like this, people rushing 379 00:18:50,160 --> 00:18:53,080 Speaker 1: for leverage products to go along the market. Um, after 380 00:18:53,160 --> 00:18:56,879 Speaker 1: a sellar, you're like, does that worry you yet? What 381 00:18:56,960 --> 00:18:59,520 Speaker 1: does that tell you? So? It worries me? But I 382 00:18:59,600 --> 00:19:03,439 Speaker 1: still so this is sort of either an internal debate 383 00:19:03,520 --> 00:19:06,240 Speaker 1: you're having with yourself or you've had with colleagues or 384 00:19:06,480 --> 00:19:10,160 Speaker 1: clients or anyone that sort of follows the market is, Um, 385 00:19:10,520 --> 00:19:15,080 Speaker 1: we're headed for something disastrous because of FED policy, ECB policy, 386 00:19:15,119 --> 00:19:18,000 Speaker 1: Bank of Japan policy. You're seeing a lot of leverage 387 00:19:18,480 --> 00:19:22,360 Speaker 1: pile up within corporations, and our view is that at 388 00:19:22,400 --> 00:19:25,160 Speaker 1: some point, well, you'll have a price to pay there. Um. 389 00:19:25,200 --> 00:19:28,960 Speaker 1: But sentiment as measured by things like short interest on 390 00:19:29,000 --> 00:19:32,159 Speaker 1: the spy or you know, these leverage products, is actually 391 00:19:32,160 --> 00:19:35,359 Speaker 1: still pretty poor, right, people, is still so scarred from 392 00:19:35,440 --> 00:19:37,720 Speaker 1: two thousand and eight. Um, this has been one of 393 00:19:37,760 --> 00:19:39,960 Speaker 1: the most unloved and I'm not the first person to 394 00:19:39,960 --> 00:19:42,200 Speaker 1: say that's one of the most unloved bull markets we've 395 00:19:42,240 --> 00:19:45,840 Speaker 1: ever seen. Despite the fact that the returns have been spectacular, that. 396 00:19:45,920 --> 00:19:47,720 Speaker 1: I feel like any time you get a sell off 397 00:19:48,080 --> 00:19:50,920 Speaker 1: five cent tempercent, the thought in the back of everyone's 398 00:19:50,920 --> 00:19:53,200 Speaker 1: head as well, well, we've got the FED at a back. 399 00:19:53,480 --> 00:19:54,960 Speaker 1: It's all kind of and they'll say this, so the 400 00:19:54,960 --> 00:19:56,399 Speaker 1: E c B you'll do something. It will be some 401 00:19:56,480 --> 00:19:58,720 Speaker 1: coordinated response. It's not gonna be as bad. I know, 402 00:19:58,840 --> 00:20:01,639 Speaker 1: by the way, there's no UM. You know, there's no 403 00:20:01,920 --> 00:20:07,119 Speaker 1: over UM you know, leverage within the broader economy that 404 00:20:07,280 --> 00:20:09,880 Speaker 1: sort of imminently could bring us down. UM. I think 405 00:20:09,880 --> 00:20:12,119 Speaker 1: there's a problem on the corporate corporation balance sheets that 406 00:20:12,160 --> 00:20:15,000 Speaker 1: at some point will lead to UM a crowding out 407 00:20:15,000 --> 00:20:17,879 Speaker 1: effect in terms of their ability to access financing. But 408 00:20:17,960 --> 00:20:21,320 Speaker 1: it's not going to push us imminently into a disastrous recession. 