Speaker 1: Strap on your parachute. It's time for What Goes Up
Speaker 1: with Sarah Ponzick and Mike Reagan. Hello and welcome to
Speaker 1: What goes Up, a Bloomberg Weekly Markets podcast. I'm Sarah Pons,
Speaker 1: reporter on the Cross Asset team, and I'm Mike Reagan,
Speaker 1: a senior editor at Bloomberg. This week on the show,
Speaker 1: the week before Election night was a volatile one. At
Speaker 1: one point, the SMP five hundred was on track for
Speaker 1: its worst week since March, with tech giving into the
Speaker 1: selling pressure. But at the same time, haven's didn't really
Speaker 1: work as they should, gold fell while bond yields rose,
Speaker 1: So what gives? And as always, we will close out
Speaker 1: this episode with our tradition the craziest thing I saw
Speaker 1: in markets this week, and by all means, if you
Speaker 1: saw something crazy and markets, give us a call on
Speaker 1: the Bloomberg Podcast hotline at six four six three to
Speaker 1: four three four nine zero and leave us voicemail and
Speaker 1: maybe we'll play your voicemail on the show and we
Speaker 1: will appreciate your crazy things. I think Sarah especially will
Speaker 1: appreciate them, because I think she struck out this week
Speaker 1: on crazy things I did. I had a pretty crazy week,
Speaker 1: and I just took cover because luckily, so many listeners
Speaker 1: wrote into us this week, so we had a plethora
Speaker 1: to choose from. So I said, you know what, Mike,
Speaker 1: I'm going to stand down this week. I'm going to
Speaker 1: take a bye week, and I'm just this is my
Speaker 1: bye week, and uh, someone this week. All right. I
Speaker 1: was a little jealous that people seem to be directing
Speaker 1: their crazy things more to you than to me. But
Speaker 1: you know, then I realized, maybe they realized you just
Speaker 1: need to help. I guess, I guess is it that
Speaker 1: I'm gonna say, that's not the reason why. But you know,
Speaker 1: next time anyone reaches out, if you reach out to me,
Speaker 1: let's let's find out why. Let let us know why
Speaker 1: you're not hitting my cup. Okay, fair enough. Well, joining
Speaker 1: us this week on the show for the first time.
Speaker 1: Very excited to have him. He's a fund manager at
Speaker 1: Westwood Holdings. His name is Adrian Helper. Adrian, welcome to
Speaker 1: the show. Thank you for having me and Adrian, I
Speaker 1: gotta say I was reading some of your talking points
Speaker 1: they sent along to prepare for the interview, and I
Speaker 1: got excited about one thing. It's you were talking about
Speaker 1: the Velocity of Money. And the reason I got excited
Speaker 1: is I love this data series. Not many people track
Speaker 1: this or follow this, and whenever I ask anyone about
Speaker 1: it that they give me a blank stare. So I'm
Speaker 1: gonna start off. We're gonna talk about the election and
Speaker 1: the volatility, like Sarah said, but I wanted to talk
Speaker 1: start off talking about the velocity of money because I'm
Speaker 1: not sure I'll ever get a chance to talk with
Speaker 1: someone who who tracks it. And for listeners who aren't
Speaker 1: familiar with the velocity of money, UM, it's basically a
Speaker 1: calculation done to try to take a stab at estimating
Speaker 1: how often every dollar in the money supply turns over.
Speaker 1: The whole data series to me, Adrian is fascinating. Let
Speaker 1: me let me just go through it to explain what
Speaker 1: the chart looks like to to listeners. UM. Bloomberg has
Speaker 1: a calculation of it that goes back to the late
Speaker 1: nineteen fifties, and if you look at the chart, it's
Speaker 1: interesting because it stays pretty stable for most of the
Speaker 1: series from the late nineteen fifties through say the early nineties.
Speaker 1: Then in the nineties it really starts shooting higher reaches
Speaker 1: about peak of about two point two in n then
Speaker 1: it kind of reverts back to the mean, picks up
Speaker 1: again a little bit before the financial crisis peaks it
Speaker 1: around two and two thousand and six. What's really interesting, then,
Speaker 1: is it it then it really crashes hard, uh, mainly
Speaker 1: in the global financial crisis, but even in the recovery
Speaker 1: after that, the trend is still pretty solidly down UM.
Speaker 1: And then it breaks below that range was in previously
Speaker 1: UM into the less than two areas. Obviously, at the
Speaker 1: beginning of this year it crashes really hard to about
Speaker 1: one point one. So a lot of that I get
Speaker 1: Like this year, obviously, the savings rate just exploded, so
Speaker 1: money is not changing hands as much. What I'm curious
Speaker 1: about is that overall trend since the since the nineties. UM,
Speaker 1: it's the steady trend down that sort of peaked sort
Speaker 1: of close to the height of the dot com bubble
Speaker 1: and then trends down all the way until this massive
Speaker 1: drop in it at the beginning of this year. I Mean,
Speaker 1: my guess is, and I'm curious what you think, but
Speaker 1: my guess is that is it just that the Internet
Speaker 1: has sort of eliminated a lot of the middlemen and
Speaker 1: and sort of you know, each dollar changes hands less
Speaker 1: than it used to. Is that a crazy theory or
Speaker 1: do you think that makes sense? There may be part
Speaker 1: of that, and you know, this is where economics meets investing,
Speaker 1: as there's a lot of theory here about you know
Speaker 1: what that impact is on markets themselves. And certainly we
Speaker 1: can have all of the monetary creation in the world
Speaker 1: and liquidity that's created, but unless that money changes hands,
Speaker 1: it's going to be very hard for us to see inflation.
