Speaker 1: Hello, and welcome to What Goes Up, a weekly markets podcast.
Speaker 1: My name is Mike Reagan. I'm a senior editor at Bloomberg,
Speaker 1: and I'm Ldonna Hick, a crosshouse at report at Bloomberg.
Speaker 1: At This week on the show, well, the markets have
Speaker 1: gotten hit with a one to punch, a hawkish pivot
Speaker 1: from the Federal Reserve Chair Jerome pal and a new
Speaker 1: sort of alarming variant of the coronavirus that's spreading around
Speaker 1: the world. Will these two combined to form the Grinch
Speaker 1: who stole the Santa Claus Rally. We'll get into it
Speaker 1: with a Goldman alum who is now the chief investment
Speaker 1: officer at Kestra Investment Management. But first, vil Donna, I
Speaker 1: I wanted to thank you for holding down the fort
Speaker 1: for the last couple of weeks while I was out.
Speaker 1: I was actually first my wife got COVID and then
Speaker 1: I got COVID, and um, as you know, I'm not
Speaker 1: usually on time with things like COVID. You know that
Speaker 1: the early adopters got it almost two years ago, and
Speaker 1: here I'm finally getting it now. You know it's it's
Speaker 1: it's right on brand for me. Like I'm I'm still
Speaker 1: listening to Taylor Swift songs, the scooter versions, you know,
Speaker 1: to give you an idea. Oh my gosh, don't say
Speaker 1: that you're going to fend a lot of podcast listeners.
Speaker 1: I'm trying to. I'm trying to recalibrate the jokes to
Speaker 1: to your generation. But anyway, Danna tell us about this
Speaker 1: week's guest. I just met her for the first time.
Speaker 1: I'm I'm excited. What do we know about? What's your
Speaker 1: intel on this guest? Well, first, I want to say
Speaker 1: welcome back, and we really missed you on the podcast.
Speaker 1: I don't believe. I don't believe that. In fact, I
Speaker 1: haven't even listened because I assumed you spent the whole
Speaker 1: time roasting me on on the last two episodes a
Speaker 1: little bit, so maybe don't really listen to them. But
Speaker 1: I did miss you. I'm glad to have you back,
Speaker 1: and I want to thank everybody who helped fill in
Speaker 1: over the last couple of weeks. But then let's bring
Speaker 1: in our guest. Her name is Kara Murphy. She's the
Speaker 1: chief investment officer of Quesh and S Management. Kara, I
Speaker 1: spoke with you recently. I had so much fun talking
Speaker 1: to you, and I want to thank you for joining
Speaker 1: us on the podcast. Well, thanks for having me, and
Speaker 1: you guys promised me it would be fun, so it
Speaker 1: was an easy yet it's supposed to be fun. It's
Speaker 1: a really high bar. Well care tell us a little
Speaker 1: bit about Kestra. I don't know a lot about the firms,
Speaker 1: so just give us sort of the the overview about
Speaker 1: Kestra and how you ended up there. It's it's only
Speaker 1: been a few months you've been there, right, That's right,
Speaker 1: that's right. So we are a wealth management firm with
Speaker 1: a number of different UM channels. So there's Kester Financial
Speaker 1: which has UM advisors all throughout the country, Grove Point.
Speaker 1: We also work with Art and Trust Company and then
Speaker 1: Blue Spring, so we have a number of different channels
Speaker 1: and ways in which we work with financial advisors. As
Speaker 1: you said, I joined a number of months ago to
Speaker 1: build out Kester Investment Management and so my remit is
Speaker 1: really to build out investment resources, research commentary strategies to
Speaker 1: be able to assist advisors in managing their client's wealth.
Speaker 1: So it's been a wonderful opportunity for me to kind
Speaker 1: of have a blank sheet of paper and build something
Speaker 1: that we think is going to be really helpful and
Speaker 1: valuable to advisors, and I want to get into some
Speaker 1: of your strategy and how you're thinking about things. But
Speaker 1: just to start things off with the big events that
Speaker 1: we had this week, because it was a really, really
Speaker 1: busy week. Because Mike mentioned, we had these pet winds
Speaker 1: that really weren't here a couple of days ago, with
Speaker 1: a new variant, plus a federal reserve that potentially could
Speaker 1: be withdrawing stimulus at a much faster pace than we
Speaker 1: had previously thought. So how are you thinking about this
Speaker 1: and how are some of these developments impacting your strategy. Yeah,
Speaker 1: as you said, it's been a very interesting week. You know,
Speaker 1: you kind of come back from a holiday and hope
Speaker 1: it will be a little quiet, but it never quite
Speaker 1: works out that way. UM. But it's not too dissimilar
Speaker 1: um to where we were over the summer. UM. So,
Speaker 1: just as the delta variant was getting going, we were
Speaker 1: starting to understand that it was much more contagious and
Speaker 1: we were starting to see rapid um case increases in
Speaker 1: the US, and that happened just at a time when
Speaker 1: the Fed was gearing up to start withdrawing some stimulus. UM.
