1 00:00:13,720 --> 00:00:16,720 Speaker 1: Hello, and welcome to What Goes Up, a Bloomberg Weekly 2 00:00:16,800 --> 00:00:20,280 Speaker 1: Markets podcast. I'm Sarah Ponza, a reporter on the Cross 3 00:00:20,320 --> 00:00:23,319 Speaker 1: Asset team, and I'm Mike Reagan, a senior editor on 4 00:00:23,360 --> 00:00:25,759 Speaker 1: the Markets team. This week on the show, the Federal 5 00:00:25,800 --> 00:00:29,400 Speaker 1: Reserve held their last meeting of the year, keeping policy unchanged, 6 00:00:29,680 --> 00:00:32,960 Speaker 1: and the ECB had their first with Christine Legard at 7 00:00:33,000 --> 00:00:35,839 Speaker 1: the Helm Plus. After one of the best years for 8 00:00:35,880 --> 00:00:38,760 Speaker 1: the bull market in stocks, what is there now to 9 00:00:38,840 --> 00:00:41,440 Speaker 1: look forward to? Well, one thing, sorry, you can look 10 00:00:41,479 --> 00:00:43,800 Speaker 1: forward to is the craziest thing I saw in markets 11 00:00:43,800 --> 00:00:46,519 Speaker 1: this week. Our tradition which we will end the show with, 12 00:00:47,040 --> 00:00:49,920 Speaker 1: of course, and a reminder if you see something crazy 13 00:00:50,120 --> 00:00:54,240 Speaker 1: in markets, uh, see something, say something? Uh specifically, call 14 00:00:54,360 --> 00:00:57,120 Speaker 1: our what goes Up hotline and leave us a voicemail. Sorry, 15 00:00:57,160 --> 00:00:59,680 Speaker 1: what's that number again? That number six or six three 16 00:00:59,760 --> 00:01:03,080 Speaker 1: two for three four nine zero. So, as Mike said, 17 00:01:03,120 --> 00:01:05,680 Speaker 1: if you see something, say something, Yeah, maybe we'll play 18 00:01:05,720 --> 00:01:08,959 Speaker 1: your voicemail on the show. But let's get right to 19 00:01:08,959 --> 00:01:12,559 Speaker 1: today's show. We've got a first time guest on the show. 20 00:01:12,760 --> 00:01:16,280 Speaker 1: His name is Mike Schumacher. He's the head of interest 21 00:01:16,400 --> 00:01:18,960 Speaker 1: rate Strategy at Wells Fargo, Mike, welcome to the show. 22 00:01:19,080 --> 00:01:21,640 Speaker 1: Thanks very much, great to be here. Great, great and 23 00:01:21,760 --> 00:01:25,800 Speaker 1: another guest back literally by popular demand. Um, if your 24 00:01:25,840 --> 00:01:27,840 Speaker 1: listeners out there, I don't know if you realize this, 25 00:01:27,920 --> 00:01:32,720 Speaker 1: you can request guests apparently, So this became a new 26 00:01:32,800 --> 00:01:37,479 Speaker 1: trend in our Twitter feed when we ask for crazy things. Well, 27 00:01:37,520 --> 00:01:41,000 Speaker 1: instead we have just gotten demands for our other guests. 28 00:01:41,000 --> 00:01:46,680 Speaker 1: So yes, yes, and so this one goes out to you, 29 00:01:46,760 --> 00:01:52,800 Speaker 1: Ellie Paname mon Underscore Singe on Twitter, who tweeted at 30 00:01:52,880 --> 00:01:57,040 Speaker 1: us we demand more, give the people what they want. Well, 31 00:01:57,080 --> 00:01:59,960 Speaker 1: we're given it to Ellie Paname. I'm a little susp 32 00:02:00,000 --> 00:02:03,440 Speaker 1: a'cious about this account. Chris. The profile pictures is a 33 00:02:03,440 --> 00:02:07,800 Speaker 1: picture Kevin McHale of the Boston Celtics wearing shorts that 34 00:02:07,920 --> 00:02:10,800 Speaker 1: I cannot describe on a family podcast due to that 35 00:02:10,880 --> 00:02:13,760 Speaker 1: eighties Arab basketball shorts. Chris being a Boston native, I'm 36 00:02:13,760 --> 00:02:15,920 Speaker 1: a little skeptical about this, but we're gonna assume this 37 00:02:15,960 --> 00:02:19,760 Speaker 1: is a real grassroots campug. Nothing to know when I've 38 00:02:19,760 --> 00:02:23,600 Speaker 1: ever met in my life. Okay, did you believe that's sir? 39 00:02:24,000 --> 00:02:25,919 Speaker 1: Not at all? And that voice is Chris Nagy, the 40 00:02:25,960 --> 00:02:28,400 Speaker 1: executive editor of the cross asset team Man Equities here 41 00:02:28,440 --> 00:02:31,360 Speaker 1: at Bloomberg and Mike, they're gonna be tweeting to demand you. 42 00:02:31,400 --> 00:02:36,600 Speaker 1: I'm sure again fantastic. I will not wear funny sorts. So, 43 00:02:36,600 --> 00:02:38,480 Speaker 1: like I wanted to ask you, you know, we got 44 00:02:38,520 --> 00:02:41,680 Speaker 1: some inflation data this week. Um, I know the Fed 45 00:02:41,760 --> 00:02:45,160 Speaker 1: prefers pc but the latest data we got was c 46 00:02:45,360 --> 00:02:49,320 Speaker 1: p I. I gotta say core CPI two point three percent. 47 00:02:49,560 --> 00:02:53,560 Speaker 1: Headline was about two point one percent. At what point 48 00:02:53,560 --> 00:02:56,359 Speaker 1: do we have to start worrying about the Fed when 49 00:02:56,360 --> 00:02:58,240 Speaker 1: it comes to inflation. I mean, this isn't the highest 50 00:02:58,240 --> 00:03:00,480 Speaker 1: it's been at the cycle, but you know, we're we're 51 00:03:00,520 --> 00:03:03,760 Speaker 1: getting back to sort of that target level the FED 52 00:03:03,760 --> 00:03:06,600 Speaker 1: would like to see. Inflation took up frankly from Chairman 53 00:03:06,600 --> 00:03:10,079 Speaker 1: Powell's discussion recently, he'd be thrilled if inflation were two 54 00:03:10,160 --> 00:03:12,919 Speaker 1: two to three on a core basis for an extended period. 55 00:03:13,360 --> 00:03:15,640 Speaker 1: Central bankers know what to do with inflation. They just 56 00:03:15,680 --> 00:03:17,440 Speaker 1: hit it over the head. So the FED could let 57 00:03:17,440 --> 00:03:19,560 Speaker 1: inflation run for a while. That would be dandy. So 58 00:03:19,840 --> 00:03:21,760 Speaker 1: bottom line is, we're not concerned. I don't think the 59 00:03:21,800 --> 00:03:24,519 Speaker 1: FED is either. So inflation was certainly a hot topic. 60 00:03:24,560 --> 00:03:26,720 Speaker 1: It came up in many questions at the press conference 61 00:03:27,000 --> 00:03:30,120 Speaker 1: on Wednesday. One point really stuck out to me from 62 00:03:30,200 --> 00:03:33,399 Speaker 1: FED chair Powell. He was talking about the so called 63 00:03:33,440 --> 00:03:36,440 Speaker 1: Philip's curve unemployment how it relates to inflation. It seemed 64 00:03:36,480 --> 00:03:38,360 Speaker 1: as though he was saying, we can have a tight 65 00:03:38,440 --> 00:03:40,920 Speaker 1: labor market, that's fine, but maybe the labor market isn't 66 00:03:41,080 --> 00:03:44,000 Speaker 1: so tight and we are not seeing extreme wage growth. 