WEBVTT - Emerging Market FX Reserves Are Declining, Sassower Says 0:00:00.080 --> 0:00:02.040 P and L is brought to you by proper Cloth, 0:00:02.120 --> 0:00:05.120 a leader in men's custom shirts with proprietary smart sized 0:00:05.120 --> 0:00:08.720 technology and top rated customer service. Ordering a custom shirt 0:00:08.760 --> 0:00:11.680 has never been easier. Visit proper cloth dot com to 0:00:11.760 --> 0:00:19.920 order your first custom shirt today. Welcome to the Bloomberg 0:00:20.000 --> 0:00:22.599 P and L Podcast. I'm Pim Fox. Along with my 0:00:22.640 --> 0:00:25.759 co host Lisa Abramowitz. Each day we bring you the 0:00:25.800 --> 0:00:29.360 most important, noteworthy, and useful interviews for you and your money, 0:00:29.360 --> 0:00:32.360 whether at the grocery store or the trading floor. Find 0:00:32.400 --> 0:00:35.800 the Bloomberg P and L Podcast on iTunes, SoundCloud and 0:00:36.080 --> 0:00:44.680 at Bloomberg dot com. For almost a quarter of a century, 0:00:44.720 --> 0:00:49.320 developing economies built up their foreign currency reserves trying to 0:00:49.479 --> 0:00:54.760 stave off another type of financial crisis, potential dramatic decline 0:00:54.840 --> 0:00:59.800 in their economic trajectories. But now it seems like that 0:01:00.080 --> 0:01:02.280 trend is changing. I want to bring in Damian Sass, 0:01:02.280 --> 0:01:05.679 our fixed income strategist here at a Bloomberg Intelligence. He 0:01:05.760 --> 0:01:09.040 joins us in our eleven three oh studio. Damien, you 0:01:09.080 --> 0:01:11.160 wrote this report. I thought it was fascinating. Can you 0:01:11.200 --> 0:01:15.560 explain why we've seen such a decline in foreign currency 0:01:15.600 --> 0:01:18.680 reserves in certain economies and just how big some of 0:01:18.720 --> 0:01:21.360 the declines have been. Yeah, sure, well, thank you Lisa, 0:01:21.400 --> 0:01:24.800 thank you pim Um. Well, look um, foreign currency reserves 0:01:24.800 --> 0:01:26.480 are really used for three things, right. They used to 0:01:26.760 --> 0:01:30.440 maintain a currency peg for fixed and or managed um 0:01:30.600 --> 0:01:33.800 the currency regimes such as for example, China, which has 0:01:33.800 --> 0:01:37.880 in fact exhibited the greatest decline in reserves um over 0:01:37.920 --> 0:01:39.600 the past two and a half years. I mean from 0:01:39.640 --> 0:01:44.440 I believe really from four trillion to just under three 0:01:44.480 --> 0:01:46.760 trillion U S dollars now, so that's a pretty big, 0:01:47.120 --> 0:01:49.840 pretty sharp decline. But they are also used to support 0:01:49.880 --> 0:01:52.720 external trade. I mean, I think the big statistic that 0:01:52.760 --> 0:01:56.240 central banks like to look at is your currency reserves. 0:01:56.240 --> 0:01:58.720 Your foreign currency reserves should be the equivalent of three 0:01:58.720 --> 0:02:02.280 months of import. But most importantly, they're used as a 0:02:02.360 --> 0:02:06.320 kind of a precautionary savings buffer during a balance of 0:02:06.360 --> 0:02:08.720 payments crisis such as you know in the late nineties 0:02:08.760 --> 0:02:10.840 we saw that in Asia. So those are really the 0:02:10.880 --> 0:02:13.359 three primary uses. And you know, the way we look 0:02:13.360 --> 0:02:16.840 at here at b I is declining currency reserves and 0:02:16.919 --> 0:02:20.040 e M just exposes them to a whole slew of 0:02:20.160 --> 0:02:23.079 new risk. And I think the emphasis now must kind 0:02:23.080 --> 0:02:27.560 of shift from long term growth and um current account health. 0:02:27.919 --> 0:02:32.320 Two more that coverage ratios and short term liquidity metrics 0:02:32.320 --> 0:02:35.440 such as reserve ratios and short term short term external debt. 0:02:35.440 --> 0:02:37.440 And that's what we focus on here in this report. 