Speaker 1: Hello, and welcome to the first episode of Odd Lots.
Speaker 1: I'm Joe Wisnthal, co host of What You Miss and
Speaker 1: editor at Bloomberg markets Now. I'm Tracy Alloway, executive editor
Speaker 1: of Bloomberg Markets. Here at Odd Lots, we want to
Speaker 1: have a discussion every week about economics, finance, markets, market structure,
Speaker 1: which Tracy loves, maybe some politics and culture thrown in
Speaker 1: stuff that doesn't necessarily fit into the normal day to
Speaker 1: day conversation. And we couldn't think of any guests better
Speaker 1: to have than Tom Kin, my guinea pig. You're the
Speaker 1: guinea pig. Tom King, as everyone should know, is the
Speaker 1: host of Bloomberg Surveillance on TV and radio here Bloomberg.
Speaker 1: He knows more about markets and economics and world events
Speaker 1: than just about anyone else in the room. He's a
Speaker 1: very eclectic background in music and mathematics. And I wanted
Speaker 1: to have wanted to have Tom Keene on the show
Speaker 1: because Tom is always interviewing people, but he'd never answering
Speaker 1: questions and never behind try to avoid it like the plagues.
Speaker 1: So we're gonna doing this for you, Joe. I'm doing
Speaker 1: this for Tracey. Everybody knows that, but um, who are
Speaker 1: you Tom? Why are you here? How did you get
Speaker 1: to be Tom Keane? Who? Everybody? I get it a lot,
Speaker 1: And what I would suggest is it's one part short
Speaker 1: term stuff, one part long term stuff, and one part
Speaker 1: blind luck. The long term thing is is being acutely
Speaker 1: aware when I was a kid, and evermore every day
Speaker 1: knowing how twisted the early years where I found something
Speaker 1: like bet stan Freeburg record and you don't know Stan
Speaker 1: Freeburg is he was a great comedian. He just died
Speaker 1: this year. And then recently it was about the privilege
Speaker 1: of running into Matt Winkler and basically Matt and I,
Speaker 1: with the support of l Mayers who runs Bloomberg Media,
Speaker 1: and Ted Fine who runs TV, they're the ones that
Speaker 1: made all this happen. Matt win Clair, for our listeners
Speaker 1: who don't know, is the guy who founded Bloomberg News. Essentially,
Speaker 1: so you got lucky. You met Matt win Clair, you
Speaker 1: just hired me because the bow tie. But to make
Speaker 1: a long story short, you get lucky and I met
Speaker 1: Matt and we basically invented what you see. That's that's
Speaker 1: a safe statement. What were you doing before then? Because
Speaker 1: when I think of you, I think you projected, or
Speaker 1: of someone who's been doing radio for decades. But what
Speaker 1: were you doing before you did radio and TV? Well,
Speaker 1: before the media thing. I was in the investment business.
Speaker 1: But there's a whole side car thing in music and
Speaker 1: an entertainment um for example. And I gauge it off
Speaker 1: my oldest child's age. I used to hold him in
Speaker 1: my arms and do the stock report in Boston. And
Speaker 1: this is the vanilla days, not cross asset, the dal
Speaker 1: Jones industrial average up forty two points today, eight forty two,
Speaker 1: blah blah blah. You know that. And so I did
Speaker 1: a little bit of investment stuff back then, but a
Speaker 1: lot of it was just the music business as well,
Speaker 1: which is the show business aspect, which a lot of
Speaker 1: people in business media try to ignore every day, and
Speaker 1: they're wrong. I mean, the f T s pink. It's
Speaker 1: pink for a reason. It's pink. It's like what you did.
Speaker 1: I mean, you invented the modern headline in modern business journalism.
Speaker 1: So it's just you know that Wisenthal wrote that headliner.
Speaker 1: You just know that how has her investment experience informed
Speaker 1: your career? A huge, huge um, it's a massive type
Speaker 1: two and that you learn so much enjoying losing money. Um,
Speaker 1: it's it's for those of you gaus see and it's
Speaker 1: log normal. Uh, you learn way more on the downside
Speaker 1: and the upside. Lots of fat tail risks. There's fat
Speaker 1: tail risk, but that's not that that's over emphasized. It's
Speaker 1: the joy of losing money within the fat tails, which
Speaker 1: is I think that's you learn factors more losing money
Speaker 1: than making money factors. But I can tell you that
Speaker 1: the way I learned to lose money was enjoying losing
Speaker 1: money in the options market. And then so when you're
Speaker 1: doing the show, whether on radio or TV, how do
Speaker 1: you apply that the fact that you learned so much
Speaker 1: more when you lost money. When you think about it,
Speaker 1: it's a humility show. It's a it's a humility thing
Speaker 1: of knowing every day how dumb you are and trying
Speaker 1: to always work at getting smarter, laughing at your mistakes.