67 00:03:44,520 --> 00:03:47,040 Speaker 1: Did that really resonate with you. Did something from that 68 00:03:47,080 --> 00:03:50,880 Speaker 1: conversation stick out to you? Yeah, it's interesting, Sarah. So 69 00:03:50,960 --> 00:03:53,520 Speaker 1: essentially he's making the case of the Phillips curve with 70 00:03:53,600 --> 00:03:56,520 Speaker 1: respect to wages is pretty flat, and wage growth actually 71 00:03:56,600 --> 00:03:59,240 Speaker 1: has been pretty good if you look at the lower 72 00:03:59,280 --> 00:04:01,440 Speaker 1: segment of the po pulation. So let's say the bottom 73 00:04:02,120 --> 00:04:04,280 Speaker 1: of wages paid, they're up almost four and a half 74 00:04:04,320 --> 00:04:06,600 Speaker 1: percent in the last year, which is great, and even 75 00:04:06,640 --> 00:04:09,560 Speaker 1: the top runners are up almost three percent, and yet 76 00:04:09,600 --> 00:04:12,080 Speaker 1: unemployments three and a half. Inflation we just heard as 77 00:04:12,120 --> 00:04:14,760 Speaker 1: ticked up, but it's nothing crazy. So I think Chara 78 00:04:14,840 --> 00:04:17,039 Speaker 1: Polo is right when he says we can probably tolerate 79 00:04:17,160 --> 00:04:20,360 Speaker 1: lower unemployment than we thought in the past without inflation 80 00:04:20,400 --> 00:04:22,680 Speaker 1: going wild. So the curve is flatter, but not totally 81 00:04:22,680 --> 00:04:26,360 Speaker 1: flat like the other big news this week obviously, was 82 00:04:27,279 --> 00:04:29,320 Speaker 1: what appears to be we're getting closer and closer to 83 00:04:29,400 --> 00:04:31,880 Speaker 1: a trade deal now. To be honest, as we record 84 00:04:32,000 --> 00:04:35,960 Speaker 1: this on a Thursday, it looks like the latest report 85 00:04:36,040 --> 00:04:40,280 Speaker 1: suggests that, um, they're very close. Who knows what will 86 00:04:40,320 --> 00:04:44,880 Speaker 1: happen in the half hour that we record this, right, 87 00:04:45,720 --> 00:04:48,800 Speaker 1: have at it, even we deserve it if uh, you know, 88 00:04:51,040 --> 00:04:53,400 Speaker 1: what are what are yields gonna look like? Though? If 89 00:04:53,440 --> 00:04:57,560 Speaker 1: we do reach a piece between US and China in 90 00:04:58,040 --> 00:05:01,280 Speaker 1: trade er, I mean, you know, tenure treasury is now 91 00:05:01,520 --> 00:05:04,960 Speaker 1: approaching that two percent level. Um, where do you expect 92 00:05:04,960 --> 00:05:06,720 Speaker 1: it to stop? If we do get good news on 93 00:05:06,760 --> 00:05:09,000 Speaker 1: the trade front we've been make in the case, if 94 00:05:09,000 --> 00:05:11,400 Speaker 1: there's a fairly modest trade deal, which I would call 95 00:05:11,440 --> 00:05:15,400 Speaker 1: this potential thing, that the tenure treasury goes to to 96 00:05:15,640 --> 00:05:18,320 Speaker 1: ten maybe two fifteen. And the way we get there 97 00:05:18,400 --> 00:05:20,480 Speaker 1: is we looked at we're tend stood back on July 98 00:05:20,640 --> 00:05:23,240 Speaker 1: thirty one, So that was the day of the first fetties. 99 00:05:23,600 --> 00:05:26,000 Speaker 1: The tenure was too oh two. The next day, you 100 00:05:26,080 --> 00:05:29,279 Speaker 1: might recall, President Trump put out his tweet really mandating 101 00:05:29,320 --> 00:05:33,200 Speaker 1: in all us companies find alternatives to Chinese suppliers. So 102 00:05:33,240 --> 00:05:35,240 Speaker 1: we think that something like two oh one too oh 103 00:05:35,240 --> 00:05:37,800 Speaker 1: two is pretty easy to beat. But since that date 104 00:05:37,880 --> 00:05:40,440 Speaker 1: there's been so much easing by central banks. Would say 105 00:05:40,440 --> 00:05:42,599 Speaker 1: anything a lot higher than that's probably out of reach. 106 00:05:42,760 --> 00:05:45,919 Speaker 1: So to ten, maybe two fifteen, if you're aggressive, somewhere 107 00:05:45,920 --> 00:05:47,920 Speaker 1: in that range we think makes sense. Chris, I want 108 00:05:47,960 --> 00:05:50,520 Speaker 1: to bring you in here on that topic. So say 109 00:05:50,640 --> 00:05:53,960 Speaker 1: we do get a trade deal this weekend, all is great. 110 00:05:54,000 --> 00:05:55,760 Speaker 1: All of a sudden, you see yields made me move 111 00:05:55,839 --> 00:05:58,960 Speaker 1: up to ten to fifteen. Is that still a good 112 00:05:59,040 --> 00:06:01,440 Speaker 1: environment for what are he's going forwards? I mean, there's 113 00:06:01,480 --> 00:06:04,119 Speaker 1: still pretty low interest rate, right what's not to like? Really? 114 00:06:04,120 --> 00:06:05,360 Speaker 1: I mean, the one thing you have to think about 115 00:06:05,400 --> 00:06:07,400 Speaker 1: is that you've just had this gigantic here, and one 116 00:06:07,440 --> 00:06:10,840 Speaker 1: interpretation of what happened is that what usually happens stock 117 00:06:10,880 --> 00:06:13,200 Speaker 1: market looks ahead to the future. The market may well 118 00:06:13,240 --> 00:06:17,279 Speaker 1: be saying something good about the macro. Backdrop in the 119 00:06:17,360 --> 00:06:19,920 Speaker 1: question is how much more do you really expect out 120 00:06:19,960 --> 00:06:21,719 Speaker 1: of stocks right now? I mean, you're going to have 121 00:06:23,440 --> 00:06:26,680 Speaker 1: year here expecting tons more on top. It's certainly possible, 122 00:06:26,839 --> 00:06:29,559 Speaker 1: you know, Uh, growth is not twist to fall apart. 123 00:06:29,600 --> 00:06:31,359 Speaker 1: Earning supposed to be strong, but the question is how 124 00:06:31,440 --> 00:06:36,120 Speaker 1: much was that baked in? And something that someone said 125 00:06:36,160 --> 00:06:38,000 Speaker 1: to me this week and I found very interesting on 126 00:06:38,040 --> 00:06:40,679 Speaker 1: the trade subject was that even if we do get 127 00:06:40,720 --> 00:06:43,560 Speaker 1: a trade deal and sure China goes along and buys 128 00:06:43,560 --> 00:06:46,640 Speaker 1: agricultural goods, things seem like they're moving along pretty nicely. 129 00:06:46,680 --> 00:06:49,640 Speaker 1: Maybe phase one turns into phase two, phase three per se. 130 00:06:50,240 --> 00:06:53,599 Speaker 1: The issue is that companies have are already started changing 131 00:06:53,640 --> 00:06:57,880 Speaker 1: their supply chains, and that that's pretty expensive. And if 132 00:06:57,920 --> 00:07:00,600 Speaker 1: they have been changing their supply chains over the past 133 00:07:00,720 --> 00:07:02,800 Speaker 1: year and a half whenever this all started back in March, 134 00:07:03,960 --> 00:07:08,240 Speaker 1: wouldn't it be pretty difficult then for companies to start 135 00:07:08,320 --> 00:07:10,720 Speaker 1: really going back to how it was or not putting 136 00:07:10,720 --> 00:07:14,560 Speaker 1: money into changing the supply chains again, and that profits 137 00:07:14,560 --> 00:07:17,720 Speaker 1: could remain print from that point that could then feed 138 00:07:17,720 --> 00:07:20,960 Speaker 1: into the global economy next year. Is that anything of 139 00:07:21,000 --> 00:07:23,120 Speaker 1: the sort that you're thinking of with your team over 140 00:07:23,160 --> 00:07:26,680 Speaker 1: at Wells Fargo, I'd say a bit. And I certainly 141 00:07:26,760 --> 00:07:29,200 Speaker 1: take the point that yes, there's probably been some switch 142 00:07:29,280 --> 00:07:32,280 Speaker 1: over to whether it's Vietnam, Malaysia, Indonesia, who knows, but 143 00:07:32,680 --> 00:07:36,760 Speaker 1: countries ex China, but probably not anywhere near. So those 144 00:07:36,760 --> 00:07:38,960 Speaker 1: companies who have not made the switch, who said, gee, 145 00:07:38,960 --> 00:07:41,400 Speaker 1: we hope this blows over, they should benefit quite a 146 00:07:41,400 --> 00:07:43,760 Speaker 1: bit if there's some sort of deal. So I guess 147 00:07:43,760 --> 00:07:46,440 Speaker 1: the way frame it from a market standpoint is, would 148 00:07:46,480 --> 00:07:49,600 Speaker 