Speaker 1: It's going to be hard to see on yields rise
Speaker 1: um And finally enough it's it's been getting on the
Speaker 1: train of concurrent with bond yields continuing to fall. I
Speaker 1: think there may be part of the explanation around a
Speaker 1: changing context of payment systems that some degree is a
Speaker 1: little bit more even barter even though we don't call
Speaker 1: it barter um. The way we do transactions in an
Speaker 1: internet age is at least part of it is an
Speaker 1: exchange of goods without monetary influence um. I do think
Speaker 1: that's a small part. I think that especially since two
Speaker 1: thousand and six, what we've seen is a rising savings rate,
Speaker 1: at least a stable to a rising savings rate, and
Speaker 1: that savings right of course, if you look back to
Speaker 1: the nineteen fifties, has been coming down significantly, kind of
Speaker 1: like the you know, the opposite of home ownership, and
Speaker 1: it almost looks like we're going back to the nuclear
Speaker 1: family kind of economy. Savings rates have been going up,
Speaker 1: and maybe that had to do with before you know,
Speaker 1: your house was your was your saving you didn't. We're
Speaker 1: too much about having the money in a bank for
Speaker 1: losing your job. That's been a bigger part of it.
Speaker 1: I think of we need the money changing hands. We
Speaker 1: need consumers to find their save things and leverage funnily
Speaker 1: enough to get the economy going. So it's something that
Speaker 1: I watch of. We can have all the monetary creation
Speaker 1: in the world until that money changes hands, it's going
Speaker 1: to be hard to see inflation and and a push
Speaker 1: for economic growth from monetary creation. Yeah, I was gonna
Speaker 1: ask you, do you think that that sort of deceleration
Speaker 1: in the velocity of money does it explain why inflation
Speaker 1: has stayed so low us say, in this century? Where
Speaker 1: is it sort of to two sides of the same coin,
Speaker 1: being the the you know, technology and just trends in
Speaker 1: general that are causing both things at wance. A good question.
Speaker 1: I think inflation is influenced by both of those things.
Speaker 1: I think it's influenced by your savings rates, by low
Speaker 1: velocity of money. So this is not just consumers, This
Speaker 1: is corporations, This is a lack of capital expenditure, things
Speaker 1: that have since the crisis. Inflation itself is influenced by that,
Speaker 1: of course, but it is also heavily influenced by changing
Speaker 1: modes of transaction, which comes from technology. So what could
Speaker 1: possibly spark change? And our investors missing something because I
Speaker 1: feel like the predominant narrative over the past couple of
Speaker 1: weeks is that we are going to see this reflation
Speaker 1: trade take hold because we may see a blue wave
Speaker 1: or no matter what the election outcome is, we are
Speaker 1: going to see more fiscal spending that's going to feed
Speaker 1: itself into the system. At some point, you're going to
Speaker 1: get an economic rebound and COVID nineteen will reconcile itself
Speaker 1: and you'll see inflation take shape. Our our investors who
Speaker 1: believe in that narrative truly missing the point that, yes,
Speaker 1: all of those factors might be in play, but the
Speaker 1: velocity of money just still remains low. And what would
Speaker 1: possibly change that I think that is part of things
Speaker 1: that in some investors are missing this so much data
Speaker 1: instruction or round all of this creation of money, of
Speaker 1: the larger balance sheet that we're operating with monetary policy
Speaker 1: pushing the portfolio balance channel, and then you know what
Speaker 1: that means for perspective inflation in the future. This gets
Speaker 1: down to whether you know when bond deals rise and
Speaker 1: what that means for balanced portfolios, things of those natures.
Speaker 1: That said, until we see money change hands, it's going
Speaker 1: to be hard to see inflation and rising prices take hold. Now,
Speaker 1: money will start changing hands if we see that differentiation
Speaker 1: between the core basket of goods demanding stable but wage
Speaker 1: inflation which keeps taken up and as people make more
Speaker 1: money than they are able to pay a little bit
Speaker 1: of extra for that xbox, for the new one that's
Speaker 1: coming out that my son ones, whichever it is. So
Speaker 1: we do see that potential happening. And I would say
Speaker 1: it's just a it's a it's a metric that is underappreciated.
Speaker 1: As you mentioned, it's a confluence of economics and markets.
Speaker 1: Investors should be watching that more closely for inflation and
Speaker 1: a measure I mean that could be a spark to
Speaker 1: the fireplace or given the amount of monet creation we've had,
Speaker 1: that would be much larger influence than in the past.
