Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along
Speaker 1: with Jonathan Ferrell and Lisa Abramowitz. Daily we bring you
Speaker 1: insight from the best and economics, finance, investment, and international relations.
Speaker 1: To find Bloomberg Surveillance on Apple podcast, SoundCloud, Bloomberg dot Com,
Speaker 1: and of course on the Bloomberg terminal. We begin right
Speaker 1: now our coverage into a July seven Federal Reserve meeting, which,
Speaker 1: in sequence with the last one and maybe in sequence
Speaker 1: with the next one, is truly historic. A student of this,
Speaker 1: of the history of the nation's economics and the action
Speaker 1: of it, is a former Richmond Federal Reserve President, Jeffrey Lacker,
Speaker 1: and we're thrilled to Professor Lacker could join us this morning.
Speaker 1: Jeff Lacker, I want to go back to one of
Speaker 1: my heroes, a gentleman from Washington University at St. Louis,
Speaker 1: the laureate Douglas North, who codified the word ambiguity and
Speaker 1: also did a careful study of the dynamics the movable
Speaker 1: parts of our economy. All of our listeners, all of
Speaker 1: our viewers, are drowning now in the dynamics of our
Speaker 1: economic world. How do we get control of it that
Speaker 1: has to do its job get inflation down. It's the
Speaker 1: institution with unique control over monetary conditions, the United States UM.
Speaker 1: Together with the fiscal authorities, they drive inflation, and the
Speaker 1: FED has got to do its job now uh and
Speaker 1: do what it takes to get inflation down. I think
Speaker 1: Chairman Powell has been right in recent months since March
Speaker 1: to emphasize that maximum employment is going to be out
Speaker 1: of reach until we get inflation down, and we need
Speaker 1: to put concerns about the labor market on what it's
Speaker 1: doing a little bit to the side and focus on
Speaker 1: getting inflation down. That's gonna take reducing spending growth, producing
Speaker 1: nominal spent and the labor market will play out as
Speaker 1: it will. Your shop Codified Economic History with Thomas Humphries
Speaker 1: one of my heroes. I've read every single page he's
Speaker 1: ever written. Right now, Thomas Humphries would be writing about
Speaker 1: comparing Volcer to Powell, Powell to Voker. He's not Paul Voker, right. So,
Speaker 1: Paul Volker was a um, a great central banker in
Speaker 1: an age of monetary mystique, an age in which central
Speaker 1: banks deliberately cultivated some obscurity and a distance from the public.
Speaker 1: They didn't want to be in the headlines unlessen you know,
Speaker 1: they wanted to choose when they'd be in the headlines. Um,
Speaker 1: we're in a different day and age. Getting inflation down
Speaker 1: revealed to central bankers around the world the value of
Speaker 1: um managing expectations and the value to that of being
Speaker 1: transparent and communicating about what they're about, what they're trying
Speaker 1: to do. J. P See strikes me as better suited
Speaker 1: for the age of central bank transparency with Paul Boker
Speaker 1: in terms of personal demeanor. The one big thing that
Speaker 1: Paul Boker had was the political the backing the political
Speaker 1: establishment in Washington and New York to get inflation down.
Speaker 1: They were fed up with it, and they were willing
Speaker 1: to take the pain. And he cultivated an appreciation of
Speaker 1: the pain that was needed, uh to withstand in order
Speaker 1: to get inflation down. And I think J. Pale Is
Speaker 1: seems to have abundant um political connections and abundant skill
Speaker 1: in managing the FEDS political connections, and so he seems
Speaker 1: pretty well suited on that grounds to a delicate subject.
Speaker 1: But you've touched on and so let's go there. How
Speaker 1: political is this fat? Right? Now? Uh? So I think
Speaker 1: they understand that. Um, there's nothing that could damage their
Speaker 1: credibility more than sustained inflation. Um. You know, they can
Speaker 1: take all the hits they want unemployment and the labor force,
Speaker 1: and climate change and and what have you, But uh,
Speaker 1: job number one is inflation. If they don't get that down,
Speaker 1: I think they realized there their political toast in some sense.
