1 00:00:01,320 --> 00:00:12,360 Speaker 1: Scrap on your parachute. It's time for What Goes Up? Hello, 2 00:00:12,480 --> 00:00:15,480 Speaker 1: and welcome to What Goes Up, a weekly Bloomberg Markets 3 00:00:15,520 --> 00:00:19,520 Speaker 1: podcast of Mike Reagan, a senior editor at Bloomberg, and 4 00:00:19,600 --> 00:00:21,959 Speaker 1: this week on the show, the armies of Gung Ho 5 00:00:22,239 --> 00:00:25,560 Speaker 1: retail traders who were so influential on the stock market 6 00:00:25,600 --> 00:00:28,200 Speaker 1: in the past. Here, well, they seem to have sobered 7 00:00:28,240 --> 00:00:30,880 Speaker 1: up a bit and the market has stopped going straight up. 8 00:00:31,520 --> 00:00:34,920 Speaker 1: Are these two topics related? And do sky hide valuations 9 00:00:34,960 --> 00:00:38,000 Speaker 1: mean a bigger correction is inevitable. We'll get into it 10 00:00:38,040 --> 00:00:41,920 Speaker 1: with a veteran Wall Street strategist, but first, Charlie Pellett 11 00:00:41,960 --> 00:00:45,120 Speaker 1: tell us who is this week's mystery co host. This 12 00:00:45,159 --> 00:00:49,400 Speaker 1: week's mystery co host is sid Verma. Sid as a 13 00:00:49,520 --> 00:00:54,120 Speaker 1: senior editor with Bloomberg's Crosssset team in London. His hobbies 14 00:00:54,120 --> 00:00:58,240 Speaker 1: include trolling Joe Wisenthal on Twitter, and while he and 15 00:00:58,280 --> 00:01:00,400 Speaker 1: Mike Reagan share the title of scene, You're out of 16 00:01:00,480 --> 00:01:04,360 Speaker 1: here said is much younger and nowhere near as washed 17 00:01:04,480 --> 00:01:07,959 Speaker 1: up as Reagan said, claims his parents are proud of him, 18 00:01:08,000 --> 00:01:11,600 Speaker 1: even though he never did become a doctor. Said, I'm 19 00:01:11,600 --> 00:01:14,040 Speaker 1: gonna need to talk to Chu earlier about these intros. 20 00:01:14,200 --> 00:01:15,679 Speaker 1: I'm not sure what I did to get on his 21 00:01:15,760 --> 00:01:18,680 Speaker 1: bad side. Maybe I didn't stand clear of the closing 22 00:01:18,680 --> 00:01:22,120 Speaker 1: doors the right way or something, But anyway, Dr said Vermont, 23 00:01:22,120 --> 00:01:24,760 Speaker 1: welcome to the show. Thank you very much. I mean, 24 00:01:24,880 --> 00:01:27,319 Speaker 1: if Charlie says that it's true, I feel like this 25 00:01:27,400 --> 00:01:31,080 Speaker 1: is a Bloomberg writer. Passes said, before we get into 26 00:01:31,080 --> 00:01:33,240 Speaker 1: the markets, I wanted to get a sense from you 27 00:01:33,360 --> 00:01:36,400 Speaker 1: of what it's like in London these days, especially now 28 00:01:36,440 --> 00:01:39,200 Speaker 1: that the pubs are back open. I can't really picture 29 00:01:39,280 --> 00:01:42,000 Speaker 1: London with closed pubs. I mean, is it really London 30 00:01:42,040 --> 00:01:44,600 Speaker 1: if the pubs aren't open? Yeah, I mean there are 31 00:01:44,600 --> 00:01:47,319 Speaker 1: a lot of pernicious effects. Um. A lot of people 32 00:01:47,360 --> 00:01:51,960 Speaker 1: were forced to talk to their family, express their emotions 33 00:01:52,200 --> 00:01:56,440 Speaker 1: in a in a civilized way um, and basically fraternize 34 00:01:56,560 --> 00:02:02,160 Speaker 1: with their neighbors UM, and do very American style subversive 35 00:02:02,200 --> 00:02:07,600 Speaker 1: things like go do fitness um, and we'll go enter 36 00:02:07,720 --> 00:02:14,440 Speaker 1: the positivity industrial complex and is Instagram and exercise with teams. Um. 37 00:02:14,600 --> 00:02:17,480 Speaker 1: Now things are opening up, so hopefully we can get 38 00:02:17,520 --> 00:02:21,160 Speaker 1: to the London of old um. And Yeah, I mean 39 00:02:21,200 --> 00:02:23,120 Speaker 1: it's it's crazy. I don't know how much of you 40 00:02:23,120 --> 00:02:26,079 Speaker 1: guys have been going out, but um, I went out, 41 00:02:26,160 --> 00:02:29,240 Speaker 1: and it's kind of you're relearning social norms when you 42 00:02:29,280 --> 00:02:33,239 Speaker 1: go to the pub, when you're queuing to actually get 43 00:02:33,240 --> 00:02:36,960 Speaker 1: around in um, and it's kind of it's we're entering 44 00:02:36,960 --> 00:02:41,040 Speaker 1: new territory. Anyway, let's get to that market chat with 45 00:02:41,080 --> 00:02:43,640 Speaker 1: our guests. Our guests this week has a list of 46 00:02:43,680 --> 00:02:47,640 Speaker 1: awards and accomplishments that's a mile long. But in my opinion, 47 00:02:47,720 --> 00:02:50,680 Speaker 1: her biggest claim to fame is that, like me, she's 48 00:02:50,680 --> 00:02:53,960 Speaker 1: a graduate of the number one university in the state 49 00:02:54,000 --> 00:02:57,520 Speaker 1: of Delaware. She is the chief investment strategist at Charles 50 00:02:57,560 --> 00:03:00,400 Speaker 1: Schwab and her name is Lizianne Sanders. Liz, and welcome 51 00:03:00,400 --> 00:03:02,880 Speaker 1: back to the show. Well, thank you, Mike, thanks for 52 00:03:02,919 --> 00:03:04,839 Speaker 1: having me in high Stid. How are you very well? 53 00:03:04,880 --> 00:03:07,720 Speaker 1: Thank you very much, and listen. Uh, it's very nice 54 00:03:07,760 --> 00:03:10,640 Speaker 1: of you to not point out that I've made that 55 00:03:10,680 --> 00:03:13,040 Speaker 1: same joke about the best school in the state of 56 00:03:13,080 --> 00:03:15,760 Speaker 1: Delaware probably every time we've we've been in the same 57 00:03:15,840 --> 00:03:18,480 Speaker 1: room together, So I appreciate that. That's okay. Hey, we 58 00:03:18,600 --> 00:03:21,399 Speaker 1: have the President United States is also a blue hen 59 00:03:21,600 --> 00:03:25,919 Speaker 1: so yeah, the alumni is moving up in the world. Listen, 60 00:03:26,040 --> 00:03:30,360 Speaker 1: let's start with that idea of the individual retail investors. 61 00:03:30,600 --> 00:03:32,720 Speaker 1: There's a sense, at least in the media that the 62 00:03:32,840 --> 00:03:35,600 Speaker 1: reddit type of traders have sort of sobered up a 63 00:03:35,640 --> 00:03:38,360 Speaker 1: bit and at least aren't chasing meme stocks the way 64 00:03:38,360 --> 00:03:41,240 Speaker 1: they used to. From your perspective, I'm curious if you 65 00:03:41,280 --> 00:03:44,000 Speaker 1: think that's true. And I wonder if in the past 66 00:03:44,040 --> 00:03:46,880 Speaker 1: year or so, when you're trying to analyze the market, 67 00:03:47,080 --> 00:03:48,880 Speaker 1: if you've been sort of looking in the mirror a 68 00:03:48,920 --> 00:03:51,480 Speaker 1: little bit more than normal, in other words, looking at 69 00:03:51,520 --> 00:03:54,880 Speaker 1: what the retail investors at Schwab and elsewhere have been doing, 70 00:03:55,440 --> 00:03:58,520 Speaker 1: if they're moving as a flock, uh, and what sort 71 00:03:58,520 --> 00:04:03,280 Speaker 1: of the sentiment is there are among that cohort right now? Yeah, So, 72 00:04:03,400 --> 00:04:08,680 Speaker 1: there there are some indications that the robust volume driven 73 00:04:08,760 --> 00:04:11,800 Speaker 1: by that that crowd, the newly minted day traders, the 74 00:04:11,880 --> 00:04:14,120 Speaker 1: Reddit crowd, whatever you wanna call, and it's broader than 75 00:04:14,200 --> 00:04:17,560 Speaker 1: just the Reddit flash mobs that became um so in 76 00:04:17,600 --> 00:04:20,280 Speaker 1: the news in the January February time frame. But if 77 00:04:20,320 --> 00:04:23,000 Speaker 1: you look more broadly, there's some indication that there's a 78 00:04:23,040 --> 00:04:26,120 Speaker 1: little bit of a waning in terms of that participation. 