1 00:00:13,760 --> 00:00:17,480 Speaker 1: Hello, and welcome to What Goes Up, a weekly markets podcast. 2 00:00:17,600 --> 00:00:20,520 Speaker 1: I'm Mike Creaging, a senior editor at Bloomberg, and this 3 00:00:20,600 --> 00:00:22,920 Speaker 1: week on the show, Well, this was supposed to be 4 00:00:22,960 --> 00:00:26,400 Speaker 1: the summer that kicks off a so called new Roaring twenties, 5 00:00:26,440 --> 00:00:29,760 Speaker 1: as vaccinations allowed us to take off our masks and 6 00:00:29,880 --> 00:00:32,519 Speaker 1: go out and see the outside world again. But if 7 00:00:32,520 --> 00:00:35,919 Speaker 1: you're looking just at the financial markets, well it sort 8 00:00:35,920 --> 00:00:38,440 Speaker 1: of looks like somebody didn't get the memo. Long end 9 00:00:38,440 --> 00:00:41,080 Speaker 1: treasury yields and the type of stocks that benefit from 10 00:00:41,080 --> 00:00:43,880 Speaker 1: a return to normalcy have both made you turns after 11 00:00:44,040 --> 00:00:46,920 Speaker 1: rising strongly earlier in the year. So what exactly is 12 00:00:46,960 --> 00:00:49,440 Speaker 1: going on? We'll get into it with the director of 13 00:00:49,479 --> 00:00:52,599 Speaker 1: investment research at one of the world's biggest hedge fund companies. 14 00:00:53,159 --> 00:00:55,760 Speaker 1: But first, Charlie Pellett tell us who this week's mystery 15 00:00:55,800 --> 00:01:01,200 Speaker 1: co host is. This week's mystery co host is John Author's. 16 00:01:01,640 --> 00:01:05,400 Speaker 1: John is a senior editor and columnist for Bloomberg Opinion. 17 00:01:05,720 --> 00:01:08,400 Speaker 1: He is a big time Red Sox fan who has 18 00:01:08,520 --> 00:01:12,560 Speaker 1: the strangest Boston accent that Reagan has ever heard. Sources 19 00:01:12,600 --> 00:01:14,840 Speaker 1: say John broke into song in the middle of the 20 00:01:14,840 --> 00:01:18,840 Speaker 1: newsroom when England scored first in the euro Cup finals, 21 00:01:19,440 --> 00:01:22,000 Speaker 1: but he was singing the blues by the end of 22 00:01:22,040 --> 00:01:24,720 Speaker 1: the shootout. Uh, John, that was a bit of a 23 00:01:24,760 --> 00:01:27,520 Speaker 1: cheap shot by Charlie there. I think you mean at 24 00:01:27,560 --> 00:01:32,880 Speaker 1: sory rather than blues. It was I was, I was 25 00:01:33,000 --> 00:01:35,320 Speaker 1: seeing all kinds of things when we beat Germany. In 26 00:01:35,360 --> 00:01:37,839 Speaker 1: the news room, I was, I was, I was elsewhere 27 00:01:37,880 --> 00:01:43,280 Speaker 1: for the for the Grand Final. We we Italy were 28 00:01:43,280 --> 00:01:45,280 Speaker 1: the best team on the on the day in the tournament. 29 00:01:45,400 --> 00:01:49,320 Speaker 1: It's much easier to much easier to take guts crushing 30 00:01:49,320 --> 00:01:51,800 Speaker 1: losses like that if if you feel that you weren't 31 00:01:51,880 --> 00:01:54,560 Speaker 1: quite the better team, right, all right, I gotta say 32 00:01:54,600 --> 00:01:59,280 Speaker 1: my wife had this sudden interest in this tournament and 33 00:01:59,440 --> 00:02:02,360 Speaker 1: the English side specifically. I think it had something to 34 00:02:02,400 --> 00:02:05,240 Speaker 1: do with the average level of handsomeness of that team though, 35 00:02:05,360 --> 00:02:08,359 Speaker 1: so I was kind of inclined to take the Italian side. 36 00:02:08,360 --> 00:02:09,920 Speaker 1: I'm a Jersey guy too, so I was kind of 37 00:02:09,919 --> 00:02:13,920 Speaker 1: inclined to take the Italian side just just because of that. Okay, 38 00:02:15,520 --> 00:02:18,200 Speaker 1: I can forgive you. It's like, but John, let's bring 39 00:02:18,280 --> 00:02:20,720 Speaker 1: in our guest, who I think is an old friend 40 00:02:20,760 --> 00:02:23,560 Speaker 1: of yours, and she's one of these people who has 41 00:02:23,600 --> 00:02:25,800 Speaker 1: just an amazing resume. I wish I could read you 42 00:02:25,840 --> 00:02:27,520 Speaker 1: just the highlights, but I think that would be all 43 00:02:27,520 --> 00:02:29,440 Speaker 1: the time we had on the show. But I encourage 44 00:02:29,480 --> 00:02:32,160 Speaker 1: you to google her and check out her history. I 45 00:02:32,160 --> 00:02:33,920 Speaker 1: think you know where. I think the two of you 46 00:02:33,960 --> 00:02:36,600 Speaker 1: have switched jobs, possibly since you last spoke, so we'll 47 00:02:36,600 --> 00:02:38,560 Speaker 1: have to we'll have to catch up on that, but 48 00:02:38,639 --> 00:02:41,440 Speaker 1: I will I will pull one thing from her resume, John, 49 00:02:41,440 --> 00:02:43,880 Speaker 1: and that is she has a few degrees, but their 50 00:02:43,919 --> 00:02:46,640 Speaker 1: first degree is as a journalism major. So I I 51 00:02:46,720 --> 00:02:49,760 Speaker 1: was encouraging for for those of us with ink stains 52 00:02:49,800 --> 00:02:53,360 Speaker 1: on our pants. Still, I'm happy to hear that. But anyway, 53 00:02:53,480 --> 00:02:58,800 Speaker 1: her name is Rebecca Patterson and she's with Bridgewater Associates. Rebecca, 54 00:02:58,880 --> 00:03:00,919 Speaker 1: thank you so much for joining the show. Oh it's 55 00:03:00,960 --> 00:03:04,320 Speaker 1: great to be here. Oh great, And Rebecca, I wanted 56 00:03:04,320 --> 00:03:07,080 Speaker 1: to sort of get a download of everything you're up 57 00:03:07,120 --> 00:03:09,239 Speaker 1: to it Bridgewater these days. I guess you've been there, 58 00:03:09,360 --> 00:03:11,920 Speaker 1: what about eighteen months or so, twenty months something like that. 59 00:03:11,960 --> 00:03:14,720 Speaker 1: But I really wanted to just first start with kind 60 00:03:14,720 --> 00:03:18,040 Speaker 1: of what we've seen in the markets, uh this week 61 00:03:18,160 --> 00:03:20,600 Speaker 1: and really over the last few months, and just kind 62 00:03:20,600 --> 00:03:22,920 Speaker 1: of get your take on the state of play. Like 63 00:03:22,960 --> 00:03:25,720 Speaker 1: I said that the yields have have come back down, 64 00:03:26,360 --> 00:03:29,960 Speaker 1: there was sort of real cyclical reopening. Uh, favorite stocks 65 00:03:29,960 --> 00:03:32,600 Speaker 1: in the stock market have made a U turn as well, 66 00:03:33,360 --> 00:03:36,000 Speaker 1: And I suppose part of it is just, you know, 67 00:03:36,600 --> 00:03:38,760 Speaker 1: the reopening seems to be progressing in sort of a 68 00:03:38,760 --> 00:03:41,760 Speaker 1: two step forward, one step back type of thing. You know, 69 00:03:41,800 --> 00:03:47,160 Speaker 1: we're seeing Masqus again in Los Angeles, this delta variant 70 00:03:47,240 --> 00:03:49,920 Speaker 1: is is really causing a lot of questions. Well, what's 71 00:03:50,320 --> 00:03:54,160 Speaker 1: curiously your thirty thousand foot take, your macro take on 72 00:03:54,160 --> 00:03:58,440 Speaker 1: on what the market signals are right now? Given especially 73 00:03:58,560 --> 00:04:00,720 Speaker 1: earlier this week, we saw that big a scoff move 74 00:04:00,800 --> 00:04:03,440 Speaker 1: that I guess you could kind of attribute possibly to 75 00:04:03,520 --> 00:04:06,920 Speaker 1: just this typical sloppy summer trading, But it's really been 76 00:04:07,000 --> 00:04:09,840 Speaker 1: going on for months now, this kind of reversal of 77 00:04:10,000 --> 00:04:14,480 Speaker 1: the reflation and reopening themes. What do you see going on? Sure, So, 78 00:04:14,600 --> 00:04:16,919 Speaker 1: at the risk of being cute, I'm going to start 79 00:04:16,920 --> 00:04:20,200 Speaker 1: with alliteration um and I would if I had to 80 00:04:20,240 --> 00:04:23,840 Speaker 1: boil down what caused this sort of view turn, if 81 00:04:23,839 --> 00:04:26,960 Speaker 1: you will, that started around April. I would say it's 82 00:04:27,040 --> 00:04:32,840 Speaker 1: policy pandemic positions and really on the policy and pandemic. 