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
Speaker 1: Ponze or porter on the Cross Asset team, and I'm
Speaker 1: Mike Reagan, a senior editor at Bloomberg. And you can
Speaker 1: think of me as the molder to Sarah's scully. I'm
Speaker 1: gonna wait for one of these weeks, Mike, when you
Speaker 1: give me one that I maybe don't have to. You know, Sarah,
Speaker 1: I thought that one was fresh. I mean, that's like
Speaker 1: mid nineties. That's about as fresh as I get. With
Speaker 1: the references. I should know it. Maybe I'm just I'm
Speaker 1: just out of it all right, Well, X files, X files.
Speaker 1: Get on the Netflix and watch some X files. It
Speaker 1: will all make sense my whole if I haven't been
Speaker 1: watching enough Netflix these days. But this week on the show, Mike,
Speaker 1: different asset classes across financial markets are giving off pretty
Speaker 1: strong messages. Real yields in the US are deeply negative,
Speaker 1: while the US dollar actually just had its worst July
Speaker 1: in a decade. That all as precious metals have become
Speaker 1: a quasi obsession with gold futures touching two thousand dollars
Speaker 1: announced for the first time ever. So what's it all
Speaker 1: telling us? And of course we will close out the
Speaker 1: episode with our tradition the craziest thing I saw in
Speaker 1: markets this week? And if you saw something crazy, please
Speaker 1: do give us a call on the Bloomberg Podcast hotline
Speaker 1: at six four six three to four three four nine oh,
Speaker 1: or tweet to us at podcasts and maybe we'll play
Speaker 1: your voicemail or read your tweet on the show. Sarah,
Speaker 1: we did get a pretty interesting voicemail. Uh, no spoilers,
Speaker 1: but I think our friends in the crypto currency world
Speaker 1: will appreciate this one, so we'll get to that at
Speaker 1: the end as well. We have been asked to speak
Speaker 1: a little bit more about crypto lately, so maybe and
Speaker 1: this is a question that Mike and I may not
Speaker 1: have answers to, so maybe some of our listeners well,
Speaker 1: and if you do, like Mike said, give us a call. Yeah.
Speaker 1: I can't give any serious answer about anything crypto. It'll
Speaker 1: all be insulting to all the crypto people, so I
Speaker 1: will not proffer an answer to this one. But hopefully
Speaker 1: you can figure out this riddle for us. Like Molder
Speaker 1: and Scully and call us call us up and let
Speaker 1: us know when once you get to that, listeners call
Speaker 1: I know we're teasing the listeners a lot with this,
Speaker 1: with this setup, but but anyway, Sarah, as you said,
Speaker 1: really interesting guests this week, first time on the show.
Speaker 1: He is the head of North American macro Strategy for
Speaker 1: State Street Global Markets and his name is Lee Farridge. Lee,
Speaker 1: welcome to the show. Thank you very much, Mike, thank
Speaker 1: you for having me. Lee. I think you've got the
Speaker 1: Molder and Scully reference, right, I certainly I got Molder
Speaker 1: and Scully. I've got to I've got to do my
Speaker 1: homework from now on. Certainly, you know, I want to
Speaker 1: get to what Sarah said at the beginning there with
Speaker 1: gold and the dollar. But before we get to that,
Speaker 1: I want to ask you about what's going on in Washington,
Speaker 1: d C. I know you've been paying pretty close attention
Speaker 1: to sort of the sausage making, as they say in
Speaker 1: d C. As far as what is going on with
Speaker 1: the prospects for another round of fiscal stimulus, Why don't
Speaker 1: you walk us through what it looks like from your seat?
Speaker 1: You know, what can we expect in terms of another
Speaker 1: spending bill, and what do you think it all means
Speaker 1: for markets going forward? Well, I think I think for
Speaker 1: the economy in general, a market specifically, it's vital that
Speaker 1: we've got another package. And there's no doubt that the
Speaker 1: Cares acts really did bail out the economy back in
Speaker 1: Q two. So the unemployment insurance supplement runs out on
Speaker 1: July thirty one. You know, the other PPP loans can
Speaker 1: get converted to grants. During the course of August, we
Speaker 1: have the moratorium mon evictions. The Care's package was was
Speaker 1: a temporary stop gap, but huge measure, and now we
Speaker 1: need another one because the GDP dats of you two
Speaker 1: showed we're still in the midst of this is Jerome
Speaker 1: Power talked about at the latest FED meeting. Data is
Speaker 1: actually deteriorated since the middle of June. We need more
Speaker 1: coming through from Congress and at the moment it's stuck.
Speaker 1: There was an attempt to try and pass a just
Speaker 1: just one part of it, which was the unemployment insurance supplement.
Speaker 1: Doesn't look as if that got through, and it was
Speaker 1: only the third of the level it was out before.