1: there be a decent uptick and confidence almost certainly, would 149 00:07:49,600 --> 00:07:51,880 Speaker 1: there be a pickup and growth probably, So it should 150 00:07:51,920 --> 00:07:53,760 Speaker 1: be a pretty good risk on move. Is that if 151 00:07:53,800 --> 00:07:57,240 Speaker 1: this happens. You know, Mike, we're getting near the end 152 00:07:57,240 --> 00:08:02,400 Speaker 1: of the year. Obviously, goodness a long one has but 153 00:08:02,440 --> 00:08:05,400 Speaker 1: there's one hurdle left to go, and that is the 154 00:08:05,440 --> 00:08:07,680 Speaker 1: sort of funding stress that you often see at the 155 00:08:07,800 --> 00:08:10,880 Speaker 1: end of the year in the repo market. Uh, walk 156 00:08:11,000 --> 00:08:14,040 Speaker 1: us through how you're thinking about that, and really, for 157 00:08:14,080 --> 00:08:16,960 Speaker 1: the listeners who are not too in the weeds, UH 158 00:08:17,040 --> 00:08:19,880 Speaker 1: in this market of me being one of them, for example, 159 00:08:20,720 --> 00:08:24,080 Speaker 1: explain to us why this funding stress happens at the 160 00:08:24,160 --> 00:08:26,080 Speaker 1: end of the year and what role the repo market 161 00:08:26,120 --> 00:08:29,320 Speaker 1: plays in it. Yeah, it's been an incredibly hot topic 162 00:08:29,400 --> 00:08:32,200 Speaker 1: over the last few months. Repost spiked in mid September. 163 00:08:32,280 --> 00:08:34,680 Speaker 1: The fed goot very concerned about it. But to back 164 00:08:34,760 --> 00:08:36,520 Speaker 1: up a little bit, the core of the problem, we 165 00:08:36,559 --> 00:08:38,960 Speaker 1: would say, and probably most people would agree, is that 166 00:08:39,040 --> 00:08:42,280 Speaker 1: bank balance sheets are very constrained, capital requirements are tight, 167 00:08:42,320 --> 00:08:45,360 Speaker 1: they're all sorts of liquidity issues, etcetera, etcetera. So banks 168 00:08:45,360 --> 00:08:47,840 Speaker 1: probably don't have as much flexibility to put cash into 169 00:08:47,840 --> 00:08:50,400 Speaker 1: the repo market as you might think. Now, the way 170 00:08:50,440 --> 00:08:53,040 Speaker 1: that showed up in September is that something called excess 171 00:08:53,080 --> 00:08:56,120 Speaker 1: reserves has gone down a lot, and it's probably a misnomber. 172 00:08:56,200 --> 00:08:59,240 Speaker 1: The reserves aren't really so excess, and at the margin, 173 00:09:00,160 --> 00:09:02,520 Speaker 1: one extra dollar really tipped the market into a frenzy, 174 00:09:02,559 --> 00:09:04,120 Speaker 1: and all of a sudden there was simply not enough 175 00:09:04,120 --> 00:09:06,640 Speaker 1: cash to go around. Now, the FED saw this, every 176 00:09:06,640 --> 00:09:09,560 Speaker 1: one in the market sought and the central bank response 177 00:09:09,600 --> 00:09:13,360 Speaker 1: to a problem is put lots of liquidity into the system. Now, 178 00:09:13,440 --> 00:09:16,200 Speaker 1: this addresses the symptoms, but not the underlying core of 179 00:09:16,200 --> 00:09:18,800 Speaker 1: the problem. The core of the problems you need regulatory relief, 180 00:09:19,120 --> 00:09:21,319 Speaker 1: but that probably takes quite a while. So the Feed 181 00:09:21,440 --> 00:09:23,400 Speaker 1: is pushing a lot of liquidity into the system. Now, 182 00:09:23,440 --> 00:09:26,440 Speaker 1: there was announcement not too long ago that talked about 183 00:09:26,520 --> 00:09:28,120 Speaker 1: doing a bit more of that. So we think the 184 00:09:28,160 --> 00:09:30,680 Speaker 1: FED is very much on the game. If you will, 185 00:09:30,760 --> 00:09:32,840 Speaker 1: there are two schools of thought. We are of the 186 00:09:32,880 --> 00:09:35,440 Speaker 1: mind that the fedle put enough liquidity in the system 187 00:09:35,520 --> 00:09:38,880 Speaker 1: to really mitigate big problems. REPO probably goes up somewhat 188 00:09:38,920 --> 00:09:41,000 Speaker 1: towards the end of the year. It was about five 189 00:09:41,040 --> 00:09:43,360 Speaker 1: percent a year ago. Right now it's around four. For 190 00:09:43,400 --> 00:09:45,760 Speaker 1: the turn of the year. Maybe it gets back to five, 191 00:09:45,800 --> 00:09:47,679 Speaker 1: but we very much doubt it gets to nine or ten, 192 00:09:47,760 --> 00:09:50,200 Speaker 1: which is where it was in September. But talking to 193 00:09:50,240 --> 00:09:52,160 Speaker 1: a lot of clients, they tell me, I get it, 194 00:09:52,200 --> 00:09:54,760 Speaker 1: But you still may have a case where a number 195 00:09:54,800 --> 00:09:57,520 Speaker 1: of big banks really don't want to put the cash out, 196 00:09:57,640 --> 00:10:00,120 Speaker 1: so any amount of liquidity will not be enough. We 197 00:10:00,160 --> 00:10:02,600 Speaker 1: think that's unlikely, but it's possible. So that's really the issue. 198 00:10:02,600 --> 00:10:05,720 Speaker 1: In a nutshell, is the supply of treasuries part of 199 00:10:05,720 --> 00:10:07,679 Speaker 1: the issue, especially on that short end. I mean, here 200 00:10:07,720 --> 00:10:12,200 Speaker 1: we are, we're running a trillion dollar deficit. UH, investors 201 00:10:12,200 --> 00:10:15,160 Speaker 1: are more in the mood for risky assets. It seemed like, 202 00:10:15,280 --> 00:10:19,200 Speaker 1: seems like UH, those primary dealers having a hard time 203 00:10:19,280 --> 00:10:23,560 Speaker 1: funding purchases of treasuries. And here we have politicians talking 204 00:10:23,559 --> 00:10:27,160 Speaker 1: about perhaps a middle class tax cut UH next year. 205 00:10:27,240 --> 00:10:30,320 Speaker 1: So maybe even bigger deficits. I mean isn't that supply 206 00:10:30,320 --> 00:10:31,880 Speaker 1: A treasury is part of the story too. It is 207 00:10:31,920 --> 00:10:33,800 Speaker 1: a big part of the story. So long term, you 208 00:10:33,800 --> 00:10:35,760 Speaker 1: look at the US budget, the episode of around a 209 00:10:35,760 --> 00:10:38,280 Speaker 1: trillion dollars, Treasury has to fund it. That means lots 210 00:10:38,280 --> 00:10:40,959 Speaker 1: of net issuance. Now the primary dealers have to buy. 211 00:10:41,000 --> 00:10:43,200 Speaker 1: That's what it means to be a primary dealer. So 212 00:10:43,280 --> 00:10:45,600 Speaker 1: if you look at primary dealer holdings of treasuries, they 213 00:10:45,640 --> 00:10:48,040 Speaker 1: have roughly doubled in the last year from about a 214 00:10:48,160 --> 00:10:50,920 Speaker 1: hundred and fifty billion to about three billion. Now this 215 00:10:51,040 --> 00:10:53,319 Speaker 1: is just the primary dealer aspect of a bank, it's 216 00:10:53,360 --> 00:10:56,199 Speaker 1: not the entire bank. So at some point you can say, well, 217 00:10:56,480 --> 00:10:58,760 Speaker 1: maybe the primaries have about as much as they want 218 00:10:58,800 --> 00:11:00,760 Speaker 1: they really don't want to have or treasuries on the 219 00:11:00,800 --> 00:11:03,560 Speaker 1: balance sheet. Maybe the FED could come to the rescue. 