Speaker 1: Hello, and welcome to What Goes Up, a Bloomberg Weekly
Speaker 1: Markets podcast. I'm Sara Ponzac, a reporter on the Cross
Speaker 1: Asset team, and I'm Mike Reagan, a senior editor on
Speaker 1: the Markets team. This week, on the show, the Feds
Speaker 1: a buyer again, Powell announced plans to expand the bank's
Speaker 1: balance sheet, but don't you dare go confusing the asset
Speaker 1: purchases with quantitative easing. And the US China trade talks
Speaker 1: were once again front and center with a Chinese delegation
Speaker 1: in Washington. D c our guests break it down, and
Speaker 1: if you're here for the craziest things we saw in
Speaker 1: markets this week, don't worry, we will get to them. Sarah,
Speaker 1: I'll give you a hint, as as I usually do
Speaker 1: minds in the collectibles market, and he guesses, I'm I'm
Speaker 1: honestly a bit worried that we may have the same
Speaker 1: craziest thing, the worst things that could happen. There's worst
Speaker 1: things that could happen. And remember that we have our
Speaker 1: very own Bloomberg Podcast hotline. Give us a call, let
Speaker 1: us know about the craziest things that you guys have heard,
Speaker 1: or feel free to ask us any questions. That number
Speaker 1: is six four six three to four three four nine zero,
Speaker 1: and we may even play your message on the show. So, Sarah,
Speaker 1: as you know, I think the podcast works best when
Speaker 1: everybody agrees with me. It just seems like the right thing.
Speaker 1: This has been over the past two epis. Seems like
Speaker 1: it lends more authority to be on the right side
Speaker 1: of history that that sort of thing. But as you
Speaker 1: informed me, I think our two guests here there might
Speaker 1: be a chance we'll get an actual debate on the podcast,
Speaker 1: which which would be exciting so um to me, this
Speaker 1: is could be the best debate since the is a
Speaker 1: hot dog of sandwich debate which has has royal many
Speaker 1: cock ol parties I've been at, and I mean, I'll
Speaker 1: give my opinion. It's clearly not wrong. Wrong you are.
Speaker 1: You've got bread, you've got meat, you've got a sandwich. Anyway,
Speaker 1: enough of that, let's introduce the guests are first guests.
Speaker 1: He's actually our first turn guest among U non Bloomberg people,
Speaker 1: our first two timer. He's the managing director of Global
Speaker 1: macro Strategy at Medley Global Advisors UH. Previously, he was
Speaker 1: chief economist and a portfolio manager at Intellectist Partners, and
Speaker 1: he spent several years at PIMCO out on the West coast,
Speaker 1: back in the Bill Gross days, and we're proud of him.
Speaker 1: Back Ben Emmons, welcome to the show. Thank you very much. Sarah,
Speaker 1: Mike is really great to be back. Thanks Ben also
Speaker 1: joining us. Well, this guy is like a three or
Speaker 1: four timer, but he's a Bloomberg guy, so he doesn't
Speaker 1: doesn't really count. Uh, he's a cross asset reporter. Lukalla,
Speaker 1: welcome to the show. Good to be here. It's uh
Speaker 1: rough to debate someone with the kung fu background of
Speaker 1: of Ben Buttoh hey, well we'll see what happens. Well,
Speaker 1: Lincoln Douglas is up. No violence here, we'll keep it
Speaker 1: very very g rated. A little violence, a little violence,
Speaker 1: podcast the violence. But if I remember correctly, the source
Speaker 1: of this debate stems from the speech that Jerome pal
Speaker 1: gave this week in which he basically announced that the
Speaker 1: FED was going to begin buying treasury bonds again, especially
Speaker 1: on the short end, a lot of treasury notes to
Speaker 1: sort of manage the yield curve, prevent these inversions. In
Speaker 1: the shooter ended part of the yield curve that we've
Speaker 1: seen so immediately. Sorry. I don't know about you, but
Speaker 1: my Twitter feed erupted into this is more quantitative easing,
Speaker 1: and other people say no, it's not quantitative easing. So, uh, luke,
Speaker 1: why don't you start explaining to us why you believe
Speaker 1: this is not quantitative easing. So first, I want to
Speaker 1: push back on your on your premise some of the
Speaker 1: some of the things you said there in terms of
Speaker 1: Powell's justification for returning to purchases of not treasury bonds
Speaker 1: but pretty much all bills, is the plan as as
Speaker 1: far as I can tell, he didn't really mention a
Speaker 1: desire to steep rest deep in the yield curve. That's
Speaker 1: something you can read into it if you want to.
Speaker 1: But he said this is all about maintaining an ample
Speaker 1: reserve system, focusing more on the liability side of bank
Speaker 1: balance sheet, make con sure reserves are ample. And for me,
Speaker 1: what this isn't is quantitative easing, it's quantitative normal ng back.