Speaker 1: So yeah, this is a huge deal. Markets are reacting
Speaker 1: to it. To an extent on the basis that the
Speaker 1: heavy lifting is going to continue with the FED, so
Speaker 1: they're going to continue to have to be as dubbish
Speaker 1: as Power talked about, um. And that's why we're seeing
Speaker 1: so the gold continue to go up, euro you know,
Speaker 1: the dollar go down. But even if we get the
Speaker 1: fiscal package, it it's almost like a bare minimum. We
Speaker 1: have to get it. Like you said, on the monetary side,
Speaker 1: when it comes to the FED and durn Power, we
Speaker 1: know that there of support there. They have made it
Speaker 1: abundantly clear that they are on the market side, they
Speaker 1: will do absolutely whatever is necessary. Now on the fiscal side,
Speaker 1: do you have a sense of what the bare minimum is?
Speaker 1: I mean, what is the bare minimum that has to
Speaker 1: come through from the fiscal package for markets to not
Speaker 1: throw a fit? I mean, sure, before we had heard
Speaker 1: of two hundred dollars floated before replacement for that unemployment boost,
Speaker 1: I mean, would would that have even been enough? It
Speaker 1: may be enough to keep the market relatively happy, but
Speaker 1: actually when we start to see the data in the
Speaker 1: next month or so, we'll see it isn't enough. Um.
Speaker 1: So your two hundred dollars is a third of where
Speaker 1: we were before So to put that in context, in May,
Speaker 1: that six hundred dollars is worth one point three trillion
Speaker 1: to the U S consumer. It's seasonally adjusted annualized rates,
Speaker 1: which is where you look at personal income, so you're
Speaker 1: looking at the third of that. That's that's a huge
Speaker 1: drop UM. And with the unemployment rate still as high
Speaker 1: as it is UM and the potential next week when
Speaker 1: we get the payrolls report for July that we won't
Speaker 1: see much of improvement in the labor market picture. So
Speaker 1: I think that two hundred dollars might be enough to
Speaker 1: calm the market to an extent, but I think it
Speaker 1: means that actually the day to go forward is is
Speaker 1: going to get bad again. Ell. Yeah, I wanted to
Speaker 1: shift to the talk about the dollar a little bit now.
Speaker 1: I'll warn't you. I tend to ask questions that have
Speaker 1: about twenty seven parts in them, soah, so, so you
Speaker 1: might need to take some notes. But you know, obviously
Speaker 1: the dollar has just been weakening very aggressively in the
Speaker 1: last few months. Last time I looked at sort of
Speaker 1: the broad indexes down at like a two year low
Speaker 1: for the d X Y and the Bloomberg version of it.
Speaker 1: Now I know the bearrish case for the dollar is
Speaker 1: pretty simple. The twin deficits, the the government budget depthsit
Speaker 1: and the trade depth sit are are very bearished for
Speaker 1: the dollar. They have been for several years now, and
Speaker 1: a lot of people predicting barishness for the dollar have
Speaker 1: kind of gotten burned. But this time it really does
Speaker 1: seem like those sort of ranges that we've seen in
Speaker 1: the dollar are going to break, that we will see
Speaker 1: some potentially some more weakness starting to hear people talk
Speaker 1: about the risk of the dollar's role as a reserve currency.
Speaker 1: Do you think that's part of it? Uh? Is it
Speaker 1: time to start worrying about the dollar its position as
Speaker 1: a reserve currency? Or is this weakness more just you know,
Speaker 1: the the other fundamentals, the twin deficits and that sort
Speaker 1: of thing, and that basically you know, the idea that
Speaker 1: that this fiscal depths it's not going anywhere, it's gonna
Speaker 1: be huge for a long time. Or you know, is
Speaker 1: there any sort of risk of to the reserve currency
Speaker 1: status that that might be applay in this weakness. I
Speaker 1: don't think really it is about the reserve stasis. I mean,
Speaker 1: I think it is more to do with the fundamentals
Speaker 1: this if these are normal FX market moves, I mean
Speaker 1: the dollar euro dollars traded at one sixty in the
Speaker 1: history of the euro, and it was still the dollar
Speaker 1: was still the reserve currency. So there's a difference between
Speaker 1: the dollar being weak and the dollar losing its reserve
Speaker 1: currency status. But what has been a trend for a
Speaker 1: number of years now, last couple of years in particular,
Speaker 1: is the share of dollars within global reserves has been
Speaker 1: going down. It's still the dominant currency, but it's probably
Speaker 1: around sixties six of global reserves now it was up
Speaker 1: at And I think the fact is as the US
Speaker 1: withdraws from the world, which it has done over the
Speaker 1: last few years, then you know, other currencies have that
Speaker 1: potential to two or central banks around the world probably
Speaker 1: will make a more balanced reserve portfolio. Now, the dollar
Speaker 1: is still going to be the biggest means of exchange,
Speaker 1: so commodities are still priced in dollars. Oil is still
Speaker 1: priced in dollars, and that means that it's still going
Speaker 1: to be the dominant currency within reserves, but is it
Speaker 1: going to be as high as it on? Us know?