Speaker 1: There's a there's a lot there's less now after the
Speaker 1: financial crisis, but there's lots of people strutting around with
Speaker 1: a certain intellectual arrogance about economics, finance, investment. Right now
Speaker 1: nobody has arrogance and international relations. Did you have to
Speaker 1: learn how much you don't know, Like, where's the point
Speaker 1: earlier in your career where you thought you knew it all?
Speaker 1: And then you know certitude of yeah, you you you
Speaker 1: learn from a wide set of mistakes and cycles, which
Speaker 1: gives you a humility which forces you to get smarter.
Speaker 1: For example, I went to a wedding this weekend and
Speaker 1: half the wedding was from Uruguay. I know nothing about
Speaker 1: Montevideo except one of my kids. Friends all went down
Speaker 1: there because it couldn't get a job in America. And
Speaker 1: I read seven articles this weekend in Uruguay just to
Speaker 1: to begin to I have no clue about Uruguay. There's
Speaker 1: that kind of madness, but compounded over I know nothing
Speaker 1: about Uruguay. I know nothing about Montevideo. Is a great
Speaker 1: humble bread because you slide in how easily you knew
Speaker 1: the capital. Now I have to ask you talk about
Speaker 1: certitude on Wall Street and in addition to having a
Speaker 1: musical background, you also have a mathematical background. And it
Speaker 1: seems like one of the areas in markets where people
Speaker 1: start to get really certain and have that certain mathematical
Speaker 1: swagger is when it comes to models, and you love
Speaker 1: talking about models, how does your experience in mathematic nex
Speaker 1: feed in. Yeah, that the background there was growing up
Speaker 1: with it. I have the clearest memories of gooding up
Speaker 1: on my tiptoes and looking over my father's desk as
Speaker 1: he did very sophisticated triple integration of space satellites and
Speaker 1: I would literally play on the floor with the French
Speaker 1: curves is a million years ago and like like think
Speaker 1: spot Nick and I g y and all that, and
Speaker 1: all of that became a mathewiness which culminated in Max
Speaker 1: peters fabulous program at the University of Colorado. Max Peters
Speaker 1: was a highly decorated Italian infantryman up the spine of
Speaker 1: Italy and World War Two, and he went out to
Speaker 1: Colorado and put together, uh, the mother of all grinds
Speaker 1: in engineering academics. And I was extremely fortunate to parachute
Speaker 1: into that for a couple of years. So you take,
Speaker 1: you know, what I get in math and what I
Speaker 1: don't get, and trust me, is a lot I don't get.
Speaker 1: And then you overlay that into some of the certitude
Speaker 1: of quantitative finance and you get a massive humility. I
Speaker 1: think the math overlay is a it's a massive type one.
Speaker 1: You've got it, but what it really is, and I
Speaker 1: see it every day, and it's getting worse. It's a
Speaker 1: little better in a couple of last couple of years.
Speaker 1: Is the math phobia within economics, finance, investments just stunning,
Speaker 1: It's just breathtaking. You see rampant math phobia. Because other
Speaker 1: people have argued that it's just the opposite, that economics
Speaker 1: and finances become too mathy, to the point where people
Speaker 1: can't explain in clear English what they're talking about. Yeah, well,
Speaker 1: let me part that debate. You're absolutely right, Joe. The
Speaker 1: basic idea is there was an era, particularly coming out
Speaker 1: of World War Two, of of math, too much math,
Speaker 1: math anxiety, etcetera, etcetera. And then at the undergraduate level,
Speaker 1: not at the PhD, not at the doctor trek level
Speaker 1: of the graduate level, but at the undergraduate level, a
Speaker 1: vast majority of people don't have the dynamics in their
Speaker 1: head to do even basic martiality and microeconomics or you know,
Speaker 1: name the flavor of macro you want to do. The
Speaker 1: British are very different. In the French they have much better,
Speaker 1: as a rule of thumb, undergraduate mathematics than we do.