Speaker 1: It's the place my kids been bugging me for the PlayStation? Uh, Sarah,
Speaker 1: what is it that I don't even know what it
Speaker 1: is now? The PlayStation PS PS PS five PS where
Speaker 1: I don't know, I don't know, I've lost track. As
Speaker 1: you can tell, I'm not exactly ready to go out
Speaker 1: and buy that for her. But well, this is how
Speaker 1: you know. The holiday season's right around the corner. But
Speaker 1: they're already getting asked. That's a good segue into sort
Speaker 1: of what you're you've been doing with your funds this year? Um,
Speaker 1: you know, that's the kids call it. Whenever they look
Speaker 1: up someone on social media, they call it stalking, which
Speaker 1: I I feel like it's a bit of a strong term, Sarah.
Speaker 1: But I was doing a little stalking of Adrian's funds
Speaker 1: on the terminal and that was good some Bloomberg. Yes, yes, dude,
Speaker 1: due diligence, I'll call it not stalking. Uh. And and and hey,
Speaker 1: everyone under your bio is up for the year. Congratulations.
Speaker 1: That's uh, that's good. Total Westwood Total Return fund up
Speaker 1: twelve percent year today, pretty good, pretty good. Um. Poking
Speaker 1: around in the holdings, I noticed, um, you had some tips.
Speaker 1: Some treasury inflation protected securities were among sort of the
Speaker 1: bigger holdings in some of the funds. And it's been
Speaker 1: an interesting sort of dialogue about tips this year. Uh,
Speaker 1: people were piled into you know, obviously during the whole
Speaker 1: crisis in March, I mean, the bond market just went berserk,
Speaker 1: and you could buy tips for a song. I guess,
Speaker 1: you know, the market was basically discounting what looked like deflation,
Speaker 1: or at least that's what it looked like. I might
Speaker 1: it might have just been a liquidity story in the
Speaker 1: bond market. And I think there was a big discussion
Speaker 1: at least among you know, some of my colleagues saying, well,
Speaker 1: tips then did really well. Uh, you know break evens
Speaker 1: are upper people where people just bargain hunting hunting with
Speaker 1: tips or was it uh, really based on concerns about
Speaker 1: inflation going forward? And maybe your funds always have tips
Speaker 1: up there in the in the sort of high weightings
Speaker 1: of the fund I don't know, but walk us through
Speaker 1: basically what your your outlook is for tips right now
Speaker 1: and how you're thinking about, you know, inflation linked bonds
Speaker 1: in general. Sure, well, you know, during the global financial
Speaker 1: prices the DFC, we saw TIPS really crap at that point,
Speaker 1: and that was liquid room. That was a market that
Speaker 1: dried up. That was a use of capital on bank
Speaker 1: balance sheets and in a large way for which created
Speaker 1: exist location. We didn't see that this time. Maybe parts
Speaker 1: of Dodd Frank and clean up and liquidity rules did
Speaker 1: their job. We did, we saw less of that disconnect.
Speaker 1: I think that means that when you looked at what
Speaker 1: happened with TIPS, it is more reflective of what you know,
Speaker 1: what we saw there in the duldrums was more reflective
Speaker 1: of a very dire apploic on inflation, and so we
Speaker 1: have seen that come up a little bit. Of course
Speaker 1: at Jackson Hole of FED did tell us that they
Speaker 1: are going to continue to let inflation run hot. That
Speaker 1: doesn't mean inflation is going to get there. And maybe
Speaker 1: that actually even means the Fed thinks that they don't
Speaker 1: see perspective inflation coming. But for folks like myself that
Speaker 1: have a multi asset representation, that's their long term view.
Speaker 1: It means I'm always going to have likely some degree
Speaker 1: of inflation protection in case we see they say that
Speaker 1: that velocity of money could be the spark to the
Speaker 1: fireplace when there's a lot of monetary creation. So I
Speaker 1: want some degree of inflation protection on the fund if
Speaker 1: we see that, I want the compensation to come in
Speaker 1: for heightened inflation. You over just my straight nominals. So
Speaker 1: it's always a decent protection to have on and I
Speaker 1: think that's that's where investors are really appining now, less
Speaker 1: that they see inflation, but more than inflation protection itself
Speaker 1: may be becoming attractive because of the rapidity with which
Speaker 1: inflation could change. I mean, we've got wage inflation that
Speaker 1: it has been increasing over core um I should say
Speaker 1: it's just been ticking up. At the same time, you've
Speaker 1: you've got a lot of liquidity in the environment and
Speaker 1: a lack of velocity. If we were to see the
Speaker 1: stimulant that we're trying to achieve from the Fed and
Speaker 1: from the Treasury take hold, then I want to be
Speaker 1: protected in some ways for the portfolio. So where does
Speaker 1: the outlook for nominal bond yields stand? Then on one end,
Speaker 1: you have the velocity of money conversation, But it feels
Speaker 1: as that the narrative has just been shifting very quickly lately.