Speaker 1: And I think you know the euro is now coming
Speaker 1: forward as as somewhat of a viable alternative. I think
Speaker 1: the the common Fiscal package that was agreed a couple
Speaker 1: of weeks ago that was significant, maybe not in terms
Speaker 1: of the numbers, but in terms of the message, in
Speaker 1: terms of taking that step to a common fiscal policy. So,
Speaker 1: you know, for once during the crisis, I'm not hearing
Speaker 1: people talking about the Eurozone breaking up, which has been
Speaker 1: every crisis we've had in the past. Oh, could this
Speaker 1: be the end of the Euro? No, we're not getting
Speaker 1: that now. You know, Christine Legarde has come in and
Speaker 1: she has you know, carried on the drugging whatever it
Speaker 1: takes mantra, and at the same time you've now got
Speaker 1: the politicians stepping up with this this more common fiscal
Speaker 1: policy that means the euro is am or viable alternative.
Speaker 1: The remember is becoming more having more of a role
Speaker 1: within global reserves, still small, but I think what you're
Speaker 1: looking at is is reserves becoming a bit more balanced.
Speaker 1: But the dollar is still going to be the reserve currency.
Speaker 1: It's still the main global means of exchange and therefore
Speaker 1: it's still going to be the dominant currency within global reserves.
Speaker 1: But that doesn't mean it can't weaken further. That doesn't
Speaker 1: mean you can't have the dollar weakening against the euro
Speaker 1: and other currencies whilest maintaining reserve currency status. There there
Speaker 1: are two different things. So in your view, what actually
Speaker 1: is it that's driving a weaker dollar. I mean, I've
Speaker 1: heard a couple of different narratives, one being simply that
Speaker 1: the US has not gotten coronavirus cases under control relative
Speaker 1: to other countries around the world, one of course being
Speaker 1: growing deficits or inflation. Is it possible at a pinpoint something,
Speaker 1: and if so, what does that mean for how much
Speaker 1: further the dollar can actually be appreciate it? Well, I
Speaker 1: think it's it's a combination of those factors. But but
Speaker 1: what they do is they manifest themselves in this debasement
Speaker 1: of the dollar. And by that what I mean is
Speaker 1: real interest rates in the US have plummeted. You know,
Speaker 1: you look at the break even as you look at
Speaker 1: the tips that real interest rates have really sharply depreciated
Speaker 1: in the US over the last few months. And you know,
Speaker 1: it's a simple question of supply and demands. So the
Speaker 1: Fed is doing all of this, it has to do,
Speaker 1: you know, in terms of printing money expanding the balance sheet.
Speaker 1: We need desperately need more on the fiscal side. So
Speaker 1: it's a supply and demand. Money is like anything else,
Speaker 1: supply and demand. If you increase the supply, which we're
Speaker 1: seeing in dollars, significant increase in supply, and there's no
Speaker 1: increase in demand, what the price has to fall. Now
Speaker 1: normally people say, well, that would be inflation, and we
Speaker 1: think about inflation. Is consumer price inflation? We're not seeing that,
Speaker 1: and then we're not seeing a pickup in in inflation.
Speaker 1: And the GDP reports showed the inflation in Q two declined.
Speaker 1: But where we are seeing in play. The reason why
Speaker 1: we're not seeing consumer price inflation is because there's no demand.
Speaker 1: If prices of goods go up, people are unemployed, wages
Speaker 1: aren't going up, they won't be able to buy them,
Speaker 1: so demand will go down. So where we're seeing the
Speaker 1: inflation come through or the debatement the dollar come through
Speaker 1: is in asset prices. So that's in gold, it's in equities,
Speaker 1: it's in the dollar on the foreign exchange markets. Even
Speaker 1: treasury is treasury yields are going down. That means that
Speaker 1: the treasury values are going up. So every asset class
Speaker 1: is going up in price against the dollar. The dollar
Speaker 1: is being debased against those asset classes. But you're not
Speaker 1: seeing that traditional inflation in the high street. And it's
Speaker 1: very hard to have that traditional inflation in the high
Speaker 1: street without wage inflation. And that's not on the horizon now,
Speaker 1: is jero and Power has mentioned? You know, we didn't
Speaker 1: get wage in place in three and a half percent unemployment.
Speaker 1: We're not going to get over eleven percent unemployment. But
Speaker 1: you can still see asset price inflation. And that's what
Speaker 1: we're witnessed in the debatement dollar through asset prices. Yeah,
Speaker 1: I think you know, whenever sort of a equity bull
Speaker 1: in the US, here's the words doll dollar weakness. You
Speaker 1: can see their eyes light up, and you know and
Speaker 1: assume that that is, you know, gonna be unequivocal bal
Speaker 1: bullish signal for for equities. Do you think that's the
Speaker 1: case this time? Given everything else you've talked about, this
Speaker 1: lack of demand and the sort of nationalist sentiment around
Speaker 1: the world. Now, this US withdrawing from the rest of
Speaker 1: the world and China specifically, is a weaker dollar, is it?