Speaker 1: It's an expansion of the balance sheet and the buying
Speaker 1: of bills in a way that's designed to ensure the
Speaker 1: adequate transmission of current monetary policy, whether or not the
Speaker 1: Fed lowers or raises rates From here, would still coincide
Speaker 1: with balance sheet expansion. Probably it's not a measure to
Speaker 1: add additional easing push people out the curve. Removed duration,
Speaker 1: so you have to move into risk your assets. And
Speaker 1: I think this kind of distinction is useful and worth
Speaker 1: noting because the intent of monetary policy matters. Back in
Speaker 1: the day, pre ninety four, I believe it was, you'd
Speaker 1: really even didn't get FED statements to know when rates
Speaker 1: are removing up or down. You had to discern it.
Speaker 1: But why by what they were doing in open market
Speaker 1: operations in excess essentially of what you would suspect they'd
Speaker 1: be doing in order to kind of manage the reserves
Speaker 1: in the system. That was the signal. So I think
Speaker 1: signal and intent matter a lot in monetary policy. Look, you,
Speaker 1: you're supposed to debate Bed, not me. All right, all right,
Speaker 1: he's the only one saying wrong things so far. His
Speaker 1: he's coming at you. But I have to say Ben
Speaker 1: was pretty rebellious this week because Jerome Howell must have
Speaker 1: said about five times in his speech did I mentioned
Speaker 1: that this is not quee? And then Ben goes ahead
Speaker 1: and sends around an email to his clients and the
Speaker 1: title of it is call it a quei comeback. So, Ben,
Speaker 1: why don't you give us your take from your point
Speaker 1: of view? Why can you call it a quwie come back? Yes,
Speaker 1: I think that and two two looks point like, look
Speaker 1: as we fair that you are buying treasury bills and
Speaker 1: you injecting reserves back in the system, and fair enough,
Speaker 1: this is what the Fed would do since fourteen. Sorry
Speaker 1: see traditional function of the fellow reserve. But let's think
Speaker 1: about it this way, like, we are in a situation
Speaker 1: where two years ago we started a normalization of the
Speaker 1: bound she's and we contracted the reserves, and we built
Speaker 1: this pretty big gap between currency circulation and reserves in
Speaker 1: the system. And that has become a pressing issue. So
Speaker 1: as Bau goes ahead and try us to fill that gap,
Speaker 1: he's gonna have to buy these tea bills to do that, right,
Speaker 1: He's gonna have to buy from dealers, right, and then
Speaker 1: those dealers have new reserves and banks are new reserves,
Speaker 1: and then there will be another let's say conversion in fact,
Speaker 1: if you're called that way, of something happening with those reserves.
Speaker 1: Why did we ended up with this repot issue in
Speaker 1: September because a lot of banks that hoard of reserves,
Speaker 1: banning a few banks held a lot of reserves. So
Speaker 1: they try to resolve that. But if you didn't think
Speaker 1: about what que actually did. There's two ways to think
Speaker 1: about it, right. One it is a duration of fact,
Speaker 1: just as you buy a long day of securities and
Speaker 1: you you push people out in the respectrum. The other
Speaker 1: part is it that you are providing let's say, a
Speaker 1: real cushion to the system. One reason why we want
Speaker 1: to really happen was to try to really resolve the
Speaker 1: frencial crisis and the liquidity aspects of that and the
Speaker 1: distress that happened. We don't really deal with that right now,
Speaker 1: but we do deal with a quickly issue, so to speak.
Speaker 1: So if you cushion the system with a let's say
Speaker 1: very af acid which is the excess reserve, by driving
Speaker 1: up the price of the risk free asset, which is
Speaker 1: the d bill, then you will get some sort of
Speaker 1: idea that people will will at least respond to it
Speaker 1: and say, Okay, there's a cushioning effect in the system.