0:02:37.960 --> 0:02:40.080 Can you tell us the countries that are involved in 0:02:40.120 --> 0:02:42.600 this and perhaps just give a detail about each one. 0:02:43.200 --> 0:02:46.160 So from I mean from the from the good side, 0:02:46.480 --> 0:02:49.640 you have countries such as Peru and the Philippines which 0:02:49.720 --> 0:02:52.919 are which which track rather well. I mean their reserves 0:02:52.960 --> 0:02:55.320 are I mean, in the case of Peru nearly three 0:02:55.320 --> 0:02:58.800 times the i m f S reserve adequacy ratio. Seeing 0:02:58.880 --> 0:03:00.799 with the Philippines, I think it's and a half times, 0:03:00.800 --> 0:03:03.680 so they get both gold stars Peru and the Philippines, 0:03:04.200 --> 0:03:08.320 that's correct, and add demerits um one. Malaysia is probably 0:03:08.400 --> 0:03:10.880 first among sort of the major e m s. You've 0:03:10.880 --> 0:03:13.960 also got South Africa, Turkey, and Kazakhstan. I mean, those 0:03:14.000 --> 0:03:15.760 four really kind of stand out to us as being 0:03:15.760 --> 0:03:20.600 below the IMPS reserve adequacy ratios, and China is right 0:03:20.600 --> 0:03:23.520 at the cusp. Yeah, so hold on a second. You 0:03:23.560 --> 0:03:25.640 also have a statistic in here that one fifth of 0:03:25.720 --> 0:03:28.639 emerging market economies at least those on record, have foreign 0:03:28.720 --> 0:03:33.000 currency reserves below the i m F reserve adequacy threshold. 0:03:33.040 --> 0:03:36.360 Are we heading toward another emerging markets crisis here? So 0:03:36.480 --> 0:03:38.480 what we're looking at here is the i m F 0:03:38.600 --> 0:03:41.680 defines the emerging markets and however way they do it. 0:03:41.720 --> 0:03:45.120 But you know, of what they define as an emerging 0:03:45.160 --> 0:03:48.520 market are below that threshold. And these are countries, not 0:03:48.600 --> 0:03:52.120 only the majors. They can be Jamaica, Armenia, Pakistan, Tunisia, 0:03:52.480 --> 0:03:54.560 the Dominican Republic. I mean, so there are quite a 0:03:54.560 --> 0:03:57.440 few of them. Many of those countries, however, do issue 0:03:57.480 --> 0:03:59.720 quite a bit of external US dollar debt, and a 0:03:59.720 --> 0:04:02.360 lot that that is in some of the broad e 0:04:02.560 --> 0:04:05.760 M indices, such as the Bloomberg Barkley's e M Hard 0:04:05.760 --> 0:04:08.240 Currency Aggregate Index. Can we just head back to China 0:04:08.280 --> 0:04:09.680 for a second. You said that they were kind of 0:04:09.680 --> 0:04:12.760 on the cusp of really being in a risky zone 0:04:12.800 --> 0:04:18.040 with respect to their capital adequacy requirements. What does this mean? 0:04:18.080 --> 0:04:21.560 I mean, does this basically mean that they can't continue 0:04:21.680 --> 0:04:24.200 to support their currency the way that they have been. 0:04:24.240 --> 0:04:26.360 Doesn't mean that they're going to have to hold back 0:04:26.440 --> 0:04:28.880 on pumping billions of dollars into their financial system and 0:04:28.960 --> 0:04:31.800 what's the what's the consequence? Well, I mean, in China's case, right, 0:04:31.839 --> 0:04:34.960 they are using their currency to help They're using their 0:04:34.960 --> 0:04:37.320 currency reserves to help support their peg to the dollar. 0:04:37.560 --> 0:04:40.440 And um, you know this doesn't in any way, shape 0:04:40.480 --> 0:04:41.840 or form mean that they're not going to be able 0:04:41.880 --> 0:04:43.520 to continue to do that. I mean, they still have 0:04:43.600 --> 0:04:46.880 by far and away the largest reserves globally. Um. You know, 0:04:46.920 --> 0:04:49.080 the way the I m F calculates reserve adequacy is 0:04:49.120 --> 0:04:52.160 they take total exports, broad money supply, short term debt, 0:04:52.360 --> 0:04:54.720 and other liabilities which are really kind of lines with 0:04:54.760 --> 0:04:57.239 the I m F, etcetera. And they and they create 0:04:57.240 --> 0:05:00.560 this threshold. And look that threshold. It is sort of 0:05:00.560 --> 0:05:03.400 a soft threshold that's developed by the I m F 0:05:03.520 --> 0:05:07.000 to sort of guide expectations. But you know, China's a 0:05:07.160 --> 0:05:10.880 huge economy. I mean, you know, it's it's it's not 0:05:10.920 --> 0:05:12.920 going under anytime soon, if you if that's where you're 0:05:12.920 --> 0:05:14.960 headed here, I'm just simply pointing out the fact that 0:05:15.000 --> 0:05:17.000 we have to begin looking at some of these emerging 0:05:17.040 --> 0:05:19.800 market nations through a bit of a different lens. Um. 0:05:19.880 --> 0:05:22.760 I can't decide whether to ask you whether the actual 0:05:22.800 --> 0:05:25.320 currency holdings are a big deal, like you know, whether 0:05:25.360 --> 0:05:28.360 they're holding dollars or euros. But you're telling me this 0:05:28.440 --> 0:05:32.000 is basically something that is endemic to each individual country, 0:05:32.000 --> 0:05:34.679 so they have their own issues. That's why this is happening. 