Speaker 1: Is it as easy as a call as it used
Speaker 1: to be to say, weaker dollar means higher stock prices,
Speaker 1: at least on the index level. You know, obviously can
Speaker 1: go under the hood and pick out who has more
Speaker 1: export exposure. But from a macro level, is it's still
Speaker 1: weaker dollar equals great for stocks. Well, I mean, it's
Speaker 1: what was saying right now. Um, you know, it still
Speaker 1: continue to go up. And I'm you know, I've been
Speaker 1: surprised over the last couple of months. I I didn't
Speaker 1: expect stocks to do this, but I've been bullish on
Speaker 1: gold for a long time, you know, and and when
Speaker 1: the crisis happened, once we got through the liquidity issues
Speaker 1: and US rates at zero and the Fed we're doing
Speaker 1: what they're doing, I was negative on the dollar. I've
Speaker 1: been shocked by how the value of equities can get
Speaker 1: so divorced by the fundamentals, because ultimately there has to
Speaker 1: be a relationship between growth and equities, because earnings have
Speaker 1: to matter. So what we've got now, if you look
Speaker 1: at forward p ratios for the SMP, we're at the
Speaker 1: highest for nineteen years. We're in the midst of a pandemic.
Speaker 1: You know, we're somewhere between a recession and depression. Although
Speaker 1: there's no strict definition of the difference between the two.
Speaker 1: But the fact is that the equity valuations are at
Speaker 1: nineteen year highs. Yeah, and and and that to me
Speaker 1: makes no logical sense. But then when I look at
Speaker 1: it in terms of the dollar debasement story, then yeah,
Speaker 1: you know, it's hard to to really turn bearish on
Speaker 1: equities when we have the moves going on in terms
Speaker 1: of policy that we're seeing. So, you know, everyone talks
Speaker 1: about the NASDAK and how great the Nazdak is, and
Speaker 1: you know, yes, it's up eighteen percent this year, which
Speaker 1: is given what's happened since the start of January is
Speaker 1: is amazing, But the SMP is flat for the year.
Speaker 1: Even that in itself can be amazing. Gold is up
Speaker 1: twenty nine since the start of the year. So, yes,
Speaker 1: equities are doing well and in saying Nazdak is hit
Speaker 1: all time highs et cetera. But actually other asset classes
Speaker 1: are doing better. If you if you look at Treasury
Speaker 1: index since the start of the year, it's outperformed the SMP.
Speaker 1: If you were long of a treasury index, you've outperformed
Speaker 1: the SMP since the start of the year. So stocks
Speaker 1: at face value are doing well, But actually when you
Speaker 1: look at them relative with a lot of other asset classes,
Speaker 1: they're not doing as well as you might think, apart
Speaker 1: from a select few. And that's where the valuations get really,
Speaker 1: really hard. It might seem as though a year in
Speaker 1: which gold has very strong returns and then treasuries have
Speaker 1: very strong returns, yet you still have the nasdak up
Speaker 1: double digits. Some would say something has to break. We
Speaker 1: can't see this continue together. But is there a scenario
Speaker 1: where this can continue? Considering the fact that real yield
Speaker 1: I mean ten, you're real yielder at record lows near
Speaker 1: negative one percent, and Jerome Powell keeps on reiterating that
Speaker 1: the Fed is not even thinking about thinking about raising rates. Yeah,
Speaker 1: I think there are actually three thinking about I was
Speaker 1: thinking about thinking about thinking about to add one in
Speaker 1: this time. I mean everything when you when you study economics,
Speaker 1: when you're an economist as I am, everything tells you
Speaker 1: you can't just keep creating money this way without there
Speaker 1: being a price at some point, and that price ultimately
Speaker 1: comes in the form of inflation. But you know, we've
Speaker 1: we've seen it in Japan for for twenty years. Yeah,
Speaker 1: we've seen the budget deficit go out. You know, the
Speaker 1: government debt grads children GDP. We've seen the b J
Speaker 1: continue to expand the balance sheet. It's never translated into
Speaker 1: inflation on the high street. Because we have this situation
Speaker 1: in the global economy hour and developed markets where you
Speaker 1: have this huge level of inequality. So for a vast
Speaker 1: number of people, wages are not going up and therefore
Speaker 1: spending power isn't going up. So it's very hard for
Speaker 1: companies to raise prices. So consumer prices and you have
Speaker 1: the Amazon effect and others, you know that they're keeping
Speaker 1: prices down. You have transparent pricing, so you don't see
Speaker 1: it come through into consumer price inflation. You see an
Speaker 1: asset price inflation. It doesn't no, I don't think it
Speaker 1: can last forever. But you know we've seen in the
Speaker 1: case of Japan it it's gone on for a long time.