Speaker 1: So as those two things unfolded Around the same time,
Speaker 1: UM delta ended up becoming more of a head one
Speaker 1: that maybe some had initially thought, and that actually got
Speaker 1: the FED to hit the pause button a bit and
Speaker 1: and pushed out expectations for tapering and for FED rate.
Speaker 1: Kites now roll forward a couple of months more and
Speaker 1: the kind of steaks on both sides have increased a
Speaker 1: little bit where we have another kind of unknown variant.
Speaker 1: We know that the market hates unknowns, so in the
Speaker 1: absence of information, people often go to dark places, right,
Speaker 1: So so the market is sometimes assuming the worst about
Speaker 1: this new variant at the same time that we're seeing
Speaker 1: more evidence of inflationary pressures. And and I think we
Speaker 1: should break down kind of what's driving some of these
Speaker 1: inflationary pressures. But clearly the stakes have gotten higher for
Speaker 1: the FED. And so we've seen a big change in
Speaker 1: language from Powell and the markets starting to pull forward
Speaker 1: expect patitions for tapering and FED rate increases. Well. Carry
Speaker 1: my colleague Cameron Christ has a sort of a jokey
Speaker 1: line that he puts in columns, and that's uh that
Speaker 1: you know, everyone got a master's in epidemiology from Google.
Speaker 1: Your you know, I know as a as a chief
Speaker 1: investment officer, I'm I'm sure you you've you've got that too. So, um,
Speaker 1: there is this sort of echo of the frightening nous
Speaker 1: of the delta variant with this omicron variant. What have
Speaker 1: you learned about it? How are you thinking about it specifically?
Speaker 1: I mean, is it potentially a false alarm? Do you
Speaker 1: think that that everyone's sort of freaking out about this?
Speaker 1: I look at this is me speaking as an investor
Speaker 1: and not an epidemiologist, but there is definitely a chance
Speaker 1: that this is a false alarm. And again i'd like,
Speaker 1: I don't mean to downplay like the very real human
Speaker 1: impact of this, but when we think about how businesses, individuals,
Speaker 1: economies have been able to react in previous periods, we've
Speaker 1: gotten better and better with every that goes by in
Speaker 1: this COVID environment. So, assuming that this new variant is
Speaker 1: not a wholly new kind of type of disease, we
Speaker 1: have better therapeutics, we have people being more careful in
Speaker 1: their behavior, we have you know, a large portion of
Speaker 1: the population vaccinated. So so there are we have a
Speaker 1: lot more tools today, um to be able to manage
Speaker 1: through this than we did before. And then put on
Speaker 1: top of that, we all know how to use our zoom.
Speaker 1: We've all gotten used to working remotely, we know how
Speaker 1: to order things online. So I think the economy and
Speaker 1: people are in much better position to be able to
Speaker 1: handle a setback, even if it isn't setback. Yeah, I
Speaker 1: still mess off the zoom from time to time, but
Speaker 1: I know I do too. Yeah, we all do. And
Speaker 1: then karat the other part of this, obviously is the FED.
Speaker 1: I know before we started taping the podcast, Mike and
Speaker 1: I have this conversation where I told him I had
Speaker 1: written this story, saying that this is the most hawkish
Speaker 1: j Powell has been in about three years. I got
Speaker 1: some mails from Bloomberg users terminal users saying, actually, you
Speaker 1: can't really use that word to describe him. So how
Speaker 1: much of what's happened this week? How big of a
Speaker 1: rule does Powell play in the sell off that we
Speaker 1: saw over the last couple of days, And do you
Speaker 1: think that the reaction was rational? So I I do
Speaker 1: think that the market had a bit of an overreaction,
Speaker 1: which is not uncommon. Right when you see a big
Speaker 1: pivot in in a viewpoint with somebody like Powell who
Speaker 1: is very influential, you can often see the market kind
Speaker 1: of overreact in the short term. And and remember that
Speaker 1: we only just recently had renomination of Powell, so his
Speaker 1: sort of level of authority has been reinforced because of
Speaker 1: that nomination. So I think his word carries very heavy weight.
