Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene. Along
Speaker 1: with Jonathan Ferroll and Lisa Abramowitz Jaily. We bring you
Speaker 1: insight from the best and economics, finance, investment, and international relations.
Speaker 1: Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot Com
Speaker 1: and of course on the Bloomberg terminal. It is a
Speaker 1: joint up right now to speak to one of the
Speaker 1: lightning rods of an international relations and our study of
Speaker 1: our relationships worldwide, and that is John Bolton, of course,
Speaker 1: Ambassador Bolton, with so many tours of duty and always
Speaker 1: someone looking at the force and power of Russia, give
Speaker 1: us a measurement on this Monday morning, John, of the
Speaker 1: force and power of Mr Putin, Well, he suffered some
Speaker 1: severe setback so far in almost six weeks of war
Speaker 1: in Ukraine. There's no doubt about it. The Russians obviously
Speaker 1: miscalculated the extent of Ukraine's resistance, which has been heroic,
Speaker 1: and they miscalculated the capability of their own military, which
Speaker 1: has had one failure after another from the strategic level
Speaker 1: on down the simple logistics like food and gasoline. Now,
Speaker 1: all that said, they still control a considerable amount of
Speaker 1: Ukrainian territory, and it looks like they're trying to get
Speaker 1: their act together, regroup, pursue more sensible objectives. I'll have
Speaker 1: a piece up dot com a little bit later this morning.
Speaker 1: It says, I think what the men Many are also saying,
Speaker 1: they're going to go after the russiphile areas of southern
Speaker 1: and eastern Ukraine. And let's remember when we come when
Speaker 1: we come to negotiations, which we're not in seriously yet,
Speaker 1: but when we come to it, the more land Russia holds,
Speaker 1: the harder it's going to be to get them to
Speaker 1: give it up. John Boldon, I want your perspective, as
Speaker 1: we talked to admnstra Vetas as well, about what has
Speaker 1: been underreported in my opinion, which is the land grab
Speaker 1: along the Black Sea. What should be the American response
Speaker 1: to the territory taken down to Odessa? Right? I think
Speaker 1: this is a central part of what Putin's objectives have
Speaker 1: been in which, frankly, if he had focused on the
Speaker 1: south and the east at the beginning of the war
Speaker 1: in February, he might already have putin once the entire
Speaker 1: north coast of the Black Sea. I don't think there's
Speaker 1: any question about that. Even so, Deatha wants all that
Speaker 1: territory because he thinks it's strategically critical to Russia and
Speaker 1: because it will landlock Ukraine. So either things that have
Speaker 1: been coming through Odessa into Ukraine now will have to
Speaker 1: pass through Russian tolls and pay for it. Are they
Speaker 1: gonna have to completely switch their trading routes through Poland
Speaker 1: and Hungary and other Eastern European countries. It will give
Speaker 1: putin enormous strategic leverage over Ukraine. And as I say,
Speaker 1: why he didn't go after it first, I don't understand.
Speaker 1: I want to turn Inbassador Bolton to the reality. You
Speaker 1: came out of Yale. You worked with David Keane, you
Speaker 1: worked the no no relation to me, I should point
Speaker 1: out you you worked with with a Rush, a Republican
Speaker 1: party that wasn't afraid to project. Then you work for
Speaker 1: Donald Trump, who had his unique isolation As Tendencies described
Speaker 1: the new American isolationism described the new GOP isolationism, well,
Speaker 1: I think there's always been a strand of isolationism in
Speaker 1: the Republican Party. I think it's actually broader in the
Speaker 1: Democratic Party. It takes a somewhat different form. They think
Speaker 1: the world is going to be saved by multilateral organizations
Speaker 1: like the United Nations. That's kind of delusional. But the
Speaker 1: Republican delusion is that none of this overseas, none of
Speaker 1: this in Ukraine has anything to do with us. I
Speaker 1: think it has everything to do with us. Our way
Speaker 1: of life depends on interest scattered all over the world,
Speaker 1: and the isolationists and the Republican Party don't see that,
Speaker 1: don't see anything worth defending. They'd find out when they
Speaker 1: began to disappear. But I am actually hopeful. I think
Speaker 1: the isolationist strand in the Republican Party has shrunk almost
Speaker 1: back to historic low levels. I think Biden's catastrophic withdrawal
Speaker 1: from Afghanistan last summer was a major factor there. And
Speaker 1: I think if you look at Republican views on assistance
Speaker 1: to Ukraine and the current conflict, you can almost see
Speaker 1: those two events pushing the party back to its real
Speaker 1: Reaganite foundations for the contemporary world. So, what would be
Speaker 1: an appropriate response from the United States, or for Europe
Speaker 1: for that matter, for alleged war crimes in Busha and
Speaker 1: other cities in Ukraine. Look, this is there's there's little
Speaker 1: doubt based on the evidence we had of real barbarity
Speaker 1: on the part of the Russians. But look, it's nothing
Speaker 1: new for them that this. They've done the Sinceria, they
Speaker 1: did it in Czechnia. Uh and so we shouldn't have
Speaker 1: been surprised by it. But I'll tell you something, none
Speaker 1: of this intimidates Vladimir Putin or the Siloviki, the men
Speaker 1: of power around him. These are the hard men of history.