220 00:11:03,960 --> 00:11:06,400 Speaker 1: This is why Chairman Paul recently got the question, I 221 00:11:06,440 --> 00:11:10,040 Speaker 1: think anyway about potentially expanding the universe of securities the 222 00:11:10,080 --> 00:11:12,480 Speaker 1: FED would buy, maybe buying some of these short coupon 223 00:11:12,559 --> 00:11:15,040 Speaker 1: bonds at dealer's own that sort of thing. So, yes, 224 00:11:15,080 --> 00:11:17,600 Speaker 1: it's very much the case. The big deficit and heavy 225 00:11:17,640 --> 00:11:20,400 Speaker 1: treasury supply impact the REPO situation. So should we just 226 00:11:20,440 --> 00:11:23,560 Speaker 1: expect that FED balance sheet to just keep growing throughout 227 00:11:24,840 --> 00:11:28,360 Speaker 1: and and beyond. I mean, I promised not to call 228 00:11:28,440 --> 00:11:33,320 Speaker 1: quantitative easy. I can't callie, but I mean that balance 229 00:11:33,360 --> 00:11:37,280 Speaker 1: sheet is it's hard to imagine it's shrinking again anytime soon. Right, 230 00:11:37,720 --> 00:11:40,000 Speaker 1: we agree with that, And the FED really has talked 231 00:11:40,040 --> 00:11:44,280 Speaker 1: about making FED funds the primary tool for conducting monetary policy. 232 00:11:44,360 --> 00:11:47,640 Speaker 1: But QUI seems awfully convenient. Do a little quie, buy 233 00:11:47,679 --> 00:11:50,360 Speaker 1: some treasury bills, try to help fix the repo problem, 234 00:11:50,840 --> 00:11:53,680 Speaker 1: maybe expand out the curve possibly if things aren't going 235 00:11:53,720 --> 00:11:56,040 Speaker 1: that well. So I think you're right, you probably will 236 00:11:56,040 --> 00:11:58,599 Speaker 1: see the balance sheet expand. In a theoretical world of 237 00:11:58,679 --> 00:12:00,720 Speaker 1: asking this just because over the last week, i'll call it, 238 00:12:00,760 --> 00:12:04,000 Speaker 1: there was some hubbub over the repo squeeze, talking about 239 00:12:04,040 --> 00:12:08,120 Speaker 1: a potential year end squeeze. Say, theoretically we did see 240 00:12:08,160 --> 00:12:11,439 Speaker 1: that happen. Could we potentially see fall out to other 241 00:12:11,480 --> 00:12:14,080 Speaker 1: areas of the fixed income space as well, or would 242 00:12:14,080 --> 00:12:17,840 Speaker 1: it be more so concentrated you can see fallout. Repo 243 00:12:18,040 --> 00:12:21,000 Speaker 1: is really like the grease that keeps the engine moving spinning. 244 00:12:21,120 --> 00:12:23,240 Speaker 1: So if that really gets clawged and makes it much 245 00:12:23,240 --> 00:12:26,840 Speaker 1: tougher for clients of any type to transact, and very 246 00:12:26,840 --> 00:12:30,000 Speaker 1: difficult for players like hedge funds to get short term funding. 247 00:12:30,240 --> 00:12:33,160 Speaker 1: Not to say it's completely unavailable, but available at really 248 00:12:33,480 --> 00:12:36,800 Speaker 1: stratospheric rates, So there could be a lot of fallout. Chris, 249 00:12:36,800 --> 00:12:40,240 Speaker 1: I feel like the repo market is something equity investors 250 00:12:40,480 --> 00:12:44,199 Speaker 1: uh pretend doesn't exist until they have to uh cram 251 00:12:44,440 --> 00:12:46,839 Speaker 1: cram their studies about what's going on, you know, and 252 00:12:47,320 --> 00:12:51,080 Speaker 1: what you edit and what you read. Uh does this 253 00:12:51,200 --> 00:12:54,680 Speaker 1: repo all this liquidity to the repo market? I think 254 00:12:54,920 --> 00:12:57,959 Speaker 1: the um assumption from a lot of people is that 255 00:12:58,000 --> 00:13:01,000 Speaker 1: this is part of this last of the rallying stocks. 256 00:13:01,080 --> 00:13:03,640 Speaker 1: Is liquidity good for stocks no matter what, even if 257 00:13:03,640 --> 00:13:05,400 Speaker 1: it's in the short end of the Yes, And an 258 00:13:05,440 --> 00:13:07,760 Speaker 1: argument can be made to things that caught, you know, 259 00:13:08,280 --> 00:13:11,880 Speaker 1: strain the system, like a gigantic budget deficit is weirdly 260 00:13:11,960 --> 00:13:14,720 Speaker 1: good for stocks. It's so liquidity provider to the reason. 261 00:13:14,760 --> 00:13:17,520 Speaker 1: I mean, it's a giant tax cut basically at the 262 00:13:17,559 --> 00:13:22,120 Speaker 1: back of that, and that's been arguably a huge factor 263 00:13:22,160 --> 00:13:25,280 Speaker 1: in the background again for the stock market. So these 264 00:13:25,320 --> 00:13:29,040 Speaker 1: things are are are tail winds until they become headwinds. 265 00:13:29,040 --> 00:13:31,240 Speaker 1: You never really know when a giant it's a big 266 00:13:31,280 --> 00:13:33,360 Speaker 1: nebulous issue for the market. I think people are aware 267 00:13:33,400 --> 00:13:35,600 Speaker 1: that the US is getting a little over its skis 268 00:13:35,679 --> 00:13:38,040 Speaker 1: on some of it's borrowing, and to the extent that 269 00:13:38,480 --> 00:13:40,840 Speaker 1: the whole repot thing is emblematic of that. It's a 270 00:13:40,880 --> 00:13:43,839 Speaker 1: factor for the market. I would agree your average equity guy, 271 00:13:44,400 --> 00:13:47,000 Speaker 1: they didn't pretend it doesn't exist, it doesn't doesn't want 272 00:13:47,000 --> 00:13:50,520 Speaker 1: to talk about it beyond his capacity. I will say, though, 273 00:13:50,559 --> 00:13:52,920 Speaker 1: in more and more conversations with different investors that I 274 00:13:53,000 --> 00:13:55,760 Speaker 1: speak with, liquidity is coming up as a reason for 275 00:13:55,800 --> 00:13:58,000 Speaker 1: this year end rally and equity. As I asked them 276 00:13:58,040 --> 00:14:00,080 Speaker 1: what's going on, They talk about the balance sheet, They 277 00:14:00,120 --> 00:14:02,240 Speaker 1: talk about this not being kiwi. But the fact of 278 00:14:02,240 --> 00:14:04,680 Speaker 1: the matter is there's more liquidity in the system. And 279 00:14:04,960 --> 00:14:07,040 Speaker 1: Davis had a pretty good research note on this, and 280 00:14:07,080 --> 00:14:09,680 Speaker 1: they said, look, money flows to where it's treated best, 281 00:14:09,679 --> 00:14:12,480 Speaker 1: and right now it's being treated well. And the equity 282 00:14:12,480 --> 00:14:13,880 Speaker 1: were I mean, if you buy that last year or 283 00:14:13,880 --> 00:14:16,200 Speaker 1: so off was the opposite, it was a reaction to 284 00:14:16,360 --> 00:14:18,400 Speaker 1: power going too far in the other direction that you 285 00:14:18,480 --> 00:14:20,160 Speaker 1: kind of have to you kind of have to buy 286 00:14:20,200 --> 00:14:22,200 Speaker 1: that that argument for this year I mean the FED 287 00:14:22,320 --> 00:14:26,560 Speaker 1: is sitting there, you know, latering liquidity into stockholders hands. 288 00:14:27,040 --> 00:14:29,200 Speaker 1: So like it all gets back to what is the 289 00:14:29,200 --> 00:14:32,800 Speaker 1: biggest risk of all this, of all this, these huge deficits, 290 00:14:33,200 --> 00:14:37,040 Speaker 1: this huge issuance of treasuries, the FED buying, I mean, 291 00:14:37,120 --> 00:14:38,920 Speaker 1: is it does it all get back to inflation? As 292 00:14:38,960 --> 00:14:44,120 Speaker 1: long as inflation stays cool enough that uh, you know, 293 00:14:44,160 --> 00:14:47,600 Speaker 1: these giant deficits, this giant supply doesn't matter if inflation 294 00:14:47,680 --> 00:14:49,800 Speaker 1: is low and therefore borrowing costs are low. It's probably 295 00:14:49,840 --> 00:14:52,040 Speaker 1: not a huge issue with respect of the US budget. 