1 00:00:00,440 --> 00:00:03,840 Speaker 1: Strap on your parachute. It's time for What Goes Up 2 00:00:04,120 --> 00:00:13,880 Speaker 1: with Sarah Ponzick and Mike Reagan. Hello and welcome to 3 00:00:13,960 --> 00:00:17,960 Speaker 1: What goes Up, a Bloomberg Weekly Markets podcast. I'm Sarah Ponzak, 4 00:00:18,079 --> 00:00:20,840 Speaker 1: a reporter on the Cross Asset team, and I'm Mike Reagan, 5 00:00:21,040 --> 00:00:24,000 Speaker 1: a senior editor at Bloomberg. This week on the show, 6 00:00:24,160 --> 00:00:28,040 Speaker 1: it was just last month that this episode's guests said 7 00:00:28,040 --> 00:00:31,080 Speaker 1: this big tech will need to continue delivering and the 8 00:00:31,120 --> 00:00:34,760 Speaker 1: tremendous equity market rally will remain vulnerable to the performance 9 00:00:34,800 --> 00:00:37,800 Speaker 1: of a handful of companies. Well, in recent days, we've 10 00:00:37,840 --> 00:00:40,600 Speaker 1: got in a firsthand look at just how vulnerable it 11 00:00:40,680 --> 00:00:43,400 Speaker 1: may be. We discussed the possible causes of this and 12 00:00:43,440 --> 00:00:46,360 Speaker 1: also the outlook from here, and as always, we will 13 00:00:46,400 --> 00:00:49,720 Speaker 1: close out the episode with our tradition, the craziest thing 14 00:00:49,960 --> 00:00:52,920 Speaker 1: I saw in markets this week, Sarah, I trust you 15 00:00:52,960 --> 00:00:56,200 Speaker 1: saw some crazy things. Trust correctly, And I have to 16 00:00:56,240 --> 00:00:58,960 Speaker 1: make up for last week. I came a little bit unprepared. 17 00:00:59,400 --> 00:01:02,120 Speaker 1: Um so this week I came more prepared than last week. 18 00:01:02,160 --> 00:01:04,480 Speaker 1: I can say that, Mike, Okay, that that's kind of 19 00:01:04,520 --> 00:01:09,280 Speaker 1: a low hurdle to clear, So I know, but you 20 00:01:09,280 --> 00:01:11,119 Speaker 1: you pulled one out at the last minute last week, 21 00:01:11,200 --> 00:01:13,400 Speaker 1: so I even see that that was a nice save. 22 00:01:14,319 --> 00:01:17,480 Speaker 1: But anyways, you said, very happy to have our guest 23 00:01:17,560 --> 00:01:19,759 Speaker 1: back this week. I believe she was on the show 24 00:01:19,840 --> 00:01:23,720 Speaker 1: once last year and before the world went crazy, uh, 25 00:01:23,760 --> 00:01:26,920 Speaker 1: and we got her perspective on the velocity of risk 26 00:01:27,040 --> 00:01:30,840 Speaker 1: and how it is accelerated. Boy um, that thesis was 27 00:01:30,880 --> 00:01:33,680 Speaker 1: sure proven true in the age of COVID. So happy 28 00:01:33,720 --> 00:01:35,840 Speaker 1: to have her back on the show. Her name is 29 00:01:36,080 --> 00:01:41,400 Speaker 1: Sema Shaw. She is the chief strategist at Principal Global Investors. 30 00:01:41,440 --> 00:01:43,920 Speaker 1: She joins US from London, where it's a little bit 31 00:01:44,000 --> 00:01:47,080 Speaker 1: later than it is here in the US. So, Seema, 32 00:01:47,120 --> 00:01:49,200 Speaker 1: I don't know if you're in your pajamas or what 33 00:01:49,280 --> 00:01:51,760 Speaker 1: I've I've been in my pajamas since March, so it's 34 00:01:51,800 --> 00:01:54,440 Speaker 1: it's totally fine if you are. It is my permanent 35 00:01:54,760 --> 00:01:59,760 Speaker 1: uniform thesis, at least pajamas from the waist down, just 36 00:01:59,840 --> 00:02:01,960 Speaker 1: in case you have any virtual meetings. No one, No 37 00:02:01,960 --> 00:02:05,720 Speaker 1: one will know exactly exactly. It's important that the top 38 00:02:05,760 --> 00:02:13,760 