79 00:04:26,240 --> 00:04:31,279 Speaker 1: But it also sometimes gets masked because the the outset 80 00:04:31,320 --> 00:04:36,200 Speaker 1: of interest by that fairly new cohort dates back to 81 00:04:36,520 --> 00:04:40,800 Speaker 1: the June July period of last year, and it didn't 82 00:04:40,839 --> 00:04:43,840 Speaker 1: that that cohort didn't get as much attention even though 83 00:04:44,160 --> 00:04:46,600 Speaker 1: the likes of Citadel came out last summer and said 84 00:04:46,640 --> 00:04:52,400 Speaker 1: that retail traders represented of daily volume, but where their 85 00:04:52,520 --> 00:04:56,919 Speaker 1: interest was most dominant within the market, at least outside 86 00:04:56,920 --> 00:04:59,960 Speaker 1: of the options market. We're in the fang type style 87 00:05:00,200 --> 00:05:03,520 Speaker 1: in the big five names that were otherwise the leadership names, 88 00:05:03,520 --> 00:05:07,920 Speaker 1: so their activity blended into what was otherwise working in 89 00:05:07,960 --> 00:05:10,280 Speaker 1: the market. It really wasn't until the beginning of this 90 00:05:10,360 --> 00:05:15,440 Speaker 1: year that that cohort got more interested in the meme stocks, 91 00:05:15,440 --> 00:05:19,040 Speaker 1: heavily shorted stocks, weak balance sheet companies, penny sheet stocks, 92 00:05:19,080 --> 00:05:22,160 Speaker 1: some of the spacks obviously cryptos. So it was just 93 00:05:22,240 --> 00:05:26,440 Speaker 1: more noticeable when it was in those lower quality, uh 94 00:05:26,680 --> 00:05:30,359 Speaker 1: not sort of typical leadership areas of the market. What 95 00:05:30,480 --> 00:05:32,520 Speaker 1: we don't know is whether that money is sort of 96 00:05:32,560 --> 00:05:36,360 Speaker 1: morphed back into where leadership has been more recently, really 97 00:05:36,400 --> 00:05:40,080 Speaker 1: since mid February, we've seen us shift, believe it or not, 98 00:05:40,160 --> 00:05:45,120 Speaker 1: back toward some semblance of fundamentals driving stocks, a bit 99 00:05:45,160 --> 00:05:48,680 Speaker 1: more of a quality bias, profitability bias, a little bit 100 00:05:48,680 --> 00:05:52,440 Speaker 1: of evaluation bias. Notice I say valuation, not value, because 101 00:05:52,440 --> 00:05:56,600 Speaker 1: I think those sometimes are are separate. So it's gonna 102 00:05:56,600 --> 00:05:59,200 Speaker 1: be interesting to see when we really open back up 103 00:05:59,240 --> 00:06:03,440 Speaker 1: and doing people or some percentage of people go back 104 00:06:03,480 --> 00:06:07,200 Speaker 1: to work and we've got sports betting again, whether some 105 00:06:07,279 --> 00:06:10,719 Speaker 1: of the forces that that drove that cohort to a 106 00:06:10,800 --> 00:06:13,719 Speaker 1: level of interest that we've not seen before, whether that 107 00:06:14,320 --> 00:06:17,000 Speaker 1: fades a bit, or whether we truly have brought them 108 00:06:17,000 --> 00:06:20,240 Speaker 1: into the world of investing for a more extended period 109 00:06:20,240 --> 00:06:25,040 Speaker 1: of time. We've seen this whole euphoria in markets UM 110 00:06:25,520 --> 00:06:27,800 Speaker 1: and yeah, as you've explained, a lot of it has 111 00:06:27,839 --> 00:06:31,560 Speaker 1: been retail driven. One thing that is incredibly different from 112 00:06:31,560 --> 00:06:36,719 Speaker 1: this UM business cycle compared to other crisis eras has 113 00:06:36,760 --> 00:06:40,280 Speaker 1: been the fact that savings right it's amongst the middle class, 114 00:06:40,600 --> 00:06:43,719 Speaker 1: has standard out stood out very respectfully. And you know 115 00:06:43,800 --> 00:06:47,119 Speaker 1: this is down to fiscal policy redress and other such 116 00:06:47,160 --> 00:06:51,680 Speaker 1: factors that what could challenge this business cycle. I guess 117 00:06:51,680 --> 00:06:54,840 Speaker 1: it's it's just like a business cycle like no other. 118 00:06:55,360 --> 00:06:58,200 Speaker 1: You know, if we forget about exultinist shocks, which no 119 00:06:58,240 --> 00:07:02,640 Speaker 1: one can predict and just thing cur broader forces. I mean, 120 00:07:02,760 --> 00:07:07,640 Speaker 1: I'm used to thinking of business cycles as young, you know, middle, 121 00:07:07,720 --> 00:07:11,560 Speaker 1: middle aged, and old. That kind of framework seems kind 122 00:07:11,560 --> 00:07:14,000 Speaker 1: of out of place because we seem to be going 123 00:07:14,080 --> 00:07:17,520 Speaker 1: back to the pre COVID business cycle. It seems that 124 00:07:17,640 --> 00:07:20,880 Speaker 1: people are talking about wage inflation and that could reduce 125 00:07:21,000 --> 00:07:24,240 Speaker 1: corporate margins and lead to a bit of overheating. I 126 00:07:24,560 --> 00:07:27,560 Speaker 1: find that's a really interesting question. What are your thoughts 127 00:07:27,560 --> 00:07:30,600 Speaker 1: on that. I think that this cycle you're right is 128 00:07:30,600 --> 00:07:33,600 Speaker 1: is more unique than any we have seen in the past, 129 00:07:33,840 --> 00:07:36,760 Speaker 1: and I'm not even sure there's a consensus assumption of 130 00:07:36,800 --> 00:07:40,280 Speaker 1: what the path of recovery looks like from here. It's 131 00:07:40,280 --> 00:07:43,480 Speaker 1: sort of all over the map. From the more bearish 132 00:07:43,600 --> 00:07:45,560 Speaker 1: end of the spectrum that believes this is just a 133 00:07:45,560 --> 00:07:48,760 Speaker 1: fiscal stimulus sugar high, we'll get the inevitable pop in 134 00:07:48,760 --> 00:07:52,440 Speaker 1: the data by virtue of base effects, but that after 135 00:07:52,480 --> 00:07:56,560 Speaker 1: that we're gonna quickly move back down to a pretty 136 00:07:56,600 --> 00:08:00,480 Speaker 1: subdued pace of growth, much like we had pre pandemic. 137 00:08:00,560 --> 00:08:02,440 Speaker 1: So for all the we have to remember, for all 138 00:08:02,440 --> 00:08:06,840 Speaker 1: the cheering about the cycle that preceded this, and it's 139 00:08:06,960 --> 00:08:10,560 Speaker 1: it's factual that it was the longest economic expansion in 140 00:08:10,720 --> 00:08:15,000 Speaker 1: history and had lovely stats associated with it, like a 141 00:08:15,200 --> 00:08:18,480 Speaker 1: three half percent unemployment rate, But the reality is that 142 00:08:18,520 --> 00:08:22,200 Speaker 1: the strength of the expansion was the weakest in history 143 00:08:22,280 --> 00:08:26,320 Speaker 1: by far. So long, yes, weak, yes, And so I'd 144 00:08:26,320 --> 00:08:29,080 Speaker 1: say the negative cases that we're going to revert back 145 00:08:29,160 --> 00:08:32,640 Speaker 1: down to that muddle through that kind of pace, and 146 00:08:32,640 --> 00:08:34,240 Speaker 1: then of course at the under the other end of 147 00:08:34,280 --> 00:08:38,480 Speaker 1: the spectrum is the roaring twenties kind of scenario. I 148 00:08:38,520 --> 00:08:41,040 Speaker 1: think that the the honest answer that I can provide 149 00:08:41,080 --> 00:08:43,080 Speaker 1: is I have no idea. I think you you mentioned 150 00:08:43,080 --> 00:08:45,320 Speaker 1: at the outside of the question the savings rate, and 151 00:08:45,360 --> 00:08:49,000 Speaker 1: certainly embedded in the more optimistic case for the economy 152 00:08:49,280 --> 00:08:52,520 Speaker 1: is that if we that savings rate goes from the 153 00:08:52,520 --> 00:08:56,360 Speaker 1: current down to this a five to seven percent that's 154 00:08:56,400 --> 00:08:59,800 Speaker 1: been typical in the last cycle, or to do the 155 00:09:00,000 --> 00:09:02,719 Speaker 1: app of how many trillions of dollars that means in 156 00:09:02,760 --> 00:09:06,839 Speaker 1: the consumption pipeline and even going ahead forward where we're 157 00:09:06,840 --> 00:09:09,600 Speaker 1: not going to have the benefit of fiscal stimulus, that's 158 00:09:09,720 --> 00:09:13,280 Speaker 1: enough to power the economy for years to come. I 159 00:09:13,280 --> 00:09:16,320 Speaker 1: don't know that that's a safe assumption. What we don't 160 00:09:16,360 --> 00:09:20,880 Speaker 1: know is whether, like the Great Depression, whether this also 161 00:09:21,400 --> 00:09:24,920 Speaker 1: ushered out a paradox of thrift to an era where 162 00:09:24,920 --> 00:09:29,760 Speaker 1: there's a mindset toward lower debt levels, higher cushion. We 163 00:09:29,800 --> 00:09:34,720 Speaker 1: already knew that household deleveraging came out of the financial crisis, 164 00:09:34,880 --> 00:09:37,560 Speaker 1: and we never levered up the consumer side of the 165 00:09:37,559 --> 00:09:40,560 Speaker 1: economy in the last expansion like we had in the 166 00:09:40,600 --> 00:09:45,440 Speaker 1: prior expansion. Debt paid down was was paramount, and thinking 167 00:09:45,480 --> 00:09:47,960 Speaker 1: we still had strong consumption data, but it wasn't on 168 00:09:48,000 --> 00:09:50,560 Speaker 1: the back of debt. And what we don't know is 169 00:09:50,600 --> 00:09:53,360 Speaker 1: whether that savings cushion is going to stay higher. The 170 00:09:53,480 --> 00:09:58,360 Speaker 1: other potential faulty assumption I think in the really robust 171 00:09:58,440 --> 00:10:03,440 Speaker 1: case is that pent up demand is both really robust 172 00:10:03,640 --> 00:10:08,079 Speaker 1: on the good side and the service society of the economy, uh, 173 00:10:08,120 --> 00:10:10,800 Speaker 1: and that it's likely to be persistent. And I just 174 00:10:11,040 --> 00:10:14,880 Speaker 1: question that piece of the really optimistic story because the 175 00:10:14,920 --> 00:10:18,160 Speaker 1: good side of the economy we are well above pre 176 00:10:18,280 --> 00:10:22,440 Speaker 1: pandemic level, so arguably the demand has been extraordinarily strong, 177 00:10:22,679 --> 00:10:25,760 Speaker 1: consistently for the past year, and that demand has been met. 178 00:10:26,360 --> 00:10:29,480 Speaker 1: So if anything, I think the pent up demand will 179 00:10:29,679 --> 00:10:32,200 Speaker 1: be much more on the services side, and just the 180 00:10:32,320 --> 00:10:35,679 Speaker 1: nature of pent up demand on services is a bit different. 