409 00:20:21,520 --> 00:20:24,480 Speaker 1: So it's interesting and it concerns me a little bit 410 00:20:24,480 --> 00:20:26,400 Speaker 1: from maybe a short tim pullback, but it's not something 411 00:20:26,440 --> 00:20:29,119 Speaker 1: I look at and say, yeah, this is the end, sir. 412 00:20:29,240 --> 00:20:31,480 Speaker 1: I think I've been called one of the most unloved 413 00:20:31,480 --> 00:20:35,439 Speaker 1: podcast hosts, like I can relate, but but I'm by you. 414 00:20:35,800 --> 00:20:38,959 Speaker 1: I'm nervous. I'm gonna change that for you question. I'm 415 00:20:39,000 --> 00:20:41,600 Speaker 1: nervous because I think I told every everyone on the 416 00:20:41,640 --> 00:20:46,560 Speaker 1: trillions podcast to buy the triple levered QQ. I was joking, 417 00:20:47,400 --> 00:20:54,240 Speaker 1: my people are taking your advice. I think exactly. It 418 00:20:54,359 --> 00:20:56,720 Speaker 1: was like a four thousand percent gain in that thing 419 00:20:57,119 --> 00:20:59,120 Speaker 1: for the decade. Yeah, you know, I mean, I don't 420 00:20:59,119 --> 00:21:02,479 Speaker 1: get Mike started about product. Doesn't really joking. Look, if 421 00:21:02,480 --> 00:21:08,880 Speaker 1: you're gonna be a ball. But John, I wanted to 422 00:21:08,880 --> 00:21:12,520 Speaker 1: to get back to that valuation idea, especially sort of 423 00:21:12,920 --> 00:21:16,159 Speaker 1: to tap into your background as a fixed income specialist. 424 00:21:16,560 --> 00:21:19,800 Speaker 1: There's a writer here, Brian Shapada at Bloomberg and our 425 00:21:19,840 --> 00:21:22,320 Speaker 1: own Cameron christ who's who's been on the show. They 426 00:21:22,400 --> 00:21:24,960 Speaker 1: both wrote about this thing called the Sherman ratio today. 427 00:21:25,000 --> 00:21:26,720 Speaker 1: I don't know if you've read this, but it's basically 428 00:21:27,160 --> 00:21:29,359 Speaker 1: this guy at Double Line came up with it, and 429 00:21:29,440 --> 00:21:33,960 Speaker 1: it's just looking at the yield of of a bond 430 00:21:34,000 --> 00:21:38,480 Speaker 1: indecks as a ratio to its duration and um, you know, 431 00:21:38,680 --> 00:21:41,920 Speaker 1: pretty simple way to value a bond product. And it's 432 00:21:42,000 --> 00:21:44,879 Speaker 1: you know, obviously for a lot of asset classes in 433 00:21:44,920 --> 00:21:47,440 Speaker 1: fixed income right now, it's very low. That's obviously very low. 434 00:21:47,800 --> 00:21:50,800 Speaker 1: What is that, you know, is that just the equivalent 435 00:21:50,840 --> 00:21:52,960 Speaker 1: of a p being very high in the stock market. 436 00:21:52,960 --> 00:21:55,919 Speaker 1: It could it could go lower, but it's it's definitely 437 00:21:55,920 --> 00:21:58,760 Speaker 1: a sign of sort of weak returns going forward. So 438 00:21:58,840 --> 00:22:01,520 Speaker 1: I would go back to the Austrian hundred year bond 439 00:22:01,600 --> 00:22:05,560 Speaker 1: last year, which I remember there was one of our 440 00:22:05,560 --> 00:22:08,679 Speaker 1: craziest things. I want to give credit to Bloomberg, but 441 00:22:08,840 --> 00:22:11,280 Speaker 1: I can't do that definitively because I can't remember who 442 00:22:11,280 --> 00:22:13,000 Speaker 1: had the report. But there was a picture of a 443 00:22:13,040 --> 00:22:16,560 Speaker 1: ski jumper, right, going off a high jump as the 444 00:22:16,560 --> 00:22:19,960 Speaker 1: bond had sort of hit just of last year. So 445 00:22:20,119 --> 00:22:22,520 Speaker 1: kudos to you if you, uh, if you were able 446 00:22:22,560 --> 00:22:25,640 Speaker 1: to do that. But there's a law