296 00:14:52,360 --> 00:14:55,240 Speaker 1: And it's interesting how many presidential candidates the cycle of 297 00:14:55,320 --> 00:14:59,600 Speaker 1: talked about fiscal restraint. That's right, zero, nobody not and 298 00:14:59,680 --> 00:15:01,520 Speaker 1: pres and a Trump also I put in that camp. 299 00:15:01,560 --> 00:15:04,040 Speaker 1: So no one at the top seems super concerned about it. 300 00:15:04,600 --> 00:15:07,280 Speaker 1: We can come up with risks. It's conceivable maybe there's 301 00:15:07,280 --> 00:15:09,480 Speaker 1: a foreign buyer strike, But I think you have to 302 00:15:09,520 --> 00:15:12,880 Speaker 1: ask yourself what else would they buy? Do you really 303 00:15:12,880 --> 00:15:15,960 Speaker 1: think investors in Japan or China or elsewhere in Asia 304 00:15:16,040 --> 00:15:18,200 Speaker 1: or Latin America are going to buy a lot of 305 00:15:18,240 --> 00:15:21,800 Speaker 1: European government bonds that have negative yield? Probably not. Do 306 00:15:21,840 --> 00:15:24,800 Speaker 1: you really think that investors who actually need a lot 307 00:15:24,800 --> 00:15:27,840 Speaker 1: of liquidity potentially and one high credit quality can go 308 00:15:28,200 --> 00:15:30,880 Speaker 1: too far away from the US. Doesn't seem that likely. 309 00:15:31,040 --> 00:15:34,240 Speaker 1: So the US markets by virtue of being very homogeneous 310 00:15:34,240 --> 00:15:37,480 Speaker 1: for one in liquid and also having excellent credit quality, 311 00:15:37,680 --> 00:15:39,760 Speaker 1: it's a home field advantage. So it's tough to lose that. 312 00:15:40,160 --> 00:15:43,120 Speaker 1: I don't know if you follow the whole uh craze 313 00:15:43,120 --> 00:15:46,360 Speaker 1: of modern monetary theory m M T at all, But um, 314 00:15:46,480 --> 00:15:48,680 Speaker 1: you know the idea that that deficits don't matter. We've 315 00:15:48,760 --> 00:15:51,520 Speaker 1: we've spent our lifetimes worrying about the deficits. Crank up 316 00:15:51,520 --> 00:15:55,120 Speaker 1: that printing press Are they sort of being proven right 317 00:15:55,160 --> 00:15:58,520 Speaker 1: to some degree? Do you think? Um? At least you know, 318 00:15:58,560 --> 00:16:00,960 Speaker 1: for example, if you're the U S and your currency 319 00:16:01,040 --> 00:16:03,400 Speaker 1: is the reserve currency, uh, and you don't have to 320 00:16:03,440 --> 00:16:06,280 Speaker 1: really worry about a major devaluation in the currency if 321 00:16:06,320 --> 00:16:09,320 Speaker 1: you're if you're cranking up the printing presses. Recently, it's 322 00:16:09,360 --> 00:16:12,160 Speaker 1: worked out. I certainly wouldn't accept that long term. But 323 00:16:12,320 --> 00:16:15,360 Speaker 1: in a world where yields are generally quite low globally 324 00:16:15,480 --> 00:16:18,840 Speaker 1: and the US has a reserve currency, the US government 325 00:16:18,840 --> 00:16:20,640 Speaker 1: can run a pretty big deficit, and right now it's 326 00:16:20,680 --> 00:16:23,000 Speaker 1: the biggest by far across G ten. It's more than 327 00:16:23,040 --> 00:16:27,080 Speaker 1: five of the US GDP, and the next biggest one 328 00:16:27,160 --> 00:16:29,360 Speaker 1: is sort of a tie between Japan and France at 329 00:16:29,400 --> 00:16:32,160 Speaker 1: about three. So the US is running a much bigger deficit, 330 00:16:32,240 --> 00:16:49,560 Speaker 1: no doubt. So going back to the interest rate conversation, 331 00:16:49,600 --> 00:16:51,960 Speaker 1: but bringing it over to equity is something that did 332 00:16:52,000 --> 00:16:54,120 Speaker 1: happen this week was that the S and P five 333 00:16:54,160 --> 00:16:58,200 Speaker 1: hundred financial index, very closely tied to movements and interest 334 00:16:58,280 --> 00:17:01,800 Speaker 1: rates lately, finally took out It's two thousand seven high. So, Chris, 335 00:17:02,120 --> 00:17:04,440 Speaker 1: what does this really tell you about how far we've 336 00:17:04,520 --> 00:17:07,240 Speaker 1: come the journey that it's been over the past twelve 337 00:17:07,280 --> 00:17:09,280 Speaker 1: years or so, Right, it's sort of the final chapter 338 00:17:09,400 --> 00:17:11,879 Speaker 1: in that in the financial crisis. From the stock market perspective, 339 00:17:11,920 --> 00:17:13,680 Speaker 1: I think you have to look at it as really 340 00:17:14,040 --> 00:17:16,800 Speaker 1: mainly testament to the power of the bullmarket. The bullmarket 341 00:17:16,840 --> 00:17:19,719 Speaker 1: insanely powerful thing. Pretty Much everything that you could do 342 00:17:19,760 --> 00:17:21,800 Speaker 1: to you could throw up in the face of banker 343 00:17:22,200 --> 00:17:26,040 Speaker 1: to impede bank earnings has been done. All the vulcar stuff, 344 00:17:26,680 --> 00:17:29,800 Speaker 1: risk taking rained in, and interest rate environments the opposite 345 00:17:29,800 --> 00:17:32,560 Speaker 1: of what they want pretty much, And yet those stocks 346 00:17:32,600 --> 00:17:35,480 Speaker 1: still pulled above all that stuff. They rallied an insane 347 00:17:35,520 --> 00:17:37,400 Speaker 1: amount from the bottom they fell the most, and they 348 00:17:37,480 --> 00:17:39,639 Speaker 1: had to rise something like sixfold to get back to 349 00:17:39,640 --> 00:17:43,800 Speaker 1: a record. So I think it's entirely the rising tide 350 00:17:43,840 --> 00:17:46,560 Speaker 1: of the stock market, and nothing specific to bank stocks 351 00:17:46,560 --> 00:17:47,960 Speaker 1: other than the fact that they're part of you know, 352 00:17:47,960 --> 00:17:49,920 Speaker 1: they're part of the US economy and we're taking part 353 00:17:50,000 --> 00:17:54,719 Speaker 1: in their earnings have slowly crept back. Chris, one of 354 00:17:54,760 --> 00:17:57,119 Speaker 1: the stories that caught my eye from your team this 355 00:17:57,160 --> 00:18:00,600 Speaker 1: week was this notion that a lot of the strategist 356 00:18:00,640 --> 00:18:05,560 Speaker 1: on Wall Street are getting bullish towards small caps um Now, 357 00:18:05,680 --> 00:18:09,000 Speaker 1: is that sort of you know, an unwind of the 358 00:18:09,080 --> 00:18:12,879 Speaker 1: defensives versus cyclical trade in some degreem Obviously, you know 359 00:18:12,960 --> 00:18:15,240 Speaker 1: the the SMP is a little bit more defensive than 360 00:18:15,280 --> 00:18:18,040 Speaker 1: the Russell two thousand. Is that all part and parcel 361 00:18:18,119 --> 00:18:19,800 Speaker 1: that you think that that makes sense? That there's a 362 00:18:19,880 --> 00:18:21,479 Speaker 1: bunch of different ways to frame. One would just be 363 00:18:21,520 --> 00:18:23,080 Speaker 1: how much more bullish can they get? As we were 364 00:18:23,080 --> 00:18:25,479 Speaker 1: discussing on large caps or megacaps in the US, I mean, 365 00:18:25,520 --> 00:18:28,200 Speaker 1: you set a gigantic year, you've run out of positive things. 