Speaker 1: of it is looking good. See, I'm gonna dispense. Usually 39 00:02:13,760 --> 00:02:16,520 Speaker 1: I have about a twelve part question that I start with, 40 00:02:16,560 --> 00:02:19,760 Speaker 1: but I'm gonna make it simple. Uh, this time what 41 00:02:19,919 --> 00:02:23,480 Speaker 1: a wild summer. I mean, it was the biggest August 42 00:02:23,560 --> 00:02:25,919 Speaker 1: gain for the US market. I don't know, Sarah wasn't. 43 00:02:25,960 --> 00:02:31,639 Speaker 1: It's like the biggest August gain in since the while 44 00:02:31,680 --> 00:02:35,519 Speaker 1: the whole country was basically more or less lockdown in quarantine. 45 00:02:36,480 --> 00:02:39,840 Speaker 1: How would you explain what happened this summer and now 46 00:02:39,880 --> 00:02:42,080 Speaker 1: that we're seeing sort of the bloom come off the rows, 47 00:02:42,720 --> 00:02:46,160 Speaker 1: what's happening right now with this little correction in the 48 00:02:46,240 --> 00:02:49,280 Speaker 1: U S exuity market and tech specifically. I mean, how 49 00:02:49,280 --> 00:02:53,560 Speaker 1: do you just describe and explain a summer like that? Yeah, 50 00:02:53,680 --> 00:02:56,880 Speaker 1: it's been absolutely astonishing. I don't think when all of 51 00:02:56,919 --> 00:02:59,640 Speaker 1: this kicked off, when lockdowns were announced, that anyone would 52 00:02:59,639 --> 00:03:02,400 Speaker 1: have entered dissipated the kind of summer performance that we've seen. 53 00:03:03,120 --> 00:03:06,840 Speaker 1: I think a lot of the strength was down to 54 00:03:07,120 --> 00:03:10,560 Speaker 1: three factors. One is the release of pent up demand 55 00:03:10,560 --> 00:03:13,560 Speaker 1: that it clearly accumulated during lockdown. So what we've seen 56 00:03:13,639 --> 00:03:16,560 Speaker 1: is a lot of easy gains, you know, people trying 57 00:03:16,600 --> 00:03:20,960 Speaker 1: to return to some semblance of normality and that's propelled markets. 58 00:03:21,000 --> 00:03:22,840 Speaker 1: And then the other two things is policy. So center 59 00:03:22,880 --> 00:03:26,720 Speaker 1: banks clearly have you flooded the market with liquidity. It 60 00:03:26,800 --> 00:03:28,680 Speaker 1: has no else to go, it just goes straight into 61 00:03:28,720 --> 00:03:31,079 Speaker 1: capital markets. So that that's been key, and of course 62 00:03:31,080 --> 00:03:35,640 Speaker 1: fiscal policy has helped with with improving confidence. But within 63 00:03:35,680 --> 00:03:38,800 Speaker 1: all of this, those three factors have driven one sector. 64 00:03:39,160 --> 00:03:41,320 Speaker 1: Each one of them has gone into one sector, and 65 00:03:41,360 --> 00:03:44,560 Speaker 1: that's tech. And when you look at the market recovery, 66 00:03:44,560 --> 00:03:46,480 Speaker 1: it has been driven simply by take You know, it's 67 00:03:46,560 --> 00:03:49,360 Speaker 1: such a narrow recovery. And I think all of that 68 00:03:49,520 --> 00:03:52,080 Speaker 1: incredible exuberance around the big tech sector, which I have 69 00:03:52,120 --> 00:03:54,839 Speaker 1: to say we have real beliefs in, but it went 70 00:03:54,880 --> 00:03:57,280 Speaker 1: a little bit too frothy, and that's why you've seen 71 00:03:57,400 --> 00:03:59,800 Speaker 1: this pullback over the last few days. I don't necessarily 72 00:03:59,840 --> 00:04:03,160 Speaker 1: but there's any major fundamentals that have resulted in this 73 00:04:03,280 --> 00:04:07,080 Speaker 1: jewel back. Seema. I likely spent the entire months of 74 00:04:07,200 --> 00:04:12,000 