Speaker 1: So UM, I think that's true of any FED, no
Speaker 1: matter what people say about independence. I think it's true
Speaker 1: to refund. Are you convinced that wanting to tolerate a
Speaker 1: recession to get inflation? Do? Yes? I do, and they should. Jeff,
Speaker 1: what kind of recession? Because the consensus right now is
Speaker 1: short and shallow. Do you share that, let's say, more
Speaker 1: constructive view of things. I'm tempted, given today's news, yesterday's news,
Speaker 1: to say a Mario dragging recession, you know, whatever it takes,
Speaker 1: because the um, the alternative to let your foot up
Speaker 1: off the break before inflation has come down, let it
Speaker 1: settled four and five. That's just a recipe for another
Speaker 1: recession down the road. That's a recession for prolonged pain,
Speaker 1: making the agony younger and longer, stretching out over years.
Speaker 1: That's not good for the American public. I think they
Speaker 1: realized that, so they're gonna have to they ought to.
Speaker 1: What they ought to do is stick with it until
Speaker 1: they get inflation down to under three percent, say within
Speaker 1: spinning distance of two, and um go from there. Okay,
Speaker 1: So whatever it takes, what is it going to take?
Speaker 1: What rate on Fed funds, rate on unemployment? Good question?
Speaker 1: So UM, I think the historical record is clear that
Speaker 1: they need to get the real federal funds rate out
Speaker 1: or above zero. So that banks the question right. So
Speaker 1: the real rate is the actual funds Fed funds rate
Speaker 1: minus expecting near term inflation. The best reads of that
Speaker 1: are about six percent. You've got the Michigan survey at
Speaker 1: five point to the New York Fed Consumer Survey, which
Speaker 1: is great, very good methodology at six point eight. Split
Speaker 1: the difference at six percent. If near term expectations of
Speaker 1: inflation stay at six percent, they're gonna have to get there.
Speaker 1: If those near term expect patients start falling, then what
Speaker 1: we have in stores or rendezvous between the Fed funds
Speaker 1: rate and expected inflation. But I doubt that expected expectations
Speaker 1: are going to fall to three and a half or
Speaker 1: four by year end. So I suspect they're going to
Speaker 1: have to go higher than that, and how quickly would
Speaker 1: they need to get there? I mean, six percent is
Speaker 1: still a long way away, even with the supersized hyps
Speaker 1: we've already seen. I don't think, um, I don't think
Speaker 1: slowing down the process does them a lot of good. Um.
Speaker 1: No matter what, whether they go you know, fifties or
Speaker 1: there's still going to be in a situation where the
Speaker 1: effect on inflation is out into next year. They're going
Speaker 1: to have to make a judgment about when to stop
Speaker 1: without knowing whether they've done enough or not based on
Speaker 1: other indications and other calculations like the one I cited,
Speaker 1: Um and uh, so they might as well get get
Speaker 1: it done. They might as well get there fast. Jeff,
Speaker 1: do you look at the path back from this inflation
Speaker 1: to whatever is normal to three let's not get into
Speaker 1: that now. Is having a smoothness a glide path, as
Speaker 1: Peter orzag would call it, or is it kinked where
Speaker 1: we get to a point we stopped, we try to
Speaker 1: figure out how to lower inflation next, etcetera. You know,
Speaker 1: if the if the Fed titans enough, I think we'll
Speaker 1: just see a gradual decline down. I think it'll sag
Speaker 1: over a couple of years. I expected to be relatively smooth.
Speaker 1: I don't have any reason to supect any jolts as
Speaker 1: an other shocks like more oil price problems in the Jeff.
Speaker 1: How would they respond you think to that negative supply
Speaker 1: shock on the energy side, I'm interested in that, not
Speaker 1: just for the Federals Earth, but maybe more so for
Speaker 1: the e CP on the gas side of things. I
Speaker 1: don't know if you've followed that news conference yesterday with
Speaker 1: the GUARD, but then we all fail to establish what
Speaker 1: their reaction function actually is and how they'd respond to
Speaker 1: a negative supply shock that push gas prices higher and
Speaker 1: potentially growth lower. This is a a key area because
Speaker 1: oil price shocks tend to cause unemployment. People think, well,
Speaker 1: you need to ease that's a reason to ease policy.