83 00:04:33,000 --> 00:04:35,880 Speaker 1: It's going from what felt in the first quarter as 84 00:04:36,440 --> 00:04:40,479 Speaker 1: a really confident, certain outlook among the market, right among 85 00:04:40,560 --> 00:04:45,200 Speaker 1: market participants that okay, after the Georgia race, we had 86 00:04:45,839 --> 00:04:50,280 Speaker 1: all all green lights for big fiscal stimulus. So we 87 00:04:50,279 --> 00:04:52,600 Speaker 1: we got one point nine trillion passed, and then there 88 00:04:52,600 --> 00:04:55,119 Speaker 1: were prospects for another package to be passed, and people 89 00:04:55,160 --> 00:04:57,599 Speaker 1: were fairly confident that was going forward. So that was 90 00:04:57,640 --> 00:05:00,880 Speaker 1: the fiscal monetary The FED told you we got this 91 00:05:00,920 --> 00:05:04,280 Speaker 1: new inflation target regime where we're gonna let we're gonna 92 00:05:04,360 --> 00:05:07,720 Speaker 1: lag the economy, We're gonna let inflation go above two 93 00:05:07,920 --> 00:05:11,520 Speaker 1: and so people thought easy policy great. And then and 94 00:05:11,560 --> 00:05:15,240 Speaker 1: then positioning followed you. You thought, great, I want to 95 00:05:15,240 --> 00:05:17,839 Speaker 1: be short bonds, I want to be long cyclical assets. 96 00:05:17,880 --> 00:05:20,679 Speaker 1: Let's go. By the time we got to late March 97 00:05:20,720 --> 00:05:24,040 Speaker 1: early April, positions have gotten pretty extended. And we know 98 00:05:24,160 --> 00:05:27,200 Speaker 1: that now based on all the data we've been able 99 00:05:27,200 --> 00:05:30,920 Speaker 1: to see you. Starting around April, I think we got 100 00:05:30,960 --> 00:05:36,000 Speaker 1: more question marks around the policy. So fiscal policy less 101 00:05:36,000 --> 00:05:39,280 Speaker 1: certain about how big the packet next package could be. 102 00:05:39,320 --> 00:05:42,360 Speaker 1: In the timing, it's not clear we're going to get 103 00:05:42,360 --> 00:05:46,040 Speaker 1: a bipartisan infrastructure package through soon. It's not as clear 104 00:05:46,080 --> 00:05:47,720 Speaker 1: if we'll get a big one done before the end 105 00:05:47,720 --> 00:05:51,000 Speaker 1: of the year, so more uncertainty there. Obviously, the June 106 00:05:51,040 --> 00:05:54,479 Speaker 1: FED meeting a little less certainty around the FEDS path 107 00:05:54,600 --> 00:05:57,400 Speaker 1: how quickly they might start tapering quantity of easy and 108 00:05:57,400 --> 00:05:59,960 Speaker 1: how quickly they might start reacting to inflation. And then 109 00:06:00,000 --> 00:06:03,080 Speaker 1: on the pandemic, of course, we're seeing the delta variant 110 00:06:03,320 --> 00:06:07,760 Speaker 1: causing some new lockdowns in places like Australia, you know, horrible, 111 00:06:07,800 --> 00:06:11,320 Speaker 1: horrible infection rates in places like Indonesia, and then just 112 00:06:11,440 --> 00:06:14,599 Speaker 1: question marks. I think it's not surprising that after last 113 00:06:14,680 --> 00:06:17,839 Speaker 1: year it was so sudden unexpected, had such a huge 114 00:06:18,000 --> 00:06:22,000 Speaker 1: economic and human impact that when you see anything that 115 00:06:22,000 --> 00:06:25,440 Speaker 1: that feels the same, it's going to cause people to say, Okay, 116 00:06:25,480 --> 00:06:28,440 Speaker 1: maybe I was pricing in too much Roaring twenties, Maybe 117 00:06:28,440 --> 00:06:31,240 Speaker 1: I want to dial back some of that risk. And 118 00:06:31,279 --> 00:06:34,400 Speaker 1: so I think that's it's the positioning that left things 119 00:06:34,520 --> 00:06:38,160 Speaker 1: vulnerable to less certainty around those other piece, if you will, 120 00:06:38,279 --> 00:06:42,840 Speaker 1: the policy and pandemic repe Obviously, you know, uh, everyone 121 00:06:42,880 --> 00:06:46,160 Speaker 1: expected some hot CPI readings, maybe not as hot as 122 00:06:46,200 --> 00:06:51,839 Speaker 1: what we've actually gotten. Um does that transition into uh 123 00:06:52,000 --> 00:06:55,200 Speaker 1: maybe transitory being a little longer than people were expected. 124 00:06:55,720 --> 00:06:58,719 Speaker 1: But also I to throw even one more p in there, 125 00:06:58,839 --> 00:07:02,520 Speaker 1: and the party politics, Uh, in the US, it's a 126 00:07:02,600 --> 00:07:05,080 Speaker 1: it's a very convenient talking point. And I know, you 127 00:07:05,120 --> 00:07:07,200 Speaker 1: know among play company like this, we shouldn't talk to 128 00:07:07,200 --> 00:07:09,800 Speaker 1: religion or politics. But but but just in general terms, 129 00:07:09,800 --> 00:07:12,720 Speaker 1: it's a very convenient talking point with midterms coming up 130 00:07:13,560 --> 00:07:17,360 Speaker 1: against what what you mentioned, the that fiscal stimulus that 131 00:07:17,360 --> 00:07:21,440 Speaker 1: played such a huge role last year. Is inflation a 132 00:07:21,600 --> 00:07:27,960 Speaker 1: sellable uh notion for politicians to vote no on on 133 00:07:28,120 --> 00:07:31,920 Speaker 1: basically everything that Biden wants to do with infrastructure and 134 00:07:31,920 --> 00:07:34,360 Speaker 1: and anything else you know, looking forward, if this delta 135 00:07:34,400 --> 00:07:38,440 Speaker 1: strain gets even worse and we're talking about maybe extending 136 00:07:38,480 --> 00:07:44,480 Speaker 1: those unemployment benefits, maybe you know all the other things. Um, well, 137 00:07:44,520 --> 00:07:47,360 Speaker 1: inflation work as a as a selling point among the 138 00:07:47,400 --> 00:07:51,400 Speaker 1: electorate and among policy to to sort of prevent another 139 00:07:51,480 --> 00:07:56,000 Speaker 1: leg of fiscal stimulus. Well, you made to two points 140 00:07:56,000 --> 00:07:58,760 Speaker 1: there that I think are probably useful for us to 141 00:07:58,800 --> 00:08:02,160 Speaker 1: impact quickly. One is if delta gets worse, and one 142 00:08:02,200 --> 00:08:06,000 Speaker 1: if inflation is bad and and I it is possible 143 00:08:06,040 --> 00:08:09,440 Speaker 1: you have both right, if if the pandemic gets worse 144 00:08:09,480 --> 00:08:13,880 Speaker 1: and exacerbates supply chain issues. You could have inflation actually 145 00:08:13,880 --> 00:08:16,080 Speaker 1: getting worse, even if growth cools a little bit, which 146 00:08:16,080 --> 00:08:18,520 Speaker 1: would be really, really not a good outcome. We hope 147 00:08:18,560 --> 00:08:22,920 Speaker 1: that one doesn't happen. Um. The thing about Delta just quickly, 148 00:08:23,120 --> 00:08:26,920 Speaker 1: and this is a very US centric view because the 149 00:08:26,960 --> 00:08:31,240 Speaker 1: country has a high, relatively high vaccination rate, and the 150 00:08:31,280 --> 00:08:34,800 Speaker 1: politicians and the public have basically said we're not locking 151 00:08:34,840 --> 00:08:38,079 Speaker 1: down again. Um. And that has its own cost. But 152 00:08:38,400 --> 00:08:41,600 Speaker 1: it means that even if the DELTA infections get worse 153 00:08:41,640 --> 00:08:43,679 Speaker 1: in the US, I think the bar is much higher 154 00:08:43,720 --> 00:08:46,679 Speaker 1: before we lock down again, which means that the economic 155 00:08:46,720 --> 00:08:50,240 Speaker 1: consequences are very different. You know, the economic shock occurred 156 00:08:50,280 --> 00:08:53,440 Speaker 1: last year because all business activity largely stopped because of 157 00:08:53,440 --> 00:08:56,679 Speaker 1: the lockdowns. We're not seeing that happen again. And so 158 00:08:56,720 --> 00:08:59,479 Speaker 1: when I look at the markets and how they've behaved recently, 159 00:09:00,040 --> 00:09:02,440 Speaker 1: if you think a large part of the equity sell off, 160 00:09:02,440 --> 00:09:05,000 Speaker 1: and we definitely saw it in reopening sectors. You know, 161 00:09:05,040 --> 00:09:07,040 Speaker 1: if you if you forget about the SMP and you 162 00:09:07,120 --> 00:09:09,880 Speaker 1: drill down to the types of companies that sold off more, 163 00:09:10,360 --> 00:09:12,920 Speaker 1: you know, you see things like hotels and leisure and 164 00:09:13,000 --> 00:09:16,600 Speaker 1: airlines down thirty or fifty from from their high over 165 00:09:16,600 --> 00:09:19,079 Speaker 1: the last few months. So that's a pretty big that's 166 00:09:19,120 --> 00:09:22,560 Speaker 1: a very big move. UM. But I think those growth 167 00:09:22,600 --> 00:09:26,400 Speaker 1: worries purely based on delta, for the United States at least, 168 00:09:26,440 --> 00:09:29,640 Speaker 1: are overdone because it is to me the bar is 169 00:09:29,679 --> 00:09:33,160 Speaker 1: so incredibly high that the US has broad lockdowns again. 