Speaker 1: July in August writing about reasons for this unbelievable tech 75 00:04:12,080 --> 00:04:15,000 Speaker 1: rally that we saw. Some being that many of these 76 00:04:15,000 --> 00:04:19,840 Speaker 1: companies are beneficiaries of COVID nineteen. Like you mentioned, they 77 00:04:19,880 --> 00:04:22,000 Speaker 1: stand to benefit. And the idea is that a lot 78 00:04:22,000 --> 00:04:24,840 Speaker 1: of these trends have been accelerated by many stay at 79 00:04:24,880 --> 00:04:29,200 Speaker 1: home orders well In recent weeks and days, there have 80 00:04:29,279 --> 00:04:35,240 Speaker 1: been many reports about one soft bank buying many call options, 81 00:04:35,240 --> 00:04:39,160 Speaker 1: and big tech companies also looking at small contract trades 82 00:04:39,320 --> 00:04:43,000 Speaker 1: seeing tons and tons of options volume from the likes 83 00:04:43,040 --> 00:04:45,680 Speaker 1: of small retail traders. And I feel like some are 84 00:04:45,760 --> 00:04:49,960 Speaker 1: questioning if we can actually attribute much of the rally 85 00:04:50,040 --> 00:04:52,679 Speaker 1: to the fact that these companies stand to benefit UH 86 00:04:52,680 --> 00:04:56,159 Speaker 1: and their true earnings potential and their growth power. Is 87 00:04:56,200 --> 00:04:59,240 Speaker 1: there reason to to question that narrative, if that at 88 00:04:59,279 --> 00:05:02,320 Speaker 1: all had a play in this unbelievable run up, like 89 00:05:02,320 --> 00:05:06,880 Speaker 1: like Mike said, the best August since the late eighties, 90 00:05:07,160 --> 00:05:09,640 Speaker 1: or is there more to it than just the option story? 91 00:05:10,120 --> 00:05:11,520 Speaker 1: You know, I think you just have to look at 92 00:05:11,560 --> 00:05:14,159 Speaker 1: some of the charts of these companies performances and you 93 00:05:14,160 --> 00:05:17,240 Speaker 1: can see that something weird went on in August. They 94 00:05:17,279 --> 00:05:20,119 Speaker 1: just you know, they have performed extremely well through till July, 95 00:05:20,200 --> 00:05:22,960 Speaker 1: and then in August they just took off, you know, 96 00:05:23,000 --> 00:05:25,080 Speaker 1: the curves almost turned exponential. So I think there has 97 00:05:25,120 --> 00:05:27,440 Speaker 1: to be something else to play there. Um and the 98 00:05:27,480 --> 00:05:30,880 Speaker 1: option story I think is key. It probably isn't everything, though, 99 00:05:31,200 --> 00:05:33,000 Speaker 1: you know, you have to look at some of the 100 00:05:33,080 --> 00:05:36,560 Speaker 1: smaller orders that went on. They almost dwarf what we've 101 00:05:36,560 --> 00:05:39,479 Speaker 1: seen the soft bank. So I think the retail investors, 102 00:05:39,520 --> 00:05:42,560 Speaker 1: you know, you're the Robin Hood app. I think that's 103 00:05:42,560 --> 00:05:44,720 Speaker 1: been a huge driver as well. These are companies that 104 00:05:44,720 --> 00:05:47,600 Speaker 1: people have been watching from home seeing how amazingly the 105 00:05:47,760 --> 00:05:50,359 Speaker 1: well they've been performing, and have tried to jump on 106 00:05:50,360 --> 00:05:52,760 Speaker 1: the bandwagon. The problem is is that a lot of 107 00:05:52,800 --> 00:05:54,960 Speaker 1: these investors and new time investors, this is probably the 108 00:05:55,000 --> 00:05:58,599 Speaker 1: first time that they've experienced any kind of crisis and 109 00:05:58,720 --> 00:06:03,200 Speaker 1: have less ability to try and analyze the fundamentals. So 110 00:06:03,240 --> 00:06:05,200 Speaker 