Speaker 1: But if you think about it more broadly, the central
Speaker 1: banks controlling the real interest rate, which is the incentive
Speaker 1: to save and delay consumption, delay spending for later. And
Speaker 1: if you get a supply shop, you want people to
Speaker 1: wait and consume later. So what you want to do
Speaker 1: is raise rates. Uh. At least one argument goes So
Speaker 1: there's a case that you know it doesn't. It doesn't
Speaker 1: mean not staying the course of inflation. Interesting, Jeffrey got
Speaker 1: a cash shop jeff Nack of the former Richmond Fat
Speaker 1: president right now and this is really important. I line
Speaker 1: up Kenneth Rogoff with this book. The Curse of Cash
Speaker 1: is one of those courageous books written in the last
Speaker 1: number of years. There's our Steve Engel out of Hong
Speaker 1: Kong and the courage he has done and reporting some
Speaker 1: of the challenges of the p ccific rim and in
Speaker 1: securities analysis. There is Richard Greenfield who was tirred and
Speaker 1: feathers years ago with a small upstart called Advantage. It
Speaker 1: wasn't funny at the time. Now we can look back
Speaker 1: with joy and we're thrilled that one of the leaders
Speaker 1: on media, rich Greenfield joins us today with Lightshead Partners
Speaker 1: on the challenges of Mr Musk and Chance to record
Speaker 1: rich just as a as a beginning point. Do the
Speaker 1: earnings today matter? I mean they matter from the standpoint
Speaker 1: of it's yet another signal that the online ad market
Speaker 1: is slowing. You saw it from Snapchat last night, You've
Speaker 1: seen it from Twitter. There are now just the building
Speaker 1: series of signs that the economy is slowing and advertising
Speaker 1: is slowing. Whether that's inflation driven or just overall broader
Speaker 1: economic weakness, it definitely there. There's very specific Twitter challenges
Speaker 1: with Musk, but the overall macro environment is clearly weighing.
Speaker 1: We'll see the big bellweathers in Google and Facebook next week.
Speaker 1: But this is certainly not um These These are negative
Speaker 1: data points, both of them for investors. Right now, Search,
Speaker 1: I gotta rip up the script here. Let's jump over
Speaker 1: the next week. Are we going to see the big
Speaker 1: boys and frankly including the Amazon advertising model, are they
Speaker 1: going to be diminished as well? I mean, look, Google
Speaker 1: has been talking about YouTube bearing some pressure. I think
Speaker 1: there's no doubt the connected TV AD market is certainly slowing.
Speaker 1: I think you're gonna hear that, whether it's from Fox
Speaker 1: or Paramount. Like I think everywhere you look, connected TV
Speaker 1: is slowing. The TV market, especially local TV, is starting
Speaker 1: to slow. The economy is weakening. From the standpoint of
Speaker 1: advertising companies. Are you know companies are seeing top line
Speaker 1: growth slow? What do they do? They cut back on
Speaker 1: the marketing spend. This is nothing. This is not a
Speaker 1: new I mean, you and I com have lived through
Speaker 1: multiple cycles over decades like this is what companies do
Speaker 1: when things start to slow, They cut their marketing spend.
Speaker 1: There's nothing shocking about it. The question is only how
Speaker 1: long will it last and how bad will it be?
Speaker 1: Is this a deep dark recession through twenty three where
Speaker 1: ads fen gets crushed or is this more of a
Speaker 1: shorter term phenomenon. We bounced back in twenty three, and
Speaker 1: that's I think that's the big question. We don't know
Speaker 1: right now, but I definitely think you'll see Facebook or
Speaker 1: sorry Meta, I keep saying Facebook, We will see Metah
Speaker 1: certainly talk about a slowdown in a continued slowdown and
Speaker 1: ad revenue and probably give relatively underwhelming Q three guys,
Speaker 1: I don't think as bad as Snapchat, but I don't
Speaker 1: think it's going to be a great, great outlook. Well
Speaker 1: for Rich to bring it back to Twitter. They did
Speaker 1: talk in the statement about those advertising headwinds, but they
Speaker 1: also said part of its reflective of uncertainty related to
Speaker 1: the acquisition of Elon Musk. What is your base case
Speaker 1: about what the verdict will be in that Delaware court
Speaker 1: in October? Is he going to be forced to buy
Speaker 1: this company for share? We really do believe he's going
Speaker 1: to be forced to buy this company for Kaylee, he
Speaker 1: signed his he signed this agreement when the case in Delaware,
Speaker 1: which is going to be litigated on an expeditive basis,
Speaker 1: he already lost the push to push this out. I
Speaker 1: think the judge, My guess is the judge is gonna
Speaker 1: look at this and go The entire Elon Musk case
Speaker 1: essentially rests on this question of bots and did Twitter
Speaker 1: disclose the proper amount of bots. The problem with that, Kayley,
Speaker 1: is when you read the merger agreement, it never talks
Speaker 1: about bots. There's no discussion of bots. It just relies
Speaker 1: on Twitter's public filings. And if you read Twitter's public filings,
Speaker 1: it says this is how we this is how we
Speaker 1: count bots, or this is how we count real users.