170 00:09:33,240 --> 00:09:35,640 Speaker 1: I think what you're seeing now are countries taking different 171 00:09:35,640 --> 00:09:38,640 Speaker 1: paths and how they deal with it. Australia locking down, 172 00:09:39,360 --> 00:09:43,280 Speaker 1: the UK opening up Freedom Day this week right, And 173 00:09:43,400 --> 00:09:45,280 Speaker 1: in the US it feels like it's going to be 174 00:09:45,400 --> 00:09:48,559 Speaker 1: very localized. The l A is having more mask mandates, 175 00:09:48,720 --> 00:09:51,400 Speaker 1: other parts of the country are saying what you know, 176 00:09:51,440 --> 00:09:54,440 Speaker 1: what vaccine and what pandemic? So UM. I do think 177 00:09:54,480 --> 00:09:57,840 Speaker 1: it's important not to extrapolate what happened last year and 178 00:09:57,880 --> 00:09:59,960 Speaker 1: think it just repeats this year. I think the word 179 00:10:00,200 --> 00:10:02,400 Speaker 1: isn't delta. The worry would be if we have a 180 00:10:02,480 --> 00:10:07,559 Speaker 1: mutation which is always possible, that evades the vaccine, right, 181 00:10:07,679 --> 00:10:10,960 Speaker 1: that that we're not protected against. That's when you could 182 00:10:11,000 --> 00:10:13,720 Speaker 1: be looking at new lockdowns. Because we're basically back at 183 00:10:13,720 --> 00:10:16,600 Speaker 1: square one. UM. And I'm not an expert. I don't 184 00:10:16,600 --> 00:10:21,480 Speaker 1: know what the probability is that that happens. But to inflation, absolutely, 185 00:10:21,559 --> 00:10:25,079 Speaker 1: that could be a political point. I as a journalist, um, 186 00:10:25,120 --> 00:10:27,280 Speaker 1: I did spend a few years in d C. Covering 187 00:10:27,320 --> 00:10:30,280 Speaker 1: Capitol Hill in the White House, which was great fun 188 00:10:30,480 --> 00:10:34,960 Speaker 1: to see firsthand how the sausage has made. And you know, 189 00:10:35,080 --> 00:10:38,680 Speaker 1: anything that affects your voters is going to be something 190 00:10:38,720 --> 00:10:41,520 Speaker 1: that becomes a campaign talking point. And if your rents 191 00:10:41,559 --> 00:10:44,560 Speaker 1: are going up, if you can't afford to buy a car, 192 00:10:45,480 --> 00:10:48,120 Speaker 1: if your food prices are going up, your gasoline prices 193 00:10:48,160 --> 00:10:51,959 Speaker 1: are going up, well yeah, blame the other party. Um So, 194 00:10:52,160 --> 00:10:55,640 Speaker 1: I I do think inflation could be something that becomes 195 00:10:55,679 --> 00:10:58,200 Speaker 1: more of a political hot button, and that will put 196 00:10:58,200 --> 00:11:01,880 Speaker 1: the FED in a really interesting position. Obviously, the Fed 197 00:11:01,960 --> 00:11:04,280 Speaker 1: is independent, They're not going to react to politics, but 198 00:11:04,360 --> 00:11:08,679 Speaker 1: you could envision uh situation over the coming months if 199 00:11:08,720 --> 00:11:11,960 Speaker 1: inflation does stay higher a little longer than maybe the 200 00:11:11,960 --> 00:11:15,319 Speaker 1: consensus believes, And the consensus today believes that inflation is 201 00:11:15,320 --> 00:11:17,960 Speaker 1: going to be back to pre pandemic levels within a year, 202 00:11:18,200 --> 00:11:21,000 Speaker 1: which is interesting to me and I think probably overdone. 203 00:11:21,760 --> 00:11:25,840 Speaker 1: Um But if inflation is high and the unemployment rate 204 00:11:25,880 --> 00:11:29,200 Speaker 1: isn't back to the Fed's target, and they're getting political pressure. 205 00:11:29,600 --> 00:11:31,600 Speaker 1: I think you're going to see a tremendous amount of 206 00:11:31,600 --> 00:11:34,640 Speaker 1: focus on the FED, and including on whether or not 207 00:11:35,280 --> 00:11:38,080 Speaker 1: President Buying keeps your own Powell the seat going into 208 00:11:38,200 --> 00:11:53,120 Speaker 1: next year. One point i'd like to to make um 209 00:11:53,160 --> 00:11:57,120 Speaker 1: on the pandemic. I certainly agree with you the chances 210 00:11:57,160 --> 00:12:02,040 Speaker 1: of another lookdown the scale of what happened last spring 211 00:12:02,120 --> 00:12:06,800 Speaker 1: requires effectively a new virus, which i'd like you don't 212 00:12:06,800 --> 00:12:09,240 Speaker 1: know enough about to to know whether it will happen. 213 00:12:10,400 --> 00:12:13,520 Speaker 1: The chances are above zero, and neither of us already 214 00:12:13,559 --> 00:12:16,000 Speaker 1: qualified to say anything much more than that. What I 215 00:12:16,080 --> 00:12:19,840 Speaker 1: do think, however, both from being a British person who 216 00:12:19,880 --> 00:12:22,520 Speaker 1: still can't go home unless I'm prepared to get very 217 00:12:22,520 --> 00:12:25,920 Speaker 1: expensive PC artists and spend ten days in quarantine even 218 00:12:25,960 --> 00:12:30,720 Speaker 1: though I'm fully vaccinated and and Britain is free, there 219 00:12:30,800 --> 00:12:36,239 Speaker 1: are actually um subtler gradations than we than we expected. 220 00:12:36,320 --> 00:12:39,560 Speaker 1: And as somebody who's generally been arguing that inflation is 221 00:12:39,600 --> 00:12:43,240 Speaker 1: more of a risk than people think, this is I 222 00:12:43,320 --> 00:12:46,680 Speaker 1: have to admit an argument that inflation may be less 223 00:12:46,679 --> 00:12:49,280 Speaker 1: of a risk than people think, which is that we're 224 00:12:49,320 --> 00:12:51,640 Speaker 1: not going to lock down. And some people might have 225 00:12:51,679 --> 00:12:55,120 Speaker 1: ideological reasons for not for for thinking they really can 226 00:12:55,240 --> 00:12:59,839 Speaker 1: behave as normal. But it's going to be around. It's 227 00:13:00,160 --> 00:13:02,200 Speaker 1: to remind us of its presence. We're about to watch 228 00:13:02,240 --> 00:13:05,240 Speaker 1: the Olympics played in front of empty stadiums. I couldn't 229 00:13:05,240 --> 00:13:07,920 Speaker 1: go to my Red Sox Yankees game last last week 230 00:13:07,960 --> 00:13:12,600 Speaker 1: because the Yankees all had covid um. It will, it 231 00:13:12,640 --> 00:13:16,040 Speaker 1: will drag on having some kind of an effect on 232 00:13:16,040 --> 00:13:18,480 Speaker 1: our lives, and it won't mean a sudden stop. But 233 00:13:18,559 --> 00:13:23,040 Speaker 1: it also won't mean all the roaring twenties ideas that 234 00:13:23,040 --> 00:13:24,760 Speaker 1: we're all going to go out and spend all this 235 00:13:24,840 --> 00:13:28,760 Speaker 1: money burning a hole in our pockets. That that argument, also, 236 00:13:28,840 --> 00:13:31,680 Speaker 1: it seems to me, is looking weaker now as we 237 00:13:31,800 --> 00:13:37,120 Speaker 1: understand where the pandemic is going. So perhaps we shouldn't 238 00:13:37,120 --> 00:13:42,520 Speaker 1: be thinking so binarily about this. Is that a concern 239 00:13:42,559 --> 00:13:46,520 Speaker 1: of yours, whether whether we really are going to spend 240 00:13:46,520 --> 00:13:49,760 Speaker 1: all the money happily in the way that people have 241 00:13:49,760 --> 00:13:54,320 Speaker 1: have been predicting. The riscue articulated definitely resonates with me 242 00:13:54,600 --> 00:13:58,120 Speaker 1: that and I think again it will depend quite a 243 00:13:58,120 --> 00:14:01,000 Speaker 1: bit country by country. We should see a lot of differentiation. 