1: I think this has also been playing out, and it's 111 00:06:05,200 --> 00:06:06,839 Speaker 1: again one of the reasons why you get this big 112 00:06:06,880 --> 00:06:09,279 Speaker 1: snap up and then you also get the biggest snap down. 113 00:06:10,040 --> 00:06:12,680 Speaker 1: You know. One theory I've I've seen floated for the 114 00:06:12,800 --> 00:06:17,280 Speaker 1: correction in tech is that people are getting more confident 115 00:06:17,360 --> 00:06:19,400 Speaker 1: that you know, that we're sort of over the hump 116 00:06:19,800 --> 00:06:23,240 Speaker 1: of the COVID virus, that the rest of the struggling 117 00:06:23,320 --> 00:06:26,440 Speaker 1: sectors of the economy, the sort of value stocks, if 118 00:06:26,520 --> 00:06:28,800 Speaker 1: you will, or the you know, non tech parts of 119 00:06:28,800 --> 00:06:31,560 Speaker 1: the economy, the cyclical parts that have really been hurt 120 00:06:32,160 --> 00:06:36,360 Speaker 1: are poised to rebound, and maybe people are getting out 121 00:06:36,360 --> 00:06:40,080 Speaker 1: of tech and preparing to to get back into you know, 122 00:06:40,279 --> 00:06:44,240 Speaker 1: more cyclical and value oriented sectors. I don't know if 123 00:06:44,240 --> 00:06:46,760 Speaker 1: I buy that, Sema. I mean, is that do you 124 00:06:46,760 --> 00:06:49,039 Speaker 1: think that could be what's going on? Or was it 125 00:06:49,200 --> 00:06:52,920 Speaker 1: just you know, this tech rally was bound to hit 126 00:06:52,960 --> 00:06:56,600 Speaker 1: a wall, This melt up was bound to melt down eventually. 127 00:06:56,680 --> 00:06:59,040 Speaker 1: You know what which which camper you on for for 128 00:06:59,120 --> 00:07:01,719 Speaker 1: sort of the cattle to behind us? Yeah, So I 129 00:07:01,720 --> 00:07:04,200 Speaker 1: think I think this is really interesting because actually I 130 00:07:04,240 --> 00:07:07,120 Speaker 1: think there's both of them are true. I think the 131 00:07:07,160 --> 00:07:09,680 Speaker 1: technicals are kind of momentum that you've seen in the market, 132 00:07:09,800 --> 00:07:14,240 Speaker 1: the very overcrowding. With all of these positions evaluations together, 133 00:07:14,320 --> 00:07:18,000 Speaker 1: you've created a story which is very very vulnerable to 134 00:07:18,040 --> 00:07:20,440 Speaker 1: any kind of pullback, and that pullback can come from 135 00:07:20,560 --> 00:07:25,880 Speaker 1: either deteriorating sentiment because of geopolitics. But another story is 136 00:07:25,920 --> 00:07:29,480 Speaker 1: just actually the improving economy and also news of a 137 00:07:29,520 --> 00:07:32,120 Speaker 1: potential vaccine. It has been a lot driven by a 138 00:07:32,240 --> 00:07:35,000 Speaker 1: very strong demand for these technology companies over the summer 139 00:07:35,360 --> 00:07:38,360 Speaker 1: as since lockdown was announced, and as a result, as 140 00:07:38,360 --> 00:07:40,880 Speaker 1: soon as you hear news of a vaccine that it 141 00:07:41,000 --> 00:07:43,360 Speaker 1: encourage people that look, we can maybe return to a 142 00:07:43,400 --> 00:07:45,200 Speaker 1: more normal way of life. We will no longer need 143 00:07:45,240 --> 00:07:48,320 Speaker 1: to be so dependent on companies to deliver our food. 144 00:07:48,480 --> 00:07:50,360 Speaker 1: My husband was saying the other day that actually he's 145 00:07:50,360 --> 00:07:52,560 Speaker 1: border delivering. He wants to go back to a supermarket. 