of diminishing returns, right, 447 00:22:25,720 --> 00:22:27,480 Speaker 1: And the counter argument to that would be what about 448 00:22:27,560 --> 00:22:29,920 Speaker 1: negative rates? Where can go negative? There's there's no end 449 00:22:29,920 --> 00:22:32,320 Speaker 1: in sight, look at Switzerland, um, But there is a 450 00:22:32,400 --> 00:22:34,800 Speaker 1: law of diminishing returns in terms of what is the 451 00:22:34,880 --> 00:22:37,880 Speaker 1: role of that bond in your portfolio? Is it return? 452 00:22:38,240 --> 00:22:40,840 Speaker 1: Is its stability? Is some combination of the two. And 453 00:22:40,880 --> 00:22:43,959 Speaker 1: I still think there's a stabilizing role for high quality 454 00:22:44,040 --> 00:22:46,399 Speaker 1: core bonds to play in your portfolio, but the return 455 00:22:46,520 --> 00:22:49,480 Speaker 1: role has been almost completely taken out the window. The 456 00:22:49,520 --> 00:22:52,280 Speaker 1: Barclay's agg last year generated return of over eight percent. 457 00:22:52,640 --> 00:22:54,840 Speaker 1: You basically got almost five years of return in one year. 458 00:22:55,280 --> 00:22:58,320 Speaker 1: So you know there'll be one offs like that, but 459 00:22:58,400 --> 00:23:00,440 Speaker 1: for the most part, you're gonna be looking at half 460 00:23:00,440 --> 00:23:02,359 Speaker 1: a percent, one percent, one and a half percent. Just 461 00:23:02,359 --> 00:23:04,640 Speaker 1: given the simple fact that you buy a bond today 462 00:23:04,640 --> 00:23:06,199 Speaker 1: at one and a half percent and hold it for 463 00:23:06,240 --> 00:23:08,040 Speaker 1: ten years, you're getting one and a half percents. You 464 00:23:08,200 --> 00:23:10,400 Speaker 1: it's a ten year bond. It's really really simple math. 465 00:23:10,760 --> 00:23:12,640 Speaker 1: So the Showman ratio and things like that, I think 466 00:23:12,640 --> 00:23:14,520 Speaker 1: are interesting ways to think about. The market is a 467 00:23:14,560 --> 00:23:17,840 Speaker 1: proxy for you know, the rich relative to say equities, 468 00:23:17,880 --> 00:23:20,800 Speaker 1: but um bonds are rich across the board, right, and 469 00:23:20,840 --> 00:23:23,600 Speaker 1: so it becomes a differentiating game like how do I 470 00:23:23,680 --> 00:23:26,719 Speaker 1: get my stability? How do I get my income? And 471 00:23:26,800 --> 00:23:29,920 Speaker 1: just rethinking the way you're building your portfolio. Right right, 472 00:23:30,520 --> 00:23:32,320 Speaker 1: I'm gonna coin a new ratio. We'll call it the 473 00:23:32,400 --> 00:23:37,199 Speaker 1: vil Donna ratio. The number of crazy things that vil 474 00:23:37,240 --> 00:23:39,040 Speaker 1: Donna saw in the market compared to the rest of us. 475 00:23:39,040 --> 00:23:45,440 Speaker 1: It's very hot. What's the Yeah, I did Vildonna c VT, 476 00:23:49,000 --> 00:23:51,240 Speaker 1: but I come with multiple just in case one of 477 00:23:51,280 --> 00:23:57,760 Speaker 1: you already has, so someone else has. All right, we'll 478 00:23:57,840 --> 00:24:03,480 Speaker 1: let you start then, so that vildonna, doesn't steal yours, 479 00:24:03,560 --> 00:24:08,040 Speaker 1: bring it on. I would say this one's very obvious, 480 00:24:08,160 --> 00:24:13,240 Speaker 1: but it's the Carlos Gone Sakae. It is totally insane 481 00:24:13,680 --> 00:24:16,199 Speaker 1: him giving the press conference for two and a half hours. 