Speaker 1: You can threaten them with crimes prosecutions all you want,
Speaker 1: it's not going to slow him down in the slightest
Speaker 1: I think I've written on this extensively for over twenty years.
Speaker 1: These International Criminal Court the type operations do not deter
Speaker 1: these things from happening, and they're very rarely able to
Speaker 1: administer punishment. That this this will have to come when
Speaker 1: Russians get control of their government again and take actions
Speaker 1: if they desire to, against the people who committed the
Speaker 1: crimes in their name. Okay, So if Latimer Putin has
Speaker 1: proven time and again that he is not capable of
Speaker 1: being deterred, that deterrence tactics to this point have not worked,
Speaker 1: what will he respond to? Does use the force need
Speaker 1: to be on the table. And when the U S
Speaker 1: and other countries like the UK today for example, saying
Speaker 1: that they don't want to escalate, they don't want to
Speaker 1: be escalatory, what would escalation actually look like? How far
Speaker 1: can they take it? Well? I think Putin would have
Speaker 1: responded to adequate deterrence, but he hasn't seen any of it.
Speaker 1: You know, there's a lot of nattering by leaders of
Speaker 1: NATO countries about United the Alliances and so on, and
Speaker 1: yet we can't get the leader of the Free world
Speaker 1: to agree to transfer of Polish MiGs to Doukrainian Air Force.
Speaker 1: He said again yesterday it would be World War three,
Speaker 1: which it certainly would not. The West clearly failed. This
Speaker 1: is a shame that we will have to bear in
Speaker 1: not being able to determin who starting this evasion. John,
Speaker 1: that was very rude and undiplomatic of you, as you've
Speaker 1: been called before. Let's drive a conversation for to what
Speaker 1: to do now? Are you advocating at the Secretary of
Speaker 1: State needs to take the Bolton rute and undiplomatic and
Speaker 1: be more assertive, more aggressive or can we have a
Speaker 1: grace to our diplomacy? Is we force what America wants?
Speaker 1: Look I think we have. We have been plenty graceful
Speaker 1: with our allies, and we're still not getting them to
Speaker 1: do enough. And we're not doing enough either. I think
Speaker 1: if you listen to some Europeans, the British in particular,
Speaker 1: uh that they say we're constantly being dragged long by
Speaker 1: Europeans like themselves urging us to do more, or pressure
Speaker 1: from both the House and the Senate Democrat and Republican like.
Speaker 1: The fact is, if Putin retains territory after this is over,
Speaker 1: he has won and and and his effort to re
Speaker 1: establish Russian hegemony and maybe even sovereignty in the space
Speaker 1: of the four Soviet Union has been very paid. I
Speaker 1: don't mean to cut you off, but this is too
Speaker 1: important John right now. And that is a new domino
Speaker 1: theory moving from Russia west. Are you suggesting there could
Speaker 1: be a domino theory here if he takes part a
Speaker 1: bit some of Ukraine. Yeah, he already has some after
Speaker 1: the fourteen invasion, to which we did not respond effectively,
Speaker 1: and he's obviously going to try and get more. He's
Speaker 1: got plenty of other targets beside NATO countries within the
Speaker 1: space of the former Soviet Union. But if you ask
Speaker 1: the polls, if you ask Estonia, lad Via, Lithuania, they
Speaker 1: are deeply afraid that that they're very high on the
Speaker 1: Russian card a list and an ineffective, indeed feckless Western
Speaker 1: response will simply encourage Prutin. Okay, so that's looking west.