181 00:10:35,760 --> 00:10:38,800 Speaker 1: It's a little more one time in nature. So I 182 00:10:38,840 --> 00:10:41,520 Speaker 1: do worry that as we start to get these really 183 00:10:41,559 --> 00:10:45,520 Speaker 1: strong numbers that there might be too much extrapolating too 184 00:10:45,559 --> 00:10:47,920 Speaker 1: far into the future. I think there are still a 185 00:10:47,960 --> 00:10:51,240 Speaker 1: lot of questions to which we don't have answers. As 186 00:10:51,240 --> 00:11:06,920 Speaker 1: a tournus, I've never extrapolated from one time data. Well, 187 00:11:06,960 --> 00:11:10,160 Speaker 1: one thing I find fascinating about the savings rates. It's 188 00:11:10,200 --> 00:11:15,920 Speaker 1: such a simplistic calculation, you know, it's basically income minus consumption. 189 00:11:16,080 --> 00:11:17,840 Speaker 1: And I don't think we get a lot of sort 190 00:11:17,880 --> 00:11:21,360 Speaker 1: of granularity about where that savings is. You know, I 191 00:11:22,080 --> 00:11:24,480 Speaker 1: wonder how much of that savings is actually housed in 192 00:11:24,520 --> 00:11:27,599 Speaker 1: brokerage accounts. And if we do start talking about a 193 00:11:27,679 --> 00:11:30,440 Speaker 1: drawdown in savings, does that mean, you know, emptying out 194 00:11:30,480 --> 00:11:33,480 Speaker 1: your your Schwab account. God forbid, Liz, you know, God forbid? 195 00:11:33,559 --> 00:11:36,719 Speaker 1: But well, it depends on, honestly, what what's going to 196 00:11:36,800 --> 00:11:39,680 Speaker 1: be The interesting test is at whatever point we get 197 00:11:39,800 --> 00:11:44,760 Speaker 1: something more than the six seven eight percent pullback, which 198 00:11:44,840 --> 00:11:48,160 Speaker 1: is what we've been limited to in the past year. 199 00:11:48,240 --> 00:11:50,920 Speaker 1: You had one in June, you had a period in 200 00:11:50,960 --> 00:11:54,120 Speaker 1: September October where you got a couple We didn't really 201 00:11:54,160 --> 00:11:55,959 Speaker 1: have it for the SMP to get a temper cent 202 00:11:56,000 --> 00:11:58,840 Speaker 1: correction in the NASDAC earlier this year. But at the 203 00:11:58,880 --> 00:12:03,480 Speaker 1: inevitable point, something is a bit more severe than that. Uh, 204 00:12:03,520 --> 00:12:07,720 Speaker 1: an actual correction, a severe correction, even God forbid a 205 00:12:07,720 --> 00:12:12,719 Speaker 1: bear market does that? Does that? Uh? Sort of what 206 00:12:12,760 --> 00:12:16,960 Speaker 1: we saw last year was it? It almost stimulated that 207 00:12:17,080 --> 00:12:20,360 Speaker 1: cohort a bit more. It didn't, It didn't scare them off, 208 00:12:20,640 --> 00:12:23,640 Speaker 1: and they looked at it the way we all know 209 00:12:23,679 --> 00:12:26,439 Speaker 1: we're supposed to, which is, boy, now we can buy cheaper. 210 00:12:27,040 --> 00:12:30,440 Speaker 1: But what we don't know is whether the inevitable something 211 00:12:30,440 --> 00:12:33,079 Speaker 1: more severe. And I don't have any crystal ball in 212 00:12:33,120 --> 00:12:36,760 Speaker 1: the timing of that. UM, what what we see with that, 213 00:12:37,120 --> 00:12:40,520 Speaker 1: with that cohort? You know, is our bonds too boring 214 00:12:40,679 --> 00:12:45,640 Speaker 1: for retail investors these days? Um? Looking at rates of returns? 215 00:12:45,840 --> 00:12:49,199 Speaker 1: And do you think treasuries and bond products need to 216 00:12:49,240 --> 00:12:52,520 Speaker 1: be marketed to be fun to get the online meme 217 00:12:52,600 --> 00:12:56,800 Speaker 1: crowd interested in the asset class. Well, I would argue 218 00:12:56,840 --> 00:12:59,800 Speaker 1: that a lot of the online meme crowd, and I 219 00:13:00,000 --> 00:13:04,719 Speaker 1: don't want to generalize here, are are largely pure momentum 220 00:13:05,200 --> 00:13:08,840 Speaker 1: uh players. I don't think they're doing a tremendous amount 221 00:13:08,840 --> 00:13:12,360 Speaker 1: of kind of deep fundamental analysis like many of us 222 00:13:12,440 --> 00:13:14,840 Speaker 1: do that have been long in the business, and I 223 00:13:14,880 --> 00:13:18,240 Speaker 1: think on the fixed income side, I think that that's 224 00:13:18,640 --> 00:13:21,800 Speaker 1: the same thing. I don't think there's a lot of 225 00:13:21,880 --> 00:13:25,760 Speaker 1: understanding on how the bond market works, the nature of 226 00:13:26,240 --> 00:13:29,040 Speaker 1: truly what is a bond bear market relative to an 227 00:13:29,120 --> 00:13:33,520 Speaker 1: equity bear market, where what the correlations are depending on 228 00:13:34,000 --> 00:13:37,680 Speaker 1: what is maybe causing the rise in yields, the growth component, 229 00:13:37,760 --> 00:13:40,800 Speaker 1: the inflation component when it starts to hit the equity market, 230 00:13:40,840 --> 00:13:43,920 Speaker 1: the impact it has on valuations, but how it's still 231 00:13:43,920 --> 00:13:46,400 Speaker 1: can serve as a diversifier what you do when rates 232 00:13:46,400 --> 00:13:49,120 Speaker 1: are rising in terms of how a position you're fixed 233 00:13:49,160 --> 00:13:53,120 Speaker 1: income portfolio, whether it's barbells or ladders, or longer duration 234 00:13:53,200 --> 00:13:57,920 Speaker 1: or short duration. I've had conversations like this with some younger, 235 00:13:57,960 --> 00:14:01,800 Speaker 1: newer investors and the eyes sort of glaze over. Maybe 236 00:14:01,800 --> 00:14:05,920 Speaker 1: it does mean you need more confetti and excitement. But 237 00:14:06,040 --> 00:14:09,200 Speaker 1: if if the bond market it becomes an area where 238 00:14:09,200 --> 00:14:12,720 Speaker 1: there's momentum in one direction another, could that crowd follow 239 00:14:12,760 --> 00:14:15,480 Speaker 1: it and try to play that trend short you know 240 00:14:15,520 --> 00:14:18,600 Speaker 1: listen yet an interesting note recently. The title is the 241 00:14:18,600 --> 00:14:22,840 Speaker 1: stock market Disconnected from the economy um and what struck 242 00:14:22,960 --> 00:14:26,320 Speaker 1: me uh in that is a really cool graphic you 243 00:14:26,440 --> 00:14:28,760 Speaker 1: had where you go through I don't know, it's about 244 00:14:28,760 --> 00:14:32,080 Speaker 1: ten or a dozen of some of the most commonly 245 00:14:32,120 --> 00:14:35,360 Speaker 1: looked at valuation metrics, a few obscure ones, you know, 246 00:14:35,400 --> 00:14:38,640 Speaker 1: like the buffet indicator, the ratio of market cap, the GDP, 247 00:14:39,360 --> 00:14:43,960 Speaker 1: Tobin's Q, the ratio of market caps, replacement value of assets. 248 00:14:44,400 --> 00:14:46,440 Speaker 1: And to describe the graphic, on the left side, it 249 00:14:46,520 --> 00:14:50,960 Speaker 1: was green meaning sort of valuations were attractive. The right 250 00:14:51,000 --> 00:14:56,400 Speaker 1: side was read meaning unattractive valuations. Pretty much everything was 251 00:14:56,520 --> 00:14:58,880 Speaker 1: pinned to the right to the red except for the 252 00:14:59,480 --> 00:15:02,480 Speaker 1: metrics that are influenced by the interest rates, like the 253 00:15:02,520 --> 00:15:04,680 Speaker 1: FED model. And that's sort of thing which kind of 254 00:15:04,720 --> 00:15:08,320 Speaker 1: explains why the market tends to have a freak out 255 00:15:08,360 --> 00:15:12,680 Speaker 1: when rates suddenly have lurched higher a few times over 256 00:15:12,720 --> 00:15:16,000 Speaker 1: this year. As you point out, though, the stock market 257 00:15:16,080 --> 00:15:18,520 Speaker 1: is forward looking, so you know, there is a case 258 00:15:18,560 --> 00:15:22,160 Speaker 1: to be made to maybe not take all these metrics 259 00:15:22,240 --> 00:15:25,200 Speaker 1: as seriously as perhaps you would have in a in 260 00:15:25,240 --> 00:15:28,160 Speaker 1: a more normal environment when the base effects so weren't 261 00:15:28,160 --> 00:15:31,080 Speaker 1: so ridiculous compared to last year. Um And we actually 262 00:15:31,080 --> 00:15:34,840 Speaker 1: did a story not too long ago about people we're 263 00:15:34,920 --> 00:15:37,560 Speaker 1: less trying to shoot down each and every one of 264 00:15:37,600 --> 00:15:41,400 Speaker 1: these types of metrics, And I get it in one way, 265 00:15:41,440 --> 00:15:43,240 Speaker 1: I totally get it. And as you point out in 266 00:15:43,280 --> 00:15:46,600 Speaker 1: your note, valuations are a lousy market timing tools. I mean, 267 00:15:46,640 --> 00:15:51,040 Speaker 1: really probably everything is allousy market timing tool when you 268 00:15:51,080 --> 00:15:53,560 Speaker 1: get to it. But still, like, I can't help but 269 00:15:53,640 --> 00:15:56,080 Speaker 1: wonder you know, whenever you hear the paradigm is shifted 270 00:15:56,080 --> 00:15:58,040 Speaker 1: and this time is different, it just it just makes 271 00:15:58,040 --> 00:16:00,680 Speaker 1: me nervous. It makes me think of to some of 272 00:16:00,720 --> 00:16:04,520 Speaker 1: the turn of the century geist of looking at new 273 00:16:04,560 --> 00:16:07,600 Speaker 1: metrics and not worrying about the traditional metrics. How are 274 00:16:07,640 --> 00:16:10,560 Speaker 1: you thinking about all that? I mean? Is it? Is 275 00:16:10,560 --> 00:16:14,320 Speaker 1: it more of a expect weaker returns over say, the 276 00:16:14,760 --> 00:16:17,840 Speaker 1: not so distant future, than it is trying to worry 277 00:16:17,880 --> 00:16:20,920 Speaker 1: about an imminent correction? You know, how do you sort 278 00:16:20,920 --> 00:16:25,960 Speaker 1: of incorporate these valuation extremes into what you're thinking about 279 00:16:26,000 --> 00:16:29,880 Speaker 1: the future. Sure, so, when when I wrote that report 280 00:16:29,960 --> 00:16:34,200 Speaker 1: recently and in conjunction with that heat map, I highlighted 281 00:16:34,240 --> 00:16:38,520 Speaker 1: as one example, what you mentioned, which is valuation, at 282 00:16:38,600 --> 00:16:43,840 Speaker 1: least in the shortish term, is a terrible timing indicator. 