Speaker 1: I'm going to do something else, right, I'm gonna take
Speaker 1: perhaps more risk or at least some enticement. And this
Speaker 1: may be the debate right where we don't debate so
Speaker 1: much about buying interior treasury bonds and that's QUE right,
Speaker 1: more about what will this program ultimately resolved into how
Speaker 1: people will behave as this question. The motivations may be different,
Speaker 1: but the the reaction will be similar in markets. I
Speaker 1: want to say, just to like back up Ben's point
Speaker 1: to a certain extent, go against myself. What you saw
Speaker 1: in markets, especially on Tuesday, there was this big twist
Speaker 1: steepening of the curve, and steepening in a trade like
Speaker 1: that is typically associated with what we saw right before
Speaker 1: QUE two and UH and following on from that in
Speaker 1: August of and again when we were talking up the
Speaker 1: possibility of q E three. So essentially what this is
Speaker 1: intended on doing, whether it's a problem with anything with
Speaker 1: the with the reserves of the system, with bank liquidity
Speaker 1: selling and so forth, it's effectively serving as forward guidance,
Speaker 1: which is pushing short rates down and removing more deflationary
Speaker 1: tail risk negative risk asset outcomes. And you saw long
Speaker 1: bond yields go up. So hey, if the market thinks
Speaker 1: it's kuwi and wants to act like it's QUI in
Speaker 1: a way, who am I to say it's not I
Speaker 1: think you just conceded defeat their Luke, I'm not sure
Speaker 1: is that? Can you can you see the threatening motions
Speaker 1: that Ben is making at Ben's practicing kung fu in
Speaker 1: his seat. But I want to ask you then, Luke.
Speaker 1: I mean you can make the quip that markets are
Speaker 1: never wrong. But if you look at the spread between
Speaker 1: three month treasury yields and tenure treasury yields, I mean
Speaker 1: we're now back near the vicinity of being in positive territory.
Speaker 1: I mean, can you make the case then that if
Speaker 1: this isn't que then we're seeing markets act the wrong way,
Speaker 1: uh potential. I think you can make that point. However,
Speaker 1: I think this week and I'm sure we'll get to this.
Speaker 1: It's kind of important to note that this wasn't happening
Speaker 1: in a vacuum, and in fact, even during Powell on Tuesday,
Speaker 1: some of the h was taken out of his remarks
Speaker 1: by the fact that you had trade headlines hitting fast
Speaker 1: and furious and kind of either whip sawing and negating
Speaker 1: the effect or in some cases accelerating it. And what
Speaker 1: we've seen essentially since that point is more positive than negative.
Speaker 1: Trade headlines, and that's a reason why the tenure yield
Speaker 1: has kind of risen as dramatically as it has this week. So, Ben,
Speaker 1: you gave a TV interview to Bloomberg TV earlier this
Speaker 1: week where you talked about this whole issue and um,
Speaker 1: how you see the rest of the year shaping out?
Speaker 1: And we wrote a story on it. The headline was
Speaker 1: shades of two thousand and eighteen route coming for markets
Speaker 1: this quarter. Emmon says, that's that's a scary headline, Ben,
Speaker 1: But I just wanted to sort of go through your rationale.
Speaker 1: You don't think, um, that this will solve the repo,
Speaker 1: which you the funding issue as we get towards year end. Um,
Speaker 1: you say, uh, this will take some time to catch up.
Speaker 1: It may alleviate at some point a bit of the
Speaker 1: funding pressures that we see, but it will not be
Speaker 1: by year end. It will be more by the second
Speaker 1: quarter of next year. So walk us through a little
Speaker 1: bit more how you see the rest of the year
Speaker 1: shaping out. It sounds like you're you're pretty cautious for
Speaker 1: the fourth quarter. Yeah, I am, man, Mike, because um,
Speaker 1: although this is a really good step at these to
Speaker 1: address it more permanently, in the sense, and they still
Speaker 1: have to, by the way, announce the permanent repo facility
Speaker 1: that it's not there yet. It may happen October. We
Speaker 1: don't know yet yet, but it's like in the air um.
Speaker 1: But most of all it will it will take a
Speaker 1: number of months to ramp it really up right, they
Speaker 1: would have to buy at least a hun to on
Speaker 1: a billion or so of de bails to make that difference.
Speaker 1: Then we're dealing with this redistribution issue of reserves that
Speaker 1: is still happening, and then we're dealing with just the
Speaker 1: year end effect in itself. Right, And if you this
Speaker 1: is actually what where I'm coming really from, is that
Speaker 1: since when the Basil three agreement may changes to let's say,
Speaker 1: leverage that banks can have on their bound sheet, particularly
Speaker 1: over year end, there's a lot of there's a lot
Speaker 1: of constraint on that. Now this is actually limited the
Speaker 1: ability of companies and others to fund themselves over year
Speaker 1: and they all go to a really small door, so
Speaker 1: to speak. And we've delvet this repeatedly, so we're dealing
Speaker 1: with it this year too. One way to look at
Speaker 1: it is the technical part of the market is the
Speaker 1: currency market, where you have basis swaps right where you
Speaker 1: can have swap floating rates with one another. That gives
Speaker 1: you sort of a sense of demand for dollars in particular.
Speaker 1: Now we're also coming off of really a tense period
Speaker 1: in August of flight to safety. There's other signs there
Speaker 1: that there's been a fair amount of dollar issuance happening
Speaker 1: in Asia, right, that's I think all of rush for
Speaker 1: having dollars before the end of the year. There's generally,
Speaker 1: I think just a demand for dollars in itself, which
Speaker 1: have nothing to do with the value of dollars, just
Speaker 1: demand for dollars. So we were in a pretty tight situation.