0:05:34.680 --> 0:05:36.680 In that case, I want to know what can we 0:05:36.720 --> 0:05:41.000 buy in South Africa or in Malaysia or in Turkey 0:05:42.040 --> 0:05:44.440 or get ready to buy because you know, if smart 0:05:44.480 --> 0:05:46.480 money goes where no one else wants to go. And 0:05:46.640 --> 0:05:47.840 I know, I mean the last time we were here, 0:05:47.839 --> 0:05:50.960 Pin we talked about Turkey maybe being you know, fundamentally 0:05:51.080 --> 0:05:53.520 undervalued on a number of different metrics. I mean, you know, 0:05:53.560 --> 0:05:56.640 whatever the political turmoil is or whatever the you know, 0:05:56.680 --> 0:06:01.960 news headlines are, it is a dynamic, industrialising economy, um 0:06:02.000 --> 0:06:06.039 that builds you know, automobiles, trucks and has an incredible 0:06:06.480 --> 0:06:09.359 retail sector. Sure, sure, I mean that's exactly right. I 0:06:09.360 --> 0:06:12.720 mean Turkey, we know their financial sector issues. I mean 0:06:12.920 --> 0:06:15.560 it's one of the most one of the largest sectors 0:06:15.640 --> 0:06:18.000 in emerging markets in terms of its issuance of US 0:06:18.080 --> 0:06:20.320 dollar debt um And there are a number of banks 0:06:20.360 --> 0:06:22.200 there that we can highlight for you that have highlighted 0:06:22.200 --> 0:06:24.479 another you know kind of um, give me, give me 0:06:24.520 --> 0:06:27.000 one give me one of Turkish Bank. Well, you've got guarantee, 0:06:27.000 --> 0:06:29.920 you've got a punk, you've got I mean, you've got 0:06:30.000 --> 0:06:32.240 quite a few there that are you know, beginning to 0:06:32.440 --> 0:06:35.240 you know, perhaps look a little bit interesting on that metric. 0:06:35.360 --> 0:06:37.239 But you know, I think what we're really talking about 0:06:37.279 --> 0:06:39.799 here is this is really supposed to be a sovereign 0:06:39.880 --> 0:06:42.800 risk sort of metric. So looking at the sovereign risk 0:06:42.839 --> 0:06:46.400 the actual you know, debt from Turkey itself or from 0:06:46.520 --> 0:06:48.839 Kazakhstan itself, from Malaysia, I mean, that's kind of what 0:06:48.880 --> 0:06:51.480 you're looking at now. In the case of Malaysia, you're 0:06:51.520 --> 0:06:53.279 looking at the cook bonds, which is a whole different 0:06:53.279 --> 0:06:56.200 animal um which I'm not about to get into right now. Um, 0:06:56.200 --> 0:06:58.479 in South Africa, they you know, the country does issue 0:06:58.480 --> 0:07:00.520 a lot of um, you know, sof in debt in 0:07:00.640 --> 0:07:04.640 U S. Dollar and Euro as well. Um bast you've 0:07:04.640 --> 0:07:06.640 got s com which are what I like to call 0:07:06.760 --> 0:07:10.040 quasi sovereign type institutions. We gotta leave it there. Damien 0:07:10.160 --> 0:07:14.680 sas our great great stuff fixed income Strategiest Bloomberg Intelligence 0:07:14.960 --> 0:07:17.680 and just go to b I go on the Bloomberg 0:07:17.720 --> 0:07:20.080 to check out all of Damien's work you gotta you 0:07:20.080 --> 0:07:22.520 gotta read this to be up to date. This is 0:07:22.520 --> 0:07:40.520 Bloomberg Another day, another high for US stacks. Can this last? 0:07:40.600 --> 0:07:43.640 We're gonna take a deep dive into both the technicals 0:07:43.640 --> 0:07:47.520 with Jeff Weiss, chief technical analyst at clear View Trading Advisors, 0:07:47.560 --> 0:07:51.480 as well as the fundamentals with Yelena Sliva, senior u 0:07:51.560 --> 0:07:54.520 S economist here at Bloomberg Intelligence. So, Jeff, I want 0:07:54.520 --> 0:07:57.120 to start with you, Hi, thank