283 00:16:43,880 --> 00:16:45,800 Speaker 1: And I agree with you if there's no such thing 284 00:16:45,880 --> 00:16:48,840 Speaker 1: as a perfect timing tool. If there were, boy this 285 00:16:48,880 --> 00:16:51,960 Speaker 1: would be easy, and it's not. But it looked at 286 00:16:52,000 --> 00:16:56,400 Speaker 1: the forward PE historically and then subsequent one year performance. 287 00:16:56,520 --> 00:17:00,440 Speaker 1: In this case it was for the SMP, and yes 288 00:17:00,800 --> 00:17:04,639 Speaker 1: there is a negative correlation, meaning higher PE ratios have 289 00:17:04,720 --> 00:17:08,600 Speaker 1: been followed by lower one year performance and vice versa. 290 00:17:08,920 --> 00:17:12,639 Speaker 1: But it was a very small negative correlation, only point 291 00:17:12,720 --> 00:17:15,520 Speaker 1: one eight. And if you look at a scattergram which 292 00:17:15,560 --> 00:17:20,040 Speaker 1: I put in the report, the the observations, the individual 293 00:17:20,119 --> 00:17:23,600 Speaker 1: observations are far and wide. They're literally all over the map. 294 00:17:23,600 --> 00:17:26,120 Speaker 1: There's plenty of instances, and you can certainly go back 295 00:17:26,119 --> 00:17:28,840 Speaker 1: to the late ninety nineties to see some of them 296 00:17:28,880 --> 00:17:33,399 Speaker 1: where you were in stratospheric valuation territory, but you still 297 00:17:33,520 --> 00:17:37,720 Speaker 1: had a pretty robust runway before ultimately the market peaked out. 298 00:17:38,000 --> 00:17:41,919 Speaker 1: I think the key difference in the current environment versus 299 00:17:41,920 --> 00:17:46,480 Speaker 1: say the rise into two thousand and this doesn't suggest 300 00:17:46,520 --> 00:17:49,240 Speaker 1: that I think it's all clear ahead and that there's 301 00:17:49,280 --> 00:17:52,879 Speaker 1: no valid comps to the excess of the late nineties, 302 00:17:52,960 --> 00:17:55,399 Speaker 1: and there are a lot of valid comps, But the 303 00:17:55,640 --> 00:17:59,840 Speaker 1: one potential offset to some of those concerns is that 304 00:18:00,240 --> 00:18:03,600 Speaker 1: into the peak in two thousand, when the SMPS PE 305 00:18:03,760 --> 00:18:05,959 Speaker 1: for a couple of years had been hovering around the 306 00:18:05,960 --> 00:18:10,840 Speaker 1: twenty seven level, underlying that the earnings, the denominator on 307 00:18:10,880 --> 00:18:13,719 Speaker 1: a forward basis was also rising. It's just prices were 308 00:18:13,840 --> 00:18:16,439 Speaker 1: rising more robustly than than earnings. What we now know 309 00:18:16,480 --> 00:18:18,879 Speaker 1: what the benefit of Pine site, is that earnings were 310 00:18:19,000 --> 00:18:21,119 Speaker 1: rising at the time, but they were rising into a peak. 311 00:18:21,560 --> 00:18:24,719 Speaker 1: What caused the parabox spike in the pe in the 312 00:18:24,760 --> 00:18:28,200 Speaker 1: current environment was, of course last year's epic plunge in earnings, 313 00:18:28,720 --> 00:18:31,240 Speaker 1: and needless to say, the plunge in earnings last year 314 00:18:31,359 --> 00:18:33,480 Speaker 1: was not your typical dipp in earnings. It was an 315 00:18:33,480 --> 00:18:36,960 Speaker 1: epic depression era reaction to what was going on in 316 00:18:36,960 --> 00:18:40,679 Speaker 1: the economy, and unlike CIRCUITOO thousand were now on the 317 00:18:40,760 --> 00:18:44,920 Speaker 1: upswing and earnings which had the effect of quickly seeing 318 00:18:44,960 --> 00:18:49,439 Speaker 1: once we rolled into improving forward four quarters, most of 319 00:18:49,480 --> 00:18:52,680 Speaker 1: which was now in one, you saw the forward pe 320 00:18:52,760 --> 00:18:55,440 Speaker 1: drop quickly from twenty seven down to twenty two. It's 321 00:18:55,440 --> 00:18:57,560 Speaker 1: popped up a little bit since then, and I'm certainly 322 00:18:57,560 --> 00:19:00,560 Speaker 1: not suggesting that a twenty two or three p is cheap, 323 00:19:01,200 --> 00:19:04,160 Speaker 1: but there is the potential that if like last year, 324 00:19:04,720 --> 00:19:08,040 Speaker 1: this year's earnings bar is still set on the low side, 325 00:19:08,520 --> 00:19:13,560 Speaker 1: that ultimately where earnings moved to could put continue to 326 00:19:13,600 --> 00:19:16,920 Speaker 1: bring down valuation levels. Now it's in conjunction. Was still 327 00:19:17,080 --> 00:19:22,120 Speaker 1: really frothy sentiment which has been positively offset by strong breadth, 328 00:19:22,359 --> 00:19:25,600 Speaker 1: but breath is starting to look a little shakier, and 329 00:19:25,640 --> 00:19:28,880 Speaker 1: it's quite weak for Nasdac and Russell two thousand. It's 330 00:19:28,880 --> 00:19:31,320 Speaker 1: been kind of hanging in there for the SMP. So 331 00:19:31,400 --> 00:19:34,000 Speaker 1: I think that's really key to watch because when you 332 00:19:34,600 --> 00:19:39,520 Speaker 1: when you have like in two thousand, wildly optimistic sentiment 333 00:19:40,119 --> 00:19:46,240 Speaker 1: but deteriorating breadth and an earnings trajectory that is peaking, 334 00:19:46,760 --> 00:19:50,639 Speaker 1: that's that's sort of a triple whammy on the negative side. 335 00:19:50,800 --> 00:19:54,639 Speaker 1: And we we we only have sort of formally the 336 00:19:54,880 --> 00:19:59,120 Speaker 1: sentiment concern, but the other two are absolutely worth watching 337 00:19:59,160 --> 00:20:02,400 Speaker 1: because the market by no means cheat, I mean implicit 338 00:20:02,520 --> 00:20:06,080 Speaker 1: in that scenario is the idea that perhaps value in 339 00:20:06,200 --> 00:20:09,399 Speaker 1: cyclical stocks might not be able to pick up the 340 00:20:09,440 --> 00:20:13,879 Speaker 1: slack if some of the big mega caps disappointment. You know, 341 00:20:13,960 --> 00:20:17,159 Speaker 1: we saw some of the story UM take a shine 342 00:20:17,240 --> 00:20:20,480 Speaker 1: with Netflix earnings, UM and so forth, and breadth has 343 00:20:20,520 --> 00:20:23,760 Speaker 1: already improved as well. We've seen a large number of 344 00:20:23,800 --> 00:20:27,600 Speaker 1: members actually trade above their two two hundred day or 345 00:20:27,640 --> 00:20:31,920 Speaker 1: fifty day moving average recently. And so it's a it's 346 00:20:31,920 --> 00:20:34,920 Speaker 1: a huge conundrum when it comes to just how much 347 00:20:34,960 --> 00:20:38,560 Speaker 1: good prices are good needs is already priced into value 348 00:20:38,560 --> 00:20:42,440 Speaker 1: in cyclical stocks, UM, what's your view on that part 349 00:20:42,480 --> 00:20:46,160 Speaker 1: of the market. So I think what's been going on 350 00:20:47,119 --> 00:20:51,320 Speaker 1: from a value perspective has more to do with the 351 00:20:51,720 --> 00:20:55,160 Speaker 1: with the sectors that we're doing well for that span 352 00:20:55,240 --> 00:20:58,600 Speaker 1: of time, in particular from late October until about mid 353 00:20:58,640 --> 00:21:02,719 Speaker 1: February this year, and there were fundamental drivers to that. 354 00:21:02,840 --> 00:21:05,520 Speaker 1: In the case of financials, it was rates going up, 355 00:21:05,560 --> 00:21:08,080 Speaker 1: a steepening of the yield curve. In the case of energy, 356 00:21:08,119 --> 00:21:12,680 Speaker 1: obviously it was an improvement in global economic growth sort 357 00:21:12,720 --> 00:21:16,880 Speaker 1: of China coming back from a demand perspective, and then 358 00:21:16,960 --> 00:21:21,240 Speaker 1: industrials was also driven by China sort of coming out 359 00:21:21,280 --> 00:21:25,920 Speaker 1: of the COVID environment and seeing a ramp in economic activity. Well, 360 00:21:26,000 --> 00:21:30,119 Speaker 1: those sectors happened to be dominant in the value indexes 361 00:21:30,240 --> 00:21:33,280 Speaker 1: so I think it was more of a sector driver 362 00:21:34,040 --> 00:21:37,360 Speaker 1: than it was a shift into value. Now, I think 363 00:21:37,400 --> 00:21:42,719 Speaker 1: we're in an environment where valuation, where a focus on 364 00:21:42,760 --> 00:21:46,760 Speaker 1: the factor of value is essential. I think for particularly 365 00:21:46,760 --> 00:21:49,720 Speaker 1: for individual stock pickers that want to try to be 366 00:21:49,840 --> 00:21:52,359 Speaker 1: in the types of stocks and parts of the market 367 00:21:52,440 --> 00:21:56,000 Speaker 1: that will do well, it's almost a hybrid or Garpi 368 00:21:56,119 --> 00:21:58,840 Speaker 1: kind approach which has really started to work in the 369 00:21:58,920 --> 00:22:01,520 Speaker 1: last month, and it's part of the reason why active 370 00:22:01,560 --> 00:22:05,840 Speaker 1: managers have been doing better relative to passive managers, why 371 00:22:06,040 --> 00:22:10,040 Speaker 1: equal weighted has been performing better relative to cap weighted. 