Speaker 1: He was also very clearly associated with the devish camp
Speaker 1: within the FED, and so to see him move a
Speaker 1: little bit more toward that hawk ish end, I think
Speaker 1: is quite significant. But you know, I might agree with
Speaker 1: some of those terminal users who reached out were like,
Speaker 1: I don't know that I'd call him a hawk. He's
Speaker 1: just a little bit more hawkish than he had been before. Yeah,
Speaker 1: I think that's fair. And I my guess is he
Speaker 1: reserves the right to go be going up back to
Speaker 1: a dove in the in the spring of this summer,
Speaker 1: if right. I mean, all we need are a couple
Speaker 1: of data points in the other direction, and he could
Speaker 1: very easily move back to the other side. Care One
Speaker 1: thing I know you you keep an eye on is
Speaker 1: the credit markets and and credit spreads. Um reading some
Speaker 1: of the notes you sent over to us with some
Speaker 1: of your thoughts, and you know pointing out that you
Speaker 1: know that the credit markets haven't really sort of freaked
Speaker 1: out over these developments. I mean, spreads are widening out
Speaker 1: a little bit, but boy, historically if you zoom out
Speaker 1: on the chart, you can't even notice it. To me,
Speaker 1: it's fascinating. I mean you you certainly, I'm sure have
Speaker 1: clients who are actively engaged in credit markets or at
Speaker 1: least dipping their toes in it, you know, for people
Speaker 1: sort of just looking at the stock market, though, there's
Speaker 1: this tendency you know, for stock investors always seek a
Speaker 1: second opinion from someone they think is smarter. In the
Speaker 1: fixed income mark gets um and that the temptation is
Speaker 1: look at to look at credit markets and say, well,
Speaker 1: they're not really freaking out. This is a false alarm,
Speaker 1: you know. To me, I think about it as I
Speaker 1: the participants in credit and fixed income tend to be
Speaker 1: h entirely professional investing class, whereas in the stock market
Speaker 1: you've got read It and Robin Hood and everything else
Speaker 1: and and and not entirely driven by you know, the
Speaker 1: CFAs of the world. But I'm curious how you are
Speaker 1: looking at credit markets as sort of the signal for
Speaker 1: the stock market, you know, the FED. While how's a
Speaker 1: little bit more hawkish. Now, I feel like, you know,
Speaker 1: the FED really sort of changed the game with their
Speaker 1: credit facilities during the pandemic actually being willing to go
Speaker 1: out and buy corporate credit. Um And I know they
Speaker 1: didn't really end up buying a whole ton, but sort
Speaker 1: of the symbolism of it, of of the FED sort
Speaker 1: of breaking that glass and breaking that seal. Does that
Speaker 1: does that at all? Sort of sort of break that
Speaker 1: signal for credit markets that that we rely on in
Speaker 1: your opinion, Well, it's so interesting that you mentioned about
Speaker 1: like stock investors looking to the bond market for confirmation,
Speaker 1: and like I often think of stock investors versus bond
Speaker 1: investors almost like Griffin Door versus s blitz Lytherin. You know,
Speaker 1: there's this like healthy level of competition between the two,
Speaker 1: and there's always this like real fealty to wherever it
Speaker 1: is that you came from. I won't say whether like
Speaker 1: who's the slitherin house, but but but there is like
Speaker 1: a fair amount of um of sort of like loyalty
Speaker 1: saying like if you're a stock investor, no, no no, no,
Speaker 1: the stock market is the one that's giving the real signals.
Speaker 1: But but I think any investor is going to look
Speaker 1: for more than one single data point to confirm, right,
Speaker 1: especially in very fast moving markets, you know, Like I
Speaker 1: think back to the global financial crisis. I was then
Speaker 1: a stock analyst covering financial companies, and we would use
Speaker 1: the credit markets a lot because they were often picking
Speaker 1: up signals, particularly like short term funding markets, that the
Speaker 1: equity markets were missing. So so there are times when
Speaker 1: there's one part of the market that's a little bit
Speaker 1: closer to this story. I think in this particular instance,
Speaker 1: like we really aren't. We're not like looking at a
Speaker 1: lot of stress in general in credit and so I
Speaker 1: wouldn't say that like credit markets are necessarily closer to
Speaker 1: the locus of the issue. It's just yet another kind
Speaker 1: of UM signal to be able to put alongside these
Speaker 1: other ones. UM. So in this case, you know, you're
Speaker 1: gonna look at the full set of data that you
Speaker 1: can UM and what that's telling us is that there's
Speaker 1: nobody there who's raising the red flag. Mike, I feel
Speaker 1: like you'd be in raven Claw or huffle Pop. Those
Speaker 1: are Harry Potter. Oh oh my god, Okay, you'll probably
Speaker 1: watch Harry Potter and like twenty years the way you're trending. Yeah,
Speaker 1: I'll catch up with that eventually. Yeah, yeah, yeah, Karen,
Speaker 1: I promise. We talked about your strategy, can you talk
Speaker 1: a little bit about what you're expecting for I think
Speaker 1: in one of your no to had said it would
Speaker 1: be really healthy for the market to turn sideways for