Speaker 1: It was just last week that we were discussing bond
Speaker 1: yields breaking through eight basis points, people talking about possible
Speaker 1: upside towards one percent, that we were going to see
Speaker 1: this reflation trade. Then all of a sudden, heading to
Speaker 1: this week, as we saw COVID cases rising, in particular,
Speaker 1: more restrictions overseas in Europe, concerns about what that could
Speaker 1: mean for the US, we saw that completely reverse itself
Speaker 1: with the tenure breaking back through a basis points and
Speaker 1: below it. Where do we currently stand and is it
Speaker 1: reasonable to expect that we are going to see much
Speaker 1: movement either which way? Or is the reality that we're
Speaker 1: just stuck in this trading range funny all of a sudden, Yeah,
Speaker 1: it's amazing. Really, you have to put everything in perspective.
Speaker 1: Plushing my curls over here. You know, the base rate,
Speaker 1: the short end of the curve is anchored, and the
Speaker 1: is very clear that it is going to be anchored
Speaker 1: for a while. As I mentioned, to let inflation run
Speaker 1: hot or too. You know, the average inflation targeting. If
Speaker 1: you look at the ducts that they produce, they give
Speaker 1: us an idea that we're not going to move rates
Speaker 1: until probably two thousand three, could be longer, which means
Speaker 1: we're really talking about the curve. We're talking about whether
Speaker 1: economic growth comes up, and you are seeing the potential
Speaker 1: for inflation, you want to be compensated for a term premium, etcetera.
Speaker 1: In your tenure body field. And it's hard for me
Speaker 1: to see a tenure body fielding yield above one percent
Speaker 1: significantly without exorbiting economic growth. And you know, while I
Speaker 1: do see the potential for good economic growth, it's supported
Speaker 1: by the necessary physical stimulus and by monetary policy. This
Speaker 1: is not an engine running by itself. This is us
Speaker 1: pouring gas. I'm an I'm an old old man that
Speaker 1: I used to work on cars back when the head
Speaker 1: carburetors and not infectors. This is us pouring gas directly
Speaker 1: into the carburetor. The car will start and you'll see
Speaker 1: some fire come out when you close the lid, you close.
Speaker 1: The bondum is the same the UK. Does the car
Speaker 1: stay started? We're not there yet. The hoods still open.
Speaker 1: We've got the car started, but it's not running on
Speaker 1: its own just yet. Until we see that, it's gonna
Speaker 1: be hard to see bond yields above, they're going to
Speaker 1: be inordinately low. And that's just if the Fed doesn't
Speaker 1: do what it did in the last in the GFC,
Speaker 1: which is, you know, how quickly we pulled out the
Speaker 1: old playbook. If we need to stimulate the economy further,
Speaker 1: we could go down to buying out the curve, so
Speaker 1: called twist. We're not calling that route yet. We are
Speaker 1: increasing the size of the balance sheet. We're buying a
Speaker 1: shoulder average maturity. But if need be, if we felt
Speaker 1: like that that portfolio balance channel was needed, we could
Speaker 1: do that as well, which which I think constrains bond
Speaker 1: yields to where you know, you hold bonds treasury bonds
Speaker 1: for two reasons. You hold it for the income and
Speaker 1: you hold it for the insurance policy. There's a lot
Speaker 1: of questions right now as to whether that insurance policy
Speaker 1: is still useful. The S and P five hundred or
Speaker 1: some risk asset drops significant lead. Do I make money
Speaker 1: on the bomb lid by prices going up and rates
Speaker 1: going down? I think you still do. I think it's
Speaker 1: an attractive asset to hold for the insurance policy, and
Speaker 1: you hold up for the income, and I say, real
Speaker 1: rates are still significantly negative. We don't have to look
Speaker 1: very far to our foreign partners to see what, you know,
Speaker 1: where other bond yields are in the developed markets to
Speaker 1: say that, gosh, let's say one percent, all of a sudden,
Speaker 1: doesn't seem so bad. Who would have ever thought you'd
Speaker 1: be thinking along those lines. Huh. By the way, Star,
Speaker 1: that was a nice twelve part question for Adrian there.
Speaker 1: I'm proud of you. That was that. That was a
Speaker 1: good one. You know, I was originally going to say,
Speaker 1: earlier in the show, your first question to Adrian, I
Speaker 1: was gonna say, you really outdid yourself with that one.
Speaker 1: I think that might have been an all time record.
Speaker 1: I had to I had to play my part. We'll
Speaker 1: put a time around that. But uh as uh agent
Speaker 1: is Sarah pointed out, there is um the minor little
Speaker 1: event risk coming up known as the US election. Um.