Speaker 1: And as you say, the message from jer own power,
Speaker 1: and this is why you know we see real yields
Speaker 1: in the US record lows. The record from you know,
Speaker 1: the very clear message from your own power is even
Speaker 1: when we start to recover, we're not going to start
Speaker 1: raising rates for a long time. You know, the market
Speaker 1: with price for about five years for the first FED
Speaker 1: rate hike. You know, when that's the situation, you've got
Speaker 1: to think inflation expectations have to rise, and that's manifesting
Speaker 1: itself in in asset prices. Walk us through your reasons
Speaker 1: for being bullish on gold, because I confess I can
Speaker 1: never quite wrap my head around what the the you know,
Speaker 1: current days catalyst is for gold. I remember a few
Speaker 1: years ago, people would talk about the actual physical demand
Speaker 1: for gold out of India and the number of weddings India,
Speaker 1: and I was like, it's trying to make sense to
Speaker 1: me now, But but but is it all just about
Speaker 1: the money supply basically? At least right now? It seems
Speaker 1: like it is that. Is that just trump everything else?
Speaker 1: Right now? Yeah? It does. I mean that that it's
Speaker 1: not about supply and demand. It's it's it's about demand.
Speaker 1: It's not about you know, it's about market demand rather
Speaker 1: than than than weddings in India. But yeah, I mean
Speaker 1: the fact is that the again going back to the
Speaker 1: supply and demand of money, if you if you massively
Speaker 1: increase the supply of dollars without an increase in demand,
Speaker 1: then the price of that has to go out down. Therefore,
Speaker 1: people seek out hard assets, and gold is the ultimate
Speaker 1: hard asset, and that's that's why it this. I mean,
Speaker 1: don't get me wrong, I'm not a gold expert or
Speaker 1: a metal person by any means, but you know, I
Speaker 1: say I've been bullish on gold for probably the last
Speaker 1: twelve months or so on the basis that I've always
Speaker 1: worried that that we had a bubble in markets and
Speaker 1: that at some point we were going to see the
Speaker 1: Fed have to cut rates and we would see QUI
Speaker 1: starts to rise again. Obviously did not foresee the pandemic,
Speaker 1: but I've been worried about it, you know, for a
Speaker 1: while now, you know, basically since the end of twenty
Speaker 1: eighteen or Q four eighteen, when the FED tried to
Speaker 1: shrink the balance sheet, when we had constated tightening and
Speaker 1: and yield started to move up, and what happens, equities
Speaker 1: crashed off in Q four eighteen, the Fed back away
Speaker 1: started cutting rates again. In it's like they're never getting
Speaker 1: out of this balance sheet where it is now, so
Speaker 1: the next downturn that happens, we're going to see more quie.
Speaker 1: And that's sort of led to my my bullish view
Speaker 1: on gold. Twelve eighteen months ago, So you became bullish
Speaker 1: on gold quite a while ago. How much does it
Speaker 1: how far does it take you? Then? Is there something
Speaker 1: that can happen that would then change your mind. The
Speaker 1: thing that would probably change my mind is if, well,
Speaker 1: if we get a vaccine, things starts to recover and
Speaker 1: we start to get inflation on the high street, and
Speaker 1: the Fed then has to to quickly backpedal. But until
Speaker 1: that happens, as long as you know the Fed, they're
Speaker 1: going to keep adding in liquidity, and as as long
Speaker 1: as rates are going to be at zero UM and
Speaker 1: your own pal is not even thinking about thinking about
Speaker 1: thinking about raising rates, then you know gold is going
Speaker 1: to continue to go up. And how do you put
Speaker 1: a value on gold? This is the problem with with
Speaker 1: equity is this is where I have a problem. Right,
Speaker 1: So I look at actors, they should be related to earnings.
Speaker 1: Gold is I don't know how you put a value
Speaker 1: on gold. I mean, I've said for a while, I've
Speaker 1: got a target in two and a half thousand. You know,
Speaker 1: I've had that for for a little while, so I'm
Speaker 1: sticking with that for now. But but really it's it's
Speaker 1: not it's not about a price target for me. It's
Speaker 1: about the conditions behind it. So if the conditions continue
Speaker 1: to be as they are now, then gold will continue
Speaker 1: to get supportive. At before we get to the craziest things. Um,
Speaker 1: I know you've been keeping a close eye on Brexit.
Speaker 1: As I like to call it, a never ending story
Speaker 1: of Brexit. This is like a soap opera in its
Speaker 1: tenth season at this point. Uh, but walk us through
Speaker 1: every I don't know how what four years? I guess
Speaker 1: it was sixteen, right, wasn't it. Yeah, out of that
Speaker 1: changed history two thousand and sixteen. We'll all remember that one.
Speaker 1: Walk us through. Uh, what's next for Brexit and if
Speaker 1: there are any sort of potential market uh implications that
Speaker 1: we should know about. Yeah, I mean there's a very
Speaker 1: clear sort of date for Brexit now. It is December
Speaker 1: thirty one. The UK will leave the Eurozone on December
Speaker 1: thirty one, come what may. The question is whether they
Speaker 1: leave with a withdrawal agreement or not. And the way
Speaker 1: things are right now, it's not looking optimistic. There was
Speaker 1: meant to be an interim agreement agreed in July that
Speaker 1: that didn't happen. They had to June thirty to actually
Speaker 1: extend the date of leaving beyond the end of this year,
Speaker 1: and they Boris Johnson, this government said they were not
Speaker 1: going to do that, and they didn't do that. So
Speaker 1: December thirty one is set in stone. And then in
Speaker 1: July there was meant to be an interim agreement that
Speaker 1: didn't happen. Um and so we are where we are.