146 00:07:52,600 --> 00:07:55,240 Speaker 1: I mean, I don't share the same sentiment, but I 147 00:07:55,280 --> 00:07:57,760 Speaker 1: think he speaks for a few people out there, so 148 00:07:58,000 --> 00:07:59,480 Speaker 1: and I think so as you get that turned to 149 00:07:59,520 --> 00:08:03,000 Speaker 1: the vaccine, then actually reliance and dependence on technology starts 150 00:08:03,040 --> 00:08:06,640 Speaker 1: to pull back. And given that all those indicators together, 151 00:08:06,680 --> 00:08:10,080 Speaker 1: we're building up an environment of vulnerability. It was almost 152 00:08:10,080 --> 00:08:12,760 Speaker 1: a perfect storm to create that pullback. Maybe if he 153 00:08:12,800 --> 00:08:14,520 Speaker 1: goes back to the grocery store, he just feels like 154 00:08:14,560 --> 00:08:17,600 Speaker 1: his life will be one step closer to normal. I 155 00:08:17,720 --> 00:08:20,680 Speaker 1: made the supermarkets want us all doing that too, because 156 00:08:20,720 --> 00:08:22,440 Speaker 1: I know I went into Whole Foods the other day 157 00:08:22,720 --> 00:08:24,520 Speaker 1: and I had like a list of three items I 158 00:08:24,560 --> 00:08:26,240 Speaker 1: wanted to get, and I ended up with like eighty 159 00:08:26,320 --> 00:08:29,640 Speaker 1: five things, uh in the check outlines. So I wonder 160 00:08:29,640 --> 00:08:32,680 Speaker 1: if there's something, you know, there's something about that impulse 161 00:08:32,720 --> 00:08:36,520 Speaker 1: purchasing power. I wonder that uh, you know, is being 162 00:08:36,559 --> 00:08:40,520 Speaker 1: lost in this whole, this whole online regime. Yeah, the 163 00:08:40,600 --> 00:08:42,760 Speaker 1: kids sweets are no longer in demand as the kids 164 00:08:42,760 --> 00:08:46,960 Speaker 1: are walking past and demanding their parents by Yeah, I've 165 00:08:46,960 --> 00:08:49,440 Speaker 1: got to say I made a Trader Joe's run the 166 00:08:49,440 --> 00:08:55,320 Speaker 1: other weekend, and I left with many more treating suites 167 00:08:55,360 --> 00:08:57,200 Speaker 1: than I planned on when I went in there, because 168 00:08:57,240 --> 00:08:59,960 Speaker 1: they just, you know, they looked good. We're a stuck 169 00:09:00,040 --> 00:09:03,240 Speaker 1: at home for the most part. I needed something extra. 170 00:09:03,360 --> 00:09:05,400 Speaker 1: Trader Chose has got to be the market leader and 171 00:09:05,480 --> 00:09:09,480 Speaker 1: impulse purchases. They know what they're doing with their store layout. 172 00:09:09,520 --> 00:09:11,240 Speaker 1: I can tell you that you go in without a 173 00:09:11,280 --> 00:09:14,959 Speaker 1: shopping list and end up with five things. So I see, 174 00:09:15,040 --> 00:09:16,520 Speaker 1: m I tell your husband I agree with him. I 175 00:09:16,720 --> 00:09:38,120 Speaker 1: can relate. He'll be happy someone does. So see. I know, 176 00:09:38,200 --> 00:09:40,600 Speaker 1: I know it's obviously so difficult to make short term 177 00:09:40,600 --> 00:09:44,160 Speaker 1: market calls, but I just want to get your view. Yes, 178 00:09:44,320 --> 00:09:47,920 Speaker 1: we got a an eleven percent correction in the NASDAC 179 00:09:48,000 --> 00:09:49,560 Speaker 1: in a matter of three days. I mean it was 180 00:09:49,720 --> 00:09:54,480 Speaker 1: the fastest correction from a record for the benchmark. Is 181 00:09:54,520 --> 00:09:58,520 Speaker 1: that enough though, to really wash out the froth is 182 00:09:58,679 --> 00:10:01,920 Speaker 1: optimistic sentiment and move forwards from here? I mean, you look, 183 00:10:02,080 --> 00:10:05,880 Speaker 1: and we're still what more