Speaker 1: But we could be wrong. So I think when you
Speaker 1: actually read the documents, it's very hard to see how
Speaker 1: Elon which is feels like he's got buyers remorse. He
Speaker 1: just doesn't want to buy it anymore. Whether it's the martin,
Speaker 1: the environment, I have no idea. Well to that point, Rich,
Speaker 1: what happens to a company if someone is forced to
Speaker 1: buy it who doesn't want it? Well, first of all,
Speaker 1: it's happened before the specific performance, which is being forced
Speaker 1: to close a transaction that you signed back in the
Speaker 1: financial crisis. There is precedent for being forced to buy
Speaker 1: a company. That's his problem, not Twitter. Rich Greenfield very
Speaker 1: quickly here, and I want you to take a broader
Speaker 1: Walter Pizak, Rich Greenfield view. Is their profit in streaming?
Speaker 1: Is it a durable business or do they compete it
Speaker 1: all the way spending two hundred million dollars on the
Speaker 1: gray Man. Uh. Tom, It's an excellent question. I think
Speaker 1: the way to answer it is right now, you are
Speaker 1: seeing one company make a lot of money, which is Netflix.
Speaker 1: Netflix is generating six seven billion dollars of EBITDA, is
Speaker 1: generating a billion dollars of free cash flow and is
Speaker 1: going to make dramatically more free cash flow next year.
Speaker 1: Everybody else, whether we're talking about Disney or I mean Peacock,
Speaker 1: is losing two and a half billion dollars a year.
Speaker 1: Paramount Plus lost a billion in the last two quarters.
Speaker 1: Everyone is just drowning in red tape right now. I mean,
Speaker 1: this is like a black hole of streaming because there's
Speaker 1: too many companies competing and they don't generate a significant
Speaker 1: amount of time spent in streaming Netflix of all time
Speaker 1: spent streaming on a connected TV YouTube. Everybody else is tiny.
Speaker 1: And that's the problem is they're all spending billions upon
Speaker 1: billions of dollars and they're not getting substantial viewership. That's
Speaker 1: the problem. I got ten more questions in no time.
Speaker 1: Rich Greenfield, thank you so much for joining us with
Speaker 1: Walter at light Shed Partners. Right now, we're gonna look
Speaker 1: at this at the President of the United States. To
Speaker 1: John mentions, it is way way better than what President
Speaker 1: Trump confronted. Maybe age, maybe health, but also just virulence
Speaker 1: as well. Laurence Sour is expert in this field, Associate
Speaker 1: professor at Nebraska Their Medical Center and director of Special
Speaker 1: Pathogens Research Network. Lauren, I want to go to our youth.
Speaker 1: I remember my mother dragging me in for boosters. It
Speaker 1: was no big deal. There was whooping cough, tetanus, there
Speaker 1: was dif theory, AD tap and T tap and all
Speaker 1: the rest of it. Why is our fear over a
Speaker 1: COVID booster shot so different than our fear over getting
Speaker 1: a detherial booster shot. To be honest him, I think
Speaker 1: a lot of it is politics and the conversation around
Speaker 1: how the vaccine was developed. I think it's rare that
Speaker 1: we see the development of a vaccine play out in
Speaker 1: the public like this one has, where we're seeing every
Speaker 1: minutia of the step wise path, and where people are
Speaker 1: paying such close attention to the data that aren't scientists,
Speaker 1: that aren't clinicians, and they're sending out interpretations into social media,
Speaker 1: into the news media that might not be quite accurate
Speaker 1: um or might be developing. And so I think changing
Speaker 1: the conversation about how vaccines are made and why we
Speaker 1: use them is really important, and bringing the trust back
Speaker 1: to the process, explaining what happened during the COVID vaccine,
Speaker 1: explaining how these are developed, and getting people back on
Speaker 1: track with some of those vaccines you just mentioned. A
Speaker 1: lot of kids are have been delayed in getting their
Speaker 1: childhood vaccines because of the COVID pandemic, So bringing everyone
Speaker 1: back up to speed and getting that population healthy again.