Speaker 1: What about to its other border with China, Mr Bolton,
Speaker 1: what role do you think China is playing actively or
Speaker 1: inactively here? Well? I wrote in the Wall Street Journal
Speaker 1: a couple of weeks ago. I think Russian China haven't
Speaker 1: on top here. It's not a full up alliance, but
Speaker 1: it's an understanding. I think China has Russia is back
Speaker 1: in this conflict, and they'll expect Russia is back when
Speaker 1: they launched their aggressive actions, whether it's against Taiwan or
Speaker 1: more in the South China See or elsewhere along their
Speaker 1: periphery in the Indo Pacific. Right now. I think what
Speaker 1: the Chinese are doing is making their financial institutions available
Speaker 1: to sanction Russian banks and others to ineffect launder that
Speaker 1: moment back into the financial system. And I think although
Speaker 1: China already purchases significant amounts of Russian oil and gas,
Speaker 1: they'll be happy to purchase or uh if if we
Speaker 1: had an effective embargo, which we don't. So these are
Speaker 1: the kinds of relationships. It doesn't require military assistance from China.
Speaker 1: Economic assistance is very important, and you've got other major
Speaker 1: countries like India, which, according to press reports, quadruple its
Speaker 1: purchases of Russian oil in February. John, I gotta get
Speaker 1: this into too important. In this conversation, you mentioned we
Speaker 1: should not worry of World War three, and perhaps we
Speaker 1: should not worry of Mr Putin and his nuclear abilities.
Speaker 1: How do we manage that? How do we develop a
Speaker 1: confidence that we will not find some form of World
Speaker 1: War Well, I'm not saying we shouldn't worry about it,
Speaker 1: of course we should. But right now we failed to
Speaker 1: deter Putin, and he's deterring us uh. And I think
Speaker 1: if he can get what he wants for free without
Speaker 1: effective Allied response, he's going to be encouraged to do more.
Speaker 1: I think providing the Polish mixes is actually a pretty
Speaker 1: small piece here. We're now in a race of time
Speaker 1: with the Russians. We've got to get more military assistance
Speaker 1: to the Ukrainians. We should be doing a lot more.
Speaker 1: I think a lot abo pctions we had are off
Speaker 1: the table. Biden gave them away in early December when
Speaker 1: he took American force away as an option. By the way,
Speaker 1: I got absolutely nothing for that. So we're constrained by
Speaker 1: what's going before us. But I think we should be
Speaker 1: absolutely clear here. If we allowed Russia to get a
Speaker 1: major part of its objectives in Ukraine, we have suffered
Speaker 1: a significant defeat. John Bolton, thank you so much, John,
Speaker 1: Thank you for having always thoughtful and controversial to say.
Speaker 1: At least Lori Calvacina has had the courage to be
Speaker 1: in the markets. She's done it small cap, large cap
Speaker 1: at RBC Capital Markets. But far more, John, Lori Calvacina
Speaker 1: has done sector analysis of what to do and just
Speaker 1: as much what not to do. Joins us now, Tom,
Speaker 1: thank you Lori. Let's start with that energy code that's
Speaker 1: not at twenty one. Get along overweight. You like the
Speaker 1: sector he left the sector That one has popped big
Speaker 1: time through twenty one, three two. Then in the last
Speaker 1: week you've made a move. Can you walk us through it,
Speaker 1: just piece by piece? What led you to this point? Sure? So. Look,
Speaker 1: our job as a strategist is to really connect the
Speaker 1: macro and the micro and so let's start with the macro.
Speaker 1: We had this sense that we really wanted to reduce
Speaker 1: some exposure to the value trade, and that's really for
Speaker 1: two reasons. Number One, the FED we have passed an
Speaker 1: important mile marker. When the FED lifts off. We typically
Speaker 1: see value outperform ahead of that, but growth take back
Speaker 1: leadership afterwards. Secondly, economic forecasts are coming down. Tom Porcelli
Speaker 1: just took his number to two and a half percent,
Speaker 1: which is trend, and consensus is looking for two point
Speaker 1: three percent next year. And we typically see value outperform
Speaker 1: and a hot or above at trend economy, but growth
Speaker 1: outperforms when the economy is running cool, so we think
Speaker 1: markets are really ready to start shifting back to growth.