372 00:22:10,400 --> 00:22:13,600 Speaker 1: So I think there is a shift towards sort of 373 00:22:13,600 --> 00:22:18,480 Speaker 1: a value mindset, which can be very distinct from value 374 00:22:18,560 --> 00:22:22,920 Speaker 1: indexes doing well. Um that one of the reasons why 375 00:22:22,960 --> 00:22:27,160 Speaker 1: we don't put tactical recommendations on growth versus value, even 376 00:22:27,200 --> 00:22:30,080 Speaker 1: though we will on large versus small is I think 377 00:22:30,119 --> 00:22:32,600 Speaker 1: there are times where there can be a huge difference 378 00:22:32,640 --> 00:22:35,720 Speaker 1: between growth and value in terms of the types of 379 00:22:35,760 --> 00:22:40,560 Speaker 1: stocks housed in the indexes versus the versus the fundamentals 380 00:22:40,640 --> 00:22:43,560 Speaker 1: of say value. You know, in october O VO two, 381 00:22:43,600 --> 00:22:49,280 Speaker 1: after the tech bust, NASDAC one trough overall, nasdack down 382 00:22:49,359 --> 00:22:54,359 Speaker 1: s SMP down fifty. If you wanted to buy deep 383 00:22:54,480 --> 00:22:56,920 Speaker 1: value and you did, and you did well in doing so. 384 00:22:57,080 --> 00:22:58,919 Speaker 1: A lot of that deep value was found in the 385 00:22:58,920 --> 00:23:02,240 Speaker 1: tech stocks there still housed in the Russell growth indexes. 386 00:23:02,880 --> 00:23:07,119 Speaker 1: More recently, utilities became really expensive. That doesn't mean Russell 387 00:23:07,119 --> 00:23:09,600 Speaker 1: moves them into the growth indexes. They're not growth stocks. 388 00:23:09,880 --> 00:23:12,119 Speaker 1: They're just really expensive stocks that are housed in the 389 00:23:12,200 --> 00:23:15,880 Speaker 1: value indexes. UM sometimes called the value trap. So when 390 00:23:15,920 --> 00:23:18,159 Speaker 1: I when I say that I think investors should have 391 00:23:18,200 --> 00:23:21,879 Speaker 1: a value mindset. That shouldn't be seen as the same 392 00:23:21,920 --> 00:23:25,480 Speaker 1: comment as just take a passive am broach approach and 393 00:23:25,560 --> 00:23:30,199 Speaker 1: just blindly by you know, the value indexes, either Russell 394 00:23:30,640 --> 00:23:33,880 Speaker 1: or SMP or other symmetric I think now we need 395 00:23:33,920 --> 00:23:38,320 Speaker 1: to be factor oriented. I think cyclical leverage to an 396 00:23:38,400 --> 00:23:41,080 Speaker 1: upturn in the economy. But that doesn't mean just think 397 00:23:41,480 --> 00:23:44,760 Speaker 1: of what typical cyclicals are. Hey, listen to what you know. 398 00:23:44,800 --> 00:23:47,040 Speaker 1: The first six months of this bull market last year, 399 00:23:47,920 --> 00:23:51,520 Speaker 1: it was the defensive names that did well. But this 400 00:23:51,680 --> 00:23:58,359 Speaker 1: era's defensive names were the Big five. They were Apple, Microsoft, Google, Netflix, Amazon. 401 00:23:59,000 --> 00:24:03,240 Speaker 1: Typical defense of areas are staples and utilities, but this 402 00:24:03,400 --> 00:24:07,719 Speaker 1: cycle just had a different definition of what was defensive, 403 00:24:07,840 --> 00:24:10,080 Speaker 1: and I think this cycle is probably gonna have a 404 00:24:10,119 --> 00:24:14,040 Speaker 1: different definition of what is cyclical. Where the cyclical leverages, 405 00:24:14,600 --> 00:24:17,520 Speaker 1: It's probably going to be in segments of the market 406 00:24:18,000 --> 00:24:20,119 Speaker 1: that might have a lot of the stocks housed in 407 00:24:20,200 --> 00:24:23,919 Speaker 1: the growth indexes. But that's where the damage was most 408 00:24:23,960 --> 00:24:29,040 Speaker 1: significant in terms of the economy and the stocks. So yes, 409 00:24:29,560 --> 00:24:32,920 Speaker 1: value factor that I think will still work cyclical, yes, 410 00:24:33,320 --> 00:24:36,359 Speaker 1: but but don't think of that just in terms of 411 00:24:36,400 --> 00:24:41,239 Speaker 1: the traditional definitions and the traditional labeling and housing in 412 00:24:41,359 --> 00:24:44,280 Speaker 1: terms of standard index. I think one of the craziest 413 00:24:44,280 --> 00:24:46,320 Speaker 1: things I saw of the year was looking at the 414 00:24:46,800 --> 00:24:50,800 Speaker 1: growth estimates for the value indexes and the growth indexes, 415 00:24:50,840 --> 00:24:54,320 Speaker 1: and the yearnings growth estimates were higher for the value 416 00:24:54,359 --> 00:24:57,120 Speaker 1: index than for the growth index, right, because that's where 417 00:24:57,280 --> 00:24:58,720 Speaker 1: I mean, look at what's going to happen in the 418 00:24:58,800 --> 00:25:04,520 Speaker 1: second quarter. I think the definitive consensus for earnings growth 419 00:25:04,520 --> 00:25:08,520 Speaker 1: in the second quarter for energy is for digits. I 420 00:25:08,560 --> 00:25:13,800 Speaker 1: think it's over a thousand percent. So they obviously the 421 00:25:14,080 --> 00:25:18,280 Speaker 1: areas of the economy that got most severely hit are 422 00:25:18,320 --> 00:25:21,480 Speaker 1: going to be where you see the greatest growth characteristics. 423 00:25:21,480 --> 00:25:27,280 Speaker 1: So it's characteristics are very different than index constituents, I'll say, 424 00:25:27,320 --> 00:25:30,240 Speaker 1: Lucien refinitive, we've we've never heard of it. I never 425 00:25:30,240 --> 00:25:33,760 Speaker 1: heard of that that particular company. But just to shift 426 00:25:33,800 --> 00:25:36,800 Speaker 1: gears a little bit, Um, you had a good note 427 00:25:36,880 --> 00:25:42,480 Speaker 1: talking about the federal debt. Obviously it's exploded. Uh, fiscal 428 00:25:42,520 --> 00:25:46,240 Speaker 1: stimulus has been such a huge driver for once, let's say, 429 00:25:46,280 --> 00:25:48,919 Speaker 1: for once of both you know, the economic recovery and 430 00:25:49,040 --> 00:25:50,679 Speaker 1: the market. I think if if for a lot of 431 00:25:50,680 --> 00:25:55,320 Speaker 1: people getting a check, it's kinda like house money that 432 00:25:55,320 --> 00:25:59,080 Speaker 1: that you can go then you bet on memestocks or whatnot. 433 00:25:59,800 --> 00:26:02,440 Speaker 1: But I think I think what also drove that that 434 00:26:02,480 --> 00:26:05,320 Speaker 1: cohort of course also may have had something to do 435 00:26:05,320 --> 00:26:07,960 Speaker 1: with zero commissions, which we have trobbed, may have had 436 00:26:08,040 --> 00:26:12,120 Speaker 1: something to do with um and and then things like 437 00:26:12,240 --> 00:26:15,320 Speaker 1: stock slices as we call them for actional shares. So 438 00:26:15,600 --> 00:26:17,720 Speaker 1: I think it was a confluence of events. But certainly 439 00:26:17,760 --> 00:26:22,800 Speaker 1: the stimulus checks as a feeder into accounts that now 440 00:26:23,000 --> 00:26:26,520 Speaker 1: allow you to trade free and more easily. Yes, it 441 00:26:26,600 --> 00:26:28,600 Speaker 1: was all part of the recipe. You know, if we 442 00:26:28,680 --> 00:26:31,639 Speaker 1: if we all put our politics for aside and just 443 00:26:31,720 --> 00:26:36,199 Speaker 1: look at the debt analytically about you know what it 444 00:26:36,280 --> 00:26:38,560 Speaker 1: could or could not be a headwinder at heil Wind 445 00:26:39,000 --> 00:26:42,719 Speaker 1: two growth. Obviously, I think you know that the glory 446 00:26:42,800 --> 00:26:46,320 Speaker 1: days of fiscal stimulus are are are probably behind us. 447 00:26:46,359 --> 00:26:48,960 Speaker 1: I mean, maybe you know if if we're lucky, we'll 448 00:26:48,960 --> 00:26:51,359 