244 00:14:01,120 --> 00:14:04,240 Speaker 1: If if you're a country like Thailand, and you depend 245 00:14:04,360 --> 00:14:08,800 Speaker 1: so heavily on tourism. Um. You know, there are very 246 00:14:08,840 --> 00:14:11,920 Speaker 1: few people who have the ability and willingness to spend 247 00:14:11,920 --> 00:14:14,640 Speaker 1: who are going to Thailand right now, um, And so 248 00:14:14,960 --> 00:14:18,120 Speaker 1: you are going to see some countries hurt and hurt 249 00:14:18,160 --> 00:14:22,320 Speaker 1: even more with delta just creating fear and uncertainty. The 250 00:14:22,440 --> 00:14:26,320 Speaker 1: United States I think is in unique is too strong 251 00:14:26,360 --> 00:14:29,480 Speaker 1: a word, but in a differentiated position in that you 252 00:14:29,520 --> 00:14:32,560 Speaker 1: do have the high vaccination rate, You do have a 253 00:14:32,640 --> 00:14:37,320 Speaker 1: savings rate that is still today um, quite a bit 254 00:14:37,360 --> 00:14:40,160 Speaker 1: elevated versus where it was before the pandemic. You have 255 00:14:40,400 --> 00:14:43,960 Speaker 1: net worth that's basically at record highs UM. You have 256 00:14:44,040 --> 00:14:47,800 Speaker 1: balance sheets both of companies and households that are extremely 257 00:14:47,840 --> 00:14:51,560 Speaker 1: healthy uh. And you have one of the tightest labor 258 00:14:51,600 --> 00:14:54,760 Speaker 1: markets we've seen in decades, even with the unemployment rate 259 00:14:54,800 --> 00:14:58,040 Speaker 1: at five point nine percent. And so while I don't 260 00:14:58,040 --> 00:14:59,760 Speaker 1: know if we're going to see a roaring twenties and 261 00:14:59,800 --> 00:15:02,720 Speaker 1: now LGY, I do think the odds, even with the 262 00:15:02,800 --> 00:15:05,640 Speaker 1: delta variant, are pretty good that you will continue to 263 00:15:05,680 --> 00:15:09,240 Speaker 1: see very robust growth in the United States in line 264 00:15:09,240 --> 00:15:12,840 Speaker 1: with and I think the biases above expectations at least 265 00:15:12,880 --> 00:15:16,440 Speaker 1: for the coming quarters. Um. Now, of course that's barring, 266 00:15:16,840 --> 00:15:20,520 Speaker 1: you know, as we said, a new virus variant. I 267 00:15:20,560 --> 00:15:24,480 Speaker 1: hate even talking about it. It's depressing, but it's possible, um. 268 00:15:24,760 --> 00:15:27,280 Speaker 1: And I think you know, we believe our base case 269 00:15:27,440 --> 00:15:30,040 Speaker 1: is that you are going to get another fiscal package 270 00:15:30,320 --> 00:15:33,120 Speaker 1: in the US this year, maybe not till the fourth quarter, 271 00:15:33,240 --> 00:15:35,120 Speaker 1: but we are going to. We we expect we will 272 00:15:35,160 --> 00:15:38,240 Speaker 1: see something get through. And we believe that the FED 273 00:15:38,560 --> 00:15:41,280 Speaker 1: is going to continue lagging the recovery, so to speak, 274 00:15:41,680 --> 00:15:44,680 Speaker 1: they will let right now, it's too noisy. How can 275 00:15:44,680 --> 00:15:47,800 Speaker 1: you read anything into a CPI report month to month? 276 00:15:48,200 --> 00:15:51,760 Speaker 1: So let the noise fade, see what the underlying inflation 277 00:15:51,880 --> 00:15:54,120 Speaker 1: rate is to the degree you can, and then figure 278 00:15:54,120 --> 00:15:56,720 Speaker 1: out where you go. And so even if the FED 279 00:15:56,800 --> 00:15:59,600 Speaker 1: does announce at Jackson Hole or in September their plan 280 00:15:59,760 --> 00:16:02,680 Speaker 1: for tapering, and maybe they start tapering somewhere around your 281 00:16:02,800 --> 00:16:05,440 Speaker 1: end um, they're they're not going to be acting the 282 00:16:05,480 --> 00:16:09,560 Speaker 1: way they were in two thousand seventeen or before. They're 283 00:16:09,600 --> 00:16:12,600 Speaker 1: not going to be preemptively tightening. And I would add 284 00:16:12,640 --> 00:16:15,440 Speaker 1: on the FED briefly that you know, we're talking so 285 00:16:15,520 --> 00:16:18,120 Speaker 1: much about inflation, and that is the big thing. But 286 00:16:18,200 --> 00:16:21,960 Speaker 1: don't forget they also fine tuned their labor market target. Right. 287 00:16:22,000 --> 00:16:25,960 Speaker 1: They're looking at inclusive employment. And if you think inclusively 288 00:16:26,000 --> 00:16:29,280 Speaker 1: about employment, you're thinking about cohorts of people high school 289 00:16:29,320 --> 00:16:33,200 Speaker 1: degree and under, etcetera. That unemployment rate tends to run 290 00:16:33,240 --> 00:16:37,000 Speaker 1: two or three percentage points higher um than the headline 291 00:16:37,040 --> 00:16:40,200 Speaker 1: unemployment rate. And that's another reason if there are any 292 00:16:40,400 --> 00:16:43,160 Speaker 1: uncertainties about growth and the Fed wants to go a 293 00:16:43,200 --> 00:16:45,600 Speaker 1: little slow, that's a reason they could go a little 294 00:16:45,640 --> 00:17:04,520 Speaker 1: slower justifiably. John, I wanted to ask you a question 295 00:17:04,520 --> 00:17:07,000 Speaker 1: about you have written about inflation. You have what you 296 00:17:07,080 --> 00:17:11,959 Speaker 1: call authors indicators. Um, you are sort of leaning, uh 297 00:17:12,000 --> 00:17:14,600 Speaker 1: perhaps on the on the hawkish side on inflation to 298 00:17:14,960 --> 00:17:17,639 Speaker 1: some degree. And I think that's interesting because it is 299 00:17:17,720 --> 00:17:21,160 Speaker 1: seeing it does seem like such a solid consensus, especially 300 00:17:21,160 --> 00:17:23,480 Speaker 1: many of the guests we've had on the show that 301 00:17:24,080 --> 00:17:29,040 Speaker 1: transitory uh you know, he's on the shorter end of transitory, 302 00:17:29,080 --> 00:17:32,000 Speaker 1: temporary whatever, however many months that is no one seems 303 00:17:32,000 --> 00:17:35,320 Speaker 1: to know. But it's not it's not a real permanent 304 00:17:35,359 --> 00:17:39,040 Speaker 1: shift in pricing. UM. We'll walk us through your indicators, 305 00:17:39,080 --> 00:17:41,920 Speaker 1: what you're seeing kind of briefly, and why you are 306 00:17:41,960 --> 00:17:45,800 Speaker 1: toting a little hawkishly. Okay. You know, first of all, um, 307 00:17:46,119 --> 00:17:49,640 Speaker 1: as Rebecca was saying earlier, I have, thankfully not being 308 00:17:49,800 --> 00:17:52,120 Speaker 1: over well over a hundred years old, I have never 309 00:17:52,160 --> 00:17:56,360 Speaker 1: lived through anything like this either, and so um, you know, 310 00:17:56,960 --> 00:18:02,280 Speaker 1: one starts from a position of humility and ignorance. The 311 00:18:02,320 --> 00:18:05,160 Speaker 1: general idea of the indicators is trying to work out 312 00:18:05,200 --> 00:18:09,200 Speaker 1: what I think the most the most important numbers will 313 00:18:09,240 --> 00:18:11,439 Speaker 1: be to keep an eye on across a range of factors, 314 00:18:11,480 --> 00:18:14,439 Speaker 1: because you can argue about whether inflation is a monetary 315 00:18:14,480 --> 00:18:18,280 Speaker 1: phenomenon or whether it's about the wage spiral or whatever. 