Speaker 1: What would you like to see in terms of action
Speaker 1: from politicians to get us back to where we don't
Speaker 1: die from dithery a in one week like members of
Speaker 1: my family did in about nineteen o five. I think
Speaker 1: a huge piece is messaging the process um and why
Speaker 1: it's important. So we need to have all of our
Speaker 1: politicians come out and talk about why vaccines are important
Speaker 1: for their children. UM. We can't have this vitriol, this
Speaker 1: dialogue playing out in the public um sphere. And and
Speaker 1: recognizing that scientists have a higher level of training, clinicians
Speaker 1: have a higher level of training than you know, the
Speaker 1: average politician on how vaccines work, why we use them,
Speaker 1: and so the opinion of an individual in you know,
Speaker 1: let's just say, for example, a member of Congress is
Speaker 1: different than a physician researcher who's trained for twenty plus
Speaker 1: years to develop these vaccines, roll out the trials, um
Speaker 1: and understand the data on how they work. Well, Lauren,
Speaker 1: as we talk about the messaging that vaccines work, what
Speaker 1: a lot of people see is I'm vaccinated and yet
Speaker 1: I still have a positive case. And especially as we
Speaker 1: talk about a new variant now that we're being told
Speaker 1: of AIDS all immunity, whether you've previously had COVID, whether
Speaker 1: you're vaccinated, does that just raise the question of getting
Speaker 1: more boosters into arms or is that just essentially saying, Look,
Speaker 1: we have to resign ourselves to the fact that everyone
Speaker 1: will contract the virus. It's just a matter of how
Speaker 1: bad it is for them. Yeah, I think it's honestly
Speaker 1: somewhere in between. I think we had a few missteps
Speaker 1: on the science side of potentially talking about sterilizing immunity
Speaker 1: early in the pandemic, especially since we didn't know exactly
Speaker 1: how the UM data would look, and so expecting people
Speaker 1: to to change their viewpoint from I'm going to get
Speaker 1: this vaccine and I won't need a vaccine and I
Speaker 1: won't get sick to um. The vaccine is protecting you,
Speaker 1: but it's protecting you from getting really sick and possibly
Speaker 1: ending up in the hospital, are dying, And that conversation
Speaker 1: is continuing to play out. I think one eventually, once
Speaker 1: we get that that vaccine level really high in the population,
Speaker 1: the mild covid um will is what we'll start to see.
Speaker 1: So people will be vaccinated, they'll probably get on a
Speaker 1: regular vaccine schedule, and it'll feel more like the way
Speaker 1: we we deal with the flu. And to be honest,
Speaker 1: people get really sick and they die every year from
Speaker 1: the flu um. But research continues on how to make
Speaker 1: better flu vaccines, how to make universal flu vaccines, and
Speaker 1: so that we'll probably follow that same path. So what's
Speaker 1: the appropriate policy response in a world in which people
Speaker 1: aren't getting as sick, but they still are getting sick,
Speaker 1: they could still be contagious. Does that mean masks forever?
Speaker 1: Does that mean we're going to stick with the policy
Speaker 1: here at Bloomberg where you're out of the office for
Speaker 1: at least five days if you test positive. I mean,
Speaker 1: how do things have to evolve in that scenario? Yeah?
Speaker 1: I think the first step is that we still have
Speaker 1: to do a lot of work to get our vaccination
Speaker 1: rate up, so UM reminding people that that they even
Speaker 1: if they have gotten vaccinated, that they need to get
Speaker 1: those boosters, pushing the federal government to bring that fourth
Speaker 1: dose to people, UM, continuing to do the studies on
Speaker 1: how we can get into that vaccine cadence and what's
Speaker 1: most appropriate. And then I think as we grow that
Speaker 1: natural immunity and the population or that vaccine immunity, will
Speaker 1: see less and less of the masks. But for now,
Speaker 1: the cases are still quite high, and I think masking,
Speaker 1: especially indoors, is quite appropriate. Lauren, are we completely to
Speaker 1: where this virus is endemic, where it's like it's here,
Speaker 1: get over it, It's not moving I think it is here, um,
Speaker 1: and I do think it is endemic. But we we
Speaker 1: were talking about endemic like it's something we just resign
Speaker 1: ourselves to and accept, when in reality, we have lots
Speaker 1: of endemic diseases that we fight tooth and nail to
Speaker 1: at bay. So dangy is a great example, UM, lots
Speaker 1: of fever is a great example. Maybe not in the
Speaker 1: United States, we don't talk about them in the same way, UM,
Speaker 1: but but across the world we fight endemic diseases because
Speaker 1: they still cause significant morbidity, immortality, and so UM, doing
Speaker 1: all we can to stop COVID spread and to fight
Speaker 1: COVID to protect our our people is still really important
Speaker 1: even if the disease becomes or is endemic. SAA, thank you.