Speaker 1: get some sort of infrastructure bill, but I mean the 449 00:26:51,640 --> 00:26:54,720 Speaker 1: big work has already done. There. Walk us through sort 450 00:26:54,760 --> 00:26:56,720 Speaker 1: of that work you did on the debt and and 451 00:26:56,760 --> 00:27:01,040 Speaker 1: what it means as it relates to the economy. Sure, 452 00:27:01,800 --> 00:27:05,439 Speaker 1: so first let's talk about the deficit, which of course 453 00:27:05,520 --> 00:27:08,160 Speaker 1: is the annual mismatch of what's coming in and going 454 00:27:08,200 --> 00:27:10,679 Speaker 1: out and um. And then debt is a cumulative effect 455 00:27:10,720 --> 00:27:14,320 Speaker 1: of running deficits, and debt, of course, can be categorized 456 00:27:15,080 --> 00:27:17,440 Speaker 1: in a number of different ways. Typically these days, when 457 00:27:17,440 --> 00:27:19,679 Speaker 1: we talk about debt, most people are talking about federal 458 00:27:19,720 --> 00:27:22,520 Speaker 1: government debt, but you know, add to that state and 459 00:27:22,560 --> 00:27:26,680 Speaker 1: local debt, non financial sector debt, corporate debt, and every 460 00:27:26,760 --> 00:27:31,720 Speaker 1: variety of household debt. And whereas government debt is going 461 00:27:31,880 --> 00:27:36,080 Speaker 1: above ad of GDP this year and that's just federal 462 00:27:36,119 --> 00:27:39,200 Speaker 1: government debt, total credit market debt is closer to about 463 00:27:39,200 --> 00:27:43,080 Speaker 1: fo of GDP, which by the way, doesn't include any 464 00:27:43,119 --> 00:27:47,120 Speaker 1: of the future debt associated with unfunded entitlements. Um, that's 465 00:27:47,160 --> 00:27:51,240 Speaker 1: when you get up into the nine percent of GDP. 466 00:27:51,400 --> 00:27:54,320 Speaker 1: But what's amazing to me, and again not to get political, 467 00:27:54,359 --> 00:27:58,080 Speaker 1: but here I'm gonna I'm gonna be not a bipartisan critic. 468 00:27:58,480 --> 00:28:02,679 Speaker 1: It's amazing to me how many people I hear in Washington, senators, 469 00:28:02,720 --> 00:28:06,359 Speaker 1: congress people who when talking about either the deficit or 470 00:28:06,400 --> 00:28:09,840 Speaker 1: the debt, will conflate the two and as they're talking 471 00:28:09,840 --> 00:28:12,520 Speaker 1: about the deficit, I think they're actually talking about debt. 472 00:28:12,960 --> 00:28:15,040 Speaker 1: And I don't know whether many of these people, and 473 00:28:15,080 --> 00:28:16,600 Speaker 1: I've heard both sides of the i'll do it, I 474 00:28:16,600 --> 00:28:18,760 Speaker 1: don't know whether they don't know the difference or they 475 00:28:18,840 --> 00:28:21,640 Speaker 1: do when they're trying to confuse people. It's sadly it's 476 00:28:21,680 --> 00:28:24,840 Speaker 1: probably the former. You know, In terms of the stock market, 477 00:28:24,880 --> 00:28:27,359 Speaker 1: what's interesting, and this is just simple fact. This is 478 00:28:27,400 --> 00:28:30,160 Speaker 1: not an assessment on my part that deficits don't matter, 479 00:28:30,200 --> 00:28:33,520 Speaker 1: but there's been a positive correlation with the deficit in 480 00:28:33,560 --> 00:28:36,480 Speaker 1: the stock market. Higher levels of a deficit as a 481 00:28:36,520 --> 00:28:39,520 Speaker 1: share of GDP have typically been accompanied by better stock 482 00:28:39,560 --> 00:28:44,360 Speaker 1: market performance. Moving on to the debt, though clearly the 483 00:28:44,480 --> 00:28:48,040 Speaker 1: environment wherein you talk about headwinds associated with debt, and 484 00:28:48,080 --> 00:28:51,680 Speaker 1: typically I get the question in terms of at what 485 00:28:51,840 --> 00:28:53,959 Speaker 1: point do we hit a wall of a point looking 486 00:28:54,040 --> 00:28:57,120 Speaker 1: forward does it start to become a problem. However, one 487 00:28:57,160 --> 00:29:00,479 Speaker 1: defines a problem, and my argument it has been a 488 00:29:00,480 --> 00:29:02,720 Speaker 1: problem for quite some time now. It's a bit of 489 00:29:02,720 --> 00:29:06,400 Speaker 1: a chicken in an egg argument. Nonetheless, going back the 490 00:29:06,480 --> 00:29:10,440 Speaker 1: long history of data that we have on economic activity 491 00:29:10,480 --> 00:29:16,480 Speaker 1: across the spectrum of GDP, productivity, inflation, capital spending, housing, 492 00:29:17,240 --> 00:29:21,360 Speaker 1: and total credit market debt, so not just government debt, 493 00:29:21,360 --> 00:29:24,680 Speaker 1: but total credit market debt, lower zones of debt have 494 00:29:24,720 --> 00:29:28,080 Speaker 1: been accompanied by much higher economic growth. Higher zones of 495 00:29:28,160 --> 00:29:31,240 Speaker 1: debt much lower economic growth. You know, I talked earlier 496 00:29:31,280 --> 00:29:35,600 Speaker 1: about Yes, the last expansion was the longest in history, 497 00:29:35,640 --> 00:29:38,120 Speaker 1: but it was also the weakest. I think the high 498 00:29:38,160 --> 00:29:41,600 Speaker 1: and rising burden of debt was a contributing factor to that. Now, 499 00:29:41,600 --> 00:29:44,280 Speaker 1: the chicken the egg piece of it comes with well, 500 00:29:44,360 --> 00:29:49,200 Speaker 1: because growth has been subdued for whatever reasons, maybe demographics 501 00:29:49,360 --> 00:29:54,680 Speaker 1: or lack of productivity, that has in turn stimulated more uh, 502 00:29:55,280 --> 00:29:58,120 Speaker 1: fiscal stimulus, which is added to the deficit, which is 503 00:29:58,120 --> 00:30:01,360 Speaker 1: added to the debt. So that's the chicken egg argument. Nonetheless, 504 00:30:01,760 --> 00:30:04,320 Speaker 1: we can go outside the United States. Look at Japan, 505 00:30:04,440 --> 00:30:07,680 Speaker 1: which has much higher debt levels, certainly government debt levels 506 00:30:07,680 --> 00:30:13,120 Speaker 1: than we do, and they've had unbelievably weak growth, but interestingly, 507 00:30:13,120 --> 00:30:17,280 Speaker 1: accompanying that has been low levels of inflation. So where 508 00:30:17,280 --> 00:30:20,560 Speaker 1: I where I disagree with some of what the consensus 509 00:30:20,640 --> 00:30:23,440 Speaker 1: is that this high and rising burden of debt is 510 00:30:23,440 --> 00:30:26,880 Speaker 1: an inflation accident waiting to happen. For decades and decades 511 00:30:26,880 --> 00:30:30,920 Speaker 1: and decades, there's been a I think complete mirror image 512 00:30:31,040 --> 00:30:35,240 Speaker 1: relationship than what the consensus believes. Higher zones of debt 513 00:30:35,240 --> 00:30:39,000 Speaker 1: have historically been companied by lower inflation rates, largely because 514 00:30:39,560 --> 00:30:43,160 Speaker 1: it tends to be accompanied by lower economic growth. So 515 00:30:43,240 --> 00:30:46,760 Speaker 1: I don't worry about the inflation piece as it relates 516 00:30:46,800 --> 00:30:50,800 Speaker 1: to debt, but I worry, especially as interest rates go 517 00:30:50,960 --> 00:30:53,880 Speaker 1: up further than they already have, that it's the crowding 518 00:30:53,880 --> 00:30:58,520 Speaker 1: out effect and a much greater share of revenues coming 519 00:30:58,560 --> 00:31:01,400 Speaker 1: in have to be devot it's simply to paying interest 520 00:31:01,480 --> 00:31:05,080 Speaker 1: on on that debt. But what evidence do we have 521 00:31:05,320 --> 00:31:09,720 Speaker 1: that public set of spending has had a crowding effect already? 522 00:31:10,560 --> 00:31:15,080 Speaker 1: What evidence do we have if it's the classic crowding 523 00:31:15,120 --> 00:31:18,240 Speaker 1: out effects. I didn't see much evidence of crowding out. 524 00:31:18,320 --> 00:31:21,680 Speaker 1: Yet I agree with you. I agree with you. What 525 00:31:21,720 --> 00:31:26,400 Speaker 1: we can look at perspectively is all the big areas 526 00:31:26,480 --> 00:31:30,360 Speaker 1: that government spends money on, whether it's education, health, defense, 527 00:31:31,000 --> 00:31:34,880 Speaker 1: and look at the growth rate expected based on you know, 528 00:31:35,000 --> 00:31:39,560 Speaker 1: CBO assumptions, and then look at some sort of standard 529 00:31:39,560 --> 00:31:43,560 Speaker 1: assumption of the change in interest rates over the next 530 00:31:43,600 --> 00:31:47,400 Speaker 1: ten years, and what the growth rate in servicing that 531 00:31:47,800 --> 00:31:49,760 Speaker 1: debt will be. The growth rate and the interest on 532 00:31:49,840 --> 00:31:53,560 Speaker 1: debt the growth rate is going through the roof. But 533 00:31:53,840 --> 00:31:56,760 Speaker 1: if we are truly all m M tears now and 534 00:31:56,800 --> 00:31:59,120 Speaker 1: we're in a different paradigm where we're just not going 535 00:31:59,160 --> 00:32:02,240 Speaker 1: to worry about and we're going to spend at a 536 