Speaker 1: a bit, which struck me a little bit because that
Speaker 1: might sound a little bit disappointing to somebody who was
Speaker 1: expecting a rally into year end. And so, how are
Speaker 1: you thinking about the next couple of weeks, what are
Speaker 1: you expecting? And then looking into two what are you
Speaker 1: expecting there as well? Yeah. So, so if we roll
Speaker 1: back briefly to like two thousand twenty, where we had
Speaker 1: this massive air pocket in the economy, corporate earnings took
Speaker 1: a really quick dip down, and then as the market
Speaker 1: started to recover, you had prices that were covered recovering
Speaker 1: way before earnings did. Right, So all of the increase
Speaker 1: in stock prices that we had in two thousand twenty
Speaker 1: was really driven by an increase in valuation. And when
Speaker 1: we roll forward to two thousand twenty two one, then
Speaker 1: we had a really big rebound in corporate earnings, profits
Speaker 1: and some compression and valuation and that's a healthy thing,
Speaker 1: and that's typically what we'll see coming out of a downturn,
Speaker 1: and so I would expect to see more of the
Speaker 1: same into two thousan in twenty two. We already have
Speaker 1: corporate profits that are at or near historic highs. We've
Speaker 1: really really strong corporate earnings growth. We think corporate earnings
Speaker 1: growth will remain strong in two thousand and twenty two,
Speaker 1: but not as strong. But if we have a market
Speaker 1: that's just turning sideways for a little bit, it just
Speaker 1: gives time for those earnings to catch up with the
Speaker 1: prices that we have right now. Yeah, I just think
Speaker 1: of it as a correction on the other axis, you know,
Speaker 1: not on the price axis, but the but the time
Speaker 1: access And I mean, you know, yes, as far as
Speaker 1: valuations go, do you think that that top has been set? Uh?
Speaker 1: Do you think? Never? Say never? Right? I? I you know,
Speaker 1: I've I've learned that it's very hard to call like
Speaker 1: specific turning points UM and and so valuations typically are
Speaker 1: are a very bad indicator UM from market turns because
Speaker 1: we can stay expensive for a long time, we can
Speaker 1: stay cheap for a long time. But what they are
Speaker 1: good at doing is forecasting forward returns over like a
Speaker 1: medium term time period. Right now, valuations are high relative
Speaker 1: to historical measures. That doesn't mean that the market is
Speaker 1: going to turn down, but it does mean it should
Speaker 1: keep a lid on returns over the medium term. And
Speaker 1: then another one of your notes said, and correct me
Speaker 1: if I'm wrong. I think it's aid that it's sort
Speaker 1: of a contrarian call that once inflation turns, we'll see
Speaker 1: a swift reversal. So I'm wondering if you can lay
Speaker 1: out the timeframe around that and you're thinking around that
Speaker 1: and how it potentially affects markets. Yeah, and so this
Speaker 1: is I don't know if you guys have had this experience,
Speaker 1: but like we we order we had some new cabinets
Speaker 1: in our house and we ordered new polls, right like
Speaker 1: simply like pretty like basic thing. But we ordered them
Speaker 1: about like fourteen months ago, and we've reordered them multiple times, right,
Speaker 1: So they're sitting on side like they were sitting on
Speaker 1: some ships, you know, off the off the port um.
Speaker 1: So we ended up ordering three different sets, not knowing
Speaker 1: which one was going to arrive when, and in fact
Speaker 1: we ended up getting two partial orders. So it was good, right,
Speaker 1: but someday that third order and the rest of the
Speaker 1: order are going to arrive, and we're gonna have a
Speaker 1: bunch of polls that we don't really need. So think
Speaker 1: about that replicating all over the economy where you have
Speaker 1: and in fact that there was just an article the
Speaker 1: other day about store owners that we're starting to order
Speaker 1: additional amounts of inventory just to be prepared and have
Speaker 1: stuff on their shelves. So once all of those ships
Speaker 1: get unloaded, once that inventory gets on trucks and it
Speaker 1: gets the stores, there are going to be certain types
Speaker 1: of goods where we end up having more inventory than
Speaker 1: what we had originally forecast. And that's the challenge in
Speaker 1: managing this inventory at a time when like demand and
Speaker 1: supply are changing so rapidly. So you know, it's you
Speaker 1: asked about a specific timing, and I think it will
Speaker 1: depend on the specific good that we're talking about. So,
Speaker 1: for instance, like lumber was one of those commodities that
Speaker 1: started to shoot up fairly early in this cycle um
Speaker 1: and you started to see people who were reaching out
Speaker 1: and buying lumber ahead of time because they were worried
Speaker 1: that the price would keep going up. Well, sure enough,
Speaker 1: those prices are down like six percent or so from
Speaker 1: that peak, so that reversal came very very quickly. So
Speaker 1: ones that went up more rapidly are likely to decline
Speaker 1: more rapidly. Um and it won't all happen at the
Speaker 1: same time. It will be kind of sequenced out. We
Speaker 1: had the exact same experience, you know, stuck in the house.