you for so much 0:07:57.160 --> 0:07:59.880 for joining us. So given that some of the tech 0:08:00.120 --> 0:08:02.280 indicators that you look at, first of all, what are 0:08:02.360 --> 0:08:05.920 the most reliable ones and what are they saying about 0:08:05.920 --> 0:08:09.080 the current run up in stocks? Well as reliable as 0:08:09.120 --> 0:08:12.000 an indicator is lee, So I'm always looking at the 0:08:12.040 --> 0:08:15.480 downside of what could go wrong, because in the stock market, right, 0:08:15.520 --> 0:08:17.280 you could be right nine out of ten times, and 0:08:17.320 --> 0:08:19.560 on the tenth time if if you don't know what 0:08:19.600 --> 0:08:22.040 to do, it could obliterate the other nine times you're right. 0:08:22.480 --> 0:08:24.600 I still think the bulls have it. I still think 0:08:24.640 --> 0:08:27.880 we're in a in a primary bull trend. Uh. In fact, 0:08:28.320 --> 0:08:30.560 we actually one of your charts over there that I 0:08:30.600 --> 0:08:34.760 gave you shows that for three Friday closes in a row, 0:08:35.200 --> 0:08:39.720 the broad based Dow Jones Total US stock Market Index 0:08:39.960 --> 0:08:44.880 has closed above a fairly significant trend line dating back 0:08:45.160 --> 0:08:48.560 quite a ways. In addition, that's been confirmed by the 0:08:48.840 --> 0:08:53.960 S and P as well as other indicators. So to me, 0:08:54.559 --> 0:08:57.720 not even going into the new multi year highs and 0:08:57.760 --> 0:09:00.440 the weekly Advanced to Climb liner, the big board and 0:09:00.480 --> 0:09:03.679 the new highs and the daily advanced declientline, it is 0:09:03.920 --> 0:09:07.480 still to me a bull until proven otherwise. And that's 0:09:07.520 --> 0:09:09.599 not gonna be CAUs of some news. It's going to 0:09:09.679 --> 0:09:13.920 be because of the action of the market itself. Okay, 0:09:13.920 --> 0:09:16.360 So then let's take a look at the fundamentals, Elena. 0:09:16.600 --> 0:09:21.640 Are we seeing economic data to support this bullish outlook 0:09:21.920 --> 0:09:25.000 that is sort of being shown by the technicals. What 0:09:25.160 --> 0:09:28.400 we see in the economic data, and we are looking 0:09:28.440 --> 0:09:32.520 at different indicators, We only see a pickup in survey 0:09:32.600 --> 0:09:36.120 indicators so far. So if you look at a Bloomberg 0:09:36.160 --> 0:09:40.400 function e c SU, for example, you will see that 0:09:41.280 --> 0:09:44.880 the biggest upward surprises are coming from the survey and 0:09:44.960 --> 0:09:49.240 business cycle indicators. Everything else is pretty much flat. So 0:09:49.720 --> 0:09:53.160 this week we're gonna see a bunch of different indicators 0:09:53.200 --> 0:09:58.240 from retail sales to industrial production, and they're all like 0:09:58.400 --> 0:10:03.120 expected to be oh okay, but not nothing like a 0:10:03.240 --> 0:10:07.559 big upward surprise is expected. So uh to me, it 0:10:07.600 --> 0:10:10.559 looks like we we are okay, but it's still a 0:10:10.600 --> 0:10:16.679 sluggish recovery. It's still uh sluggish growth. Jeff wise, p 0:10:16.960 --> 0:10:20.319 h excuse me. I wanted to also just mention and 0:10:20.360 --> 0:10:23.719 congratulate you on your new book. It's called Relationship Investing 0:10:24.200 --> 0:10:28.840 Stock Market Therapy for your money, and boy does that 0:10:28.920 --> 0:10:32.000 you know if anything needs therapy now, it's it's everybody's money. 0:10:32.000 --> 0:10:34.000 And you have been noted as someone that is able 0:10:34.040 --> 0:10:38.360 to combine both the art and the science of market analysis. 