Speaker 1: And and the problem is one of the problems is
Speaker 1: obviously that the pandemic, the virus is as you know,
Speaker 1: the focus is not on Brexit negotiations within the European Union.
Speaker 1: It's on trying to revive the economy. You know, similarly
Speaker 1: in the UK in a lot of ways. So you know,
Speaker 1: these issues that are still the fundamental issues that have
Speaker 1: been there since the since the referendum vote, which is
Speaker 1: how in the UK have access to the Single market
Speaker 1: whilst maintaining sovereignty over its laws and borders, and the
Speaker 1: EU say you can't. If you want access to our
Speaker 1: single market, you have to allow free moon of labor
Speaker 1: and free movement of capital and you have to accept
Speaker 1: our laws, and the UK said, we're not doing that.
Speaker 1: So it's hard to see how they get an agreement.
Speaker 1: So you know, the market is not I mean sterling's
Speaker 1: doing fabulously while strings back over one thirty. You know,
Speaker 1: it's along with the dollar going down. We're seeing sterling
Speaker 1: rally along with the euro. But I do think at
Speaker 1: some point during the second half of this year we
Speaker 1: have to start looking at that and working out, well,
Speaker 1: if the UK does leave without an agreement with which
Speaker 1: at the moment to me is the most likely scenario,
Speaker 1: then that has to be another big blow for the
Speaker 1: UK economy. Do you believe these deadline the deadline over
Speaker 1: at the end of the years is literally set in stone.
Speaker 1: I mean a lot of these dates, a lot of
Speaker 1: these deadline dates have been set in sort of you know,
Speaker 1: whiteboard marker. They raised pretty easily. But this this time
Speaker 1: it's real. Huh. I think this time in Israel. Yeah,
Speaker 1: I mean it's an Act of Parliament. Yeah, it's set
Speaker 1: in stone as much as it can be setting stone.
Speaker 1: You know what's crazy is that in a year that
Speaker 1: would have been so dominated by politics, Brexit, the U
Speaker 1: S election. Sure we're hearing about the election more so
Speaker 1: now that we are entering August, but it has completely
Speaker 1: taken a back seat. Yeah. No, absolutely, I mean there
Speaker 1: should have been a big political year as you say Brexit,
Speaker 1: the U S election, um, and you know, you look
Speaker 1: at the polls on the US election, and the potential
Speaker 1: for a blue wave has to be you know significant now,
Speaker 1: that's what the polls are telling us. And yet the
Speaker 1: market is is really not focused on it yet and
Speaker 1: it has to become focused on it, you know, pandemic
Speaker 1: or not. We have to start working out what what
Speaker 1: does the potential Biden presidency mean? And the market isn't
Speaker 1: there yet. I suspect after the summer, when when we
Speaker 1: get into September, then I think people will start trying
Speaker 1: to pass out. You know, what is Biden likely to do?
Speaker 1: What's it likely to mean? But but you know it's
Speaker 1: later than I would have thought. Well, I guess if
Speaker 1: the if the blue wave does not wash away drown power,
Speaker 1: maybe maybe how much change can we expect? Well, I mean,
Speaker 1: I think the thing is where we can expect changes
Speaker 1: on the you know, things that are likely to impact
Speaker 1: tax equity market, Yeah, corporate tax potential regulation, you know,
Speaker 1: depending on who he picks is his VP or whoever
Speaker 1: is in his administration. Break up of the tech stocks maybe,
Speaker 1: you know, that's been that was talked about by some
Speaker 1: of the candidates, you know, for the for the Democratic nomination.
Speaker 1: So you know, these are things that are are significant
Speaker 1: and at some point one would think that has to
Speaker 1: start factoring into the market. All right, well, you know
Speaker 1: we have to factor in Sarah factor into the podcast
Speaker 1: factored in Crazy Things. Charlie Pellett will tell us stand
Speaker 1: clearer of the craziest things we sign markets this week.
Speaker 1: All right, Lee, I hope they warned you about our gimmick.
Speaker 1: Here the craziest thing you've seen lately in markets. I
Speaker 1: got a feeling you've got a good one for us,
Speaker 1: so let's let's start with you. Well, I was told
Speaker 1: it was it was the craziest thing you've seen this week,
Speaker 1: and it wasn't a major move, but I found it amusing.