Speaker 1: My wife decided it's the perfect time to redecorate, and
Speaker 1: you know, ordered guiding room chairs. We got a new
Speaker 1: front door. I mean, we never got the first thing
Speaker 1: you wanted, right, It's so frustrating, it's such a nightmare.
Speaker 1: But Carol, I think I always picture some of our
Speaker 1: listeners sitting there sort of you know, rolling their fingers
Speaker 1: on the desk, saying, just tell me what to buy?
Speaker 1: Have this person tell me what to buy right now?
Speaker 1: So can you kind of break it down? It was
Speaker 1: sort of what's attractive to you both from uh, you know,
Speaker 1: sort of an allocation standpoint at this point in the cycle,
Speaker 1: and also you know what you like in each bucket
Speaker 1: of allocation. So like one word of warning that I
Speaker 1: would have is make sure that your overall portfolio allocations
Speaker 1: are aligned with your risk level and your strategic goal, right,
Speaker 1: so so you know when you think about the incredible
Speaker 1: growth and stocks that we've had over the last year
Speaker 1: or two, it's very likely that folks have portfolios that
Speaker 1: are out of whack, right, where the equities have just
Speaker 1: become a disproportionately large portion of their overall portfolio. And
Speaker 1: so this is part of just being disciplined, right, And
Speaker 1: it doesn't matter where you are on the cycle. You
Speaker 1: should you should be just like looking at that portfolio
Speaker 1: and confirming, yes, you know, I am comfortable with this
Speaker 1: level of risk. Make sure you're honest with yourself, right.
Speaker 1: You don't want to get over your skis and have
Speaker 1: too much risk. Then the market tirns down and then
Speaker 1: you're unhappy. So so that's very important, and that just
Speaker 1: goes to like the good hygiene habits of being an investor.
Speaker 1: And then when I think about, you know, our expectation
Speaker 1: for returns going forward for both stocks and bonds are
Speaker 1: more muted than what we've seen over the last couple
Speaker 1: of years, no surprise, UM. And as I said, that's
Speaker 1: part of you know, earnings catching up with prices. Bond
Speaker 1: yields are incredibly low. There's only so much lower that
Speaker 1: they can go. UM, So it indicates more moderate returns
Speaker 1: going forward. Within the stock market, we talked about valuation,
Speaker 1: and this reflects my bias generally is more of a
Speaker 1: value type investor. UM, but we would have a preference
Speaker 1: for the types of companies that have, you know, strong growth,
Speaker 1: characteristic strong balance sheets, have the opportunity to start to
Speaker 1: return capital or increase their capital return to shareholders. And
Speaker 1: you can find stocks like that in pretty much any sector.
Speaker 1: So it's not necessarily a sector, but UM, but having
Speaker 1: a higher preference or quality in general, I'm like six
Speaker 1: game stop Sheba. You know, I got a mixture rebalanced.
Speaker 1: That's that's a good mix. It's a really good mix. Actually,
Speaker 1: she but you it was down earlier this week, even
Speaker 1: though it had some really high profile around announcements around it,
Speaker 1: and oh my, oh my goodness, but can you talk
Speaker 1: about where tech fits in with what you were just saying,
Speaker 1: because it struck me a little bit by earlier this
Speaker 1: week we had expected some of the bigger names to
Speaker 1: maybe hold up really well during the sell off days
Speaker 1: that we saw. I remember looking at the Nicety thing
Speaker 1: in Next I think it was on one saying it
Speaker 1: was down something like two point seven percent, which really
Speaker 1: struck me. So how are you thinking about where tech
Speaker 1: fits in with your strategy and are you expecting some
Speaker 1: of the names to be a performers going forward. Yeah, Now,
Speaker 1: tech is a good example where you can find those
Speaker 1: really go go stocks with super high aggressive evaluations, and
Speaker 1: then you can also find some more mature companies who
Speaker 1: have like very solid earnings growth. So so you you
Speaker 1: can kind of find good examples of both types of stocks.
Speaker 1: And so you know in the cellf that you're talking about.