366 00:18:28,200 --> 00:18:31,520 Speaker 1: There's actually this dynamic where they've they actually set there 367 00:18:32,480 --> 00:18:35,960 Speaker 1: to estimates and then the market went crazy underneath them. 368 00:18:35,960 --> 00:18:38,360 Speaker 1: So all of those pretty optimistic estimates when they set 369 00:18:38,400 --> 00:18:40,480 Speaker 1: them now in a percentage basis, look like nothing. This 370 00:18:40,640 --> 00:18:43,119 Speaker 1: is sort of as something we've we've touched on a 371 00:18:43,119 --> 00:18:45,359 Speaker 1: few times. So they've run out of things to be 372 00:18:45,440 --> 00:18:47,600 Speaker 1: excited about. And if there's one thing that strategists are 373 00:18:47,600 --> 00:18:51,120 Speaker 1: going to perennially do, it's try to be excited about something. 374 00:18:51,240 --> 00:18:52,800 Speaker 1: Small Caps are the one thing that's kind of about 375 00:18:52,800 --> 00:18:54,840 Speaker 1: performed this year, and you know, makes sense that that's 376 00:18:54,840 --> 00:18:56,639 Speaker 1: what they're choosing. I do have to say there is 377 00:18:56,680 --> 00:18:59,320 Speaker 1: one quote in that story about small caps that I 378 00:18:59,359 --> 00:19:02,520 Speaker 1: was a little bit particle of just because one person 379 00:19:02,600 --> 00:19:05,240 Speaker 1: came out and said that, well, yeah, small caps might 380 00:19:05,280 --> 00:19:07,919 Speaker 1: take off in the fact that we get a trade 381 00:19:07,920 --> 00:19:10,480 Speaker 1: deal and all of a sudden they're more domestically oriented 382 00:19:10,480 --> 00:19:12,920 Speaker 1: and small caps which should do better. But a year 383 00:19:12,920 --> 00:19:15,320 Speaker 1: and a half ago people were saying the exact opposite, 384 00:19:15,359 --> 00:19:18,879 Speaker 1: that once we got a trade war, then more domestically 385 00:19:18,880 --> 00:19:22,040 Speaker 1: oriented U S docks should do better, and they never did. Yeah, 386 00:19:22,359 --> 00:19:26,600 Speaker 1: looking for a coherent UH, I would be against anyone 387 00:19:26,760 --> 00:19:29,120 Speaker 1: like parsing the things that I say week a week 388 00:19:29,160 --> 00:19:33,000 Speaker 1: on this podcast for consistency half the time. Um, you 389 00:19:33,040 --> 00:19:38,600 Speaker 1: know Ellie Pennam, he would never cast any down on 390 00:19:38,680 --> 00:19:43,560 Speaker 1: my my thesis. Uh. Like. If let's turn to Europe 391 00:19:43,560 --> 00:19:46,159 Speaker 1: a little bit. Christine Legarde made her debut at the 392 00:19:46,240 --> 00:19:51,000 Speaker 1: ECB this week. Uh clearly she didn't make she didn't 393 00:19:51,040 --> 00:19:54,400 Speaker 1: break anything, you know, Uh, no major freak outs in markets. 394 00:19:54,400 --> 00:19:57,280 Speaker 1: Do you see uh much of a change of the 395 00:19:57,280 --> 00:20:00,280 Speaker 1: guard there or is it sort of steady as she 396 00:20:00,359 --> 00:20:05,320 Speaker 1: goes in Europe? It's a change of Luguard. But there 397 00:20:05,320 --> 00:20:09,240 Speaker 1: you go right into that. You did, Thank you. I 398 00:20:09,280 --> 00:20:12,760 Speaker 1: thought she was very smooth. She's a super seasoned politician 399 00:20:12,800 --> 00:20:14,840 Speaker 1: as we know, so as far as being able to 400 00:20:14,880 --> 00:20:17,520 Speaker 1: present and get a message across, she might already be 401 00:20:17,560 --> 00:20:20,040 Speaker 1: the best central banker on day one. That's quite possible, 402 00:20:20,160 --> 00:20:23,480 Speaker 1: just given her personal experience as far as policy goes, 403 00:20:23,840 --> 00:20:26,000 Speaker 1: I would agree she didn't say much, but didn't really 404 00:20:26,000 --> 00:20:28,800 Speaker 1: have to. E c B is starting a review next 405 00:20:28,840 --> 00:20:30,399 Speaker 1: month that'll go on a good chunk of the year, 406 00:20:30,560 --> 00:20:32,840 Speaker 1: just like the Fed is doing a review, so that 407 00:20:32,920 --> 00:20:35,520 Speaker 1: gives some cover. And the e c B has already 408 00:20:35,560 --> 00:20:38,520 Speaker 1: been so easy for so long it's hard to see 409 00:20:38,560 --> 00:20:42,159 Speaker 1: a radical shift getting easier. Maybe a little bit on 410 00:20:42,200 --> 00:20:45,320 Speaker 1: the margin, maybe the deposit rate goes from minus fifty 411 00:20:45,359 --> 00:20:47,919 Speaker 1: to minus sixty, but probably the better avenue is to 412 00:20:47,960 --> 00:20:50,040 Speaker 1: do a bit more q E. So we don't see 413 00:20:50,080 --> 00:20:51,879 Speaker 1: a huge shift on tap right now. But at this 414 00:20:51,880 --> 00:20:54,159 Speaker 1: point we just don't know enough about her views. You know, 415 00:20:54,240 --> 00:20:57,359 Speaker 1: one story we had out after her press conference was 416 00:20:57,960 --> 00:21:02,760 Speaker 1: there was a discussion h the forehand about the negative 417 00:21:02,760 --> 00:21:06,520 Speaker 1: effects of negative yielding debt um So they are listening 418 00:21:06,560 --> 00:21:08,919 Speaker 1: to sort of the complainers out there, the pension funds, 419 00:21:09,400 --> 00:21:14,119 Speaker 1: the banks, the US. I'm curious how you've been in 420 00:21:14,160 --> 00:21:17,080 Speaker 1: this business a while. Would twenty years ago, would you 421 00:21:17,080 --> 00:21:21,000 Speaker 1: have ever guessed a we'd see uh, negative yielding debt, 422 00:21:21,160 --> 00:21:24,959 Speaker 1: and where do you see it going in that whatever 423 00:21:25,440 --> 00:21:28,400 Speaker 1: X number of trillion dollars of negative yielding debt, it's 424 00:21:28,440 --> 00:21:31,399 Speaker 1: bound to come down, I would guess, right, Negative yielding 425 00:21:31,400 --> 00:21:34,080 Speaker 1: debt is not something I would have foreseen or probably 426 00:21:34,119 --> 00:21:36,560 Speaker 1: anyone really years ago, and yet here it is, and 427 00:21:36,600 --> 00:21:39,320 Speaker 1: it's huge. It's whatever the number is today, thirteen fourteen 428 00:21:39,359 --> 00:21:43,000 Speaker 1: trially and some some crazy numbers. So we suspect when 429 00:21:43,000 --> 00:21:45,439 Speaker 1: the history has written about negative policy rates, they'll be 430 00:21:46,200 --> 00:21:48,560 Speaker 1: deemed to be a pretty poor idea. It doesn't seem 431 00:21:48,600 --> 00:21:50,720 Speaker 1: to us they've worked a ton. Again, we prefer the 432 00:21:50,800 --> 00:21:53,880 Speaker 1: Quei avenue if a central bank is going for non 433 00:21:53,920 --> 00:21:57,480 Speaker 1: traditional policy, and KIWI has a really disruptive effect on 434 00:21:57,520 --> 00:22:01,040 Speaker 1: banking systems. So it seems, especially running in Europe, which 435 00:22:01,080 --> 00:22:04,080 Speaker 1: is very banking center, that it's gone super negative. US 436 00:22:04,119 --> 00:22:06,000 Speaker 1: hasn't done that, all right, So before we get to 437 00:22:06,040 --> 00:22:09,480 Speaker 1: the craziest thing, Chris coming back to you again as 438 00:22:09,480 --> 00:22:12,440 Speaker 1: a shameless plug reporter and editor on your team. Low 439 00:22:12,440 --> 00:22:14,879 Speaker 1: Wing has a great story coming out this weekend and 440 00:22:14,880 --> 00:22:17,320 Speaker 1: it's about the best sharp ratio ever. So I was 441 00:22:17,359 --> 00:22:18,840 Speaker 1: hoping you could maybe give us a little bit of 442 00:22:18,840 --> 