Speaker 1: I feel like, you know, obviously, all the polls, all
Speaker 1: the betting markets, whatever metric you look at, makes it
Speaker 1: look like Biden's a pretty good chance to win. The
Speaker 1: Senate looks more like a toss up. I mean, the
Speaker 1: House is likely going to stay under Democratic control. The
Speaker 1: Senate looks more like a toss up. Yet, I feel
Speaker 1: like a lot of investors sort of talk themselves into
Speaker 1: this notion of a blue wave coming, that the Dems
Speaker 1: would sweep both the House, Senate and the White House,
Speaker 1: and that as a result, we'd get this massive fiscal
Speaker 1: stimulus early in And so, you know, a lot of
Speaker 1: people for that are sort of, you know, positioning for
Speaker 1: this idea of a reflation, a steeper yield curve, perhaps
Speaker 1: that proverbial rotation from growth to value and cyclicals that
Speaker 1: sort of is seems to always be someone's positioning for
Speaker 1: that somewhere. But I wonder, you know, for a guy
Speaker 1: like you, I mean, does it make sense to try
Speaker 1: to get ahead of this result next week or do
Speaker 1: you sort of stand back and and try to, you know,
Speaker 1: let the cards fall where they may. You know, how
Speaker 1: are you sort of approaching this event risk coming up?
Speaker 1: I think it does make sense, And and my prediction
Speaker 1: for who's gonna win is I'm just kidding, I'm not
Speaker 1: gonna It's very hard to say the outcome of the election.
Speaker 1: What I what I can do as an investors, I
Speaker 1: can look at the various potential outcomes, and you know,
Speaker 1: while I don't I don't have an Excel model that
Speaker 1: probability waits those I can get an idea of what
Speaker 1: I think the outcome might be in different scenarios. And
Speaker 1: I think you're exactly right on what is consensus right
Speaker 1: now as far as Biden win less you know, the
Speaker 1: potential but less consensus of a Blue sweep, or you know,
Speaker 1: really just the Democrats take the center, and if that happens,
Speaker 1: I think there, you know, that's a positive potential event
Speaker 1: from fiscal rise. You're exactly right that that will just
Speaker 1: as we talked about the economic activity and the push
Speaker 1: on nominal interest rates further out, that will push up
Speaker 1: the curve. So we'll see a rising interest curve, we'll
Speaker 1: see rising inflation expectations, we'll see rising commodity prices where
Speaker 1: you know, stimulus means we're going to pump money into
Speaker 1: infrastructure and roads and buying copper for wires and things.
Speaker 1: That is where we'll start to see some activity there.
Speaker 1: So that's that's a positive offset by the taxes where
Speaker 1: the corporate tax rate would go from all the things
Speaker 1: we know, and we can see some shift around in
Speaker 1: some sectors. So there's a there's a great opportunity for
Speaker 1: investors to think about individual companies in their reactions and
Speaker 1: the sector rotations. Places like healthcare are going to be impacted.
Speaker 1: That's probably the number one place where there's a complete
Speaker 1: difference between what the two candidates would would like to see.
Speaker 1: The other option is that we see Trump won the election. Um.
Speaker 1: Then as you say, the Senate's kind of a kind
Speaker 1: of a toss up, and if we see Trump win
Speaker 1: the election and just things stay the same, then actually
Speaker 1: that's probably a good outcome as well, because we both
Speaker 1: candidates would like to see a lot of fiscal stimulus.
Speaker 1: One of those candidates doesn't want to raise taxes at
Speaker 1: the same time, so maybe that's a positive, more positive
Speaker 1: outcome that center outcome, which is where you have a
Speaker 1: Senate that remains read and a blue president. There's one
Speaker 1: aspect of that that scares me, and usually that's the
Speaker 1: good outcome. Usually that means okay, less policy volatility. A
Speaker 1: lot of things don't make it through, and the market
Speaker 1: likes less uncertainty and less volatility on policy. Um. One
Speaker 1: thing that does scare me around that of anything that
Speaker 1: does is because of all this partisanship that we have,
Speaker 1: will there be a pushback and an elongation of the
Speaker 1: time frame to get to a phase for stimulus. UM,
Speaker 1: that's what I think the market will be focused on
Speaker 1: for for the big risk on risk off afterwards is
Speaker 1: can we come to agreement on providing the necessary stimulus
Speaker 1: to the economy? Um. Secondary questions will be okay, well,
Speaker 1: depending on the candidate that wins, will we see taxes
Speaker 1: or or no taxes? Will we see UM A, c
Speaker 1: A or some other healthcare plan? The primary thing right now,
Speaker 1: because of the visibility of COVID, is going to be okay. Well,
Speaker 1: then can we come to fruition on our phaise for Well,
Speaker 1: if there's anything that we learned four years ago, almost
Speaker 1: to the day, it's that one predicting the election is
Speaker 1: very difficult, and to predicting what the outcome of an
Speaker 1: election means for markets is also very difficult. I mean,
Speaker 1: the market even got it wrong on election night, going
Speaker 1: limit down in the middle of the night and then
Speaker 1: just rip roaring back. But I think we can all
Speaker 1: agree that Tuesday will be a bit of a hectic
Speaker 1: and maybe a crazy night, Mike, a crazy night that
Speaker 1: could last a month maybe, and we're all looking forward
Speaker 1: to it. Well, I feel like that was an intentional
Speaker 1: segue there, Sarah, that was that right? You read me correctly. Right,
Speaker 1: you want to talk some crazy things, I'm ready for it.