0:10:39.000 --> 0:10:41.719 And having said that, I want to just have you 0:10:41.760 --> 0:10:43.880 speak a little bit about one of the things you 0:10:44.000 --> 0:10:47.000 described that people ought to spend the lion's share of 0:10:47.080 --> 0:10:51.359 their time on the analytical portion of the investment process 0:10:51.960 --> 0:10:56.280 and not on trading fees. We keep hearing all about fees. 0:10:56.440 --> 0:11:00.120 You know, don't spend money on fees. Tell us why 0:11:00.160 --> 0:11:04.240 this is something that you've learned well? To me? Um, 0:11:04.280 --> 0:11:06.400 you know I I I always say that's kind of 0:11:06.400 --> 0:11:09.600 like having a bad dinner but bragging about the mint 0:11:09.720 --> 0:11:12.400 at the at the end of the meal. Pim uh 0:11:12.480 --> 0:11:16.040 to me again, you want to obviously get you know, 0:11:16.240 --> 0:11:20.560 as competent advice as possible, consistent with very reasonable fees. 0:11:20.840 --> 0:11:24.360 But to me, it's all about where do you buy, 0:11:24.520 --> 0:11:28.520 where do you sell, getting the primary trend right, riding 0:11:28.559 --> 0:11:32.320 it for all it's worth, and then having someone or 0:11:32.400 --> 0:11:36.000 some approach that will give you a discipline to stop 0:11:36.040 --> 0:11:40.040 a cut from becoming a hemorrhage from becoming a financial amputation. 0:11:40.120 --> 0:11:43.199 Because I lived through nineteen seventy three nineteen seventy four, 0:11:43.360 --> 0:11:46.880 and I've seen the horrific toll something like that couldn't inflict, 0:11:46.880 --> 0:11:49.720 and that's one of the motivating reasons I wrote this 0:11:49.840 --> 0:11:54.400 book to try and help people avoid some of those mistakes. Well, Jeff, 0:11:54.679 --> 0:11:58.120 so pare what Elena was talking about with your bullish sentiment. 0:11:58.200 --> 0:12:00.840 I'm struggling to sort of understand end the sort of 0:12:00.880 --> 0:12:03.760 feeling that the stocks to just keep on hitting new 0:12:03.800 --> 0:12:06.520 highs day after day after day, when, as Elena said, 0:12:06.800 --> 0:12:11.640 we're not really seeing the justification for that in fundamental data. Yes, 0:12:11.679 --> 0:12:14.680 that could change, but so far we're not seeing it well, Lisa. 0:12:14.960 --> 0:12:19.959 In technical jargon, if you wait very often, not always, 0:12:20.000 --> 0:12:24.679 nothing's always, but if you wait for the underlying background 0:12:24.840 --> 0:12:29.360 or fundamentals to justify why a stock market has moved. 0:12:29.960 --> 0:12:33.760 I don't know what someone's gonna be paying for that privilege. 0:12:34.000 --> 0:12:38.720 Is it an SMP fifty, Is it an SMP twenty, 0:12:38.800 --> 0:12:41.560 I don't know. I can tell you this though. Um, 0:12:41.720 --> 0:12:44.760 in my opinion, the twenty two thirty to twenty two 0:12:44.840 --> 0:12:48.080 thirty five area is a daily closing area I'd watch, 0:12:48.240 --> 0:12:51.360 and that's four percent below where we are now. That 0:12:51.520 --> 0:12:53.720 to me is the area to watch, all right. So basically, Jeff, 0:12:53.760 --> 0:12:56.800 you're saying that the economic data is a lagging indicator. Elena, 0:12:57.080 --> 0:12:59.880 is there any economic data point that you look at 0:13:00.080 --> 0:13:04.040 you do not think it's a lacking indicator? Well, I 0:13:04.080 --> 0:13:07.680 think what we should look and that is probably gonna 0:13:07.720 --> 0:13:11.679 be even more important than economic data, is what cha 0:13:11.920 --> 0:13:15.240 Yellen is going to tell us tomorrow, And that could 0:13:15.320 --> 0:13:18.640 be a little bit forward looking. Right, So we think 0:13:18.720 --> 0:13:22.880 that she will continue to be on a davish side. Uh, 0:13:22.960 --> 0:13:28.280 She's gonna be herself, no, no hawky ish science from her. Uh. 0:13:28.320 --> 0:13:33.480 Probably the testimony itself will not contain any clues as 0:13:33.800 --> 0:13:36.600 about the timing of the next rade hike, but she 0:13:36.679 --> 0:13:39.960 will probably be asked about it. And uh, I don't 0:13:40.000 --> 0:13:43.720 think she's gonna rule out March. She's probably gonna say, oh, 0:13:43.840 --> 0:13:46.440 it's a life meeting. Every meeting is a life meeting. 