316 00:18:18,359 --> 00:18:21,000 Speaker 1: But you know, there are plainly many factors that go 317 00:18:21,080 --> 00:18:24,000 Speaker 1: into causing it, and there are plainly genuine there are 318 00:18:24,040 --> 00:18:26,399 Speaker 1: real forces in either direction. I think some of this 319 00:18:26,520 --> 00:18:29,960 Speaker 1: debate gets a little weak and it's like saying, you know, 320 00:18:30,119 --> 00:18:33,000 Speaker 1: the picture, just through this at this through the ball 321 00:18:33,160 --> 00:18:35,359 Speaker 1: over a hundred miles an hour. Of course he's not 322 00:18:35,400 --> 00:18:37,880 Speaker 1: going to hit it. And the other guy says, well, 323 00:18:37,880 --> 00:18:41,400 Speaker 1: look this guy, it's the most muscle bound sluggly you've 324 00:18:41,440 --> 00:18:44,440 Speaker 1: ever seen. He swung really hard. It's bound to go out. 325 00:18:44,880 --> 00:18:46,919 Speaker 1: Both of those are very stupid things to say. There 326 00:18:46,960 --> 00:18:51,240 Speaker 1: are very strong forces in either direction, and yet any 327 00:18:51,320 --> 00:18:54,840 Speaker 1: number of outcomes is possible depending on the exact angle, 328 00:18:54,960 --> 00:19:00,000 Speaker 1: that margin, everything about the contact that is that is made. 329 00:19:00,320 --> 00:19:04,080 Speaker 1: So there are forces in both directions. What we need 330 00:19:04,119 --> 00:19:08,080 Speaker 1: to see is how they how they counteract. So we 331 00:19:08,840 --> 00:19:13,000 Speaker 1: all the standard measures of inflation, including trimmed mean, including core, 332 00:19:14,000 --> 00:19:18,760 Speaker 1: everything suggests that inflation is higher than it has been 333 00:19:18,760 --> 00:19:20,680 Speaker 1: on the average for the last ten years. You can 334 00:19:21,400 --> 00:19:28,840 Speaker 1: I've seen some remarkable prestig agitation with with the numbers. Ultimately, yes, 335 00:19:28,880 --> 00:19:32,160 Speaker 1: inflation is definitely a bit higher. Whichever way you look 336 00:19:32,200 --> 00:19:34,359 Speaker 1: at it. It may not be terrifying, but it's higher. 337 00:19:35,119 --> 00:19:37,720 Speaker 1: Um the bond market at this point, there is no 338 00:19:38,160 --> 00:19:40,720 Speaker 1: possible doubt that the bond market just doesn't think this 339 00:19:40,800 --> 00:19:44,040 Speaker 1: is a problem in terms of its consensus, in terms 340 00:19:44,040 --> 00:19:47,320 Speaker 1: of the view that finally emerges from the price uh. 341 00:19:48,200 --> 00:19:51,080 Speaker 1: If you look at we've got indicators for the for 342 00:19:51,400 --> 00:19:55,399 Speaker 1: various components. The one that's fascinating, which I think is 343 00:19:55,640 --> 00:19:57,640 Speaker 1: probably going to be critical over the next few months 344 00:19:57,800 --> 00:20:01,840 Speaker 1: shelter um, which which recommentioned earlier in the in the 345 00:20:02,040 --> 00:20:06,520 Speaker 1: in her first comments as well that generally speaking, there 346 00:20:06,560 --> 00:20:10,240 Speaker 1: are all kinds of technical complaints about exactly how how 347 00:20:10,480 --> 00:20:14,680 Speaker 1: shelter is accounted for in the in the CPI calculations. 348 00:20:14,720 --> 00:20:16,840 Speaker 1: But if house prices rise as much as they've done 349 00:20:17,280 --> 00:20:21,960 Speaker 1: of late, it would be very surprising. Indeed, if rents 350 00:20:22,200 --> 00:20:25,840 Speaker 1: didn't start to rise once annual leases show up and 351 00:20:26,040 --> 00:20:30,920 Speaker 1: landlds have the chance to negotiate a higher, higher rent, 352 00:20:31,080 --> 00:20:33,200 Speaker 1: that the odds are very high that you will see 353 00:20:33,200 --> 00:20:36,840 Speaker 1: that number not get into Zimbabwe territory, but you might 354 00:20:36,880 --> 00:20:39,840 Speaker 1: get it getting into three or a bit more, and 355 00:20:39,880 --> 00:20:43,560 Speaker 1: that would be very very intriguing, very interesting if it happened. 356 00:20:44,000 --> 00:20:48,919 Speaker 1: Then we have wage inflation numbers which are broadly banging 357 00:20:49,080 --> 00:20:51,200 Speaker 1: the line of where they've been for much of the 358 00:20:51,600 --> 00:20:56,160 Speaker 1: last decade, with the intriguing exception that the lower skilled, 359 00:20:56,240 --> 00:20:59,840 Speaker 1: lesser educated people are getting a nicer deal than they 360 00:21:00,560 --> 00:21:04,240 Speaker 1: for a while, obviously because of the way the because 361 00:21:04,320 --> 00:21:07,959 Speaker 1: of all the effects on employment we know about from 362 00:21:08,000 --> 00:21:11,160 Speaker 1: the pandemic, there's a lot of noise there. I think 363 00:21:11,200 --> 00:21:13,080 Speaker 1: you need until the end of this year at the 364 00:21:13,160 --> 00:21:15,280 Speaker 1: very earliest to have any clarity as to whether there 365 00:21:15,280 --> 00:21:18,480 Speaker 1: has been what you would logically expect, which is some 366 00:21:18,600 --> 00:21:20,440 Speaker 1: kind of an increase in the strength of the hand 367 00:21:20,440 --> 00:21:24,040 Speaker 1: of labor. Broadly speaking, I think what we need to 368 00:21:24,040 --> 00:21:31,720 Speaker 1: see is whether um, the wage inflation starts to take 369 00:21:31,840 --> 00:21:35,280 Speaker 1: hold in the way that some people fear. And also 370 00:21:35,320 --> 00:21:40,200 Speaker 1: I forgot to measure commodities, whether commodity inflation takes hold 371 00:21:40,440 --> 00:21:44,640 Speaker 1: in the way that some fear. And that's my that's 372 00:21:44,680 --> 00:21:48,920 Speaker 1: my best attempts to try to be calm and logical 373 00:21:49,440 --> 00:21:53,840 Speaker 1: and provide some kind of a manageable way for for 374 00:21:53,960 --> 00:21:57,840 Speaker 1: our clients are viewers, to understand this in a in 375 00:21:57,840 --> 00:22:02,920 Speaker 1: a way that doesn't oversimplify. I'm glad you brought up psychology, John, 376 00:22:02,960 --> 00:22:05,440 Speaker 1: that that gives me the perfect segue to the craziest 377 00:22:05,480 --> 00:22:08,720 Speaker 1: things we've seen in markets this week, Rebecca. But before 378 00:22:08,720 --> 00:22:10,600 Speaker 1: we get to that, Rebecca, there are two There are 379 00:22:10,640 --> 00:22:13,280 Speaker 1: two things on a certain cohort of listeners of the 380 00:22:13,280 --> 00:22:16,399 Speaker 1: show wait very patiently for so we'll get to the 381 00:22:16,440 --> 00:22:18,840 Speaker 1: crazy things. That's obviously one of them. But I think 382 00:22:18,840 --> 00:22:20,719 Speaker 1: a lot of people just want to hear an answer 383 00:22:20,760 --> 00:22:23,439 Speaker 1: to the general question just tell me what to do 384 00:22:23,520 --> 00:22:26,159 Speaker 1: with my money right now. So I'm curious, you know, 385 00:22:26,680 --> 00:22:33,480 Speaker 1: given this sort of paralyzing feeling of uncertainty and noise. Yeah, 386 00:22:33,760 --> 00:22:36,720 Speaker 1: and especially given Bridgewater, you know, the famous um all 387 00:22:36,800 --> 00:22:39,040 Speaker 1: weather strategy. I mean, we've had a lot of debate. 