Speaker 1: And in fact, in mid March we started to see
Speaker 1: growth outperformed value. So that's the macro, and when we
Speaker 1: thought about how we wanted to reduce that value exposure,
Speaker 1: we turned to our analyst survey, which is something that
Speaker 1: we do once a quarter and just completed last week.
Speaker 1: Back in December. When we did this survey, my Energy team,
Speaker 1: which had been bullish and highly bullish throughout all, was
Speaker 1: number one in terms of their performance assessments over the
Speaker 1: next six to twelve months, and the survey we just completed,
Speaker 1: they fell the number four. Now I'm not saying they're bearished,
Speaker 1: but their enthusiasm clearly fell it much and we had
Speaker 1: a sense that between that and financial's energy was really
Speaker 1: the better place to reduce that value exposure, just given
Speaker 1: those bottom up and puts from our analysts. So learning
Speaker 1: help us understand. Also then the next logical question, and
Speaker 1: this sequence of questions that will have with you this morning,
Speaker 1: why maintain the overweight un financials given the growth slowed
Speaker 1: down that you seem to be talking about. So I
Speaker 1: think we're, you know, when we're thinking about that economic forecast,
Speaker 1: we're making the assumption that we're heading for a below
Speaker 1: trend type economic backdrop, but not a recession. And I
Speaker 1: do leave that call to Tom for Shelley, and he
Speaker 1: will tell you that the risks have grown, but he
Speaker 1: hasn't really pulled into been pulled into that yet as
Speaker 1: his base case. I do think financials have been suffering
Speaker 1: from that growing sense of recession fears. And I think
Speaker 1: as the market really sort of transitions and sort of
Speaker 1: settles into this idea that we're just going to hit
Speaker 1: growth significantly, but not really enter a recession. You could
Speaker 1: actually see some relief on the financial side. Also. Frankly, John,
Speaker 1: I think that heading into this reporting season, the sentiment
Speaker 1: on financials has been pretty dour. That's the complete opposite
Speaker 1: of what we saw ahead of the last reporting season
Speaker 1: when they had really been flying and got you know,
Speaker 1: kind of pulled back down. I think we have a
Speaker 1: better set up going into this reporting season just from
Speaker 1: a sentiment perspective, Laura, the zeitgeist is that earnings grow
Speaker 1: and then they don't. That the market goes up and
Speaker 1: then it doesn't, That nominal GDP is pretty good, and
Speaker 1: then it's not. How do you determine that tip point
Speaker 1: when earnings turn low single digit or dare I say negative?
Speaker 1: So it's a great question, Tom, and I will tell
Speaker 1: you that as a forecaster and someone who builds a
Speaker 1: lot of back tests and regressions, earnings have simply gotten
Speaker 1: much harder to forecast. And there are models that we've build,
Speaker 1: inputs that we've looked at over time, things liking that
Speaker 1: labor costs, for example, which have been brilliant at forecasting
Speaker 1: earnings in the past um but haven't worked as well
Speaker 1: when we look over the past few years, and I'm
Speaker 1: thinking specifically about margets and I think the reason for that,
Speaker 1: and you know, I'm a transcript junkie. We really go
Speaker 1: through and just you know, read everything we can in
Speaker 1: SMP five hundred recording season each quarter, and what we've
Speaker 1: really seen or two things is Number one, companies have
Speaker 1: just gotten much much better at combating margin pressures and
Speaker 1: so new efficiencies, software, new tools, new recruiting strategies, those
Speaker 1: are all kind of throwing a monkey wrench in the
Speaker 1: models for people like me. Secondly, when you think about
Speaker 1: the market from kind of a top down perspective, technology
Speaker 1: has been just a structural margin winner over time, and
Speaker 1: it now accounts for a disproportionate share of earnings, much
Speaker 1: much bigger impact now than it has in the past,
Speaker 1: and so that's also throwing some of those backward models off.
Speaker 1: And I'll tell you, I think the by side has
Speaker 1: really ratcheted down their expectations for earnings coming into this
Speaker 1: recording season. So we're not expecting things to be fantastic,
Speaker 1: but we do think there's already a lot of fear
Speaker 1: baked it awesome. As always, you know, we love catching
Speaker 1: up with you lot of count of scena of obviously
Speaker 1: capital markets, just on some of the changing kids around
Speaker 1: the sect of preferences for obviously and how to line
Speaker 1: up with you can always tain as well without further ado.