Speaker 1: If I, if I talked to British students. Their knowledge
Speaker 1: of first order difference equations off the chart honors undergraduate
Speaker 1: programs in the US. Some of them they have no
Speaker 1: clue what what that is. I'm pleased to say I've
Speaker 1: I've forgotten almost all the mathematics I learned in college. However, however,
Speaker 1: I want to know. So when you see something like
Speaker 1: the events of August when the market sold off and
Speaker 1: a lot of people were talking about mathematical formulas and
Speaker 1: model based equations and risk parody at the center of
Speaker 1: that sell off, what do you think I think some
Speaker 1: of it was extremely valid this time around. Uh I,
Speaker 1: I think that the modtle fatigue is much more in
Speaker 1: the macro area. The work Olivia Blanchard did at the
Speaker 1: i m F with Joe Stiglson others really important to
Speaker 1: ask the non sophisticated and the very sophisticated differential equation
Speaker 1: models that pro PhDs use, and I don't pretend to
Speaker 1: be fluent in them. They're very suspect after what we
Speaker 1: went through in August of oh seven. Stepping back, so
Speaker 1: you have this interest in lifelong interest in mathematics in music,
Speaker 1: which I was also want to get to. But then
Speaker 1: how did that when did it click that markets and
Speaker 1: investments where they were in the earliest memories, earliest it
Speaker 1: was permeating in my house. My my grandfather knew a
Speaker 1: w CO and the point and figure guy. He did
Speaker 1: point and figure charts. My mother did point and figure charts,
Speaker 1: totally totally permeating investment theory and investment analysis, you know,
Speaker 1: just original Graham, Don and Coddle up on. So in
Speaker 1: addition to everything else you were always interested in, you
Speaker 1: always knew that this was something you wanted to know.
Speaker 1: You know, I didn't know, it just was there. It
Speaker 1: was just there kind of thing. I'm also, I don't
Speaker 1: think a lot of people know about your musical background.
Speaker 1: But why do you give us the sixteed and here's
Speaker 1: Tom King's music? The ninety second version is real simple.
Speaker 1: At eight years old, I walked into a place called Stutsman's,
Speaker 1: which is legendary and the acoustic music business. With my father.
Speaker 1: There were six Grutch White Falcons lined up and where Rochester,
Speaker 1: New York Kodak and my father bought me a forty
Speaker 1: two dollar you know, acoustic guitar, and then I just
Speaker 1: began grinding away and there were three or four iterations
Speaker 1: of it. But to make a long story short, I
Speaker 1: ended up doing the New England singer songwriter thing, juggling
Speaker 1: a bunch of other stuff. There's a place in Nashville
Speaker 1: called the Blueberg Cafe, which is magical Bloomberg. You know.
Speaker 1: It was just the New England folks and it was
Speaker 1: sort of you know in terms of artists around it. Uh,
Speaker 1: it was post Tracy Chapman, um Susan Vega was really
Speaker 1: happening with Luca and Solitude standing and then a whole
Speaker 1: host of people came on, really jumped, started by a
Speaker 1: guy named David Wilcox who did an album called Either
Speaker 1: Hurricane for A and M Records, which just there was
Speaker 1: like this mini folk boom and what was so cool?
Speaker 1: We knew when we this is before the internet. That's
Speaker 1: a key statement. Even we had no idea what was
Speaker 1: coming in digital, but we knew how lucky we were
Speaker 1: to do it. When we were doing it, we knew
Speaker 1: it couldn't last. What was the greatest guitar you've ever owned?
Speaker 1: The one I got now with the greatest guitar my
Speaker 1: my concert Gibson J one hundred, which was picked out
Speaker 1: by Eric Schoenberg up in Boston was stolen and I
Speaker 1: got it back four years ago. I told Dave Drummond
Speaker 1: and Google. I got it off Google Images. There was
Speaker 1: my guitar and Google images. But that and I've got
Speaker 1: some others now. But I think that's you know, I
Speaker 1: guess the best ones that when my father had, but
Speaker 1: that's been lost. So with your very very idiosyncratic background
Speaker 1: in mathematics, it's almost like Joe Wisenthal an investment. When
Speaker 1: you do your show today at Bloomberg and you look
Speaker 1: around the world, what do you see as the most
Speaker 1: important story going on right now? Um, I think the
Speaker 1: number one stories. One of my kids said to me, Daddy,
Speaker 1: when does this get got to be fun? And I
Speaker 1: think there's a massive understanding by people of a certain
Speaker 1: vintage that the kids don't have. They have lots of
Speaker 1: wonderful digital stuff and medical stuff, etcetera, etcetera, but the
Speaker 1: optimism has been shattered. And the answer Jeff emmel I
Speaker 1: was with two years ago, I'm guessing and he said, look,
Speaker 1: all we need is three point two percent GDP and
Speaker 1: that solves a lot of problems. That's a very smart
Speaker 1: comment by the applied mathematician from Dartmouth. We don't have that.