00:32:02,360 --> 00:32:05,680 Speaker 1: level akin to what we've seen this year and disregard 537 00:32:05,880 --> 00:32:08,760 Speaker 1: any concern about deficits in the near to medium turn, 538 00:32:09,120 --> 00:32:12,920 Speaker 1: then I agree with you. It isn't automatically the case 539 00:32:13,600 --> 00:32:16,440 Speaker 1: that a high and rising burden of debt crowds out 540 00:32:17,080 --> 00:32:20,840 Speaker 1: spending or investments elsewhere. I think we're at the beginning 541 00:32:20,840 --> 00:32:23,920 Speaker 1: of an experiment to see whether we are in a 542 00:32:24,080 --> 00:32:27,760 Speaker 1: in a different MMT like paradigm of which there is 543 00:32:28,920 --> 00:32:32,160 Speaker 1: implicit supporters on both sides of the aisle. You know, 544 00:32:32,200 --> 00:32:35,320 Speaker 1: if there's one area of somewhat bipartisan supporter or a 545 00:32:35,320 --> 00:32:38,960 Speaker 1: game that both sides are are playing pretty effectively right now, 546 00:32:39,080 --> 00:32:42,440 Speaker 1: it's it's kicking the can down the road. So I 547 00:32:42,480 --> 00:32:45,000 Speaker 1: agree with you while we we may not have to 548 00:32:45,640 --> 00:32:49,160 Speaker 1: um sort of face the implications of that crowding out effect, 549 00:32:49,240 --> 00:32:52,200 Speaker 1: because it's not something that's that's a worry right now. 550 00:33:07,880 --> 00:33:10,720 Speaker 1: I wonder if you know MMT works if you are 551 00:33:10,880 --> 00:33:15,240 Speaker 1: guaranteed that you're the global reserve currency and that oil 552 00:33:15,280 --> 00:33:17,760 Speaker 1: continues to be traded in dollars. You know, if if 553 00:33:17,760 --> 00:33:20,760 Speaker 1: the Southeast decide that they want to sell their oil 554 00:33:20,800 --> 00:33:25,000 Speaker 1: and euros or renmimby or douge coin or whatever and 555 00:33:25,000 --> 00:33:28,520 Speaker 1: and start keeping reserves in other currencies, if that sort 556 00:33:28,520 --> 00:33:33,320 Speaker 1: of upturns the case for m MT a little bit. Well, 557 00:33:33,320 --> 00:33:35,720 Speaker 1: that's certainly a big part of the case that we 558 00:33:35,720 --> 00:33:39,880 Speaker 1: we sit in this extraordinary, you know, privileged chair of 559 00:33:39,960 --> 00:33:43,040 Speaker 1: having the being the global monetary standard and having the 560 00:33:43,080 --> 00:33:46,720 Speaker 1: world's reserve currency. And I do think possibly even in 561 00:33:46,800 --> 00:33:49,520 Speaker 1: my lifetime, we live in a world where there are 562 00:33:49,640 --> 00:33:52,880 Speaker 1: multiple reserve currencies, but in terms of the dominance of 563 00:33:52,960 --> 00:33:56,280 Speaker 1: the dollar and it representing the monetary standard. When you 564 00:33:56,320 --> 00:34:01,320 Speaker 1: look at what percent the dollar represents in global reserves, 565 00:34:01,400 --> 00:34:05,840 Speaker 1: the present represented in global trade, and how the doomsayers 566 00:34:05,880 --> 00:34:10,120 Speaker 1: have been suggesting a plunge in that for decades that 567 00:34:10,280 --> 00:34:14,000 Speaker 1: I don't buy. I I see the ideas we have 568 00:34:14,160 --> 00:34:18,000 Speaker 1: more sort of siloed segments of the global economy, that 569 00:34:18,080 --> 00:34:22,359 Speaker 1: there will be the emergence of more regional transaction with 570 00:34:22,440 --> 00:34:25,600 Speaker 1: local currencies. I think that's the nature of technology and 571 00:34:25,600 --> 00:34:28,600 Speaker 1: the speed with which that can be done and translations 572 00:34:28,600 --> 00:34:31,400 Speaker 1: can be done. But I don't worry about the dollar 573 00:34:31,960 --> 00:34:35,759 Speaker 1: losing its reserve status. There's really not many countries, if any, 574 00:34:35,880 --> 00:34:38,759 Speaker 1: you can think of that, certainly not China. I get 575 00:34:38,760 --> 00:34:41,080 Speaker 1: the question all the time, well, what would stop them 576 00:34:41,160 --> 00:34:44,799 Speaker 1: from just dumping their treasury securities. Well, if that would 577 00:34:44,800 --> 00:34:47,080 Speaker 1: be aiming the gun squarely at their own economic foot 578 00:34:47,680 --> 00:34:50,720 Speaker 1: so I'm not sure they want to do that to 579 00:34:50,719 --> 00:34:56,640 Speaker 1: to make some point, and they're just is nothing out there, 580 00:34:57,080 --> 00:35:01,200 Speaker 1: including the Chinese yuan or the euro, that has anywhere 581 00:35:01,280 --> 00:35:04,279 Speaker 1: near the weight in those metrics on percent of reserves 582 00:35:04,400 --> 00:35:08,959 Speaker 1: for our trade that I think dethrones the dollar anytime soon. 583 00:35:09,080 --> 00:35:12,360 Speaker 1: So that as an underlying sort of basis for m 584 00:35:12,480 --> 00:35:15,279 Speaker 1: M T, which I don't fully agree that it's a 585 00:35:15,320 --> 00:35:20,040 Speaker 1: theory that can persist at infinitum without negative consequences. Um, 586 00:35:20,120 --> 00:35:24,320 Speaker 1: but I don't worry about the dollar losing its reserve status. 587 00:35:24,320 --> 00:35:27,440 Speaker 1: But I think you can have that view but still 588 00:35:27,480 --> 00:35:30,759 Speaker 1: take issue with them. Empty said, I brought up that 589 00:35:30,880 --> 00:35:33,279 Speaker 1: was no accident me bringing up dose coin. That is 590 00:35:33,360 --> 00:35:37,040 Speaker 1: that is meant to be. Uh. The segue to the 591 00:35:37,080 --> 00:35:38,759 Speaker 1: part of the show that I think a lot of 592 00:35:38,760 --> 00:35:41,680 Speaker 1: listeners tune in, Charlie Pellett once again, we'll tell us 593 00:35:41,880 --> 00:35:45,080 Speaker 1: what that is. Tieden up your straight jackets. It's time 594 00:35:45,239 --> 00:35:49,399 Speaker 1: for the craziest things we saw in markets this week, 595 00:35:49,680 --> 00:35:52,680 Speaker 1: So said, I have a lot of faith in you 596 00:35:53,280 --> 00:35:57,080 Speaker 1: to deliver us with the craziest thing you ever saw 597 00:35:57,120 --> 00:35:59,279 Speaker 1: this week. A lot of faith that will be a 598 00:35:59,280 --> 00:36:02,320 Speaker 1: good one. What do happen? There are lots of crazy 599 00:36:02,360 --> 00:36:04,719 Speaker 1: things have been happening in recent weeks. But I think 600 00:36:04,840 --> 00:36:07,919 Speaker 1: one crazy thing that I don't think has got any 601 00:36:07,960 --> 00:36:12,080 Speaker 1: attention whatsoever. Um, is the fact that Ghana came out 602 00:36:12,640 --> 00:36:16,800 Speaker 1: the country of Ghana came out with a zero coupon bond. 603 00:36:17,239 --> 00:36:19,080 Speaker 1: And this is after they try to go for a 604 00:36:19,120 --> 00:36:23,440 Speaker 1: century bond. And the zero coupon bonds are just weird 605 00:36:23,520 --> 00:36:28,440 Speaker 1: instruments UM, and they found ample demand UM, and they 606 00:36:28,480 --> 00:36:34,400 Speaker 1: found a way to UM issue whilst trying to pacify 607 00:36:34,560 --> 00:36:37,640 Speaker 1: credit rating agencies. And to me, that was an interesting 608 00:36:37,719 --> 00:36:42,800 Speaker 1: deal about how credit markets UM just all the UM 609 00:36:43,200 --> 00:36:48,120 Speaker 1: firepower and all the leverage is with borrows and UM. 610 00:36:48,160 --> 00:36:50,120 Speaker 1: This week, for example, I was on a call with 611 00:36:50,239 --> 00:36:54,040 Speaker 1: some some of my colleagues and we find that European 612 00:36:54,120 --> 00:36:58,520 Speaker 1: distress funds of buying high quality effectively buying much higher 613 00:36:58,600 --> 00:37:01,880 Speaker 1: quality credits than you could ver imagine because it's just 614 00:37:01,960 --> 00:37:06,560 Speaker 1: a sortable shortage of investable assets. So when you see Gharner, 615 00:37:06,600 --> 00:37:09,800 Speaker 1: an emerging market issue is able to do funky stuff 616 00:37:09,840 --> 00:37:12,440 Speaker 1: like that, that that always gets to be interested. That is, 617 00:37:12,560 --> 00:37:14,920 Speaker 1: I assume that's a local currency bond, not a not 618 00:37:15,520 --> 00:37:18,520 Speaker 1: a dollar bond. It that is actually a euro bond, 619 00:37:18,680 --> 00:37:24,000 Speaker 1: so zero coupon bond. But yeah, it's usually more volatile 620 00:37:24,080 --> 00:37:28,000 Speaker 1: than bonds that pay regular interests, So it's definitely one 621 00:37:28,040 --> 00:37:30,319 Speaker 1: of the weirdest things out there. Liz, are you gonna 622 00:37:30,320 --> 00:37:35,279 Speaker 1: put any clients into a zero coupon uh A B Well, 623 00:37:35,320 --> 00:37:38,600 Speaker 1: I I don't personally put any clients money anywhere, and 624 00:37:38,640 --> 00:37:41,200 Speaker 1: they should all be very thankful for that. But I 625 00:37:41,239 --> 00:37:44,359 Speaker 1: would say as a company, no, I don't think you're 626 00:37:44,360 --> 