0:13:46.960 --> 0:13:51.240 But uh, we don't think that that really means that 0:13:51.280 --> 0:13:55.760 they will hike in March. Uh. Still at Bloomberg Intelligence Economics, 0:13:55.840 --> 0:13:59.800 we think that the tightening will be gradual. Only two 0:14:00.000 --> 0:14:02.400 eight tikes this year June and at the end of 0:14:02.440 --> 0:14:06.000 the year. So uh, the outlook for the fit is 0:14:06.040 --> 0:14:09.280 still kind of the same gradual tight ending this year 0:14:09.679 --> 0:14:13.280 and no no big surprises. Quick one to you, Jeff 0:14:13.320 --> 0:14:15.840 Wats Imagine that you've got the scenario that you sat 0:14:15.880 --> 0:14:18.720 out all of this move higher in stocks. Now you're 0:14:18.760 --> 0:14:21.040 wondering was that a mistake? Should I admit it to 0:14:21.120 --> 0:14:25.000 myself and get in or do I just you know, 0:14:25.240 --> 0:14:27.920 keep my counsel. If it were my money and I 0:14:28.200 --> 0:14:32.120 basically write that book from from me, what would I 0:14:32.240 --> 0:14:36.080 do if your money, the reader's money, where my money? Yes, 0:14:36.160 --> 0:14:41.400 I think it's a bull trend um at the mistake Otherwise, Uh, yeah, 0:14:41.480 --> 0:14:43.640 a mistake or you know, to me, a mistake is 0:14:43.680 --> 0:14:45.560 not selling a stock on the way down when you 0:14:45.560 --> 0:14:47.640 should and selling it the market understand to get the 0:14:47.680 --> 0:14:50.360 extra ten cents on the upside and risking twenty five 0:14:50.400 --> 0:14:53.800 hours on the downside. But yes, I think we are 0:14:53.840 --> 0:14:56.400 in a bull trend. I think, you know, miss Yellen 0:14:56.600 --> 0:14:58.680 is welcome to come over my home, but there will 0:14:58.720 --> 0:15:01.320 be no talk about, you know, economic statistics. There. We 0:15:01.360 --> 0:15:04.280 will be looking at we will be looking at stock charts. 0:15:04.320 --> 0:15:06.320 And again, I was in economics major. It's just that 0:15:06.640 --> 0:15:09.640 I don't have an ability to look at reams as 0:15:09.680 --> 0:15:13.080 I note in the Book of Fundamental Data and Economic Analysis, 0:15:13.240 --> 0:15:15.520 and have any idea what that portends for me in 0:15:15.640 --> 0:15:17.720 terms of the stock market. So to me, if I 0:15:17.760 --> 0:15:21.480 want to look at a stock, I look at the stock. 0:15:22.000 --> 0:15:24.360 To me is the purest form of analysis. And thanks 0:15:24.400 --> 0:15:27.720 for being with us and sharing it. Thank you, Chief 0:15:27.800 --> 0:15:30.960 technical Analyst, clear View Trading Advisors. He's the author of 0:15:31.000 --> 0:15:35.160 the new book Relationship Investing Our Thanks also to Elena Strieteva, 0:15:35.480 --> 0:15:48.080 senior US economist for Bloomberg Intelligence. This is Bloomberg P 0:15:48.240 --> 0:15:50.160 and L is brought to you by proper Cloth, a 0:15:50.280 --> 0:15:53.240 leader in men's custom shirts. At proper cloth dot com, 0:15:53.360 --> 0:15:56.720 ordering custom shirts has never been easier. Create your custom 0:15:56.760 --> 0:15:59.920 shirt size by answering ten easy questions select from a 0:16:00.000 --> 0:16:03.680 were five fabrics to suit your personal taste. Shirts start 0:16:03.720 --> 0:16:06.160 from eighty five dollars and are delivered in just two 0:16:06.160 --> 0:16:10.400 weeks with Proper Cloths perfect fit Guarantee. Remakes are completely 0:16:10.480 --> 0:16:13.560 free and expert staff are standing by to help. For 0:16:13.800 --> 0:16:17.440 premium quality, perfect fitting shirts, visit proper cloth dot com 0:16:17.840 --> 0:16:29.760 Custom shirts made Smarter. The musical artist Adele opened the 0:16:29.960 --> 0:16:34.360 fifty nine Annual Grammy Awards by singing the well her 0:16:34.400 --> 0:16:37.240 rendition of the hit song Hello, and she went home 0:16:37.400 --> 0:16:40.920 the big winner. And now Kim Fox is going to 0:16:40.960 --> 0:16:46.000 sing it for us and your dreams, uh perhaps our nightmare. Um, 0:16:46.040 --> 0:16:49.520 you know adult took home five awards, and also that 0:16:49.560 --> 0:16:53.600 she had that tribute to George Michael and yes, this 0:16:53.680 --> 0:16:55.840 is going somewhere. But you know, the other album that 0:16:56.240 --> 0:17:00.960 was really in competition was from Beyonce, and that was 0:17:01.040 --> 0:17:04.399 the Lemonade album. But you know there was one winner, 0:17:04.480 --> 0:17:06.639 no matter who wins, and that was a gentleman named 0:17:06.760 --> 0:17:10.760 Rob Stringer. And here to tell us who is Rob Stringer. 