Speaker 1: I'm ready. I'm ready to use all of our submissions
Speaker 1: as my own. All right, Charlie Pellett will tell us
Speaker 1: what time it is. Stand clear of the craziest things
Speaker 1: we saw in markets this week. All right, Sorry, since
Speaker 1: you're getting flooded with listeners crazy things, let us know
Speaker 1: what you got. So I'll start with Seal Roston and
Speaker 1: I really hope I am pronouncing your name correctly. Apologies
Speaker 1: if I'm not. Uh. He actually reached out to me
Speaker 1: on the Bloomberg terminal, so likely the coolest way to
Speaker 1: be reached out for a crazy thing. Maybe a little
Speaker 1: bit elitist, but we'll go with that. Absolutely. He's a
Speaker 1: London based analyst over at Man Group and he flagged
Speaker 1: a story on the Bluemberg terminal. It's crazy and also
Speaker 1: just very ironic. The headline of this story is fraud
Speaker 1: prevention firm goes bankrupt after CEO charged fraud. The lead
Speaker 1: the first paragraph of the story reads, cyber fraud prevention
Speaker 1: firm n S eight, Inc. Filed for Chapter eleven bankruptcy
Speaker 1: on Tuesday, listing assets of at least ten million dollars
Speaker 1: in liabilities of at least one hundred million dollars and
Speaker 1: con you think if you run a cyber fraud firm
Speaker 1: that you would be hyper vigilant of not committing the
Speaker 1: fraud yourself. Maybe it's just a proof of concept or something.
Speaker 1: He's uh, you know, he was just exploit showing them
Speaker 1: their vulnerabilities, craps. Was it his his own firm that
Speaker 1: found his own fraud then right, right, right, that's all
Speaker 1: gonna work out. That is a good one. That is
Speaker 1: a good one. I that's a good one. I applaud that.
Speaker 1: And a guy from Man Group how about that. That's
Speaker 1: pretty interesting. That's uh the big hedge fund firm in London,
Speaker 1: all right. I got one from Twitter from our loyal
Speaker 1: listener whose name is probably not really Twiggy Sunday, but
Speaker 1: that's what he goes by on on Twitter, and he
Speaker 1: points out, I feel like this stupid asteroid comes up
Speaker 1: every week on the show. But there's an asteroid floating
Speaker 1: out in space. You can't get away from it that
Speaker 1: they say is worth ten thousand quadrillion dollars. I don't.
Speaker 1: There must not be a number after quadrillion, Why it's
Speaker 1: ten thousand quadrillion dollars From quadrillion it goes to infinity.
Speaker 1: I don't know. Yeah, and uh, he asked the question, Well,
Speaker 1: what could possibly be on this asteroid? I assumed it
Speaker 1: was covered in intrastrate derivatives? Is the only thing I
Speaker 1: could think that would get you to to to ten
Speaker 1: thousand quadrillion, Adrian, I don't know, maybe maybe uh something else.
Speaker 1: Eric Quener on Twitter responded, maybe it's covered with the
Speaker 1: new iPhone, which could be a too. Turns out it's
Speaker 1: just covered in iron. It's it's full. It's if they
Speaker 1: think it's almost entirely made of iron and nickel and
Speaker 1: enough that it's worth ten thousand quadrillion dollars. Although I
Speaker 1: feel like our pest guests, Cam Harvey would would be
Speaker 1: shaking his fist at at the screen right now if
Speaker 1: you heard that, because obviously that amount of supply of
Speaker 1: iron and nickel is gonna hurt prices, I would assume.
Speaker 1: But anyway, pretty good one from Trick Twiggy Sunday. It's unbelievable.
Speaker 1: Whenever you heard the quadrillion as a number, the next
Speaker 1: time you do prices, right with me? Mike, I'm gonna
Speaker 1: have to use quadrillion. That's right. We did not have
Speaker 1: a prices right, Well I got one frag and we
Speaker 1: can still do a prices right, Okay, Adrian, I don't
Speaker 1: know would you pay ten thousand quadrillion for an asteroid
Speaker 1: made of iron and nickel? I think it depends on
Speaker 1: its velocity. That was a great answer, the velocity of buddy,
Speaker 1: the velocity of an iron clad asteroid. How about you, Adrian?
Speaker 1: I fear that we did not warn you about our gimmick. Here.