Speaker 1: Andrew Hallandhorst the most studied economist in America in the
Speaker 1: last number of days. He's chief US Economists City Group. Andrew,
Speaker 1: John Ferreroll Torrio to Shreds a day you put out
Speaker 1: your note looking for a set of higher notes. I'm
Speaker 1: glad to see you survived, Andrew. I want to talk
Speaker 1: about the underlying theory at you see l A that
Speaker 1: you learned on all this. If we get the persistency
Speaker 1: of a non measured rate rise, what are the responsiveness
Speaker 1: is within the system you're most focused on. Those elasticities
Speaker 1: are going to be absolutely original. Given the Hollendhorst move,
Speaker 1: which ones matter? Yeah, thanks very much Tom for having me.
Speaker 1: It's a great question how the economy responds as you
Speaker 1: start to see interest rates moving higher um and you
Speaker 1: to your point. I think when people first saw our
Speaker 1: call for fifty basis point hikes at the next four meetings,
Speaker 1: it looked aggressive to some people. But if you think
Speaker 1: about the kind of underlying theory, like you were mentioning,
Speaker 1: this is a FED that has a neutral rate. They
Speaker 1: think around two and a half percent. In a world
Speaker 1: of two percent inflation. We're living in a world of
Speaker 1: six seven, eight, almost nine percent inflation, depending on how
Speaker 1: you calculate it. So the idea that FED officials would
Speaker 1: want to pretty expeditiously to use their term, get to
Speaker 1: a number like two percent, a little bit over two percent,
Speaker 1: that that's not that aggressive of a call. Okay, well
Speaker 1: this is important. Let's chop it down from I S
Speaker 1: l M and all the other theories blah blah blah
Speaker 1: down to the core economic function. If we get a
Speaker 1: whole norse move, which partial differential moves the most consumption
Speaker 1: or business investment or is it going to be expressed
Speaker 1: in the trade balance, which one matters? Tom. I would
Speaker 1: watch the howasing market here. I think that's really the
Speaker 1: important sector to watch in general. That's where interest rates
Speaker 1: have a very direct effect on what's going on in
Speaker 1: the economy. And if you look at that thirty year
Speaker 1: fixed rate nominal mortgage rate that's moved up from around
Speaker 1: three percent above four and a half percent now, so
Speaker 1: we've had a significant move in mortgage rates. The question
Speaker 1: you ask as an economist, is is four and a
Speaker 1: half percent mortgage rate really that high in a world
Speaker 1: where you're seeing inflation that's much higher. Does the FED
Speaker 1: need to go even further than that? But I think
Speaker 1: that is kind of the first sign that we're getting,
Speaker 1: you know, some traction from what the FED is doing
Speaker 1: feeding through to broader financial conditions, WHI should feed through
Speaker 1: in some way to the housing market. It's just it's
Speaker 1: not really that that's gonna be enough to pull off
Speaker 1: the housing market. And that really that really rings true
Speaker 1: here is Kaylee looks at seven thousand square feet downtown.
Speaker 1: I mean, the mortgage rate adjustment has been huge. Honestly,
Speaker 1: house prices Tom in this country, in the UK, for
Speaker 1: that match, are obscene, absolutely incredible. Nuts, are right, I'm
Speaker 1: gonna use that word. They are nuts. And Drew I
Speaker 1: wasn't tough on you at till a couple of weeks ago,
Speaker 1: and you know that. Let's talk about the economic data. Andrew.
Speaker 1: You've got faith in this economy. You've got faith in
Speaker 1: this economy, and for that reason, to restrain this economy,
Speaker 1: you think rates have to go a whole lot higher.
Speaker 1: There was one little crack in that on Friday, and
Speaker 1: even the team picked up on it. The I M.