Speaker 1: So typically when you get later in an economic cycle,
Speaker 1: the market tends to start to shift towards growth, right
Speaker 1: because overall growth is harder to come by, so we're
Speaker 1: going to pay more of a premium for those companies
Speaker 1: who actually can deliver repeatable growth. But then contrast that
Speaker 1: with where we are right now, which is that a
Speaker 1: lot of those um valuations are quite stretched relative to
Speaker 1: historic levels. So I think when you have that risk
Speaker 1: goff environment like we saw earlier this week, the market
Speaker 1: is punishing those that have the more lofty valuations and
Speaker 1: the less reliable earnings. So I think what the market
Speaker 1: is telling us that in a risk off environment, when
Speaker 1: we're worried, we're going to go back to that safety
Speaker 1: rather than looking for growth. One bullet point in your notes,
Speaker 1: I wanted to discuss a little bit. You say, once
Speaker 1: inflation turns, we will we will see a swift reversal.
Speaker 1: Do you mean a reversal in that this recent dip
Speaker 1: we've had, or reversal in the the oh, I mean
Speaker 1: reversal in prices so um, and you know, I think
Speaker 1: that's worth drilling into a little bit more. Right, there's
Speaker 1: sort of like two things going on with inflation. There's
Speaker 1: the supply chain disruptions that we talked about, right, and
Speaker 1: so the good sitting off of ports and the multiple
Speaker 1: orders UM. And I think that's where you'll see the
Speaker 1: really big swift reversal in price increases. And that's very
Speaker 1: concentrated in durable goods, and it's um concentrated in and
Speaker 1: UM a lot of types of prices that tend to
Speaker 1: be more volatile anyway. The other one that's more concerning,
Speaker 1: and this is a little bit more I think what
Speaker 1: Powell is looking at is just like the the you know,
Speaker 1: core sticky, everyday type of inflation that's more tied to
Speaker 1: economic growth. And so you know, we've had over the
Speaker 1: last couple of weeks we've had some really strong indicators
Speaker 1: of almost a re acceleration of growth into fourth quarter.
Speaker 1: And the bigger concern is that very broad based growth
Speaker 1: will find its way into those like sticky kind of
Speaker 1: core prices. UM so, so that and that's a part
Speaker 1: of the um of the economy that moves more slowly,
Speaker 1: but certainly those durable goods anything affected by the supply
Speaker 1: chain I think will reverse quite swiftly. So so I
Speaker 1: keep wondering, well, how how big of an effect can
Speaker 1: the FED have on inflation until the supply chain stuff
Speaker 1: is sorted out? But I'm curious, so how how you
Speaker 1: kind of look at that core stuff? Would you look
Speaker 1: at sort of a trimmed uh CPI measure or something
Speaker 1: like that, Or that's another one where like you have
Speaker 1: to look at like a ton of different ways of
Speaker 1: slicing and dicing because you're going to get very different answers.
Speaker 1: Then you can't rely on you know, your your standard
Speaker 1: core p PC because you know, you look at it
Speaker 1: a slightly different way and you get very different numbers.
Speaker 1: So we've broken it down by um, you know, core
Speaker 1: versus headline trimmed, broken it down into like pandemic affected
Speaker 1: baskets versus non and I think what it's seeing is
Speaker 1: that there, it's pretty it's pretty easy to track that
Speaker 1: stuff that has been affected very directly by the supply chain,
Speaker 1: but it's hard to remove all of that from the core,
Speaker 1: from like the true core. But what we've seen is
Speaker 1: that in the specific indicators that we know are impacted
Speaker 1: by the supply chain, we have seen some of those
Speaker 1: start to peek and start to come down. So I
Speaker 1: mentioned lumber, Auto prices is another one where use car
Speaker 1: prices have started to retreat a little bit, and we've
Speaker 1: seen a number of other indicators like that that have
Speaker 1: started to sort of come on the other side, stuff
Speaker 1: that's not sitting on a on a ship somewhere right right,
Speaker 1: Tiden up your straight jackets. It's time for the Craziest
Speaker 1: Things we saw in markets this week? Well, Theil Donna
Speaker 1: speaking of core, obviously, the core element of this podcast
Speaker 1: is the craziest things we saw in markets this week. Uh,
Speaker 1: and there's a lot of inflation in that area as well.
Speaker 1: The crazy things continue to keep rising. What are you
Speaker 1: got for us this week? Well, first, I have to
Speaker 1: apologize to everybody because I've been calling it the weirdest
Speaker 1: thing or which is it crazy? You know, I'm in
Speaker 1: my bed sleeping during COVID and I'm getting texts. Tell
Speaker 1: fil Donna, it's the craziest thing. Oh, I shouldn't know better.
Speaker 1: I did get a submission from a listener. I have
Speaker 1: a submission from Alan wax Staff in Minnesota, and he
Speaker 1: and I were actually exchanging messages via Twitter. He sent
Speaker 1: me a link to an eBay page that lists Spider
Speaker 1: Man movie tickets, and at first I think the top
Speaker 1: one was for seventy dollars, and then as I scrolled through,
Speaker 1: some of them were going into the tens of thousands.