482 00:24:16,280 --> 00:24:20,040 Speaker 1: He was so animated. He really came out to defend himself. 483 00:24:20,720 --> 00:24:23,240 Speaker 1: And if you read some of the reports about what 484 00:24:23,359 --> 00:24:27,480 Speaker 1: actually happened of him sneaking out of Japan, hiding in 485 00:24:27,520 --> 00:24:30,359 Speaker 1: a box, getting on a plane, there was one report 486 00:24:30,400 --> 00:24:33,080 Speaker 1: I read where he actually was in the same hotel 487 00:24:33,359 --> 00:24:36,720 Speaker 1: that shinzo Abe then checked into an hour later or so. 488 00:24:37,280 --> 00:24:41,159 Speaker 1: There are lots of weird coincidences and it's just the 489 00:24:41,200 --> 00:24:44,480 Speaker 1: craziest story. It seems like someone's gonna make a movie eventually. 490 00:24:44,640 --> 00:24:53,600 Speaker 1: What's the title of that movie? Gone, Gone, Gone. That's good. 491 00:24:54,119 --> 00:24:57,480 Speaker 1: I think Prince Harry and Gone Prince Harry and Megan 492 00:24:57,640 --> 00:24:59,240 Speaker 1: might need to bring him in as a consultant to 493 00:24:59,280 --> 00:25:02,200 Speaker 1: get get there ourselves out of Britain because it doesn't 494 00:25:02,200 --> 00:25:05,320 Speaker 1: sound like they're they're they're trying with what's called them 495 00:25:05,400 --> 00:25:11,280 Speaker 1: megsit well down. I'll give you high points for crazy 496 00:25:11,359 --> 00:25:14,240 Speaker 1: low points in the It is kind of obvious, yes, 497 00:25:14,359 --> 00:25:17,639 Speaker 1: but so that's that's that's right, though. Sorry, can you 498 00:25:17,680 --> 00:25:20,760 Speaker 1: beat the Carlos Gon saga? All right, I've got to 499 00:25:20,760 --> 00:25:23,040 Speaker 1: say mine's a little bit obvious too. Um. So it 500 00:25:23,080 --> 00:25:26,760 Speaker 1: came on Thursday, early in the morning, not too early. Um. 501 00:25:26,920 --> 00:25:30,160 Speaker 1: President Trump loves to tweet, but he tweeted, and I'm 502 00:25:30,160 --> 00:25:33,440 Speaker 1: going to read you the original tweet before we did 503 00:25:33,600 --> 00:25:36,960 Speaker 1: eventually get a correction. Um. But it said, in all 504 00:25:37,000 --> 00:25:39,959 Speaker 1: caps stock market at all time high, how are your 505 00:25:40,000 --> 00:25:46,640 Speaker 1: four oh nine ks doing up? No caps anymore? Only up? 506 00:25:46,720 --> 00:25:49,879 Speaker 1: What are you doing wrong? And obviously okay, typo for 507 00:25:50,200 --> 00:25:53,280 Speaker 1: nine k. But I found it very interesting that he 508 00:25:53,400 --> 00:26:00,879 Speaker 1: was saying, oh, is only up the four oh nine K. 509 00:26:01,040 --> 00:26:03,200 Speaker 1: I guess that's like the triple lever that he's got 510 00:26:03,200 --> 00:26:07,359 Speaker 1: the triple lever, which kind of think of it. Maybe 511 00:26:07,359 --> 00:26:13,000 Speaker 1: that's my million dollar idea there, the triple levered. Uh Mike, 512 00:26:13,040 --> 00:26:15,840 Speaker 1: you're just gonna cause more influences to triple leverage funds. 