Speaker 1: I wonderful to hear from us O. White. It's been
Speaker 1: a while and that's good news, I guess, but we've
Speaker 1: missed you. The University of Nebraska Medical Census, Laurence, Sawada.
Speaker 1: Every week there's fruit basket down on the shore and
Speaker 1: you know the cake that you know, the Christmas like
Speaker 1: date cake thing cut a knife through, and gallons of
Speaker 1: ice cream, even cases of beer we get in sometime
Speaker 1: but then other times and I'll get the photo out
Speaker 1: here soon on Twitter. You get a blue shirt that
Speaker 1: looks perfect on afterthought, because she hates the Red Sox
Speaker 1: as much as Doug Cass I ate the Red Sox.
Speaker 1: Got Cass, thank you so much for thinking of me.
Speaker 1: If you agree to wear that T shirt at the game,
Speaker 1: and I will as well because I have one. Obviously,
Speaker 1: I am now committing to taking you the World Series
Speaker 1: game between the Yanks and Houston in the Bronx. That
Speaker 1: would be good, dog, Except there's a problem. Yeah, you
Speaker 1: haven't seen me since I was seven, and there's no
Speaker 1: chance this floated ticket is getting into that T shirt. Anyways,
Speaker 1: how about Disastros? I mean, before we get to the market, Uh,
Speaker 1: Doug quickly here, what is it like when when a
Speaker 1: team has their number Yankees betting one fifty one against
Speaker 1: the Astros? Take it easy. Record is still they're gonna
Speaker 1: meet the Houston. They're going to meet Houston in the
Speaker 1: World Series. We'll see. By the way, I am told
Speaker 1: that they're actively um seeking Soto and Castillo. And if
Speaker 1: that occurred on the door, it's a it's an American
Speaker 1: Soota joins the Yankees. Well, it's like the Yankees are
Speaker 1: two and five against the Astros this season, so they're
Speaker 1: going to be I don't know. You obviously didn't take
Speaker 1: stats exactly good. Let's look at the stat right now,
Speaker 1: Doug Cass, of this nascent bull market we're in right now,
Speaker 1: what is the character of the up we've seen the
Speaker 1: last six weeks. It's been interesting. I mean, my my skepticism,
Speaker 1: which emerged late last year, has helped Sea Breeze performance
Speaker 1: slightly up for the year, a little commercial, but as
Speaker 1: we discussed last time on surveillance, I've turned more positive
Speaker 1: in June and I view that period as a likely
Speaker 1: low in the making, and my mantra continues to be
Speaker 1: mild and brief. In the first half of the year,
Speaker 1: we moved from a period of gross an excessive speculation, elations,
Speaker 1: elation complacency on the part of most market participants, and
Speaker 1: the expectation of only positive outcomes, to a period in
Speaker 1: which speculation has been decimated, investors of the risk and
Speaker 1: the gross valuations have been reset lower. Fear in the
Speaker 1: VIX was rising, and the general consensus was mostly negative outcomes.
Speaker 1: In fact, and this is really important, the first half
Speaker 1: disastrous market to decline. What about a big change in sentiment.
Speaker 1: Remember the term nattering nabobs of metivism. By the way
Speaker 1: Q Bramo on this, that was the WILLIAMS. Sapphire's term
Speaker 1: for a Spireau agnew speech. But that but the nave
Speaker 1: obs of negatism populated the investment seem uh and reminding
Speaker 1: me of Helene miss great quote there is nothing like
Speaker 1: price to change sentiment um. I think it's very interesting
Speaker 1: if people talk about positioning um, which is a non
Speaker 1: fundamental analysis of the market. Some say it's non vigorous,
Speaker 1: but to some degree this has been a positive A
Speaker 1: position driven rally tradition. Position usually doesn't fit in my
Speaker 1: investment view, but it doesn't extremes. And let me very
Speaker 1: briefly explain the market volume is qua totative and passive trading.