Speaker 1: The the younger people, people under about thirty two, have
Speaker 1: never known normal. So when you look at the world,
Speaker 1: you don't necessarily see problems of inequality, you see generational problems. No,
Speaker 1: I think they're both there, but I think in two
Speaker 1: thousand and fifteen that the generational issues are less spoken,
Speaker 1: which to an extent speaks of the anger into politics today.
Speaker 1: When do you think it wasn't normal? Or when was
Speaker 1: it was? Well, you know, you stand on the floor
Speaker 1: of the Republican convention. Ex conventions are going you go,
Speaker 1: well this is surreal or the Democratic doesn't matter which
Speaker 1: part party. But the answer is we are programmed for
Speaker 1: certain nominally real GDP that ain't happened. There's a quarter here,
Speaker 1: at quarter there, Macroeconomic Advisor is right now, hiss, third
Speaker 1: quarter at one. The next quarter is a little bit better.
Speaker 1: But we we have not had the run rate of
Speaker 1: GDP that provides base psychological comfort to a lot of people,
Speaker 1: whether it's over educated torps like my kids, or you know,
Speaker 1: people really struggling millions of Americans. Do you think I mean?
Speaker 1: I remember thinking in and when we had the Raging
Speaker 1: Dead ceiling debate, and I think that was the first
Speaker 1: time that we saw this huge I would say, the
Speaker 1: crisis and the economy seeming to really spill over into politics,
Speaker 1: and we had this start division the Tea Party and leadership.
Speaker 1: But it hasn't faded as much as I would have guessed,
Speaker 1: given how far unemployment has dropped. I mean, the economy
Speaker 1: is much better than it was in eleven, but we
Speaker 1: still have look at Donald Trump and leading in the polls,
Speaker 1: and we have rise of more radical politicians everywhere. Do
Speaker 1: you think it's something beyond economics. It has to do
Speaker 1: with the media environment, the Internet. It has to do
Speaker 1: the media, and it has to do with speed of
Speaker 1: trans Twitter and all. I mean the Cypress crisis alone
Speaker 1: with Twitter was surreal that Saturday morning when Cyperus drew up.
Speaker 1: How the Twitter dialogue changed the discussion. But what I
Speaker 1: would what is under emphasized from a Newtonian mechanics standpoint
Speaker 1: is inertial force and the word chronic. And the answer
Speaker 1: is you totally right about ten and eleven. And what's
Speaker 1: different now is it may not be forced masure like
Speaker 1: it was then, but there's just this chronic weight of
Speaker 1: gridlock in Washington. This chronic sense of g d P
Speaker 1: under performing even while unemployment supposedly gets better. And that
Speaker 1: goes back to productivity. You know, we could board everybody
Speaker 1: with three ratio productivity analysis just act productivity in the
Speaker 1: media is uh appallingly reported. There's capital, there's labor, and
Speaker 1: there's a separate ray show wrapped around something called total
Speaker 1: factor productivity or TFP. And the pros know all that
Speaker 1: and they sort of just, you know, when we talk
Speaker 1: about productivity, gloss over it. But the answers laboring happening.
Speaker 1: And certainly for a part of America, this Angus Deaton
Speaker 1: winning the Nobel Prize a big deal, big big deal.
Speaker 1: This is the death of aggregate aggregation, of summoning everything
Speaker 1: together and that that's a really big deal that I
Speaker 1: talked to Shower today and I chance to talk about it. Well,
Speaker 1: that brings us to again to your show. When you
Speaker 1: go out and talk to people, what makes some good
Speaker 1: interviews and who are the best interviewees that you think
Speaker 1: you've had. It's a it's a chemistry. It's a mixture,
Speaker 1: uh And there's always exceptions. There's hyper academic people that fail,
Speaker 1: and and I do think it's a chemistry We keep
Speaker 1: very careful track of who we like and who we
Speaker 1: don't like. And I would say the third rail is
Speaker 1: we don't want people that are scripted or consulted. That
Speaker 1: was the rage to three five years ago. There's less
Speaker 1: of that now. We have less and less people on
Speaker 1: talking points, which is where a consultant comes in and
Speaker 1: tells them four things to say. That's going away. But
Speaker 1: mostly it's you know, it's a media phrase. Pop. They've
Speaker 1: gotta have Pop, particularly in radio is critical. So we
Speaker 1: talked about these sort of big general generational issues that
Speaker 1: you see is the main thing? What about this moment
Speaker 1: specifically when you look at financial markets? What are the
Speaker 1: big things that you're watching. We're going to get into
Speaker 1: prediction season soon for what do you? What do you?