513 00:26:15,880 --> 00:26:20,880 Speaker 1: I don't I don't know if we need this right now. Alright, John, 514 00:26:21,000 --> 00:26:24,600 Speaker 1: pretty stuff competition here? You got anything that can I'm 515 00:26:24,600 --> 00:26:27,040 Speaker 1: just I'm shaking my head because those are two really 516 00:26:27,040 --> 00:26:31,119 Speaker 1: good ones. Especially anyway. Uh So I'll go back to 517 00:26:31,160 --> 00:26:33,800 Speaker 1: the markets right Brent and w T I below the 518 00:26:33,880 --> 00:26:37,600 Speaker 1: levels they were last Friday morning before Solemony was killed. 519 00:26:37,880 --> 00:26:40,320 Speaker 1: Is an amazement to me, given what's happened over the 520 00:26:40,359 --> 00:26:42,920 Speaker 1: last week. So that's my crazy thing of the week. 521 00:26:43,119 --> 00:26:45,600 Speaker 1: What does that tell you? I mean, I constantly see 522 00:26:45,640 --> 00:26:48,359 Speaker 1: reach it snows when there's events like this sort. And 523 00:26:48,400 --> 00:26:50,240 Speaker 1: we saw a couple of months ago after the DONE 524 00:26:50,280 --> 00:26:53,000 Speaker 1: strikes on some Saudi oil facilities, the idea that there 525 00:26:53,040 --> 00:26:55,480 Speaker 1: needs to be a risk premier then baked into oil, 526 00:26:55,560 --> 00:26:58,240 Speaker 1: so oil prices should therefore be higher. So then after 527 00:26:58,280 --> 00:27:00,960 Speaker 1: an event like this that oil prices are lower. What 528 00:27:01,320 --> 00:27:04,840 Speaker 1: how is that possible? It's I don't know. I struggle 529 00:27:04,880 --> 00:27:06,320 Speaker 1: to make sense of it. I mean, I think there's 530 00:27:06,880 --> 00:27:09,400 Speaker 1: you have a very long argument about the long term 531 00:27:09,440 --> 00:27:12,280 Speaker 1: headwinds to the price of oil, given people shift to 532 00:27:12,320 --> 00:27:15,040 Speaker 1: alternative forms of energy, and obviously the USS rise and 533 00:27:15,119 --> 00:27:18,919 Speaker 1: more supply in the market, and how inefficient and you know, 534 00:27:19,160 --> 00:27:23,159 Speaker 1: dysfunctional OPEC is as an organization. UM, But in that 535 00:27:23,200 --> 00:27:25,439 Speaker 1: short period of time, you would think that the if 536 00:27:25,440 --> 00:27:27,159 Speaker 1: you read all the experts in the Middle East, the 537 00:27:27,240 --> 00:27:30,720 Speaker 1: response for Iran is you know, UM closed the strait 538 00:27:30,760 --> 00:27:33,919 Speaker 1: of her moves right, take you know, um, you know, 539 00:27:34,200 --> 00:27:36,600 Speaker 1: take potshots at oil tankers and things like that, go 540 00:27:36,720 --> 00:27:39,480 Speaker 1: back at Saudi Arabia, do another drone strike. So it 541 00:27:39,520 --> 00:27:42,119 Speaker 1: was pretty shocking to me that oil. It wasn't surprising 542 00:27:42,119 --> 00:27:44,439 Speaker 1: that it came back on Wednesday after Trump made his 543 00:27:44,640 --> 00:27:47,159 Speaker 1: press briefing, but the fact that it went all the 544 00:27:47,200 --> 00:27:50,440 Speaker 1: way back below um last Thursday night early Friday morning 545 00:27:50,480 --> 00:27:53,280 Speaker 1: is a bit of a shocker. Yeah, I agree, I agree. 546 00:27:53,280 --> 00:27:56,119 Speaker 1: You think there'd be still some risk premium build. Do 547 00:27:56,119 --> 00:27:59,960 Speaker 1: you have any points for that one, Mike? That's good, 548 00:28:00,520 --> 00:28:02,440 Speaker 1: all right, I'll give you mine. I think I win again. 