Speaker 1: And that was Yes, that was when Jerome Palm was
Speaker 1: speaking at his press conference following the FED meeting, and
Speaker 1: he was asked about the shortage of coins in the system,
Speaker 1: and he talked about the shortage of coins and what
Speaker 1: the FED was going to do about it, and suddenly
Speaker 1: the dollar rallied gold sold off because while he was speaking,
Speaker 1: the dollar was declining, gold was was within touching distance
Speaker 1: of its all time highs again up near two thousand dollars,
Speaker 1: and he started talking about coins, and certainly the dollar
Speaker 1: rallied and gold sold off. And I think somebody thought
Speaker 1: he was talking about a a lack of dollar liquidity
Speaker 1: like we had in March. So people thought he was
Speaker 1: talking about this lack of dollar liquidity that suddenly there
Speaker 1: was a shortage of dollars. So somebody came in, or
Speaker 1: a number of people came in the bought a load
Speaker 1: of dollars and sold gold and actually was talking about acorns.
Speaker 1: He was talking about quarters and dimes and nickels. And
Speaker 1: we're all sitting again, why is the dollar suddenly sold off? What? What?
Speaker 1: What caused that? And I said he was talking about
Speaker 1: a dollar shortage. No, he was talking about shortage of
Speaker 1: quarters and nickels, and so that to me was was crazy.
Speaker 1: It shows that times were in and how nervous the
Speaker 1: market is, how far these moves have gone. But it was, Yeah,
Speaker 1: that was the craziest thing I've seen for a while
Speaker 1: in market. And I told you, I told you you'd
Speaker 1: have a good one. Pretty good. When Mike has a
Speaker 1: feeling crazy, hunches always come true, just like Molder. So
Speaker 1: I still want to look that up I haven't have
Speaker 1: to go on and after this uh x files. Careful
Speaker 1: Google in that though. That's a dangerous Google search term
Speaker 1: right there. I'll send you some, Sarah. The truth is
Speaker 1: out back, Okay, I'll find it whatever whatever, whatever that means.
Speaker 1: All right, Sarah, I have a you know, I have
Speaker 1: another hunch, Sarah, I think you and I might have
Speaker 1: the same one, the same one. So I'll let me.
Speaker 1: I'll let you start, okay, star Lukay, all right, Okay,
Speaker 1: So this is just a crazy one all around. Um So,
Speaker 1: Mike and I'm both talking about Kodak. Of course, the
Speaker 1: one thirty one year old company that filed for bankruptcy
Speaker 1: in used to be known uh for photography or in
Speaker 1: the photography space. Then briefly I had a stint in
Speaker 1: the crypto space, and all of a sudden it is
Speaker 1: moving into pharmaceuticals. Um So. The company received a government
Speaker 1: loan essentially to help may generic drugs to help treat
Speaker 1: the coronavirus, one of them being hydroxychloro quinn and shares
Speaker 1: of Kodak just when absolutely insane. This week, at one point,
Speaker 1: up more than two thousand seven, we saw droves of
Speaker 1: robin hood traders piling into the stock about eighty thousand
Speaker 1: and twenty four hour period. But there's another part to
Speaker 1: the story that is also crazy. And I don't know
Speaker 1: if Mike, you are also going to hop on this one. Oh,
Speaker 1: I don't know. Why don't you hop on it first?
Speaker 1: And then I will? Alright. So a lot of people
Speaker 1: thought that something fishy was going on in the stock
Speaker 1: because if if you look at trading volume that happened
Speaker 1: on Monday announcement, right, So the announcement wasn't made until
Speaker 1: the next day, and typically like the day before Monday
Speaker 1: or the trading session before on Friday, you saw seventy
Speaker 1: five thousand shares of Kodak trade. However, on Monday, all
Speaker 1: of a sudden, you saw one point six five mi
Speaker 1: ly in shares change hands. So there's tons of people
Speaker 1: out there saying, what's going on. It looks like insider trading.
Speaker 1: Something's really fishy. Turns out, what happened on Monday was
Speaker 1: that Kodak had given UH some local news outlets UH
Speaker 1: previous announcement on what was happening on this announcement. However,
Speaker 1: they didn't tell them that it was embargoed. It wasn't embargoed.
Speaker 1: So a very few number of local news stations actually
Speaker 1: published the news on this announcement, and then Codex said,
Speaker 1: wait a second, that's not supposed to be public yet,
Speaker 1: so they made them delete the news and pull down
Speaker 1: some tweets that had been put out previously. Um So,
Speaker 1: the idea is that some people had caught wind that
Speaker 1: this was going on, traded on the news on Monday
Speaker 1: ahead of the official announcement, but then all of a sudden,
Speaker 1: a lot of it was taken down. Um So, no
Speaker 1: one had a clue what had happened, why trading volume
Speaker 1: had spiked so much on Monday, and then we just
Speaker 1: sat continue throughout the remarkable. My favorite stat of it is,
Speaker 1: so the loan was for a hundred or what seven
Speaker 1: hundred and sixty five million, and the companies added something
Speaker 1: like one point four billion in market cap. Is less
Speaker 1: than a hundred million market cap company at the end
Speaker 1: of next week, So do that ratio a two to
Speaker 1: one loan to market cap ratio. Um and good luck
Speaker 1: to all you robin Hood traders out there for for
Speaker 1: for buying this one. And remember Kodak also pivoted the
Speaker 1: blockchain a couple a couple of years ago and that
Speaker 1: didn't quite work out. But uh, I don't know, what
Speaker 1: do you think LEAs now they're think I got to
Speaker 1: give it to Lee though that the coins. I think
Speaker 1: I gotta tip my hat to leave with the coins
Speaker 1: at the at the FED press conference. That's good, it
Speaker 1: was too obvious. Congratulations, lead distinct Door. You can put
Speaker 1: this on your resume. I will well. As Mike hinted
Speaker 1: at in the beginning of the podcast, we did get
Speaker 1: a call into our podcast hotline and it's also about
Speaker 1: coins in a way, but digital coin. Um. So this
Speaker 1: is from Morgan Hill from Fort Lauderdale, Florida. So why
Speaker 1: don't we go ahead and hear what he had to say. Hello,
Speaker 1: my name is Morgan Hill. I'm an analyst in Fort Lauderdale.