00:22:21,160 Speaker 1: a preview. Well that, yeah, that's a great start. That's 443 00:22:21,200 --> 00:22:24,840 Speaker 1: just looking at the basically volatility adjusted uh return in 444 00:22:24,880 --> 00:22:28,040 Speaker 1: the SMPP hunter, which means so if you're an asset 445 00:22:28,080 --> 00:22:31,120 Speaker 1: and you bounce around ten percent a day and it's 446 00:22:31,119 --> 00:22:33,840 Speaker 1: an incredibly jarring ride, then it's less of a big 447 00:22:33,880 --> 00:22:36,200 Speaker 1: deal in a way if you if you cover a hundred, 448 00:22:36,240 --> 00:22:39,199 Speaker 1: if you double say, because you know the moves have 449 00:22:39,240 --> 00:22:41,719 Speaker 1: been so big, you could just as easily have fallen 450 00:22:41,760 --> 00:22:44,560 Speaker 1: by half or fallen by this is the sharp ratio 451 00:22:44,680 --> 00:22:47,840 Speaker 1: means that it's just a steady climb. It's measures the 452 00:22:47,840 --> 00:22:51,320 Speaker 1: steadiness and the slope of the climb. And what you 453 00:22:51,359 --> 00:22:53,880 Speaker 1: found is that this year of this decade, the one 454 00:22:53,920 --> 00:22:56,720 Speaker 1: coming right after the financial crisis, the one where everyone 455 00:22:56,840 --> 00:22:59,520 Speaker 1: was like stocks are dead, you can't touch stocks, is 456 00:22:59,560 --> 00:23:02,439 Speaker 1: the best decade on record as far as we can 457 00:23:02,480 --> 00:23:06,000 Speaker 1: calculate a Sharps ratio, going back about eighty years. Uh, 458 00:23:06,040 --> 00:23:08,199 Speaker 1: this is bigger than just a little bit, bigger than 459 00:23:08,200 --> 00:23:10,359 Speaker 1: the tech bubble. The tech bubble was much bigger return, 460 00:23:10,640 --> 00:23:12,560 Speaker 1: but much more volatility on the way up. You look 461 00:23:12,560 --> 00:23:15,440 Speaker 1: at the charts of they're crazy. The moves all look 462 00:23:15,520 --> 00:23:19,040 Speaker 1: like a year moves this year just incremental couple, Yeah, 463 00:23:19,040 --> 00:23:22,080 Speaker 1: a couple of meltdowns. But uh, for the most part 464 00:23:22,200 --> 00:23:24,840 Speaker 1: during the last ten years, pretty much steady climb without 465 00:23:24,880 --> 00:23:26,920 Speaker 1: a hell of a lot of volatility. You know what 466 00:23:27,000 --> 00:23:30,440 Speaker 1: I thought, speaking of sharp ratios, I was curious, if 467 00:23:30,440 --> 00:23:33,240 Speaker 1: you take a triple levered stock fund, what would you 468 00:23:33,280 --> 00:23:36,840 Speaker 1: guess higher sharp or lower sharp than the regular by 469 00:23:36,880 --> 00:23:41,280 Speaker 1: far lower higher, my man, So, Mike and I were 470 00:23:41,400 --> 00:23:44,320 Speaker 1: on the e T F Trillions podcasts this past week 471 00:23:44,560 --> 00:23:48,560 Speaker 1: and Mike stopped talking about leverage GTS. He's all all 472 00:23:48,640 --> 00:23:51,280 Speaker 1: about it. If you bought the triple levered q q 473 00:23:51,480 --> 00:23:56,320 Speaker 1: Q four thousand percent return, okay, because some insane return 474 00:23:56,680 --> 00:23:58,680 Speaker 1: in the decade. In the decade, right, well, that's it. 475 00:23:58,800 --> 00:24:02,840 Speaker 1: Your numerators higher than your denominator kind of. I feel 476 00:24:02,880 --> 00:24:05,240 Speaker 1: like it would have gone to zero a few times. 477 00:24:05,280 --> 00:24:07,359 Speaker 1: You know, if you're bullish stocks, go go big or 478 00:24:07,359 --> 00:24:09,200 Speaker 1: go home. You know, if you never get stopped out, 479 00:24:12,119 --> 00:24:15,479 Speaker 1: that's pretty crazy to kick it off listeners at home. 480 00:24:15,520 --> 00:24:17,320 Speaker 1: I do not really recommend that. It's just just a 481 00:24:17,359 --> 00:24:20,159 Speaker 1: discussion point. We don't recommend anything. I just wanted to 482 00:24:20,160 --> 00:24:23,080 Speaker 1: get the trillions et f listeners riled up about some time. 483 00:24:24,000 --> 00:24:26,520 Speaker 1: Maybe they'd hate listen to the show. All right, So 484 00:24:27,119 --> 00:24:29,080 Speaker 1: I guess the sharp raisio for a levergy TF is 485 00:24:29,119 --> 00:24:34,080 Speaker 1: pretty crazy. But Mike, what's your actual crazy thing this week? Okay? 486 00:24:34,680 --> 00:24:36,480 Speaker 1: Do you guys might have noticed President Trump was a 487 00:24:36,520 --> 00:24:39,800 Speaker 1: little angry recently? They noticed that, Yeah, what do you 488 00:24:39,840 --> 00:24:42,520 Speaker 1: think he's angry about? Chris? Alright, like the kid who 489 00:24:42,600 --> 00:24:45,399 Speaker 1: hits the climate cheese? Like that kid, that's true? Like, 490 00:24:45,520 --> 00:24:47,600 Speaker 1: what do you think he's angry at not thrilled about 491 00:24:47,640 --> 00:24:49,800 Speaker 1: the impeachment thing. Yeah, he's angry about that stuff, but 492 00:24:49,920 --> 00:24:53,000 Speaker 1: he was really angry about toilets. He's mad at how 493 00:24:53,000 --> 00:24:55,280 Speaker 1: often enough to flush at toilet. He came out and 494 00:24:55,280 --> 00:24:58,720 Speaker 1: he said, people are flushing toilets ten fifteen times. I 495 00:24:58,720 --> 00:25:01,280 Speaker 1: don't look, I don't know anyone who flushes needs to 496 00:25:01,280 --> 00:25:03,919 Speaker 1: flush the toilet fifteen times. Granted I do not travel 497 00:25:03,920 --> 00:25:07,520 Speaker 1: in the same social circles as President Trump, but it 498 00:25:07,600 --> 00:25:09,720 Speaker 1: got me. Uh, you know a lot of people making 499 00:25:09,800 --> 00:25:13,000 Speaker 1: jokes about this, but as sort of the equities background, 500 00:25:13,000 --> 00:25:14,399 Speaker 1: it made me think, well, are we gonna have to 501 00:25:14,480 --> 00:25:17,320 Speaker 1: replace our toilets now because of President Trump? And what 502 00:25:17,480 --> 00:25:20,600 Speaker 1: stocks could benefit from that? So I went I did 503 00:25:20,600 --> 00:25:24,879 Speaker 1: some research, some some research on toilets. Uh, sure you 504 00:25:24,920 --> 00:25:27,520 Speaker 1: really enjoyed that research. Good. A good website to start 505 00:25:27,520 --> 00:25:31,280 Speaker 1: if you're curious, flush guide dot com. A lot of 506 00:25:31,280 --> 00:25:34,800 Speaker 1: this comes from them. The hottest toilet in the country 507 00:25:34,880 --> 00:25:38,399 Speaker 1: American standard. It's not American, it's made in Japan by 508 00:25:38,440 --> 00:25:42,800 Speaker 1: a company called Lixel. And actually the second biggest toilet 509 00:25:42,800 --> 00:25:46,600 Speaker 1: maker is a company called Toto. Also Japanese also probably 510 00:25:46,640 --> 00:25:48,840 Speaker 1: make Trump mad. So I was figured, all right, someone's 511 00:25:48,840 --> 00:25:51,239 Speaker 1: got to be buying toilet stocks after this comment, right, 512 00:25:51,720 --> 00:25:55,080 Speaker 1: not really, Lixel down about two percent since Trump said this, 513 00:25:55,200 --> 00:25:58,399 Speaker 1: tote up one percent. So I thought, well, what could it? 514 00:25:58,560 --> 00:26:01,800 Speaker 1: What could it be about? Toto and they sell You're 515 00:26:01,800 --> 00:26:03,600 Speaker 1: not gonna believe