Speaker 1: Can you walk us through what's been happening and why
Speaker 1: that maybe just a little bit of a blinking, flashing
Speaker 1: light on your dashboard. Yeah, I think you really have
Speaker 1: to be watching all the signals here because to your point, John,
Speaker 1: I mean, we have very strong demand, demand that is
Speaker 1: exceeding supply. The issue when demand exceeds supply is that
Speaker 1: even as demand begins to cool, you might not see
Speaker 1: activities slow that much. You would really see prices slow
Speaker 1: down because well, you're constrained by supply at the beginning
Speaker 1: of the day in any case. UM, So we're watching
Speaker 1: all these indicators on something like in I s M
Speaker 1: slowing down UM that that would be raising our level
Speaker 1: of concerns somewhat. You know a lot of people looking
Speaker 1: at the yield curve. That's another signal that I think
Speaker 1: means we should be cognizant of the fact that the
Speaker 1: economy may slow down UM and and the FIT may
Speaker 1: need to slow down the economy down significantly to get
Speaker 1: inflation down. So there's a lot of reasons to be
Speaker 1: thinking about scenarios where the economy slows down. But what
Speaker 1: I would go back to is the other number on Friday,
Speaker 1: which was the jobs report, and we're running on average
Speaker 1: above five thousand new jobs a month. You have wage
Speaker 1: inflation above five percent annualized. UM. You put those numbers together,
Speaker 1: you have nominal incomes that are running above ten percent
Speaker 1: year on year, and I think that kind of nominal
Speaker 1: income growth, we're probably going to see a lot of
Speaker 1: spending power behind that. But in the face of higher
Speaker 1: oil prices, really higher prices across the board, Andrew, how
Speaker 1: long can the American consumer go before demand destruction really
Speaker 1: starts to kick in. Yeah, it's a great question, and
Speaker 1: I think we are seeing that to some extent. Um.
Speaker 1: We were talking about housing before. Um, you would demand
Speaker 1: for housing be even stronger if house prices were not
Speaker 1: as high as they are. That's definitely the case. So
Speaker 1: you know, a combination of higher price prices and higher
Speaker 1: mortgage traits in the housing market. And then we're broadly
Speaker 1: for consumption, like you're talking about, we have higher oil prices,
Speaker 1: higher gasoline prices at the pump that that really does
Speaker 1: hurt consumers on a day to day basis. Um. Again, though,
Speaker 1: you're just coming at that from so much nominal income
Speaker 1: power you know, hitting that increase in prices that I
Speaker 1: don't think that will be enough so far. Now we're
Speaker 1: watching the you know, if you watch the consumer sentiment
Speaker 1: numbers for instance, there you do see some of those
Speaker 1: numbers tipping because people are concerned about prices that are
Speaker 1: moving higher as they should be. Um but so far
Speaker 1: it still looks like an economy that was running well
Speaker 1: above two percent potential growth, probably still running above two
Speaker 1: percent potential growth. But you know, kind of like you
Speaker 1: were discussing earlier, slowing down closer to that two percent numbers.
Speaker 1: You go through the year, Andrew, to bring it back
Speaker 1: to monetary policy, how does the balance sheet factor into
Speaker 1: your assumptions of potentially two basis points of move over
Speaker 1: four meetings? If the balance sheet is introduced as a
Speaker 1: factor in May, does what influence? Does that have? Great question?
Speaker 1: So economists like myself spending a lot of time right
Speaker 1: now guessing at what these interest rate increases will look
Speaker 1: like beneficials spending a lot of time talking about the
Speaker 1: potential path of interest rate increases. But really we should
Speaker 1: probably all be a bit more focused on the balance sheet.