Speaker 1: And my question actually is just in regards to the
Speaker 1: recent weakening in the US dollar as of late and
Speaker 1: correspondingly and increase or in performance at least in crypto
Speaker 1: relative to the euro. Uh and uh, you know, modestly
Speaker 1: in the dollar as well. If there is a blue sweep,
Speaker 1: are there any considerations regarding a spike in the price
Speaker 1: appreciation of crypto relative to other currencies and how that's
Speaker 1: being Christon, I would love you know your feedback. Thank
Speaker 1: you so much and I enjoy the show. So basically
Speaker 1: what Morgan is asking, he says that if there is
Speaker 1: a blue sweep, are there any considerations regarding a spike
Speaker 1: in price appreciation of crypto relative to other currencies, and
Speaker 1: how that's being priceton. Now, Mike, you have an answer
Speaker 1: to this. I do certain most certainly do not not
Speaker 1: an answer that will be acceptable Tony crypto enthusiasts out there, So, uh,
Speaker 1: if you have an answer to this question, give us
Speaker 1: a call on the hotline at six four six three
Speaker 1: two four three four nine. Oh, Lee, I don't know
Speaker 1: how how closely you follow crypto. Do you see any
Speaker 1: bullish case for crypto in the event of a blue sweep?
Speaker 1: I mean, I guess in theory you could think of, uh,
Speaker 1: weaker dollar, bigger deficits, that that type of thing. I mean,
Speaker 1: maybe that's what he's getting at. Yeah, I mean I
Speaker 1: think you know, I've been asked this question, you know,
Speaker 1: given the view on gold, I've been asked about bitcoin,
Speaker 1: um crypto. Yeah, you know, in the same way as
Speaker 1: gold is a a hard asset, then you can make
Speaker 1: the case that crypto is as well, because it's you know,
Speaker 1: it's a it's an asset priced against the dollar, and therefore,
Speaker 1: if there's a depreciation the dollar, you would expect something,
Speaker 1: you know, crypto to go up against the dollar. So yeah,
Speaker 1: a lot of people are putting it in the sort
Speaker 1: of gold category, and I can see the argument for that.
Speaker 1: You know, it's got to be the most volatile safe
Speaker 1: haven in the world, though I have to say so,
Speaker 1: I'm not sure I'm I'm buying into it personally. Well
Speaker 1: I know I'm not buying into it personally, but I
Speaker 1: can see the argument putting it alongside gold. But the
Speaker 1: volatility makes it a really, really tough sell. Is a
Speaker 1: safe haven for me. My favorite remarks along those lines
Speaker 1: where someone tweeted one time that we the dollar sure
Speaker 1: is volatile against bitcoin, isn't it. That's that's the right direction, right.
Speaker 1: So all right, Well, hopefully we got some other calls
Speaker 1: with opinions on that, because I'm sorry, we need to
Speaker 1: outsource some of our crypto content to to the listeners
Speaker 1: because I I am the furthest thing from an authority
Speaker 1: on on that space, and I would never pretend to
Speaker 1: be one either. But with but said, such a great
Speaker 1: time having we Farriage on the show today. Thank you
Speaker 1: so much for joining us, Lee my pleasure. Thank you
Speaker 1: for having me What Goes Up. We'll be back next week.
Speaker 1: Until then, you can find us on the Bloomberg Terminal
Speaker 1: website and app, or wherever you get your podcasts. We'd
Speaker 1: love it if you took the time to rate interview
Speaker 1: the show on Apple Podcasts so more listeners can find us.
Speaker 1: And you can find us on Twitter, follow me at
Speaker 1: at Sarah Pontzech, Mike is that Reaganonymous, and you can
Speaker 1: also follow Bloomberg Podcasts at podcasts. Also, thank you to
Speaker 1: Charlie Pellett of Bloomberg Radio and the voice of the
Speaker 1: New York City Subway system. What Goes Up as produced
Speaker 1: by Jordan Gospore. The head of Bloomberg podcast is Francesca Levie.
Speaker 1: Thanks for listening. See you next time.