388 00:22:39,280 --> 00:22:42,159 Speaker 1: Another question I'm sick of answering and asking, is is 389 00:22:42,200 --> 00:22:45,120 Speaker 1: sixty forty dead? You know, obviously all weathers a more 390 00:22:45,160 --> 00:22:50,680 Speaker 1: sophisticated but sort of similarly motivated strategy. Just walk us through, 391 00:22:50,720 --> 00:22:54,560 Speaker 1: like what is you know, how should we be positioned 392 00:22:54,640 --> 00:22:57,200 Speaker 1: in this environment? And what is kind of your outlook 393 00:22:57,240 --> 00:23:00,480 Speaker 1: for for the all weather strategy given you know, high 394 00:23:00,560 --> 00:23:04,680 Speaker 1: valuations in both both bond and stock markets. So all 395 00:23:04,760 --> 00:23:08,000 Speaker 1: whether um, I think, I think when you go back 396 00:23:08,000 --> 00:23:10,920 Speaker 1: to why it started and what the goal was, it 397 00:23:11,480 --> 00:23:15,240 Speaker 1: makes it so much more clear. Ray Dahlia, our founder, 398 00:23:15,800 --> 00:23:19,840 Speaker 1: when he got going, he realized his kids might not 399 00:23:20,160 --> 00:23:23,399 Speaker 1: have the same aptitude or interest he did. He wanted 400 00:23:23,600 --> 00:23:27,560 Speaker 1: to have a strategic allocation for his family as kids 401 00:23:27,600 --> 00:23:30,200 Speaker 1: that could compound well over time. Right, So you don't 402 00:23:30,240 --> 00:23:33,400 Speaker 1: want to participate in all the volatility. You just want 403 00:23:33,440 --> 00:23:38,080 Speaker 1: to to do well and it with its less volatility 404 00:23:38,200 --> 00:23:40,639 Speaker 1: or possible, And you don't want to have to be 405 00:23:40,640 --> 00:23:43,040 Speaker 1: able to predict what the heck is going to happen. Right, Well, 406 00:23:43,160 --> 00:23:44,919 Speaker 1: no one knows what the next twenty years is going 407 00:23:44,960 --> 00:23:48,200 Speaker 1: to look like. So can you put together a balanced 408 00:23:48,240 --> 00:23:51,760 Speaker 1: portfolio that can do well regardless of what the economic 409 00:23:51,880 --> 00:23:56,400 Speaker 1: environment is and the two economic variables that are most important. 410 00:23:56,440 --> 00:23:59,360 Speaker 1: I think we'd all agree if you are trying to balance, 411 00:23:59,480 --> 00:24:01,880 Speaker 1: is going to be owth and inflation, and you know 412 00:24:02,119 --> 00:24:04,040 Speaker 1: common sense, like I don't need to give you a 413 00:24:04,080 --> 00:24:09,280 Speaker 1: bunch of fancy correlations or aggressions. Certain assets are going 414 00:24:09,320 --> 00:24:12,240 Speaker 1: to do better in a rising growth, rising inflation environment 415 00:24:12,240 --> 00:24:15,160 Speaker 1: a reflation Some are going to do better in stagflation. 416 00:24:15,760 --> 00:24:18,560 Speaker 1: And so if you can have balanced sets of those 417 00:24:18,600 --> 00:24:21,159 Speaker 1: things for each of those environments, you're not going to 418 00:24:21,240 --> 00:24:24,520 Speaker 1: have the portfolio that performs best all the time, obviously 419 00:24:24,640 --> 00:24:28,560 Speaker 1: mathematically it can't, but it can perform relatively well all 420 00:24:28,600 --> 00:24:32,080 Speaker 1: the time regardless of the environment. So so that's what 421 00:24:32,200 --> 00:24:34,760 Speaker 1: he built, and that was the goal. Like you don't 422 00:24:34,760 --> 00:24:36,320 Speaker 1: have to pay attention to it, you don't have to 423 00:24:36,359 --> 00:24:39,640 Speaker 1: market time, and it's not going to ride through the volatility, 424 00:24:39,720 --> 00:24:43,160 Speaker 1: which obviously costs you over time in the compounding. So 425 00:24:43,760 --> 00:24:46,120 Speaker 1: when bond yields, we get the question all the time 426 00:24:46,160 --> 00:24:48,560 Speaker 1: with bond yields this slow, would we want to be 427 00:24:48,640 --> 00:24:52,239 Speaker 1: long bonds? We're going to own bonds as part of 428 00:24:52,240 --> 00:24:55,720 Speaker 1: this portfolio where we think the bond yields have room 429 00:24:55,800 --> 00:24:59,240 Speaker 1: to fall um and so you know, j g B 430 00:24:59,480 --> 00:25:02,280 Speaker 1: is probably out so much, you know, But but there 431 00:25:02,320 --> 00:25:04,680 Speaker 1: are bonds that have enough field that there is room 432 00:25:04,760 --> 00:25:06,720 Speaker 1: for them to act as a defensive asset. But the 433 00:25:06,760 --> 00:25:09,720 Speaker 1: portfolio has never just been about bonds. It's about having 434 00:25:09,760 --> 00:25:12,879 Speaker 1: a balance set of assets. So to to answer your question, 435 00:25:12,960 --> 00:25:16,440 Speaker 1: what should people do now, I think the most important 436 00:25:16,480 --> 00:25:19,680 Speaker 1: thing people can do is look at their portfolio and say, Okay, 437 00:25:19,680 --> 00:25:23,760 Speaker 1: this is an incredibly unusual time. The pandemic, the fiscal policy, 438 00:25:23,960 --> 00:25:27,960 Speaker 1: central banks doing different things. So and there is that 439 00:25:28,040 --> 00:25:31,640 Speaker 1: consensus view we discussed earlier. What are the risks around that? 440 00:25:31,760 --> 00:25:33,640 Speaker 1: If you know, maybe we are going back to nine 441 00:25:33,920 --> 00:25:36,720 Speaker 1: seventies inflation. But if inflation runs a little hotter than 442 00:25:36,760 --> 00:25:39,880 Speaker 1: expected over the next few years, am I vulnerable to that? 443 00:25:40,400 --> 00:25:42,040 Speaker 1: And if I am, what do I want to do? 444 00:25:42,200 --> 00:25:44,880 Speaker 1: Maybe I want to add some inflation link bonds. Maybe 445 00:25:44,960 --> 00:25:47,240 Speaker 1: I want to have some gold in my portfolio. Maybe 446 00:25:47,280 --> 00:25:50,960 Speaker 1: I want to think about uh certain types of equities 447 00:25:51,000 --> 00:25:54,080 Speaker 1: that will perform better, that have more pricing power. If 448 00:25:54,119 --> 00:25:56,680 Speaker 1: if the pandemic gets worse, we have a new mutation 449 00:25:56,800 --> 00:26:00,320 Speaker 1: and growth stalls. God help us, Um, it is going 450 00:26:00,359 --> 00:26:03,120 Speaker 1: to protect me. Then, so just I think the most 451 00:26:03,160 --> 00:26:05,160 Speaker 1: important thing you should be doing is staring at way 452 00:26:05,200 --> 00:26:08,280 Speaker 1: you own and then say what are the tail risks? 453 00:26:08,640 --> 00:26:11,600 Speaker 1: Reasonable tail risks? We can come up with a million unreasonable, 454 00:26:12,119 --> 00:26:15,119 Speaker 1: and then am I overexposed to either of those? And 455 00:26:15,160 --> 00:26:17,280 Speaker 1: then what pieces do I need to add or adjust 456 00:26:17,280 --> 00:26:19,919 Speaker 1: in my portfolio to try to give me balance because 457 00:26:19,920 --> 00:26:22,640 Speaker 1: it is an unusual time. The other thing I'd say, 458 00:26:22,960 --> 00:26:25,720 Speaker 1: and and this is you started out by reminding folks 459 00:26:25,720 --> 00:26:28,280 Speaker 1: that I was a reporter once upon a time. One 460 00:26:28,320 --> 00:26:30,800 Speaker 1: thing I think that being a reporter helped me in 461 00:26:30,840 --> 00:26:34,320 Speaker 1: this job is you learn to tune out noise. You know, 462 00:26:34,720 --> 00:26:38,560 Speaker 1: I keep my Bloomberg on all day long, every day, um, 463 00:26:38,760 --> 00:26:42,520 Speaker 1: and I will open an article every couple of minutes. 