0:17:10.800 --> 0:17:14.840 We've got our own Lucas Shaw Bloomberg Entertainment reporter. Lucas, 0:17:14.920 --> 0:17:18.439 is that enough of us set up? Yeah? It is so. 0:17:18.600 --> 0:17:22.560 Rob Stringer is the head of Columbia Records, which is 0:17:22.680 --> 0:17:26.400 I believe the oldest functioning record label in the United States. 0:17:26.880 --> 0:17:29.920 It's been around since then the late nineteenth century. Of course, 0:17:30.000 --> 0:17:33.440 had a different name back then. UH. And in over 0:17:33.480 --> 0:17:35.920 the years, they've worked with David Bowie who won Big 0:17:36.000 --> 0:17:38.480 Last Night. They've worked with Bruce Springsteen, worked with Bob Dylan, 0:17:38.880 --> 0:17:42.040 and over the past ten or fifteen years, their biggest 0:17:42.119 --> 0:17:44.960 two acts you you would say, have been Adele and 0:17:44.960 --> 0:17:47.359 and Beyonce. They've actually worked with Beyonce since she was 0:17:47.400 --> 0:17:50.560 in the girl group Destiny's Child and and Rob Stringer. 0:17:50.600 --> 0:17:53.080 In April will go from being the head of Columbia 0:17:53.119 --> 0:17:55.040 Records to being the head of all of Sony Music, 0:17:55.080 --> 0:17:57.240 which is the second BIGS record label in the world. 0:17:57.480 --> 0:18:01.120 How common is this for one record label to have 0:18:01.400 --> 0:18:04.880 two of the most celebrated artists at the Grammy Awards. 0:18:05.840 --> 0:18:09.720 It is common for a record label group like Universal 0:18:09.840 --> 0:18:14.679 or Sony or Warner UH to really dominate those I forget. 0:18:14.720 --> 0:18:16.879 I think a couple of years ago, Universal had almost 0:18:16.920 --> 0:18:19.240 all of the major nominees, and that is the biggest 0:18:19.280 --> 0:18:22.040 record label group. But to have one label within the 0:18:22.080 --> 0:18:25.960 group is less common. Usually you have you know, it's 0:18:25.960 --> 0:18:29.320 split amongst three or four or five in anyone category. 0:18:29.560 --> 0:18:33.560 So Rob Stringer obviously made some really good selections with 0:18:33.600 --> 0:18:37.600 the signing of Adele and Beyonce. Does this translate into 0:18:37.640 --> 0:18:41.200 green into profits, into saving the music industry that's being 0:18:41.280 --> 0:18:46.080 eaten away by online streaming music services? More than anything, 0:18:46.119 --> 0:18:49.560 I think it provides stability. So if you are trying 0:18:49.600 --> 0:18:51.600 to figure out where your next hit is going to 0:18:51.680 --> 0:18:54.280 come from or where the sales are going to come from, Uh, 0:18:54.640 --> 0:18:57.760 you can rest easy knowing that you're relying on Beyonce 0:18:57.920 --> 0:19:01.560 and Adele because every time those acts release an album, 0:19:01.600 --> 0:19:04.320 it's gonna sell. You know. Adele took the unusual step 0:19:04.880 --> 0:19:07.879 with with her latest release twenty five, of not making 0:19:07.880 --> 0:19:11.159 it available on any streaming services the first couple of weeks, 0:19:11.160 --> 0:19:12.760 and she a loan hold. She went on to set 0:19:12.800 --> 0:19:15.520 a record. Now, the money for first week sales, now, 0:19:15.520 --> 0:19:20.159 the money from streaming services is is rising. But but 0:19:20.240 --> 0:19:22.919 what's different is that you tend to have a longer 0:19:23.000 --> 0:19:25.360 tail with it. Because people will stream your album over 0:19:25.400 --> 0:19:27.120 a long period of time, you can kind of keep 0:19:27.119 --> 0:19:30.879 making money longer after it's release than you might have. Otherwise, 0:19:31.640 --> 0:19:33.280 you don't get as much to that kind of first 0:19:33.280 --> 0:19:35.040 week pop. You get a lot of streams, but even 0:19:35.080 --> 0:19:37.200 if you get, you know, a hundred million streams in 0:19:37.240 --> 0:19:39.320 a week, you're not going to make a ton of money. 0:19:39.400 --> 0:19:42.159 So if you have these artists like Adele or Beyonce 0:19:42.320 --> 0:19:45.560 who can balance that interest on streaming with still being 0:19:45.600 --> 0:19:49.080 able to move full albums, you're in a pretty good position. 