than sixty percent off belows 184 00:10:05,960 --> 00:10:09,120 Speaker 1: from March. I mean that's obviously not a small number. No, 185 00:10:09,280 --> 00:10:11,160 Speaker 1: I would agree. Look, I think there is still froth 186 00:10:11,200 --> 00:10:14,000 Speaker 1: in the market, but ultimately, if there's a really strong 187 00:10:14,160 --> 00:10:16,439 Speaker 1: circular growth story, I don't think that you're going to 188 00:10:16,520 --> 00:10:20,040 Speaker 1: see significant drops from here. You know, chances are that 189 00:10:20,080 --> 00:10:22,880 Speaker 1: you're not going to see the magnitudes of increases certainly 190 00:10:22,880 --> 00:10:24,559 Speaker 1: that we've seen over the last six months. That's not 191 00:10:24,600 --> 00:10:27,680 Speaker 1: going to be repeated. But do we expect the market 192 00:10:27,760 --> 00:10:30,760 Speaker 1: to come tumbling down from here? I'm certainly not a 193 00:10:30,800 --> 00:10:32,760 Speaker 1: buyer of that idea, and I think, as I said, 194 00:10:32,800 --> 00:10:34,840 Speaker 1: the reason is is that we may have increased our 195 00:10:34,840 --> 00:10:36,920 Speaker 1: aliance and we may pull back some of that dependence 196 00:10:36,960 --> 00:10:39,760 Speaker 1: on technology, but a fundamental core of that is here 197 00:10:39,800 --> 00:10:42,400 Speaker 1: to stay. And also in an environment where there is 198 00:10:42,480 --> 00:10:45,640 Speaker 1: so much uncertainty, we still don't know what's around the corner. 199 00:10:45,960 --> 00:10:48,080 Speaker 1: You still need companies that have got those really strong 200 00:10:48,120 --> 00:10:50,960 Speaker 1: balance sheets and positive cash flows, and those make acap 201 00:10:51,040 --> 00:10:55,240 Speaker 1: tex stocks meet that criteria seem you know. Let's turn 202 00:10:55,240 --> 00:10:57,960 Speaker 1: our attention to the next big risk, which is on 203 00:10:58,000 --> 00:11:01,600 Speaker 1: everyone's mind. It's the US elections in November. You and 204 00:11:01,720 --> 00:11:05,240 Speaker 1: your colleagues at Principle had an interesting note looking at 205 00:11:05,240 --> 00:11:09,839 Speaker 1: the elections, and you know, this sort of historical precedent 206 00:11:10,080 --> 00:11:13,559 Speaker 1: is that it's pretty common for there to be volatility 207 00:11:13,559 --> 00:11:16,280 Speaker 1: in the market, in the equity market ahead of a 208 00:11:16,640 --> 00:11:20,400 Speaker 1: US presidential election. You know, I don't know what the 209 00:11:20,400 --> 00:11:23,880 Speaker 1: percentage of that happening is, but it's it's pretty high 210 00:11:24,000 --> 00:11:29,400 Speaker 1: and pretty you know, easily telegraphed and predictable. But that 211 00:11:29,480 --> 00:11:32,800 Speaker 1: I'll tell you often typically calms down after the election, 212 00:11:33,080 --> 00:11:36,439 Speaker 1: when investors have a sense of what the next administration's 213 00:11:36,880 --> 00:11:40,360 Speaker 1: priorities are gonna be, what kind of policies may influence 214 00:11:40,360 --> 00:11:43,520 Speaker 1: their portfolios. I have to wonder, though, this is a 215 00:11:43,640 --> 00:11:47,719 Speaker 1: very unique environment leading up to this election. For one thing, 216 00:11:47,760 --> 00:11:51,160 Speaker 1: all this froth that even after this correction still exists 217 00:11:51,160 --> 00:11:56,040 Speaker 1: in the market. Also just the bizarre nature of the 218 00:11:56,040 --> 00:11:58,920 Speaker 1: the election, where you know, the mail in bouting will 219 