Speaker 1: So this program that they're talking about will make some difference,
Speaker 1: but not immediately. Um. In addition that you if you
Speaker 1: do deal with this constraint in itself, then you're going
Speaker 1: to get the same sort of sort of gaveway, a
Speaker 1: really tight gave way to get through. And if we're
Speaker 1: then dealing with everything that comes ahead of us now,
Speaker 1: the trade talks, we don't know how it ends, right,
Speaker 1: So the tears that come into effect perhaps next week
Speaker 1: and in December, other than certainty we know the drill
Speaker 1: of that, So it does. It does keeps us in
Speaker 1: a really tight environments. And that's the caution that I have,
Speaker 1: you know, and and it will that be the chase
Speaker 1: of Tony eighteen. Yes, that looks like a bit like that,
Speaker 1: um and that depends, of course, to on on all
Speaker 1: the geopolitical developments. But we have a lot of that
Speaker 1: this time, right, not forget what's happening with Turkey Syria,
Speaker 1: which is very politically charged, and that also China is
Speaker 1: involved in that too. There's all of that political aspect
Speaker 1: there to that markets are in a bind here, and
Speaker 1: to piggyback on Bend's point, they're like that that is
Speaker 1: trying to essentially help with the amount of water going
Speaker 1: through the plumbing here and and loosen that up. But
Speaker 1: the size of the pipes is really what's going to
Speaker 1: become an issue at the end of Q four And
Speaker 1: Bank of America had kind of a recent note uh
Speaker 1: talking about just GA regulations and the desire of big
Speaker 1: banks to avoid search charges on their assets, and that means,
Speaker 1: you know, essentially slimming down on your assets, which obviously
Speaker 1: has ripple effects beyond in terms of those who need
Speaker 1: financing or have finance positions currently and it's kind of
Speaker 1: same as it ever was. It is shades of eighteen
Speaker 1: there and that you know, you see some banks that
Speaker 1: are right above a level where if they just got
Speaker 1: below it would be a lower charge for the next year.
Speaker 1: So that means they have the same incentive to kind
Speaker 1: of retreat from a market, the market in the way
Speaker 1: that they did in Q four that had people just
Speaker 1: crying about how bad liquidity was and really seeing a
Speaker 1: lot of the gaps you got during that time, it
Speaker 1: really makes you wonder if they shouldn't do say assets
Speaker 1: over a period rather than it doesn't. It doesn't make
Speaker 1: you wonder that that's not how the Basil agreement works.
Speaker 1: And ultimately the Basil Agreement actually is overlapping agreement that
Speaker 1: all banks do have to comply with, even though the
Speaker 1: domestic regulation may be a bit different. It has been
Speaker 1: an interesting repeating a phenomenon of the last four years
Speaker 1: sixteen eighteen and now right so, and every time that
Speaker 1: the tensions get build up that year and effect becomes
Speaker 1: more severe. So this year too, we have plenty of
Speaker 1: reasons to be really cautious. So I am with look
Speaker 1: that on that way is that we're going to go
Speaker 1: through small door. There's gonna be a lot of parties
Speaker 1: have to all go through the small door, and whether
Speaker 1: the fetes there but this repoperation or not. I don't
Speaker 1: think that the tightness in the markets will necessarily change
Speaker 1: as it was then. When you talk about shades of eighteen,
Speaker 1: especially being at the beginning of the fourth quarter, a
Speaker 1: lot of people will picture the near death experience of
Speaker 1: the ballmarket that we experienced last year. But many would
Speaker 1: point out the fact that interest rates are much lower
Speaker 1: clearly than where they were back then. How does that
Speaker 1: change the picture heading into this quarter and then maybe
Speaker 1: even into as well, because as we all know, the
Speaker 1: fourth quarter was pretty rough, but then we saw a
Speaker 1: very steep rebound. Yeah, And I think that's an interesting
Speaker 1: point because you were talking here about then the macro
Speaker 1: reasons of why there's caution that, yes, we have hunter
Speaker 1: based point basements, more of lower rates, with rate cuts everywhere.
Speaker 1: There's a lot of focus on to try to avoid
Speaker 1: the tradeboard turning into a global recession, so not our
Speaker 1: insurance being put in the system. That's completely opposite from
Speaker 1: last year. Clearly, at that time, we were actually very
Speaker 1: confident that we had a very strong outlook and it
Speaker 1: was more about talking about tightening, and in fact emerging markets,
Speaker 1: in particular central banks there had had the tighten because
Speaker 1: they dealt with pressure on their currencies. So we're really
Speaker 1: opposite situation on that front. But that all said, like,
Speaker 1: I think the complexity of the trade war has has
Speaker 1: compounded since that time, and there's so many layers have
Speaker 1: been added to with that, although not not not all
Speaker 1: of that has been yet really implemented the market clearly
Speaker 1: discounting that's a scenario that makes the economic scenario a
Speaker 1: lot worse than what we had before. They say at
Speaker 1: least six months before, you know, the complexity vally pent up.