00:37:47,239 Speaker 1: going to see it on any Schwab recommended list anytime soon. 627 00:37:47,360 --> 00:37:53,000 Speaker 1: Just just just a guess, just a guess. What was 628 00:37:53,040 --> 00:37:55,880 Speaker 1: that anything crazy from you this week? Yeah? You you already, 629 00:37:55,960 --> 00:38:00,759 Speaker 1: you already used it to tease this uh segment, the 630 00:38:01,040 --> 00:38:06,000 Speaker 1: doge coin. I I have trouble sort of getting a 631 00:38:06,080 --> 00:38:10,600 Speaker 1: lot about the valid cryptocurrencies, if you want to call 632 00:38:10,680 --> 00:38:14,280 Speaker 1: it that, let alone something that was started as a 633 00:38:14,280 --> 00:38:18,440 Speaker 1: as a joke. So um, I've been shaking my head 634 00:38:18,440 --> 00:38:20,920 Speaker 1: at that one. I have to admit, Okay, well you're 635 00:38:20,920 --> 00:38:23,240 Speaker 1: gonna shake it even harder when you hear my craziest 636 00:38:23,239 --> 00:38:26,680 Speaker 1: thing because this is a little self indulgent, but I 637 00:38:26,680 --> 00:38:31,799 Speaker 1: I actually tweeted out a chart of the SMP five 638 00:38:32,040 --> 00:38:36,000 Speaker 1: d priced in doge coin, denom denominated in dog coin, 639 00:38:36,560 --> 00:38:40,080 Speaker 1: simple ratio of of the SMP level to doge coin. 640 00:38:40,719 --> 00:38:43,040 Speaker 1: Possibly the stupidest thing on Twitter this week, as well 641 00:38:43,040 --> 00:38:44,920 Speaker 1: as the craziest thing And I'm proud. I'm proud of 642 00:38:44,960 --> 00:38:47,840 Speaker 1: that because it's that's not an easy accomplishment, given Twitter 643 00:38:48,360 --> 00:38:50,600 Speaker 1: what it is. But here's where we're gonna have some 644 00:38:50,640 --> 00:38:52,439 Speaker 1: fun in is I'd like to turn this segment into 645 00:38:52,560 --> 00:38:54,440 Speaker 1: kind of a quiz show, like the price is right, 646 00:38:55,040 --> 00:38:58,240 Speaker 1: SMP five hundreds done pretty well since the presidential election, 647 00:38:58,560 --> 00:39:01,239 Speaker 1: at least since the day after. I it's a more 648 00:39:01,280 --> 00:39:06,440 Speaker 1: than since November fours. And what do you think the 649 00:39:06,480 --> 00:39:11,240 Speaker 1: performance of the SMP five hundred priced and doge coin 650 00:39:11,600 --> 00:39:17,279 Speaker 1: has been since the US election? No idea. Honestly, you know, 651 00:39:17,320 --> 00:39:20,719 Speaker 1: I haven't even done the calculation on on what the 652 00:39:21,000 --> 00:39:25,000 Speaker 1: performances of doge coin from whatever recent trout to whatever 653 00:39:25,160 --> 00:39:29,000 Speaker 1: recent high, so I'm not even gonna adventure a guest. 654 00:39:29,200 --> 00:39:31,640 Speaker 1: I imagine your bosses and the and the Schwab clients 655 00:39:31,640 --> 00:39:34,040 Speaker 1: are probably happy to hear that that I'm not spending 656 00:39:34,120 --> 00:39:36,759 Speaker 1: my time looking. Yes, I hope they're happy to hear that. 657 00:39:37,000 --> 00:39:38,840 Speaker 1: My boss is maybe not as happy to hear to 658 00:39:38,880 --> 00:39:42,640 Speaker 1: hear me doing ratios. Said, what's what's your guests at 659 00:39:42,760 --> 00:39:46,920 Speaker 1: the doge coin denominated performance of the SMP five since 660 00:39:46,960 --> 00:39:56,160 Speaker 1: election day? I'm gonna say it's good, seriously down. But 661 00:39:56,360 --> 00:39:58,920 Speaker 1: you know, I do think there's a serious point to 662 00:39:58,920 --> 00:40:01,759 Speaker 1: be made, Lausanne, is that people are throwing money at 663 00:40:01,800 --> 00:40:05,480 Speaker 1: things that are literally jokes. You know, maybe Game Stop 664 00:40:05,560 --> 00:40:09,480 Speaker 1: had some you know, fundamental turnaround story. I don't know, 665 00:40:09,560 --> 00:40:11,800 Speaker 1: but you know a lot of people are just trading 666 00:40:11,840 --> 00:40:14,520 Speaker 1: on the memes. I just can't wrap my head around it. 667 00:40:15,000 --> 00:40:17,520 Speaker 1: Muther and I it's not even you know, what they 668 00:40:17,560 --> 00:40:20,799 Speaker 1: say often, what many often say about just the other 669 00:40:20,920 --> 00:40:26,240 Speaker 1: cryptocurrencies is that at this stage it's less a currency. 670 00:40:26,320 --> 00:40:29,279 Speaker 1: Let's use bitcoin as an example, less a currency, less 671 00:40:29,280 --> 00:40:32,160 Speaker 1: an investment, more a religion. You know, it's very faith based. 672 00:40:32,880 --> 00:40:37,960 Speaker 1: I don't even know how to categorize something like doach coin. Uh, 673 00:40:38,040 --> 00:40:41,719 Speaker 1: it's just it's we're at some point we're going to 674 00:40:41,760 --> 00:40:45,360 Speaker 1: look back whether that's going to be the poster child, 675 00:40:45,840 --> 00:40:50,239 Speaker 1: but there will be some poster children associated with us 676 00:40:50,280 --> 00:40:53,440 Speaker 1: looking back at some point and thinking how did people 677 00:40:53,480 --> 00:40:56,319 Speaker 1: not see this? I think I was created with with 678 00:40:56,360 --> 00:40:59,000 Speaker 1: the intention to be the poster child of excess. I 679 00:40:59,000 --> 00:41:00,960 Speaker 1: mean that's a coin of pure tonical way of looking 680 00:41:01,000 --> 00:41:03,640 Speaker 1: at it. I mean, no one who's buying dose coin 681 00:41:03,760 --> 00:41:07,240 Speaker 1: things that's going to be changing the world, Like the 682 00:41:07,320 --> 00:41:11,040 Speaker 1: bitcoin believers argue, no one believes that it's going to 683 00:41:11,120 --> 00:41:13,799 Speaker 1: be a medium of exchange or store of value. You 684 00:41:13,880 --> 00:41:17,840 Speaker 1: have market participants who fully aware that it's ridiculous but 685 00:41:17,960 --> 00:41:20,799 Speaker 1: find it fun, isn't it? You know, similar just to 686 00:41:20,880 --> 00:41:24,759 Speaker 1: buying expensive shoes, you know, having a night out on 687 00:41:24,800 --> 00:41:28,480 Speaker 1: the town. It's it's an experience that everyone's enjoying. It's 688 00:41:28,520 --> 00:41:32,040 Speaker 1: the greater full theory. Uh so you know, if somebody 689 00:41:32,080 --> 00:41:35,040 Speaker 1: else's is willing to pay an even more ridiculous some 690 00:41:35,280 --> 00:41:38,600 Speaker 1: than I'm a winner. It's only that greatest fool who 691 00:41:38,680 --> 00:41:42,239 Speaker 1: gets stuck holding the bag, I guess. But with that, 692 00:41:42,320 --> 00:41:44,960 Speaker 1: I think we have run out of time. Lizen, always 693 00:41:45,080 --> 00:41:47,760 Speaker 1: such a pleasure to catch up with you. Appreciate your time. 694 00:41:48,000 --> 00:41:50,960 Speaker 1: And I know you're in Florida now, so where that sunscreen? 695 00:41:51,000 --> 00:41:54,239 Speaker 1: Be sure to wear the sunscreen I always do. I'm 696 00:41:54,280 --> 00:41:56,680 Speaker 1: inside working, I'm I'm in front of this camera all 697 00:41:56,719 --> 00:41:58,920 Speaker 1: the time, and if it's not a fake backdrop, I'm 698 00:41:58,960 --> 00:42:02,080 Speaker 1: actually inside outside. But it's a lovely place to live, 699 00:42:02,280 --> 00:42:04,520 Speaker 1: all right. And our old, my old co host, Sarah 700 00:42:04,520 --> 00:42:06,680 Speaker 1: pond Zac moved to Florida too, so if you see her, 701 00:42:07,080 --> 00:42:10,480 Speaker 1: say hello and Sid Dr Sid Verma, very happy to 702 00:42:10,560 --> 00:42:11,640 Speaker 1: have you on the show. I hope we can get 703 00:42:11,680 --> 00:42:13,400 Speaker 1: you back to thank you very much for having me. 704 00:42:20,120 --> 00:42:22,600 Speaker 1: What Goes Up. We'll be back next week. Until then, 705 00:42:22,640 --> 00:42:25,360 Speaker 1: you can find us on the Bloomberg Terminal, website and app, 706 00:42:25,560 --> 00:42:28,319 Speaker 1: or wherever you get your podcast. We'd love it if 707 00:42:28,320 --> 00:42:30,200 Speaker 1: you took the time to rate and review the show 708 00:42:30,239 --> 00:42:33,560 Speaker 1: on Apple Podcast so more listeners can find us. And 709 00:42:33,680 --> 00:42:36,680 Speaker 1: you can find us on Twitter, follow me at Reaganonymous. 710 00:42:37,239 --> 00:42:41,279 Speaker 1: Sid Verma is at Underscore sid Verma. This week's guest, 711 00:42:41,360 --> 00:42:44,839 Speaker 1: Liz Anne Saunders, is at Liza Anne Saunders. You can 712 00:42:44,880 --> 00:42:49,239 Speaker 1: also follow Bloomberg Podcast at at podcast and thank you 713 00:42:49,320 --> 00:42:51,480 Speaker 1: to Charlie Pelletta, Bloomberg Radio and the voice of the 714 00:42:51,480 --> 00:42:54,680 Speaker 1: New York City Subway System. What Goes Up is produced 715 00:42:54,680 --> 00:42:58,840 Speaker 1: by Laura Carlson. The head of Bloomberg Podcast is Francesco Leavy. 716 00:42:59,200 --> 00:43:00,879 Speaker 1: Thanks for listening, See you next time.