549 00:28:02,480 --> 00:28:09,000 Speaker 1: I always win, all right, Well, I'll let you guys 550 00:28:09,000 --> 00:28:11,959 Speaker 1: award me to win after you hear mind this thing 551 00:28:12,000 --> 00:28:14,480 Speaker 1: I saw in markets this week. Now, Vldon is probably 552 00:28:14,480 --> 00:28:17,080 Speaker 1: gonna call me on this because it actually happened in 553 00:28:17,119 --> 00:28:20,240 Speaker 1: seventeen ninety the year seventeen nineties, so not technically this week. 554 00:28:20,720 --> 00:28:24,280 Speaker 1: But it was in Jason's Wags this day. It was 555 00:28:24,320 --> 00:28:28,719 Speaker 1: in Jason Wags this day in financial history for January nine. Uh, 556 00:28:28,800 --> 00:28:30,760 Speaker 1: and I saw it in Matt Levin's column, So shout out, 557 00:28:30,800 --> 00:28:34,359 Speaker 1: shout out to him. He's he's like the vice uh, 558 00:28:34,960 --> 00:28:39,320 Speaker 1: chairman of crazy things. But I'll just read it to 559 00:28:39,400 --> 00:28:43,640 Speaker 1: you now this Remember this is January nine, sevente Insider 560 00:28:43,680 --> 00:28:46,640 Speaker 1: trading gets off to a roaring start as Treasury Secretary 561 00:28:46,680 --> 00:28:50,520 Speaker 1: Alexander Hamilton's submits to Congress his report on the Public Credit, 562 00:28:50,880 --> 00:28:54,680 Speaker 1: which proposes buying up distressed bonds to consolidate the national 563 00:28:54,720 --> 00:28:57,440 Speaker 1: debt US and state bonds, which had been trading in 564 00:28:57,480 --> 00:29:01,120 Speaker 1: a fraction of their value. Immediately, Surgeon pro in one 565 00:29:01,120 --> 00:29:04,200 Speaker 1: of the earliest and most shocking cases of insider trading 566 00:29:04,200 --> 00:29:08,040 Speaker 1: on record, several members of Congress higher sailboats and stage 567 00:29:08,040 --> 00:29:11,040 Speaker 1: coaches to take them south faster than the news can 568 00:29:11,040 --> 00:29:13,840 Speaker 1: travel by foot. They can then snap up bonds at 569 00:29:13,880 --> 00:29:18,160 Speaker 1: bargain prices before Southern newspapers spread the news of Hamilton's proposals. 570 00:29:18,520 --> 00:29:21,680 Speaker 1: I love this story for two for two reasons, um, 571 00:29:21,720 --> 00:29:25,640 Speaker 1: because nothing's changed. Right. Uh, here we are. It's two 572 00:29:25,720 --> 00:29:28,600 Speaker 1: hundred and thirty years later, and what are we talking about. 573 00:29:28,640 --> 00:29:35,000 Speaker 1: They're still taking stage coaches. Well, if you've written Jersey Transit, 574 00:29:35,040 --> 00:29:39,040 Speaker 1: you would, you would, basically. But here, what's what's driving 575 00:29:39,040 --> 00:29:42,000 Speaker 1: the markets. It's the Fed buying bonds, not the Treasury, 576 00:29:42,040 --> 00:29:44,840 Speaker 1: but the Fed buying bonds and this whole issue of 577 00:29:45,040 --> 00:29:48,200 Speaker 1: I disagree with him that it was insider trading. The 578 00:29:48,240 --> 00:29:51,800 Speaker 1: news was public. They just were had low latency trading 579 00:29:51,960 --> 00:29:54,600 Speaker 1: to beat the news down to the to the southern markets. 