00:11:58,960 --> 00:12:02,000 Speaker 1: be a big you. President Trump is already you know, 220 00:12:02,160 --> 00:12:06,920 Speaker 1: raising a lot of suspicion at least he alleges as 221 00:12:06,920 --> 00:12:10,600 Speaker 1: far as the you know, how how reliable the vote 222 00:12:10,640 --> 00:12:15,280 Speaker 1: can be when it's done over the mail. In many elections, 223 00:12:15,320 --> 00:12:17,640 Speaker 1: it seems like it's almost a no brainer to buy 224 00:12:17,720 --> 00:12:20,360 Speaker 1: that pre election dip. I wonder if if you think 225 00:12:20,400 --> 00:12:23,880 Speaker 1: that's the case this time. And also given the valuations 226 00:12:23,880 --> 00:12:26,400 Speaker 1: of the market, is that volatility that dip before the 227 00:12:26,440 --> 00:12:30,600 Speaker 1: election failed to be potentially a bigger than the normal 228 00:12:30,679 --> 00:12:33,040 Speaker 1: one this time. Yeah, these are these are really good 229 00:12:33,040 --> 00:12:36,120 Speaker 1: points that I think all investors are are starting to 230 00:12:36,280 --> 00:12:39,160 Speaker 1: consider pretty deeply at this stage. Well, as you said, 231 00:12:39,600 --> 00:12:42,359 Speaker 1: you know, it is still a pretty frothy market. Valuations 232 00:12:42,440 --> 00:12:45,240 Speaker 1: is still very stretched, and in that environment you have 233 00:12:45,360 --> 00:12:49,520 Speaker 1: created almost a perfect scenario where any kind of shifting 234 00:12:49,559 --> 00:12:53,480 Speaker 1: sentiment can result in a sudden drop. Right, So this 235 00:12:53,520 --> 00:12:55,320 Speaker 1: is a risk ve losty story that we talked about 236 00:12:55,360 --> 00:12:58,880 Speaker 1: months ago. The thing is with US elections, typically you 237 00:12:58,920 --> 00:13:01,319 Speaker 1: do see that volatility, but then the foltility fades and 238 00:13:01,360 --> 00:13:03,760 Speaker 1: it goes back to fundamentals. So would have been fundamentals 239 00:13:03,840 --> 00:13:06,720 Speaker 1: driving the markets over the last six seven months. You know, 240 00:13:06,760 --> 00:13:10,120 Speaker 1: we spoke about it before. It's down really to center banks, 241 00:13:10,440 --> 00:13:13,800 Speaker 1: to fiscal policy, but mainly center banks for markets, that's 242 00:13:13,800 --> 00:13:16,880 Speaker 1: really been key. So, yes, we do anticipate a rise 243 00:13:16,880 --> 00:13:19,280 Speaker 1: in volatility. Do we think that would be the right 244 00:13:19,280 --> 00:13:21,360 Speaker 1: time to buy the dip? Actually, I don't think it's 245 00:13:21,360 --> 00:13:23,400 Speaker 1: the right time to try and do any kind of 246 00:13:23,440 --> 00:13:27,439 Speaker 1: trading around the election, because it's so difficult to anticipate 247 00:13:27,520 --> 00:13:30,440 Speaker 1: and read what's going to happen, especially in scenario where 248 00:13:30,480 --> 00:13:33,640 Speaker 1: you could potentially see the election result being questioned not 249 00:13:33,720 --> 00:13:35,320 Speaker 1: just for a week or so, but for even a 250 00:13:35,320 --> 00:13:38,199 Speaker 1: month or two after. So actually, from our perspective, you're 251 00:13:38,240 --> 00:13:40,640 Speaker 1: better off just staying invested. You look away from all 252 00:13:40,640 --> 00:13:44,160 Speaker 1: the noise, keep your positions, and keep your eyes on 253 00:13:44,240 --> 00:13:48,520 Speaker 1: the fundamentals because past the election, coming into the things 254 00:13:48,520 --> 00:13:49,960 Speaker 1: that are going to be driving the market is still 255 00:13:49,960 --> 00:13:52,640 Speaker 1: gonna be the same stuff, and that's mainly the Federal Reserve. 