464 00:26:42,640 --> 00:26:45,360 Speaker 1: But I do not read every headline. And I don't 465 00:26:45,359 --> 00:26:47,399 Speaker 1: mean that as an insult. But if I read every 466 00:26:47,440 --> 00:26:50,679 Speaker 1: story on every news feed I get, I don't know 467 00:26:50,720 --> 00:26:52,200 Speaker 1: what else I would do with my life that would 468 00:26:52,280 --> 00:26:54,960 Speaker 1: keep me up all the day. So I think you 469 00:26:55,040 --> 00:26:58,439 Speaker 1: have to understand what's meaningful, what's material, and what's just 470 00:26:58,800 --> 00:27:01,399 Speaker 1: noise that I can ignore. You know, when we talk 471 00:27:01,480 --> 00:27:05,480 Speaker 1: about inflation, inflation expectations. The Fed cares a lot about that. 472 00:27:05,560 --> 00:27:07,920 Speaker 1: Do they get de anchored. They care about the five 473 00:27:08,000 --> 00:27:11,080 Speaker 1: year five year break, even they care about wages in 474 00:27:11,119 --> 00:27:14,199 Speaker 1: the labor market. You can watch those three things and 475 00:27:14,240 --> 00:27:17,640 Speaker 1: a lot of the other stuff is probably noise. Um. 476 00:27:17,680 --> 00:27:21,360 Speaker 1: And so those those would be my two pieces of advice. Well, 477 00:27:21,480 --> 00:27:24,080 Speaker 1: I we thank you for your frequent clicking of the 478 00:27:24,200 --> 00:27:28,520 Speaker 1: article's Rebecca stand clear of the craziest things we saw 479 00:27:28,560 --> 00:27:32,359 Speaker 1: in markets this week. I think it's that time for 480 00:27:32,400 --> 00:27:35,440 Speaker 1: the craziest things we saw in markets. Uh, Mr authors, 481 00:27:35,480 --> 00:27:38,080 Speaker 1: I think I want to start with you, what's the 482 00:27:38,119 --> 00:27:41,600 Speaker 1: maddest thing you've seen this week? Maddest since apparently is 483 00:27:41,600 --> 00:27:48,520 Speaker 1: an anglicism, Um, I've just checked. Um. You might remember 484 00:27:48,560 --> 00:27:51,240 Speaker 1: back in two thousand and nine there was this epochal 485 00:27:51,320 --> 00:27:54,240 Speaker 1: moment when the yields on the SMP went above the 486 00:27:54,320 --> 00:27:59,359 Speaker 1: yield on the tenure um. And this was extraordinary. It 487 00:27:59,440 --> 00:28:01,480 Speaker 1: was the end of the cultural the equity blah blah 488 00:28:01,520 --> 00:28:09,000 Speaker 1: blah blah blah. And last year we saw as big 489 00:28:09,000 --> 00:28:12,240 Speaker 1: as spread in the yield between in favor of equities 490 00:28:12,240 --> 00:28:14,879 Speaker 1: over over bonds as we've seen back in oh nine. 491 00:28:15,960 --> 00:28:18,679 Speaker 1: Both times basically your money doubled over the next twelve 492 00:28:18,680 --> 00:28:22,960 Speaker 1: months if you went into doctorative bonds. Amazingly, we're back 493 00:28:23,000 --> 00:28:27,280 Speaker 1: there again. Um. So the last two times this happened, 494 00:28:28,200 --> 00:28:35,760 Speaker 1: stocks were plainly cheap after a massive sell off. Um 495 00:28:35,800 --> 00:28:39,479 Speaker 1: this is the first time, right that we are actually 496 00:28:39,520 --> 00:28:42,920 Speaker 1: as an all time high in the stock market. And 497 00:28:43,040 --> 00:28:47,280 Speaker 1: yet you get a higher yield dividend yield from stocks 498 00:28:47,760 --> 00:28:51,120 Speaker 1: than you do from ten year bonds, which is crazy. 499 00:28:51,280 --> 00:28:57,280 Speaker 1: That is certainly crazy, not not sexy and funny, but crazy. Absolutely, Absolutely, 500 00:28:57,560 --> 00:28:59,960 Speaker 1: that's pretty good, all right, I'm going to be funny. 501 00:29:00,160 --> 00:29:03,440 Speaker 1: Can I be funny? All right? Because if if I 502 00:29:03,480 --> 00:29:06,480 Speaker 1: wanted to be serious, I would talk about the bond deal, 503 00:29:06,560 --> 00:29:08,880 Speaker 1: the U S. Treasury yield being where it is given 504 00:29:08,880 --> 00:29:12,680 Speaker 1: the economic backdrop. And but I feel like your listeners 505 00:29:12,760 --> 00:29:15,440 Speaker 1: are all so well educated and a stoot that they 506 00:29:15,480 --> 00:29:17,960 Speaker 1: know that already. So I'm gonna I'm gonna go in 507 00:29:17,960 --> 00:29:22,280 Speaker 1: a different direction. I Um, I started in finance doing 508 00:29:22,360 --> 00:29:25,960 Speaker 1: foreign exchange and precious metals research for JP Morgan, and 509 00:29:26,040 --> 00:29:29,320 Speaker 1: so perhaps it's not surprising that I was instantly attracted 510 00:29:29,360 --> 00:29:33,920 Speaker 1: to crypto, just academically, just fascinated by it. So I've 511 00:29:33,960 --> 00:29:38,840 Speaker 1: been following it closely since it was born. And this 512 00:29:38,920 --> 00:29:41,800 Speaker 1: isn't quite this week, but it's recent enough that I 513 00:29:41,840 --> 00:29:45,320 Speaker 1: think it still fits your game. Um you know, I 514 00:29:45,360 --> 00:29:50,760 Speaker 1: am fascinated by this virtual world we're now in, and 515 00:29:50,800 --> 00:29:54,480 Speaker 1: I think part of it is a reflection of immense 516 00:29:54,560 --> 00:29:57,440 Speaker 1: amounts of liquidity in the system, people looking for places 517 00:29:57,520 --> 00:30:00,440 Speaker 1: to make money. I think part of it is, you know, 518 00:30:00,680 --> 00:30:04,080 Speaker 1: the beauty that is technology and the advances people make. 519 00:30:04,800 --> 00:30:08,160 Speaker 1: Maybe there's some populism in there too, but when you 520 00:30:08,200 --> 00:30:12,080 Speaker 1: put all things together. We had a record real estate 521 00:30:12,080 --> 00:30:15,040 Speaker 1: deal recently. We talked about rents and home prices. Okay, 522 00:30:15,120 --> 00:30:20,120 Speaker 1: virtual land. It's happening to nine hundred thousand dollars paid 523 00:30:20,280 --> 00:30:28,440 Speaker 1: for sixteen virtual acres virtual acres, So this was blockchain 524 00:30:28,560 --> 00:30:33,080 Speaker 1: real estate. Um de central Land. You pay with Mona 525 00:30:34,000 --> 00:30:36,960 Speaker 1: and you know, normally if you use an n f T, 526 00:30:37,480 --> 00:30:39,640 Speaker 1: you're buying a song, you're buying a piece of art. 527 00:30:39,680 --> 00:30:41,480 Speaker 1: At least you can print it out right, you can 528 00:30:41,480 --> 00:30:45,680 Speaker 1: touch something. You have virtual land, you can you can 529 00:30:45,720 --> 00:30:49,160 Speaker 1: have events on your virtual land. Atari apparently has bought 530 00:30:49,240 --> 00:30:52,520 Speaker 1: virtual Land recently and they're going to have old time 531 00:30:52,600 --> 00:30:56,040 Speaker 1: Pong championships and so forth. That you can attend. But 532 00:30:56,240 --> 00:30:59,200 Speaker 1: the problem with virtual land as opposed to physical land. 533 00:30:59,240 --> 00:31:02,480 Speaker 1: Physical land has limited supply. That is part of what 534 00:31:02,720 --> 00:31:07,120 Speaker 1: underlies its value. Virtual land that there is absolutely nothing 535 00:31:07,160 --> 00:31:10,520 Speaker 1: to limit its supply. So aside from someone else just 536 00:31:10,600 --> 00:31:14,360 Speaker 1: thinking it's cooler and having more cryptocurrency to spend, what 537 00:31:14,560 --> 00:31:16,680 Speaker 1: makes you think this is a good investment. But I'm 538 00:31:16,680 --> 00:31:20,360 Speaker 1: just I'm fascinated by how the crypto world is evolving, 539 00:31:20,800 --> 00:31:23,160 Speaker 1: how people are looking for ways to use all this 540 00:31:23,280 --> 00:31:26,200 Speaker 1: liquidity that they have received over the last year, And 541 00:31:26,360 --> 00:31:29,400 Speaker 1: this one just jumped out to me as being particularly 542 00:31:29,440 --> 00:31:32,200 Speaker 1: out there and worthy of sharing on your show. That's 543 00:31:32,280 --> 00:31:34,080 Speaker 1: that's pretty good. I feel like I should say something 544 00:31:34,120 --> 00:31:37,240 Speaker 1: about yield farming on that land, but uh, I don't 545 00:31:37,240 --> 00:31:39,680 Speaker 1: know if that's that's the purpose of this. But Rebecca, 546 00:31:39,680 --> 00:31:41,640 Speaker 1: what to have you on sometime just to talk crypto 547 00:31:41,720 --> 00:31:44,200 Speaker 1: and defied because I'm fine, I'm about ten years late 548 00:31:44,240 --> 00:31:46,240 Speaker 1: to it, but I'm I'm I'm fascinated with it all. 549 00:31:46,280 --> 00:31:51,120 Speaker 1: But that's a good one, John, that's stiff competition there. Um, 550 00:31:51,160 --> 00:31:54,560 Speaker 1: I will give you mine. Mine's a very old school asset. 