Speaker 1: That's an incredibly important tool that the FED has when
Speaker 1: we talk about a flat yield curve, two ye yields
Speaker 1: being pretty high and tenure yields staying relatively low. Well,
Speaker 1: the FED is a very large owner of long term
Speaker 1: treasuries and mortgage backed securities. That's gonna put downward pressure
Speaker 1: on long term yield So I think the FED is
Speaker 1: going to start this on somewhat of an autopilot where
Speaker 1: there are caps on the amount of securities that are
Speaker 1: reinvested each month. That's going to bring the balance sheet
Speaker 1: down slowly. Um. But it's something to watch because if
Speaker 1: the FED needs another lever to pull on to fight
Speaker 1: inflation that's running too high, well, the balance sheet is
Speaker 1: there as a lever could defend at some point, think
Speaker 1: about sales to they think about being more aggressive with
Speaker 1: the balance sheet. I think all those things are on
Speaker 1: a table. We're just not really focused on them right now. Andrew,
Speaker 1: fascinating kill. We appreciate your time as a white buddy
Speaker 1: to can't hump and break it down for Sandraw Holland,
Speaker 1: host there of sits. This is when Jay Kramer out
Speaker 1: on Twitter this morning, Elon Moss, could you please create
Speaker 1: an algorithm for Twitter to get rid of the death
Speaker 1: threats and the like. Also, how about a two track,
Speaker 1: one with real names that is paid for and one
Speaker 1: that is at supported where people can hide behind anonymous
Speaker 1: names and dump on du Chasso. We did that, we
Speaker 1: Jim's Jim's um. Yeah, a wise comment because there's so
Speaker 1: much vitriol. It's like it's a cesspool. It's you know,
Speaker 1: I go on and off because people are so filled
Speaker 1: with hate and get it too, but not like especially
Speaker 1: especially you know a lot of these people are you know,
Speaker 1: reside in the cheap seats and they're shrouded by and
Speaker 1: then emmity, and they've never been on the playing field,
Speaker 1: and they say that they wouldn't say to your face,
Speaker 1: you've been cautious here? What do you do with Twitter?
Speaker 1: Now that Mr Musco is nine point x percent stock up?
Speaker 1: Doubly trade? I probably traded Twitter, uh those people on
Speaker 1: real money pro on the street No, Over twenty times
Speaker 1: over the last seven years, starting at I actually was
Speaker 1: not long going into this, but I showed a stock
Speaker 1: at sixty as I tweeted out, and then covered about
Speaker 1: five percent lower this morning, so I'm flat the stock
Speaker 1: um Musk is a genius. The irony is that the
Speaker 1: SEC doesn't allow him to tweet, but unless his counsel
Speaker 1: at at at Tesla allows him, you know, goes over
Speaker 1: what he's going to tweet. So it's filled with irony. Um,
Speaker 1: he filed thirteen G, not at thirteen D, so he's passive.
Speaker 1: So I think it's an over reaction in my view.
Speaker 1: All right, Doug, So you know, I'm I'm just looking
Speaker 1: around here. I just came back from a nice few
Speaker 1: days off in California. Things are great out there, sunshine
Speaker 1: six and a half dollars a gallon for gas. But
Speaker 1: I've got an economy that's slowing. I got interest rates
Speaker 1: that are going higher. I've got inflation. My Huevos Franciero's
Speaker 1: a Katie's placing Carmel this yesterday cost me twenty one
Speaker 1: dollars um. What do I do in this market? Well,
Speaker 1: I mentioned to Tom and and Apropos to answering your question, Paul,
Speaker 1: that I wanted to rip up the script and basically
Speaker 1: link something that I learned in my first statistics class
Speaker 1: at Wharton with Jamie Diamond's comment, because I think it
Speaker 1: will serve to answer your question. The term I learned
Speaker 1: was gausy and distribution or normal distribution before everyone's eyes
Speaker 1: glaze over. Most no gauzy in by a different name,
Speaker 1: and it's a familiar name. It's a bell shaped curve,
Speaker 1: which is a probability distribution function used in statistical analysis.
Speaker 1: Now most view market outcomes these days as a bell
Speaker 1: shaped curve. The average strategist comes in and says, well,
Speaker 1: Tom and Paul, the market smps can earn three twenty
Speaker 1: five dollars plus a minus apply one multiple, where maybe
Speaker 1: two or three uh pe numbers higher than normal, but
Speaker 1: interest rates are low, so the stocks are not expensive
Speaker 1: expensive relative to interest rates. I think that's linear thinking.
Speaker 1: Um uh, you know, in a normal distribution a normal world,
Speaker 1: of the outcomes are within three standard deviations of the mean,
Speaker 1: and two thirds are within one standard deviation. That's how
Speaker 1: the majority of investors are thinking today. I strongly disagree
Speaker 1: what I believe to be the normal distribution consensus. I
Speaker 1: see it much differently. I don't see a Gaussian or
Speaker 1: normal curve. I see what I call a Cassian distribution
Speaker 1: and abnormal distribution aftorial. Some call me abnormal on Twitter. Um.