Speaker 1: So I think that that the year end situation on
Speaker 1: that sense is not different than last year in terms
Speaker 1: of having tension about where we're really handing with trade brackits,
Speaker 1: golf tensions, etcetera. The uncertainty is just much more elevated,
Speaker 1: and that is not I think it's something that low
Speaker 1: rates have yet the offside where they have not really
Speaker 1: upsettled uncertainty. And if you look kind of at the
Speaker 1: the history of the market from eighteen to the present
Speaker 1: and especially during the risk of episodes a February UH
Speaker 1: of alpocalypse and q FO. To be clear, it's it's
Speaker 1: very evident that these don't appear to be broad macro issues.
Speaker 1: It does appear as though market structure and liquidity concerns
Speaker 1: just become the overriding factors, like we've had over the
Speaker 1: past couple of years. I'd say we're up about twenty
Speaker 1: percent and earnings are up about but the time periods
Speaker 1: in which those have occurred are completely divorced from one another.
Speaker 1: So I think, you know, the kind of stocks follow fundamentals, yeah,
Speaker 1: over the long haul, but we've seen kind of market
Speaker 1: conditions play a bigger role, especially in our risk off episodes,
Speaker 1: you know. But I wanted to go back to something
Speaker 1: you mentioned, Um, the Turkey invading Seria situation. UM. I
Speaker 1: know that Lira was weak, the Turkish lero was weak. Um,
Speaker 1: is there any other risks from that scenario that we
Speaker 1: need to think about. Have you seen any sort of
Speaker 1: contagion in markets elsewhere or is it just add on
Speaker 1: top of the sort of global geopolitical uncertainty that we
Speaker 1: have all over the place. It's an add on and
Speaker 1: it will be local and it will be very fact
Speaker 1: you know, impact on Turkey itself. And obviously the region
Speaker 1: and you know, looking Syria has been a war going
Speaker 1: on for eight years. But I think the political angle
Speaker 1: there was about the curves right who holds so many
Speaker 1: of these ices fighters and the subsequent flood of again
Speaker 1: of refugees out of Syria coming into Europe. Right, So
Speaker 1: you have Europe there in place, and you have the
Speaker 1: US focus on as and obviously the let's say, the
Speaker 1: criticism on on the on the turner from took on
Speaker 1: this on this policy related to Syria. This is another
Speaker 1: political angle here. I think that's new. It won't really
Speaker 1: impact i'd say trade talks or or or another sort
Speaker 1: of event. It's just add on um contagion to other uh,
Speaker 1: locally emerging markets is not there, other than if it
Speaker 1: were the fact that say the Turkish banks again because
Speaker 1: Leira weekends in the banks at no liquidity anymore, etcetera.
Speaker 1: That you know, there's some banks in Europe that have
Speaker 1: lent lots of Turkish banks and they and Turkish banks
Speaker 1: are very religned on dollar funding, so that could be
Speaker 1: dead tension. You know, resurfacing has happened before, you know,
Speaker 1: when Turkish LEARR was on a lot of pressure and
Speaker 1: Trump had at a big skirmage with icon as I
Speaker 1: think twenty seventeen, so maybe something like that. Other than that,
Speaker 1: I don't think it's brons Contagian issue. Well, for first,
Speaker 1: like I think you know, this is probably first and
Speaker 1: foremost in everyone's mind, more a moral issue than anything.