Speaker 1: What do you have your on? What would you What
Speaker 1: are the charts that you look at first thing in
Speaker 1: the morning. My chart of the year's inflation adjusted come
Speaker 1: out of these back sixty seventy years. I've shown it
Speaker 1: in TV probably ten times. You can steal. It's a
Speaker 1: great chart, great great chart, and it looks like a
Speaker 1: persistent decline in commodity prices over many years. And then
Speaker 1: there's a China aberration, and we are, off the top
Speaker 1: of my head, two thirds to three quarters of our
Speaker 1: way back to normal, which is commodity long term commodity deflation.
Speaker 1: So you don't think the long term, we're not. It's
Speaker 1: not over yet. If we're going to return to normal,
Speaker 1: I would suggest not that it's not over. I'm not
Speaker 1: going to make a prediction. I would say the people
Speaker 1: predicting it is over ore on tenuous ground. That's Thomas
Speaker 1: media experience coming through that, refusing to make a prediction.
Speaker 1: Do you think one thing I feel is like everyone's
Speaker 1: talking about deflation and central banks around the world failing
Speaker 1: to hit their policies and how are they going to reflate?
Speaker 1: They can't do it, And then you see these conversations
Speaker 1: the Phillips curve, this idea that the employment and the
Speaker 1: inflation ratear inversely related, and how that's dead and broken.
Speaker 1: Do you think we could be getting to an extreme
Speaker 1: in the other direction where everyone is just thrown in
Speaker 1: the towel on any sort of inflation coming back and
Speaker 1: anything like that, and no to get wonky on you
Speaker 1: within a classic I SLM matrix Johnny Hicks thirty nine
Speaker 1: and Krugman's written about this beautifully. What I would suggest
Speaker 1: is there's a total underestimation of real economy effects. Everybody's
Speaker 1: over in the bank. What's yelling gonna do, what's karneiy
Speaker 1: gonna do? Which is fine, I mean, that's what keeps
Speaker 1: us some point, all rio's but the real economy effects
Speaker 1: have been grossly underrated from day one of the crisis
Speaker 1: August of oh seven. And the other thing I would
Speaker 1: suggest is the interest rate transmission between the real economy
Speaker 1: and the bank side of things. The l M curve
Speaker 1: is totally broken at the zero bound. And these there's
Speaker 1: things we don't understand that are going on in the
Speaker 1: interest rate sphere right now that are there. There's a
Speaker 1: mystery here. I can't believe we've gotten this far in
Speaker 1: the segment without talking about your bow ties and the
Speaker 1: fact that the bow t high was almost entirely responsible
Speaker 1: for bringing you to Bloomberg. Since Mr Matt Winkler also
Speaker 1: in choice wearing those. I found a picture of my grandfather,
Speaker 1: my mother's father, five years ago, holding me and he
Speaker 1: had a bow tie on. I have no recollection of
Speaker 1: my grandfather having a bow tech um. It started when
Speaker 1: I was sort of sort of kind of like premed
Speaker 1: and I was in emergency rooms and they wouldn't let
Speaker 1: you wear a normal tie because they're afraid the patient
Speaker 1: will grab you with a regular tie. So I was
Speaker 1: forced to wear a bow tech uh, doing what was
Speaker 1: called extern This is a million years ago. This is
Speaker 1: before anesthesia and uh uh you know it sort of
Speaker 1: started with that. I'm assuming back then they weren't amazed
Speaker 1: ties though as they they were not. No, they weren't.
Speaker 1: We did the clip on thing minimally. I must admit
Speaker 1: that that was like, no, I don't want to do that.
Speaker 1: Do you have a favorite tie? Doesn't mean something? No,
Speaker 1: not really. This one's actually very old. This is like
Speaker 1: one of the original it's an orange tie for those.
Speaker 1: Thank you very much for joining us. That was a
Speaker 1: phenomenal Discuy Shin. I learned a lot about you and
Speaker 1: podcasts is really cool. You know we did in years
Speaker 1: ago and I totally agree with a new um enthusiasm podcast.
Speaker 1: Thank you for being our guinea pig. Tom, Thank you,
Speaker 1: thank you for joining us on the first episode of
Speaker 1: Odd Lots. We'll be doing this every week and you
Speaker 1: can find it on Bloomberg dot com, iTunes, SoundCloud and
Speaker 1: just about anywhere else. You can follow us on Twitter
Speaker 1: at at the Stalwart, for Me, at Tracy Ellaway. For
Speaker 1: Tracy will obviously be tweeting out the links. And thanks
Speaker 1: again to Tom Keene for joining us and being our
Speaker 1: guinea pig on this first episode, and thank you for
Speaker 1: listening