551 00:31:54,680 --> 00:31:58,280 Speaker 1: In fact, it is something that I think is three 552 00:31:58,480 --> 00:32:03,360 Speaker 1: D and fifty years old from the Alternative Assets Space Whiskey. 553 00:32:03,480 --> 00:32:07,880 Speaker 1: The the world's oldest bottle of whiskey was distilled two 554 00:32:07,920 --> 00:32:11,680 Speaker 1: hundred and fifty years ago. I actually believe that the 555 00:32:11,760 --> 00:32:14,560 Speaker 1: liquid inside of it's even a hundred years older than that. 556 00:32:14,800 --> 00:32:19,720 Speaker 1: So around the Revolution. Uh, it's that old. This whiskey, 557 00:32:19,920 --> 00:32:23,200 Speaker 1: Uh from Old Ingle Do Whiskey. That was the name 558 00:32:23,240 --> 00:32:26,440 Speaker 1: of the brewer, Rebecca, you'll be interested in this. It 559 00:32:26,440 --> 00:32:30,320 Speaker 1: will once belonged to none other than JP Morgan himself, 560 00:32:31,360 --> 00:32:33,760 Speaker 1: and in fact it was. It was auctioned off by 561 00:32:33,800 --> 00:32:36,120 Speaker 1: the Skinner auction House, and it was bought by the 562 00:32:36,160 --> 00:32:40,280 Speaker 1: Morgan Library, the JP Morgan Library in Midtown, which leads 563 00:32:40,280 --> 00:32:42,920 Speaker 1: me to believe it it probably will never be drank. 564 00:32:43,040 --> 00:32:46,240 Speaker 1: Perhaps when Jamie Diamond finally retires, they'll they'll they'll dust 565 00:32:46,240 --> 00:32:49,800 Speaker 1: it off. But this leads me to another popular segment, 566 00:32:49,840 --> 00:32:51,480 Speaker 1: the price is right. I want to know what each 567 00:32:51,480 --> 00:32:54,400 Speaker 1: of you think the winning bid was for the world's 568 00:32:54,520 --> 00:32:58,680 Speaker 1: oldest whiskey seven fifty milliliter bottle, if that helps, I 569 00:32:58,680 --> 00:33:00,360 Speaker 1: don't know, if you know you're looking for a bargain 570 00:33:00,440 --> 00:33:05,000 Speaker 1: by volume. Uh, keeping in mind that it was JP 571 00:33:05,120 --> 00:33:08,920 Speaker 1: Morgan himself and it was bought by the Morgan Library 572 00:33:09,040 --> 00:33:11,600 Speaker 1: and the two part questions. Second part would be would 573 00:33:11,640 --> 00:33:14,920 Speaker 1: you take a take a taste of it? John? How 574 00:33:14,920 --> 00:33:17,200 Speaker 1: about you? What's what's your bid for the world's oldest 575 00:33:17,200 --> 00:33:22,720 Speaker 1: bottle of whiskey? Dr Oh, I'm way over. I would 576 00:33:22,760 --> 00:33:26,320 Speaker 1: I would at least double I would double that bid. Okay, 577 00:33:26,560 --> 00:33:28,400 Speaker 1: the prices right rules are in effect, so you could 578 00:33:28,400 --> 00:33:33,720 Speaker 1: go a hundred and fifty one. All right, I will 579 00:33:33,760 --> 00:33:36,080 Speaker 1: be chicken. Then let's go. Let's go with a hundred 580 00:33:36,080 --> 00:33:38,960 Speaker 1: and fifty one. That's easy, Rebecca. I'm with you. I 581 00:33:38,960 --> 00:33:42,080 Speaker 1: would have guessed in the millions. I feel like you 582 00:33:42,080 --> 00:33:44,720 Speaker 1: know the type of people that collect whiskey. This is 583 00:33:44,800 --> 00:33:50,160 Speaker 1: you know, your babe, Ruth Card hundred and seven. Wow, 584 00:33:50,400 --> 00:33:56,360 Speaker 1: congrats John, fascinating. Maybe Bridge, I don't know if Bridgewater 585 00:33:56,440 --> 00:33:59,440 Speaker 1: wants to add something to its portfolio. This is truly 586 00:33:59,480 --> 00:34:04,440 Speaker 1: all weather. Uh. It could be an uncorrelated alpha stream 587 00:34:04,560 --> 00:34:09,000 Speaker 1: right there. Sorry, you guys talking over, talking over. I 588 00:34:09,000 --> 00:34:10,360 Speaker 1: don't know. I don't know if that you know. I 589 00:34:10,360 --> 00:34:12,200 Speaker 1: don't know what the investors would say about that, But 590 00:34:12,360 --> 00:34:13,799 Speaker 1: to me, it seems like a bargain. I don't know, 591 00:34:14,000 --> 00:34:17,400 Speaker 1: it seems like it might be somewhat ill liquid liquid investor, 592 00:34:18,680 --> 00:34:20,600 Speaker 1: and I do think I would not taste it. I 593 00:34:20,640 --> 00:34:22,759 Speaker 1: think that's meant to be kept on a shop. I'm 594 00:34:22,760 --> 00:34:27,239 Speaker 1: not sure. I think a lot of the joy of whiskey, 595 00:34:27,280 --> 00:34:29,799 Speaker 1: and a lot of the joy of tasting general is 596 00:34:30,000 --> 00:34:33,640 Speaker 1: from the sense of smell. And it's part of the 597 00:34:33,760 --> 00:34:36,759 Speaker 1: joy of drinking whiskey is to is to rotate it 598 00:34:36,920 --> 00:34:38,799 Speaker 1: under your nose a few times before you take the 599 00:34:38,800 --> 00:34:41,480 Speaker 1: first sip. I might be a little nervous, but actually 600 00:34:41,480 --> 00:34:45,520 Speaker 1: posing in needs my mouth, I think I probably would 601 00:34:45,560 --> 00:34:51,160 Speaker 1: be quite game for holding that gorgeous, gorgeous pete aroma 602 00:34:51,200 --> 00:34:53,799 Speaker 1: beneath my beneath my nose for a bit. All right, Chad, Well, 603 00:34:53,800 --> 00:34:55,759 Speaker 1: I'll tell you what if I'm not sure if the 604 00:34:55,800 --> 00:34:58,399 Speaker 1: Morgan Library is even open in these times, but when 605 00:34:58,400 --> 00:35:00,600 Speaker 1: it does, maybe we'll walk down and and see. We'll 606 00:35:00,640 --> 00:35:01,920 Speaker 1: see if they a lot of sniff it. They got 607 00:35:01,920 --> 00:35:04,320 Speaker 1: a lot of sniff it. Right, Let's let's make it 608 00:35:04,360 --> 00:35:06,520 Speaker 1: a field trip. I would be I would be down 609 00:35:06,600 --> 00:35:10,040 Speaker 1: for that, all right, it's a date. With that said, 610 00:35:10,160 --> 00:35:12,640 Speaker 1: I think that is all the time. We had really 611 00:35:12,719 --> 00:35:15,359 Speaker 1: enjoyed the conversation. Rebecca, Thank you so much for your time. 612 00:35:15,480 --> 00:35:17,319 Speaker 1: John is always a pleasure to catch up with you, 613 00:35:17,360 --> 00:35:19,640 Speaker 1: and hopefully we can all do it again. Sounds good, 614 00:35:19,680 --> 00:35:24,080 Speaker 1: we can talk about doge coin. I won't be joining you. 615 00:35:25,920 --> 00:35:27,960 Speaker 1: That's a teaser for the next episode. If I've ever 616 00:35:28,000 --> 00:35:33,280 Speaker 1: heard one gonna I'm gonna keep you to that, Rebecca Lord, okay, 617 00:35:33,280 --> 00:35:44,680 Speaker 1: by what Goes Up. We'll be back next week. Until then, 618 00:35:44,719 --> 00:35:47,040 Speaker 1: you can find us on the Bloomberg Terminal website and 619 00:35:47,160 --> 00:35:50,279 Speaker 1: DApp or wherever you get your podcasts. We'd love it 620 00:35:50,320 --> 00:35:52,200 Speaker 1: if you took the time to rate and review the 621 00:35:52,239 --> 00:35:55,319 Speaker 1: show on Apple Podcasts so more listeners can find us, 622 00:35:56,160 --> 00:35:59,360 Speaker 1: and you can find us on Twitter, follow me at Reganonymous. 623 00:36:00,080 --> 00:36:03,120 Speaker 1: John authors is at John Author's You can also follow 624 00:36:03,160 --> 00:36:07,439 Speaker 1: Bloomberg Podcasts at podcasts at that Get to Charlie Pellet 625 00:36:07,480 --> 00:36:09,160 Speaker 1: of Bloomberg Radio in the voice of the New York 626 00:36:09,200 --> 00:36:12,840 Speaker 1: City Subway System. What Goes Up is produced by tofor Forez. 627 00:36:13,200 --> 00:36:16,640 Speaker 1: The head of Bloomberg Podcasts is Francesco Levie. Thanks for listening. 628 00:36:16,719 --> 00:36:19,160 Speaker 1: To see you next time. Thank you