Speaker 1: But when it comes to the potential market impact, I
Speaker 1: think one extra way you could see this is some
Speaker 1: potential read through between this and the possibility of the
Speaker 1: president being impeached or that impeachment then being successful, and
Speaker 1: the Senate to the extent that matters to markets. Because
Speaker 1: if there's one thing that several Republican senators have not
Speaker 1: liked them have been happy to voice their disapproval on
Speaker 1: this week Marco Rubio and Lindsay graham Uh in particular
Speaker 1: come to mind, it's that they very much do not
Speaker 1: agree with this or in policy decisions. So inasmuch as
Speaker 1: the president's constituency right now is is very dependent upon
Speaker 1: his party, and particularly his party in the Senate, in
Speaker 1: order to retain control, this is one way in which
Speaker 1: he perhaps might be undermining his support. Because this has
Speaker 1: been a topic of light and we've discussed it on
Speaker 1: a couple of the past episodes been Let's get your view,
Speaker 1: I mean, thinking about impeachment and the markets, what is
Speaker 1: the relationship if at all, I guess the relationship is
Speaker 1: not about the faults of you know, treasury debt. I
Speaker 1: wouldn't strongly emphasize that. I don't think that has anything
Speaker 1: with one and on it to do, because that's would
Speaker 1: be people's first maybe thinking is said, we're going to
Speaker 1: get a default over getting a very weak dollar. Neither
Speaker 1: has happened so far or will happen. I think, um,
Speaker 1: it will be disruptive, of course, because any political leadership
Speaker 1: change causes again additional uncertainty will be here the case
Speaker 1: two if you really think about it, we have not
Speaker 1: had a political crisis like we've had in Europe for example,
Speaker 1: including what's happening with the Brexit it. So it will
Speaker 1: be a really, I think, will first constitutional political crisis
Speaker 1: that you know. Ultimately, I do think markets will react
Speaker 1: negatively too. In a sense. It is disruption. It's uncertainty.
Speaker 1: If you do think back of the Nixon era when
Speaker 1: you know it wasn't impeached, but he ultimately left the
Speaker 1: White House. There was a lot uncertainty after that, right
Speaker 1: and how things would unfold, so that boy would definitely
Speaker 1: affect markets, but I think that it is a otherwise,
Speaker 1: it's more of an issue that it will be about
Speaker 1: the election, how to shape South, who will be the
Speaker 1: new Republican front runner there? That particularly, I think, and
Speaker 1: that's more political. I think that would not have impact
Speaker 1: on markets. I think the only thing you could see
Speaker 1: about this then is that the dollar actually ironically continue
Speaker 1: to strengthening because it's just to flight safety effect from
Speaker 1: the uncertainty. Yeah. Interesting, the pound did strengthening quite a
Speaker 1: bit on Thursday when Boris Johnson and the Irish Prime
Speaker 1: Minister met. It renewed optimism that maybe they will in
Speaker 1: some sort of agreement before the Brexit dropped dead deadline.
Speaker 1: What is your read on how that's all going to
Speaker 1: shape out? I mean, I think the pound went from
Speaker 1: like a dollar twenty two to above a dollar. Have
Speaker 1: we seen the loads in the pounder? Or is there
Speaker 1: is there danger for a big crash if this stuff
Speaker 1: falls through before the end of the month. So the
Speaker 1: good news actually is with with the brexits two things.
Speaker 1: Actually one day passed a law through the House of
Speaker 1: Comments that they could not leave the EU with without
Speaker 1: a deal. That's pass. So no matter what happens between
Speaker 1: now and the end of October, Boris Johnson or someone
Speaker 1: appointed would have to go to the EU for an extension.
Speaker 1: That's very clear. So we won't get this hard accit.
Speaker 1: As I said before, the Bank of England and the
Speaker 1: e c B have done some pretty good background works
Speaker 1: to control the followed in the derivative markets so that
Speaker 1: it won't be a financial systemic effect either if there's
Speaker 1: a Brexit, and that's why markets have always been pretty
Speaker 1: calm about the Brexit headlines, other than just general uncertainty effect. UM.
Speaker 1: Of course the pounds has upside here if if it
Speaker 1: does lead to the resolution finding the Brexit is behind us.
Speaker 1: If anything is just a relief right like the three
Speaker 1: years of this UM. But the most likely outcome so
Speaker 1: far still is that UM, if you do not leave
Speaker 1: the the the EU on the so without a deal
Speaker 1: on the one, then it will be new elections. Obviously
Speaker 1: that will be happening in November and a number of
Speaker 1: months during that extension time new government. That what happens
Speaker 1: was that Boris Johnson Matt with the Northern Irish Prime
Speaker 1: Minister and they find a way. I guess to keep
Speaker 1: the e the Northern Ireland into the EU on a
Speaker 1: certain code and it's a very technical thing, and that
Speaker 1: would be then to to the sort of a piece
Speaker 1: of of of the government, not only the government but
Speaker 1: other opposition parties except the Irish d d UP. They
Speaker 1: would be against that still, but it would be just
Speaker 1: enough to actually say now we can actually have to
Speaker 1: withdraw agreement work on the technicalities of the hardboard around
Speaker 1: Northern Ireland, which has been the big block you know,
Speaker 1: against that Brexfit conclusion. But they say it there is
Speaker 1: still a lot of work to be done, So I
Speaker 1: would I would be still in the camp of saying
Speaker 1: we're gonna head towards the ENNA in a month with
Speaker 1: a no deal action that leads to you know, new
Speaker 1: elections in the UK and more broadly stepping back. When
Speaker 1: you take a look at Thursday's price action, this could
Speaker 1: be peak policy maker optimism that we've kind of ever seen,
Speaker 1: at least so far this year. If you can look
Speaker 1: at a day when cable the pound against the US
Speaker 1: dollar is up about one five and U S docks
Speaker 1: with heavy exposure to China are also up one point
Speaker 1: five percent, those two things don't happen together. We don't
Speaker 1: suspect that global policy makers are going to avoid worst
Speaker 1: case scenarios and rally like that on both legs that often.