this, Sarah. This is the craziest thing 516 00:26:03,800 --> 00:26:07,159 Speaker 1: I've seen in a while. Their Neo rest and X 517 00:26:07,240 --> 00:26:14,040 Speaker 1: two dull flush toilet list price thirteen thousand dollars. You're 518 00:26:14,040 --> 00:26:17,080 Speaker 1: going to be right, but it's the Yeah, look, it's 519 00:26:17,080 --> 00:26:19,439 Speaker 1: a thing of beauty. It looks like Steve Jobs designed 520 00:26:19,440 --> 00:26:21,920 Speaker 1: this thing. And you know what's crazy. I never thought 521 00:26:21,960 --> 00:26:24,040 Speaker 1: that we'd be talking about toilets on this show for 522 00:26:24,280 --> 00:26:26,320 Speaker 1: a couple of minutes at a time. Yeah, I can 523 00:26:26,359 --> 00:26:28,800 Speaker 1: go on who you can, I can tell. But Trump 524 00:26:28,840 --> 00:26:31,199 Speaker 1: would love this one because it has technology known as 525 00:26:31,240 --> 00:26:35,960 Speaker 1: the Tornado flush, two powerful nozzles that create centrifugal cyclonic 526 00:26:36,040 --> 00:26:39,840 Speaker 1: rest in action. Now but here listen, is more effective 527 00:26:39,840 --> 00:26:43,320 Speaker 1: in one flush than most toilets are with multiple flush. Trump, 528 00:26:43,359 --> 00:26:49,639 Speaker 1: if you're listening, I got the solutionary fixed amazing, unbelievable, unbelievable. Chris, 529 00:26:49,640 --> 00:26:51,119 Speaker 1: did you come prepared with anything? Well, I was just 530 00:26:51,119 --> 00:26:55,159 Speaker 1: gonna bring up the crazy Walmart Cocaine Santa and that's it, 531 00:26:55,520 --> 00:27:01,960 Speaker 1: And moving on, switters Matter something that depicts snowman Santa 532 00:27:02,160 --> 00:27:05,600 Speaker 1: sitting in front of snow with the crazy eyes and 533 00:27:05,720 --> 00:27:09,280 Speaker 1: the snow is arranged in little white lines, and I 534 00:27:09,280 --> 00:27:12,320 Speaker 1: don't think it's called cocaine step. But then the caption is, Oh, 535 00:27:12,320 --> 00:27:14,359 Speaker 1: it's going to be a white Christmas. So this thing 536 00:27:14,440 --> 00:27:16,680 Speaker 1: lasted like twenty minutes before they were forced to pull 537 00:27:16,760 --> 00:27:21,560 Speaker 1: it because of popular outcry. Possibly yes, possibly appropriate. The 538 00:27:21,640 --> 00:27:23,800 Speaker 1: ugly sweaters are a big thing around the holidays now, 539 00:27:23,840 --> 00:27:29,280 Speaker 1: I think that's yeah, big big stimuls see economy. Alright, Sarah, 540 00:27:29,320 --> 00:27:32,280 Speaker 1: what do you got? So did everyone here see the 541 00:27:32,320 --> 00:27:35,840 Speaker 1: original video of the Tesla cyber truck when they were 542 00:27:35,840 --> 00:27:37,800 Speaker 1: going to throw the ball at its mass the window. 543 00:27:37,920 --> 00:27:41,960 Speaker 1: Huge mistakes. So there's another video that's now making its 544 00:27:41,960 --> 00:27:44,800 Speaker 1: ways around with the Tesla cyber truck and it's uh. 545 00:27:44,960 --> 00:27:47,160 Speaker 1: Elon Musk himself decided he was going to take out 546 00:27:47,160 --> 00:27:50,960 Speaker 1: one of the prototypes to go eat at Nobu in Malibu, California, 547 00:27:51,080 --> 00:27:53,960 Speaker 1: and there's a video of him on TAMZ. He's leaving 548 00:27:53,960 --> 00:27:55,840 Speaker 1: in the cyber truck and at the very end of 549 00:27:55,840 --> 00:27:58,680 Speaker 1: it he knocks over a sign, makes an illegal turn 550 00:27:58,760 --> 00:28:02,840 Speaker 1: the wrong way. Um So, once again a video of 551 00:28:02,920 --> 00:28:05,760 Speaker 1: the Tesla cyber truck making its way around the internet. 552 00:28:06,080 --> 00:28:09,400 Speaker 1: But at the same time, Tesla stock is trading at 553 00:28:09,520 --> 00:28:11,800 Speaker 1: the highest levels in a year, so maybe all the 554 00:28:11,840 --> 00:28:15,320 Speaker 1: publicity is good. I'm a contrarian on that cyber truck. 555 00:28:15,359 --> 00:28:17,560 Speaker 1: I think it's going to sell. Well. Yeah, it looks 556 00:28:17,600 --> 00:28:19,520 Speaker 1: like something you find on the moon. It looks amazing. 557 00:28:19,560 --> 00:28:22,639 Speaker 1: It really all right, Mike today, warry about our gimmick. 558 00:28:22,640 --> 00:28:24,720 Speaker 1: Here the craziest thing. I was thinking about this, and 559 00:28:24,760 --> 00:28:28,240 Speaker 1: it's very difficult to top the funky Santa, the toilet 560 00:28:28,560 --> 00:28:31,359 Speaker 1: or the truck. But we come, we come prepared. I 561 00:28:31,400 --> 00:28:34,000 Speaker 1: will throw out that. I think our president tweeted something 562 00:28:34,000 --> 00:28:35,760 Speaker 1: like a hundred times this past Sunday. It was some 563 00:28:35,800 --> 00:28:39,360 Speaker 1: crazy no, a hundred times on Sunday. I'll put that out. 564 00:28:39,720 --> 00:28:42,320 Speaker 1: Just think about the interval between tweets. What correction I 565 00:28:42,440 --> 00:28:45,080 Speaker 1: was waking time was tweeting? It's pretty high? Is that 566 00:28:45,120 --> 00:28:47,680 Speaker 1: all original tweets? Does that include retweets? Are you getting 567 00:28:47,680 --> 00:28:51,040 Speaker 1: pretty deep? I don't know that. It's the important information 568 00:28:51,120 --> 00:28:53,400 Speaker 1: that we need to know, sir. You gotta tweet more 569 00:28:53,680 --> 00:28:56,160 Speaker 1: I do. I I can't even match one hundred. I 570 00:28:56,160 --> 00:29:00,320 Speaker 1: could maybe tweet a hundred times in two years. Maybe 571 00:29:01,520 --> 00:29:03,040 Speaker 1: I gotta I got to step it up. Work to do, 572 00:29:03,560 --> 00:29:05,680 Speaker 1: We've all got work to do. Well. One guy who 573 00:29:05,720 --> 00:29:10,320 Speaker 1: tweets a lot is Ellie Panamey, who's I actually know 574 00:29:10,360 --> 00:29:13,000 Speaker 1: who this person is, and he's gotten about two thousand 575 00:29:13,640 --> 00:29:19,280 Speaker 1: more air time than well, he got exactly what he wants. 576 00:29:19,480 --> 00:29:22,360 Speaker 1: So with that said, Chris Nigi Mike Chumucker, thank you 577 00:29:22,400 --> 00:29:24,480 Speaker 1: so much for both coming on the show. Thank you 578 00:29:31,560 --> 00:29:34,440 Speaker 1: What Goes Up. We'll be back next week. Until then, 579 00:29:34,520 --> 00:29:36,800 Speaker 1: you can find us on the Bloomberg Terminal, website and 580 00:29:36,840 --> 00:29:39,840 Speaker 1: app or wherever you get your podcasts. We love it 581 00:29:39,840 --> 00:29:41,880 Speaker 1: if you took the time to rate interview the show 582 00:29:41,880 --> 00:29:45,520 Speaker 1: on Apple Podcasts so more listeners can find us. And 583 00:29:45,600 --> 00:29:49,280 Speaker 1: you can find us on Twitter, follow me at therapont Seck, 584 00:29:49,720 --> 00:29:53,880 Speaker 1: Mike is at Reaganonymous, Chris Nagi is at Chris nag one, 585 00:29:54,280 --> 00:29:58,560 Speaker 1: and you can also follow Bloomberg Podcasts at Podcasts. What 586 00:29:58,720 --> 00:30:01,360 Speaker 1: Goes Up is produced by over Foreheads. The head of 587 00:30:01,360 --> 00:30:05,040 Speaker 1: Bloomberg podcast is Francesca Levie. Thanks for listening. See you 588 00:30:05,120 --> 00:30:05,520 Speaker 1: next time.