Speaker 1: The craziest thing have you have you observed? I think
Speaker 1: crazy in the past week or past month, or I
Speaker 1: haven't looked other than you know, thinking about the markets
Speaker 1: yesterday or Wednesday was the you know, it's one of
Speaker 1: those very unusual days where everything is down in the markets,
Speaker 1: and that was there's only then three days that we've
Speaker 1: seen that since nineteen nineteen nineties, and both of the
Speaker 1: both of the other days we're in March of this year,
Speaker 1: and so you start to worry about, you know, the
Speaker 1: crack in what is kind of the fundamental underpinnings of
Speaker 1: things like risk parity and you know, just the old
Speaker 1: crux up for what you sixty portfolio was the way
Speaker 1: to go and that forty is bonds. Yeah, you need
Speaker 1: to make sure that the offsets there. So, but that's
Speaker 1: not quite the crazy you're looking for now. That is
Speaker 1: that is very crazy, and that is the crazy we're
Speaker 1: looking for. But I have I have a question, Like
Speaker 1: you said, I saw the statistic about that being the
Speaker 1: third time it's ever happened since the nineteen The other
Speaker 1: two were this year. What does that tell you about
Speaker 1: this market regime that we're living in the fact that
Speaker 1: on a day when we saw pretty severe sell off
Speaker 1: in the equity market, gold was lower, bonds were lower.
Speaker 1: I mean, classic market studies would tell you that doesn't
Speaker 1: make sense. De leveraging Maybe some c I was assumed
Speaker 1: some funds blown up somewhere, or some leverage funds. But
Speaker 1: but what do you think, Cadren if we were to
Speaker 1: see a you know, blow up in the equity markets
Speaker 1: when bond prices then build up ten points, would we
Speaker 1: see bond yields then go down to negative? Yeah? I
Speaker 1: probably would be the one to tell you guess they
Speaker 1: could do. But right now there's an asymmetry in those prices,
Speaker 1: and the same thing does with you know you have
Speaker 1: commodities in gold, and there's a there's a questioning now
Speaker 1: on the protection that you get in various risk assets.
Speaker 1: But bitcoin did fun. I actually I I I tweeted
Speaker 1: out what happened to hedges as a joke after a
Speaker 1: Wednesday sell off, and you better be sure I was
Speaker 1: quick to hear bitcoin did five you you heard that
Speaker 1: about a thousand times. I imagine the enthusiasts will call
Speaker 1: them not pumpers, not promoters, the offici crypto crypto offficionados
Speaker 1: out there. All right, Now, that's a good one, Adrian.
Speaker 1: I didn't I hadn't seen that stat of only three times.
Speaker 1: That's remarkable. Um, but it does uh make me competent.
Speaker 1: I've I've edited about ten straight stories about the portfolio
Speaker 1: going out of fashion, so I it does kind of
Speaker 1: explain why people are worried about that. All right, I
Speaker 1: got a good one for you and Sarah. Um, let's
Speaker 1: hear it, all right. One of my favorite characters in
Speaker 1: the financial press is Mr Bill Gross. I'm sure listeners
Speaker 1: are very familiar with him, the bond King as they
Speaker 1: call him, and I like him because a lot of
Speaker 1: financial types and this is the way you should be
Speaker 1: by the way is buttoned down, reserved. You don't want
Speaker 1: to make headlines for for anything but a good fun performance.
Speaker 1: Bill doesn't worry about any of that. He's out there
Speaker 1: living his life and you know, let let the headlines
Speaker 1: fall where they may. And when he writes his momentaries,
Speaker 1: it's it's always among my favorite because they're so colorful
Speaker 1: and and just so unlike most other commentary out there.
Speaker 1: So Mr Gross bought a million dollar statue made of
Speaker 1: glass sculpture. I guess it's not one single statue uh
Speaker 1: made of glass uh that is supposed to be evocative
Speaker 1: of the um of Japanese fishing lures or or fishing
Speaker 1: bobs whatever they call him that amazingly to me were
Speaker 1: made of glass. I don't know, like a lobster pot
Speaker 1: bowie type of thing, but made of glass. I I
Speaker 1: blown glass. I can't imagine that is the most durable
Speaker 1: material for that. But regardless, it's also not a very
Speaker 1: durable material for outdoors artwork. Um because the thing kept breaking.
Speaker 1: And there's a big conflict here because Mr Gross's neighbor
Speaker 1: does not like the statue and he's complained about it
Speaker 1: because he lights it up real bright at night, and
Speaker 1: and you know there there's concerns that maybe he's thrown
Speaker 1: rocks at it, or someone else who doesn't like it
Speaker 1: has thrown rocks at it. But they're not sure if
Speaker 1: it's that or just the palm trees the fronds are
Speaker 1: falling on it. Whatever the case, it casts some serious
Speaker 1: damage to to this sculpture. So Gross put off this
Speaker 1: giant net over it, and that thing's like ten feet hot.
Speaker 1: So this guy next to him is trying to look
Speaker 1: out and enjoy the views of the Pacific, and he
Speaker 1: doesn't like the sculpture. He also doesn't like the giant
Speaker 1: net over it, so he's been calling the uh I
Speaker 1: forget what beaches, Laguna Beach. Maybe it's it's one of
Speaker 1: those really high money, yeah, Laguna Beach beach towns in California.
Speaker 1: So the neighbor has been calling the police. They're threatening
Speaker 1: to sue each other. Um Gross got back at him
Speaker 1: by blaring music on like volume eleven on his outdoor speakers,
Speaker 1: including the theme song to Gilligan's Island, in order to
Speaker 1: drive this guy crazy. And he even texted the guy.