Speaker 1: These products and strategies worship at the altar of price momentum.
Speaker 1: They know nothing about price everything nothing about value, everything
Speaker 1: about price. The other of market volume is active trading,
Speaker 1: mostly hedge funds. They're the marginal buyer. So when price
Speaker 1: momentum shifts to the upside, as it recently has, the
Speaker 1: quant strategies following by that other twenty percent hedge funds
Speaker 1: have been a defensively positioned Remember the b of a
Speaker 1: bull bear indicative felt to zero and they're all off sides,
Speaker 1: um and uh so they come in. And what we've
Speaker 1: seen is that we witnessed the dual impact of both
Speaker 1: passive and active players buying. Over the last several weeks,
Speaker 1: I believe we've set the loads of the year. That said,
Speaker 1: we've traveled long distance in a very short period of time.
Speaker 1: I sent you a chart, um in which this bear
Speaker 1: market rally was plus nine percent compare to the pre
Speaker 1: Is that is that is that? Is that what you
Speaker 1: call it, Doug? A bear market rally here? I well,
Speaker 1: that that's what people are calling it. What are you
Speaker 1: playing at that? Um more pronounced? You know, you know,
Speaker 1: let me do a baseball analog. Okay. The market in
Speaker 1: the first half of two was like my cousin Sandy
Speaker 1: Kofax when he graduated from Cincinnati and joined the Dodgers.
Speaker 1: Both that Sandy and the markets were a mess. The
Speaker 1: SMP fell by over Nasdack. Sandy's first two years were
Speaker 1: as horrible as this year's first half. In the markets,
Speaker 1: he was you guys don't remember, but he was so wild.
Speaker 1: He averaged a walk and a half every inning he pitched.
Speaker 1: In nineteen fifty five and ninety fifty six, he only
Speaker 1: pitched about fifty innings each year, and then things changed.
Speaker 1: He got his mojo, He's got his rhythm, he got
Speaker 1: his control in nineteen fifty nine. He went on from
Speaker 1: nineteen sixty one to sixty six, having arguably the greatest
Speaker 1: six years ever for a pitcher, finishing his career with
Speaker 1: three of the less four years. So so the market
Speaker 1: in the last has been more like Sandy than say
Speaker 1: Troy Pitchers Byron Guardia, who was worth What do you
Speaker 1: say this weekend when you're having your eighty dollar brunch
Speaker 1: down in Florida? What do you say to someone the
Speaker 1: summertime summer bunch? Excuse me, Doug, What do you say
Speaker 1: to someone who says I'm comfortable in cash? I say
Speaker 1: to them that, uh, that there are substantive and underappreciated buffers.
Speaker 1: They're going to serve as ballast to the U. S
Speaker 1: economy and are likely to lead to only a mild
Speaker 1: and brief recession and a less tragic impact on US
Speaker 1: corporate profits than the consensus increase in the expects. Things
Speaker 1: like the absence and large part of the sort of
Speaker 1: leverage positions and segments of the economy that have characterized
Speaker 1: previous deep economic cycles. Unlike fifteen years ago and in
Speaker 1: other previous economic downturns, our banking system is far less
Speaker 1: leverage and has sizable cushions of liquidity and capital. No
Speaker 1: one talks about. Everyone talks about the problems, the woes
Speaker 1: facing the housing market, but no one talks about the
Speaker 1: sizeable unrealized embedded gains in the nation's housing stock and
Speaker 1: also the large unrealized gains in the U S stock market.
Speaker 1: And here's an interesting stature. The household liabilities to household
Speaker 1: net worth is at the lowest level in fifty two years,
Speaker 1: and no one's talking about that. I will look that
Speaker 1: up and research that, Doug cast do quickly ten seconds.
Speaker 1: Amazon for long term, you've published that. What do you
Speaker 1: got now? Um, I wouldn't buy Amazon here. Amazon bases
Speaker 1: a number of headwinds going forward. I want to own
Speaker 1: it long term. Douglas Cass, thank you so much, greatly
Speaker 1: appreciate my T shirt. Yeah, I hate affect afterthought size
Speaker 1: she will love You're gonna that. This is the Bloomberg
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Speaker 1: Tom Keene, and this is Bloomberg