0:19:49.520 --> 0:19:55.760 Hey hey, Lucas, the record companies missed another digital revolution. 0:19:55.840 --> 0:19:58.000 I mean they missed the online streaming. I mean that's 0:19:58.000 --> 0:20:02.480 why we talk about Spotify, Pandora, Amazon, Apple and so on. 0:20:03.000 --> 0:20:06.680 They missed that. But I understand that the big thing 0:20:06.720 --> 0:20:12.000 on social media last night for the Grammys was Beyonce, 0:20:13.119 --> 0:20:17.200 and it was her performance and her costume and so 0:20:17.240 --> 0:20:20.920 on that lit up the social media world. Does the 0:20:20.960 --> 0:20:23.320 record record companies figure out how to make money out 0:20:23.320 --> 0:20:28.280 of that, because Facebook and Snapchat certainly think they do. Uh. 0:20:28.359 --> 0:20:31.240 The only way that the record companies would make money 0:20:31.240 --> 0:20:36.520 from that would be more people streaming or buying her album, 0:20:36.600 --> 0:20:39.440 which will invariably happen because you just get so much 0:20:39.440 --> 0:20:41.119 attention from it. People are gonna wake up today and 0:20:41.119 --> 0:20:43.800 they're gonna want to listen to Lemonade. The challenge with 0:20:43.840 --> 0:20:46.679 that is that Beyonce has limited where her album is 0:20:46.720 --> 0:20:49.600 even more than Adele. So though Adele is now available 0:20:49.600 --> 0:20:52.360 on Spotify and Apple Music, in these other places Beyonce 0:20:52.440 --> 0:20:54.480 you either buy it or you you stream it untitled, 0:20:54.480 --> 0:20:56.960 which is her husband jay z service. You know. But 0:20:57.080 --> 0:20:59.840 you raise a good point, which is that they're all 0:21:00.080 --> 0:21:03.320 these ways, all these touch points for for music and 0:21:03.680 --> 0:21:07.119 really for for more broadly for entertainment, whether it's on 0:21:07.119 --> 0:21:09.600 Facebook or Snapchat or Twitter or YouTube, and the music 0:21:09.640 --> 0:21:13.320 industry has really struggled with how it can kind of 0:21:13.359 --> 0:21:17.080 effectively monetize that because unlike with a movie, where you 0:21:17.119 --> 0:21:19.720 can't really replicate the movie the experience of a movie 0:21:20.400 --> 0:21:22.879 in like a you know, a brief Facebook post, you 0:21:22.920 --> 0:21:25.640 can hear a song in all of these different avenues. 0:21:25.640 --> 0:21:28.440 And so they've really tried to extract more money from 0:21:28.480 --> 0:21:30.840 them and are in the process right now of of 0:21:31.119 --> 0:21:33.479 negotiating with Facebook to try and figure out how they 0:21:33.520 --> 0:21:36.440 make money off of Facebook. But it's it's a tough 0:21:36.440 --> 0:21:39.040 balance because these tech companies feel like as long as 0:21:39.119 --> 0:21:42.480 they're not just completely ripping a full song, uh, it's 0:21:42.520 --> 0:21:46.080 it's nice exposure for these artists to monetize their works 0:21:46.119 --> 0:21:49.880 in other ways, Lucas, how irrelevant are the Grammys at 0:21:49.880 --> 0:21:52.320 this point to the major labels just because it's not 0:21:52.400 --> 0:21:56.720 giving them any more money necessarily, not directly, right, Um, 0:21:56.760 --> 0:21:59.959 you know, it's just an opportunity to to fump your 0:22:00.080 --> 0:22:03.200 chest and say you're you're the best for a little while. 0:22:03.240 --> 0:22:04.920 I mean, I think it's not who doesn't want a 0:22:04.960 --> 0:22:08.440 reason to do that? Right? Yeah? Uh? You know they 0:22:08.480 --> 0:22:12.000 took the sixteen share right, a sixteen share on in 0:22:12.040 --> 0:22:14.280 the overnights for Nielsen. So that was like the same 0:22:14.320 --> 0:22:17.600 as it was last year, Yeah, which was which was 0:22:17.680 --> 0:22:24.720 bound down. Yeah, right, Like all awards shows, they mattered most, 0:22:25.400 --> 0:22:28.119 kind of they seem to matter most for that that 0:22:28.200 --> 0:22:30.840 baby boomer generation and a little bit after it. You know, 0:22:30.840 --> 0:22:34.720 they're really popular throughout the seventies, eighties, nineties. You have 0:22:34.800 --> 0:22:37.560