Speaker 1: So this that's kind of something to keep in mind
Speaker 1: going forward. Thursday's a pretty special day when you look
Speaker 1: at global markets. So far, everyone just decided to be
Speaker 1: really up to the bias definitely seen to be towards
Speaker 1: positive outcomes all around, which you would think maybe people
Speaker 1: would have learned their lessons by hour or maybe and
Speaker 1: my just my too, Synacole. Then no, you're actually right,
Speaker 1: and I think there's still a lot of caution out there.
Speaker 1: I mean a little move of rates, but it's very
Speaker 1: limited if you actually look at I mean it's a
Speaker 1: great point by way by by look to look at
Speaker 1: those two items that's directly linked to these two two deals.
Speaker 1: But if you if you look at the ranges, the
Speaker 1: SMP is still within the August range, right at what
Speaker 1: all the stress happens, Tang year is really at a
Speaker 1: low range, dollars stronger, Still not much movement there, gold
Speaker 1: is up, etcetera. There's a lot of caution. Um, you know,
Speaker 1: it's great if we get optimism. I'm just I think
Speaker 1: a lot of investors field. This is more of like
Speaker 1: that's a little bit of liquidy gap there that optimism.
Speaker 1: That why Marcus move up waiting for this ultimately what
Speaker 1: what will be the resolution in both cases, which you know,
Speaker 1: again we don't know. I think you could maybe call
Speaker 1: the optimism crazy. I think you could, and I think
Speaker 1: that is a good segue to the craziest things we
Speaker 1: saw in markets this week. I believe we got a
Speaker 1: call into the what Goes Up hotline? Is that correct?
Speaker 1: We did. It's from Gerald who is actually in Hong Kong,
Speaker 1: and he's pointing out the fact that all in this
Speaker 1: week China announced that it will actually encourage foreign financial
Speaker 1: institutions and funds to invest in their financial markets, and
Speaker 1: at that same time, Bloomberg reported further about trying to
Speaker 1: bar capital flows into China that is out of the US.
Speaker 1: So take a listen. So if I just arrived from Mars,
Speaker 1: I could be confused which country represents capitalism and free
Speaker 1: markets and which country is run by authoritarian communist But
Speaker 1: then again, these days Hong Kong itself is a bit
Speaker 1: like Mars, especially on the weekends. Thanks by It's a
Speaker 1: great point. I wonder if these, uh, the Chinese officials
Speaker 1: are eyeing all that NBA money that came into the
Speaker 1: country and and some some good potential investors there. Perhaps
Speaker 1: it's pretty blue Will. Supposedly Houston Rockets jerseys have just
Speaker 1: come out of Nike stores in China. Yeah, yeah, that's
Speaker 1: that's interesting. I mean that who would have thought that's
Speaker 1: where the tensions would escalate. But hopefully, hopefully there's peace
Speaker 1: on the horizon. All right, Luke, can you beat that
Speaker 1: craziest thing? I think I might be able to. And
Speaker 1: it's because I think this one I'm really playing to you,
Speaker 1: I know you kind of like the legal ones. And
Speaker 1: I'm also playing a bit to Sarah here because I
Speaker 1: think she might have had a family member that did
Speaker 1: something along the same lines, except a lot less criminality involved.
Speaker 1: To tell that story a little later, So there's a
Speaker 1: fourteen count indictment unsealed against the citizen of Singapore alleging,
Speaker 1: essentially that he hijacked and did some identity theft with
Speaker 1: a prominent California video game developer to often open cloud
Speaker 1: computing accounts so that he would be able to have
Speaker 1: computing power to mine bitcoin and ethereum. Apparently about five
Speaker 1: million worth of cloud computing employed here, and at one
Speaker 1: point they believe he was actually one of the biggest
Speaker 1: users of Amazon Web services by volume at the time,
Speaker 1: based on how much he was told an employing towards
Speaker 1: this tax. So I think that's the that's the craziest
Speaker 1: thing I've got for you. That's pretty good. That's pretty good.