Speaker 1: But and a normal distribution considers that there's a wide
Speaker 1: range of tail outcomes that have a higher probability than
Speaker 1: at any time in the last few decades. In other words,
Speaker 1: to me, the markets pull are underprising risk in the
Speaker 1: rally over the last half of market looks like a
Speaker 1: bear market rally. And let's consider what Jamie Diamond says.
Speaker 1: I've I have said online on the show and offline
Speaker 1: to John you Um and Tom that um My concern
Speaker 1: is chiefly that there's abundance of uncertainties and the very
Speaker 1: probabilities of outcomes that exist today, d Jamie Diamond said
Speaker 1: this morning. He warned that the war in Ukraine would
Speaker 1: collide with rising inflation UH to slow the pandemic recovery
Speaker 1: and alter global alliances for that case to come, but
Speaker 1: what he wrote next is far more important. He wrote,
Speaker 1: they referencing Ukraine inflation present completely different circumstances than what
Speaker 1: we've experienced in the past, and their confluence may dramatically
Speaker 1: increase the risk of the head. Well, it is possible
Speaker 1: and hopeful that all these events will have peaceful resolutions,
Speaker 1: we should prepare for the potential negative outcomes. And this
Speaker 1: is why I view the world, the stock market, the
Speaker 1: SMP as overvalued. Never before have we had the possibility
Speaker 1: of these outlier unexpected outcomes which are happening with greater frequency.
Speaker 1: So twenty one times the ratio one times is really
Speaker 1: quite expensive. Doug, what's important yours? We don't know where
Speaker 1: the Baltimore Orioles are in the Bell curve, but it's
Speaker 1: not a good sight to see. I know where the
Speaker 1: Yankees are and I don't even want to discuss it anymore.
Speaker 1: It's part of your terms for coming out. We talk
Speaker 1: to your people and said you wouldn't talk about it. Doug.
Speaker 1: What's so important within this analysis is corporations adapt with
Speaker 1: your analysis? Do you go to you know, forget about
Speaker 1: trading like casts? Do you go to cash? Or are
Speaker 1: there places to hide given your caution? Well, I have
Speaker 1: a very long list of shorts. Uh, some companies you
Speaker 1: haven't heard of, or whether fraud exists or the company's outlook. Uh.
Speaker 1: I'm not going to get into the details, but I'll
Speaker 1: briefly give you some names. Carbon Crispy Cream, you know,
Speaker 1: Robin Hood the Crispy Cream, awful business model. It's going
Speaker 1: to go the way the first Crispy Cream did could
Speaker 1: put Berkeley lights light speed. One of my favorites is
Speaker 1: Digital World acquisition, which is down nine dollars this morning.
Speaker 1: And that's of course Donald Trump's Truth Social, which is
Speaker 1: having serious problems having people download. There's a waiting list
Speaker 1: of over a million names. I've tried to get on it,
Speaker 1: not because I'm interested in in the propaganda, but I'm
Speaker 1: trying to figure out how the site is working, how
Speaker 1: effectively it is working. In fact, over the weekend, the
Speaker 1: two people that lead the technology and development resigned from
Speaker 1: the company, and um, they're gonna have problems. You know.
Speaker 1: The other thing is in theory. UM truth Social provides
Speaker 1: um a platform versus Twitter. But I think people from
Speaker 1: the right and the left like Twitter because they could
Speaker 1: kill each other with so much vitriol and hate. I
Speaker 1: don't think it is as compelling if you have a
Speaker 1: site with only right leaning um uh tweeters or contributor.
Speaker 1: IM out of time. I got five seconds. Would you
Speaker 1: explain the price of Florida real estate? Oh my god,
Speaker 1: I've been talking about this whole weekend. Have you been
Speaker 1: spying on my conversation? If I told you what I
Speaker 1: paid for my house on Seabreeze Avenue in Palm Beach
Speaker 1: and it was offered Friday night by someone who walks
Speaker 1: not a realtor, so when he wants to pay me cash,
Speaker 1: just walked up and knocked on my door. Happened him
Speaker 1: at home. My dog, my two docksins um Ali and
Speaker 1: Daisy at barking um and I was, I was, I
Speaker 1: was stunned. Okay, well I'm not telling you because it's
Speaker 1: in a residence stress with my kids. Doug cast thank
Speaker 1: you so much, knocking on his door down in Florida
Speaker 1: with Seabreees partners as well. This is the Bloomberg Surveillance Podcast.
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