Speaker 1: He said, keep it up and there's gonna be a
Speaker 1: concert every night so, uh, I just love this story.
Speaker 1: I don't know, I love I love, I love him.
Speaker 1: I also so there's these broken shards of the sculpture
Speaker 1: that I would actually be willing to bid on. Uh,
Speaker 1: you know, because good artwork, you know, Sarah, I I
Speaker 1: love nothing more than ridiculously overpriced artwork which I cannot afford.
Speaker 1: But I feel like I could afford a few shards
Speaker 1: of Bill Gross's broken sculptures. You think you could? You
Speaker 1: think you can make that work? I tell you, if there,
Speaker 1: if anyone out there is connected to Gross, tell him
Speaker 1: I'm a bitter. I mean, maybe only a couple hundred bucks,
Speaker 1: but I'd like to display them in my more modest
Speaker 1: New Jersey yard with absolutely a giant spotlight on them
Speaker 1: and see what the neighbors think. Because good artworks all
Speaker 1: about the story. And if anyone came up to me
Speaker 1: and said, why do you have these glass shards in
Speaker 1: your in your front, you know I could be like, well, sir,
Speaker 1: let me let me tell you this story. Tell you
Speaker 1: the story. So, by all means, if Mr Gross, if
Speaker 1: you hear this, I'm a I'm a bitter on your
Speaker 1: broken pieces of glass. You know, this really makes me
Speaker 1: think you know how I told you many times that
Speaker 1: the guy above me is constantly playing jazz music. Well
Speaker 1: now I'm wondering if he's playing jazz music because he
Speaker 1: really dislikes something that I'm doing. He's trying to annoy me.
Speaker 1: I don't know. I don't know, but I do have.
Speaker 1: I have one more that I want to share from Twitter,
Speaker 1: and this is from at T J. Beller. He did
Speaker 1: reach out to both of us, so thank you very much.
Speaker 1: He said. The craziest thing I saw in markets this
Speaker 1: week courtesy of Taylor Rigs, who was a Bloomberg anchor
Speaker 1: and reporter on television, Apple and Microsoft now larger combined
Speaker 1: market cap than the entire consumer stape staples sector, and
Speaker 1: Mike wrote back to him confirmed, um three point six trillion,
Speaker 1: just about what those two companies combined versus two point
Speaker 1: three trillion for just consumer staples. And I just myself
Speaker 1: pulled up a chart of Apple's market cap because it's
Speaker 1: pretty unbelievable when you think about the speed at which
Speaker 1: we have seen its market cap nearly double. It took
Speaker 1: years for Apple to reach that one trillion dollar market
Speaker 1: cap level, so that was originally surpassed in well now
Speaker 1: as we speak, about three quarters of the way into
Speaker 1: one nine trillion, so almost doubled in less than two years,
Speaker 1: from one trillion to two trillion. To talk about velocity, Adrian, Yeah,
Speaker 1: what do you think about that, Adrian? Does that make
Speaker 1: you nervous that there's a company worth almost two trillion
Speaker 1: out there, that these two companies are as big as
Speaker 1: the entire stables sector of the s MP? Or is
Speaker 1: it is that just the world we live in now,
Speaker 1: where these these mega cap companies dominate everything. It's all
Speaker 1: about earnings. It's the world we live in, and it's
Speaker 1: it's the future of of pulling in all that those
Speaker 1: growth assets that they're doing. If it makes me nervous,
Speaker 1: it's around regulation, of starting to think about when you
Speaker 1: have such great, large industries and the emos, do we
Speaker 1: have a concern around regulation that looks at breaking up
Speaker 1: pieces of that because we feel like we're constraining further.
Speaker 1: And I think that'll be a conversation for the you know,
Speaker 1: for the next administration, regardless of which comes in. It's
Speaker 1: already something they're looking at. Yeah. Absolutely, And if I'd
Speaker 1: say if that asteroid actually we're covered in iPhones, then
Speaker 1: that would be bad news for Apple all thinks. I
Speaker 1: don't know how Apple would have gone on the iPhones
Speaker 1: on the asteroid in the first place, but some alien,
Speaker 1: some alien company has replicated the iPhone. Who knows. We'll
Speaker 1: start some conspiracy theories. Thanks for the laugh on Adrian.
Speaker 1: That was not deserved, but I appreciate I appreciate the
Speaker 1: fake laugh. Anyways, a fake laugh will take Mica a
Speaker 1: long way. It doesn't matter, a notional laugh, whatever it takes.
Speaker 1: All my laughs are genuine. Okay, thank you? All right, Well,
Speaker 1: we're looking forward to a very very busy week um
Speaker 1: an exciting week for many of us and Adrian Helford.
Speaker 1: This was a great opportunity to have you on the
Speaker 1: show and we really appreciate it. Thank you for having me.
Speaker 1: What goes up. We'll be back next week. Until then,
Speaker 1: you can find us on the Bloomberg Terminal website and
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Speaker 1: by Jordan Gospore. The head of Bloomberg podcast is Francesco Levie.
Speaker 1: Thanks for listening, See you next time.