Speaker 1: So do you buy Amazon then? Or do you buy
Speaker 1: And by the I think I'm gonna have to call
Speaker 1: my brother after this and make sure all is good
Speaker 1: in the world. He used to mind bitcoin and he's
Speaker 1: a very good ex professional video game player. So the
Speaker 1: two my cross we might have a witness to this week. Alright, man,
Speaker 1: that's a tough one to beat, can you top I'm
Speaker 1: not even sure what exactly went on there. Some guy
Speaker 1: hacked into the cloud and was mining bitcoin. I'm gonna
Speaker 1: try it. Yeah, I'm gonna completely the other way in
Speaker 1: terms of let's keep to stick to the markets, let's
Speaker 1: keep it boring, boring, and let's go back to the
Speaker 1: e c V with their issues right as in the
Speaker 1: Financial Times with borders. That's the ECB officials had such
Speaker 1: a clash with each other abouts this que decision. But
Speaker 1: if you then read the minutes from the c B.
Speaker 1: There's nothing of that in there. I thought, this is
Speaker 1: really crazy, like this game be right they you know?
Speaker 1: So I'm not aware to say it's just the usual
Speaker 1: europe Being way of communicating with one another, which means,
Speaker 1: by the way, just like with the Brexit, and just
Speaker 1: like with that situation, there's always what I called European
Speaker 1: they get together, they kiss each other, lily on the cheek,
Speaker 1: on each other, and then it will be that's the
Speaker 1: craziest therapean way. It sounds like whoever the secretary was
Speaker 1: that type those up those minutes should be promoted to diplomatic. Alright, Sarah,
Speaker 1: can you beat that? All right, I'm gonna rip off
Speaker 1: the band aid and make sure that we don't have
Speaker 1: the same one today. Mine is kind of a follow
Speaker 1: up on something I've touched on in the past, and
Speaker 1: that is Treasury Secretary mnutions father with art. Can we
Speaker 1: get a confirmation that it's not the same the same?
Speaker 1: Great love it? Um? So the headline and the story
Speaker 1: is Mnusian's dad is selling dakooning for as much as
Speaker 1: thirty five million dollars. And I know in past times
Speaker 1: on the show we talked about the stainless steel Bunny
Speaker 1: that he had purchased on the behalf of hedge fund
Speaker 1: manager Steve Cohen for about ninety million dollars. Well, this
Speaker 1: time around he is selling a painting. It's actually titled
Speaker 1: untitled twenty two, which makes me think we're there twenty
Speaker 1: one other untitled paintings. Funk forty nine by the James Gang. Yeah,
Speaker 1: but for thirty five million dollars. Thirty five million, and
Speaker 1: you don't you don't even get a title. You don't
Speaker 1: even get a title untitled two. All right, Well, I'm
Speaker 1: gonna concede defeat to you, because that's pretty good. Mine's
Speaker 1: also from the collectibles market. But I got I gotta
Speaker 1: set up with a little childhood story when when I
Speaker 1: was a young baby, really uh you know, one of
Speaker 1: seven kids, youngest of sevens my parents had They drove
Speaker 1: us all around in this beat up old Volkswagen minibus
Speaker 1: from the sixties, and there were so many of us
Speaker 1: in it. Like when you go up the hills, sometimes
Speaker 1: some kids would have to get out so that it
Speaker 1: could make it all the way up. It's like the
Speaker 1: bigger kids would push so piece of junk car, right,
Speaker 1: So my brother sends me a link today nineteen sixty
Speaker 1: Volkswagen minibus granted this one's in mint condition. Then take
Speaker 1: a guess on what it's uh, it's it's up for
Speaker 1: self for a thousand dollars close hundred and one thousand dollars.
Speaker 1: And what's interesting is my childhood house recently went up
Speaker 1: for sale and the asking price was only about double
Speaker 1: of what our childhood car was. Tells you something about
Speaker 1: you know, buy and hold what exactly you should be holding.
Speaker 1: That's on Classic Auto Mall dot com. So if any
Speaker 1: listeners want to buy that, I hope they give me
Speaker 1: a ride some day. But anyways, living it there Ben
Speaker 1: Emmon's Lukawa. Thanks so much for joining us on the
Speaker 1: show to day. Thank you very much for having thank
Speaker 1: you what goes out. We'll be back next week. Until then,
Speaker 1: you can find us on the Bloomberg Terminal web site,
Speaker 1: an app, or wherever you get your podcasts. We'd love
Speaker 1: it if you took the time to rate interview the
Speaker 1: show on Apple podcast so more listeners can find us.
Speaker 1: And you can find us on Twitter, follow me at
Speaker 1: at Sarah Pontzack, Mike is at your anonymous and Luke
Speaker 1: Kawa is at l J Kawa. You can also follow
Speaker 1: Bloomberg Podcasts at podcasts. What Goes Up is produced by
Speaker 1: tober Foreheads. The head of Bloomberg podcast is francesco Leavie.
Speaker 1: Thanks for listening, See you next time.