580 00:29:54,640 --> 00:29:56,720 Speaker 1: I think it's shocking to me that a headline in 581 00:29:57,720 --> 00:29:59,760 Speaker 1: would have the words insider trading in it. I don't know, 582 00:29:59,800 --> 00:30:02,240 Speaker 1: I and I think of before. I think of it 583 00:30:02,280 --> 00:30:05,800 Speaker 1: as a simpler, wider Maybe it actually wasn't obviously, but 584 00:30:05,800 --> 00:30:07,640 Speaker 1: I don't know. I actually kind of thing. I think 585 00:30:07,680 --> 00:30:10,800 Speaker 1: that's his editorializing calling you training. Like I said, it's 586 00:30:11,120 --> 00:30:13,240 Speaker 1: it's low this these are these were the flash Boys 587 00:30:13,400 --> 00:30:17,560 Speaker 1: of sevent is the way I look at slow latency, 588 00:30:17,800 --> 00:30:20,600 Speaker 1: you know. And it's like the the and Levin made 589 00:30:20,640 --> 00:30:22,440 Speaker 1: this point in the com it's like the the guys 590 00:30:22,440 --> 00:30:25,000 Speaker 1: who got in trouble for the Bank of England audio feed. 591 00:30:25,000 --> 00:30:27,520 Speaker 1: Did you see that they had a faster audio feed 592 00:30:28,160 --> 00:30:31,880 Speaker 1: from the Bank of England press conferences and they could 593 00:30:31,880 --> 00:30:33,520 Speaker 1: trade on it. Yeah, so they could trade on it. 594 00:30:33,560 --> 00:30:38,480 Speaker 1: So pretty crazy, like the flash Boys. Analogy that could 595 00:30:38,520 --> 00:30:42,080 Speaker 1: also be a book title. They have Carlos gone Um 596 00:30:42,120 --> 00:30:47,920 Speaker 1: and then Flashboys. We got sells a hit, A lot 597 00:30:47,920 --> 00:30:51,240 Speaker 1: of value add from this podcast. Absolutely um with that, 598 00:30:51,360 --> 00:30:52,760 Speaker 1: I think we have to leave it there though, so 599 00:30:52,880 --> 00:30:55,240 Speaker 1: John McKai, Bvildonna Hiri, thank you so much for joining 600 00:30:55,280 --> 00:31:05,320 Speaker 1: us today, Thanks for having us, Thank you What Goes Up. 601 00:31:05,400 --> 00:31:08,160 Speaker 1: We'll be back next week. Until then, you can find 602 00:31:08,200 --> 00:31:11,080 Speaker 1: us on the Bloomberg Terminal, website and app, or wherever 603 00:31:11,160 --> 00:31:13,840 Speaker 1: you get your podcasts. We'd love it if you took 604 00:31:13,840 --> 00:31:16,520 Speaker 1: the time to rate interview the show on Apple Podcasts 605 00:31:16,760 --> 00:31:19,440 Speaker 1: so more listeners can find us. And you can find 606 00:31:19,520 --> 00:31:23,000 Speaker 1: us on Twitter. Follow me at at Sarah Ponzack, Mike 607 00:31:23,240 --> 00:31:26,120 Speaker 1: is at re Anonymous, Our guests Buildonna hi Rich is 608 00:31:26,160 --> 00:31:29,920 Speaker 1: at Bildonna Hirich, and John McKay is at John Underscore 609 00:31:30,000 --> 00:31:33,800 Speaker 1: McKay one. You can also follow Bloomberg Podcast at podcast 610 00:31:33,880 --> 00:31:35,600 Speaker 1: and don't forget. You can give us a call on 611 00:31:35,600 --> 00:31:39,200 Speaker 1: our Bloomberg Podcast hotline that number six four six three 612 00:31:39,240 --> 00:31:43,479 Speaker 1: two four three zero. What Goes Up is produced by 613 00:31:43,480 --> 00:31:46,440 Speaker 1: Top for Foreheads and edited by Darrell Dillard. The head 614 00:31:46,440 --> 00:31:49,720 Speaker 1: of Bloomberg Podcast is Francesca Levie. Thanks for listening. See 615 00:31:49,720 --> 00:31:50,320 Speaker 1: you next time.