Speaker 1: So it turns out I mean, I like Spider Man
Speaker 1: and all, but not for dollars. So it turns out
Speaker 1: that advanced ticket sales for the movie had crashed MC's
Speaker 1: website last weekend, and then mc CEO Adam Aaron tweeted
Speaker 1: that the first eighty six thousand purchases of these special
Speaker 1: reserved tickets for a December sixteen showing or some such
Speaker 1: they were going to receive a Spider Man n f T.
Speaker 1: But there was something like a hundred unique kind of tea.
Speaker 1: So it was super complicated story. All these tickets. I
Speaker 1: believe we're getting bit up on eBay because of this
Speaker 1: and some other auction sites just because of the tweet
Speaker 1: and all of this that was happening. Wow, that is fascinating.
Speaker 1: So thank you Allen for for sending that in because Yeah,
Speaker 1: sometimes I think that guy manages his company to optimize.
Speaker 1: It's a strategy segments he manages to get in there.
Speaker 1: That's pretty good. I don't know. I thought I had
Speaker 1: a good one, But that's pretty good. How about you care?
Speaker 1: What's your craziest, ender weirdest thing. So my you know,
Speaker 1: we we talked about inflation, but we haven't talked about housing. Right,
Speaker 1: So the housing market has been going crazy, and I'm
Speaker 1: here in Austin where it's been especially crazy. But sure enough,
Speaker 1: outside of Boston, there was a house that had had
Speaker 1: a serious house fire, so there was almost nothing left
Speaker 1: of the house, but sure enough it went on Zillo
Speaker 1: for three thousand dollars as is, and I don't know,
Speaker 1: I've been tracking it to see if it's actually sold yet.
Speaker 1: But burned house, that's a hot house. Did they burn
Speaker 1: it to tear the house into it? N f T
Speaker 1: Maybe that's the but put him on EVA and yeah,
Speaker 1: a millionaires. I sometimes think that the press loves that story.
Speaker 1: This house that's a piece of junk. So but really
Speaker 1: it's the lot, right, I mean, you know, I know
Speaker 1: it's like it might have that lot, might that house
Speaker 1: was probably worth less with the structure on it. Then
Speaker 1: you know, well interestingly, so I looked and it's on
Speaker 1: Zillo and the estimate was pretty close to three. I'm
Speaker 1: assuming Zela did not try to flip that one, given
Speaker 1: their there uh turmoilson, But you know, I like, I
Speaker 1: like that crazy thing because it's it allows us to
Speaker 1: talk about a more serious topic, which is this insane
Speaker 1: housing market. And I think anyone of a certain age
Speaker 1: who lived through the financial crisis to see house price
Speaker 1: gains like this is very worrisome. I mean, do you
Speaker 1: is there any concern for you of of sort of
Speaker 1: a subsequent crash and housing prices and you know, is
Speaker 1: the system hopefully better you know, safeguarded at this time
Speaker 1: than than what happened last time? Yeah? So, I mean
Speaker 1: a key difference between today and two thousand seven is leverage.
Speaker 1: So if you look at mortgage lending standards, they're actually
Speaker 1: still fairly tight. And go back to two thousand seven,
Speaker 1: mortgage lending standards had been loosening for years, and lenders
Speaker 1: had becoming increasingly creative in offering financing to individuals. And
Speaker 1: then if you look just in general at consumer balance
Speaker 1: sheets people have. You know, we have among the highest
Speaker 1: savings rates that we've ever had. Consumer debt levels are
Speaker 1: really low, interest rates are really low, so when you
Speaker 1: do carry debt, the service payments are very low. So
Speaker 1: I think that the fundamental health of consumer balance sheets
Speaker 1: is much much better today than it was. No. Seven. Yeah,
Speaker 1: that's a great point. All right, I'll stop worrying about that.
Speaker 1: I've got a long list of things. My job is done.
Speaker 1: I'll scratch that one off again. Minds from the alternative
Speaker 1: asset class, uh, the collectibles class. So this is an
Speaker 1: incredible I I encourage everyone to google the story from
Speaker 1: the Washington Post. Really a well reported story. It's about
Speaker 1: a letter from Catherine the Great, the Russian empress of
Speaker 1: the of the eighteenth century. She wrote a letter supporting
Speaker 1: mass immunization against smallpox. Uh. This is way back in
Speaker 1: you know, the late seventeen eighties. And for one thing,
Speaker 1: I'm fascinated at at the fact that you know, immunization
Speaker 1: goes that far back, but this story lays out the
Speaker 1: history of of immunization and it's it's even more fascinating. So,
Speaker 1: prior to vaccination, they did what is called variolation, which
Speaker 1: instead of creative a vaccine, they would take a piece
Speaker 1: of the scab from the small pox were I hate
Speaker 1: to say the word puss, but take some puss for
Speaker 1: the small pox moon and actually get that into your bloodstream.
Speaker 1: And that's how you would, uh, that's how you you
Speaker 1: get the immunity to it. I'm never complaining about a
Speaker 1: shot again, right, I know, I'm I'm not at all
Speaker 1: vaccine skeptical. I gotta say, I think I would have
Speaker 1: been a little vary relations skeptical. Back to the well,
Speaker 1: what's nuts is it's not even that far back. So
Speaker 1: the way this was discovered in the West was a
Speaker 1: slave in the early part of the seventeen hundreds who
Speaker 1: introduced it in the US. And he said in Africa
Speaker 1: they were doing this for hundreds of years. It's fascinating. Really, yeah,
Speaker 1: that is fascinating. I encourage every and to look up
Speaker 1: that story. Uh. It gives you a really great uh
Speaker 1: look back on that. And the reason she wrote this
Speaker 1: letter is because there was a lot of peasancy and
Speaker 1: skepticism um to this, which I kind of sympathize with
Speaker 1: in this case. Yeah, but anyway to turn it into
Speaker 1: the craziest thing in prices, right, So this or she
Speaker 1: wrote sold at auction along with a painting of Catherine
Speaker 1: the Great from some some famous artists I don't know,
Speaker 1: but the letter is really the key thing. So time
Speaker 1: will play prices, right, Karen Villdonna, start with you, vildonna?
Speaker 1: What would you pay for this letter from Catherine the Great?
Speaker 1: Denominated in British pounds? By the way, you gotta you know,
Speaker 1: you gotta account for the effects. I'm notoriously bad at
Speaker 1: guessing these things. I'm going to I'm going to overshoot.
Speaker 1: I'll go with ten million, Okay, I will keep my
Speaker 1: eye out, I will keep my poker face. Ten million
Speaker 1: British pounds is that way too high? I will I
Speaker 1: will say that Vldonna is the type of customers that
Speaker 1: auction houses dream of. And you'll probably getting some calls
Speaker 1: from from from sales reps at uh at various. I
Speaker 1: usually on a shoot by a huge amount, So I'm
Speaker 1: really I'm trying really hard. I might have hit my
Speaker 1: hand a little bit there, but you might forget I
Speaker 1: said that, what what what's your bid? What's your bid? Well,
Speaker 1: I think a very important question is are there n
Speaker 1: f T s that come with us? I don't know
Speaker 1: my price. You're free to burn the letter and sell
Speaker 1: it as an n f T probably for what would
Speaker 1: uh Bildona's talking about? Okay, so I'm going to take
Speaker 1: the under. Then, Uh, let's go with five million pounds.
Speaker 1: You guys are big spenders. I thought it was a
Speaker 1: lot nine hundred and fifty one British pounds, which bargain, bargain,
Speaker 1: let's go for it. Yeah, you should. You guys should
Speaker 1: go go make a bit on that, and then we
Speaker 1: can hang it up behind all of our zoom calls.
Speaker 1: There we go. That would be that would be a
Speaker 1: flex in a zoom call, for sure. If that would be,
Speaker 1: Oh my gosh, that'd be fun. Yeah, I've got I
Speaker 1: hang my wife's diploma because my diploma looks like I
Speaker 1: don't know something from a comic book. It's not a
Speaker 1: very distinguished looking tell you a little bit about maybe
Speaker 1: that color is a little bit about the university I
Speaker 1: went to. But my wife has a very distinguishing diplomas
Speaker 1: and luckily no one has zoomed it enough to to
Speaker 1: realize it's not mine, but it's not your name. But
Speaker 1: with that said, I think that is all the time
Speaker 1: we have care. Really great to have you on, uh,
Speaker 1: really good conversation. I hope we can get you back
Speaker 1: some day. Thank you, Thank you. Yeah, I love turning
Speaker 1: talking about burning houses. Let's do it again. Thank you, Carol.
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
Speaker 1: app or wherever you get your podcast. We love it
Speaker 1: if you took the time to rate and review the
Speaker 1: show on Apple Podcasts so more listeners can find us.
Speaker 1: And you can find us on Twitter, follow me at Reganonymous.
Speaker 1: Will do a Hirich is at Bildta Hirich. You can
Speaker 1: also follow Bloomberg Podcast at podcast and thank you to
Speaker 1: Charlie Powell to Bloomberg Radio. What Goes Up is produced
Speaker 1: by Laura Carlson. The head of Bloomberg Podcast is Francesco Levie.
Speaker 1: Thanks for listening. To see you next time.