256 00:13:53,040 --> 00:13:55,240 Speaker 1: The election is less than two months away. I know, 257 00:13:55,360 --> 00:14:00,960 Speaker 1: I can't believe it well, and the result or maybe 258 00:14:01,480 --> 00:14:06,560 Speaker 1: conclusive results or maybe a year away, Sarah. So we hope, hopefully, 259 00:14:06,640 --> 00:14:09,439 Speaker 1: we hope, hopefully we're going to be the inauguration day. 260 00:14:09,520 --> 00:14:12,280 Speaker 1: That's my hope for this country. God help us. If 261 00:14:12,320 --> 00:14:15,640 Speaker 1: we don't, we'll see what you mentioned the Federal Reserve. 262 00:14:16,280 --> 00:14:18,840 Speaker 1: And of course we have the next FED meeting coming 263 00:14:18,960 --> 00:14:22,920 Speaker 1: up next week, so the next really near term risk 264 00:14:23,040 --> 00:14:26,080 Speaker 1: probably for the markets. Is there anything that you would 265 00:14:26,080 --> 00:14:28,520 Speaker 1: expect or maybe you are looking out for that might 266 00:14:28,560 --> 00:14:31,440 Speaker 1: be unexpected, especially after the release of the policy review 267 00:14:31,760 --> 00:14:35,000 Speaker 1: and the latest speech from Powell in Jackson Hall. Well, 268 00:14:35,040 --> 00:14:37,720 Speaker 1: I think there is one thing that Jerome really needs 269 00:14:37,760 --> 00:14:41,160 Speaker 1: to to discuss, and he needs to give some parameters 270 00:14:41,200 --> 00:14:44,080 Speaker 1: around this new inflation framework. That's what people want to know. 271 00:14:44,200 --> 00:14:46,800 Speaker 1: You know, what is too high above two You know, 272 00:14:46,880 --> 00:14:49,520 Speaker 1: at what point do they feel like, Okay, this is 273 00:14:49,520 --> 00:14:51,440 Speaker 1: the time to stop pulling back. How long does it 274 00:14:51,480 --> 00:14:53,840 Speaker 1: need to be over two percent? Uh? These are the 275 00:14:53,880 --> 00:14:56,200 Speaker 1: things that I think investors need to get a better 276 00:14:56,200 --> 00:14:58,640 Speaker 1: hold of. We're also going to be looking out for 277 00:14:58,840 --> 00:15:02,520 Speaker 1: more information and pretend chill yield, curve control, any kind 278 00:15:02,560 --> 00:15:05,680 Speaker 1: of explicit forward guidance, although at the stage, you know, 279 00:15:05,720 --> 00:15:09,760 Speaker 1: having listened to the various FED presidents over the last 280 00:15:09,800 --> 00:15:12,080 Speaker 1: couple of weeks, I'm not sure we're actually going to 281 00:15:12,120 --> 00:15:14,480 Speaker 1: receive much more news. I feel like they are trying 282 00:15:14,480 --> 00:15:17,640 Speaker 1: to pull back from providing too much information on anything 283 00:15:18,200 --> 00:15:21,360 Speaker 1: and hoping that actually just the inflation framework itself is 284 00:15:21,560 --> 00:15:23,920 Speaker 1: enough to get the market going. And I think it 285 00:15:24,000 --> 00:15:26,280 Speaker 1: may be in some ways right, because you know, they've 286 00:15:26,360 --> 00:15:28,800 Speaker 1: gone out of their way to make sure that people 287 00:15:28,880 --> 00:15:32,080 Speaker 1: know there is no chance of FED rate hikes over 288 00:15:32,080 --> 00:15:35,760 Speaker 1: the foreseeable future, and of course hopefully we'll get some 289 00:15:36,160 --> 00:15:40,160 Speaker 1: more details on this sort of new inflation targeting regime 290 00:15:40,200 --> 00:15:43,320 Speaker 1: that the FED has where they we're looking at that 291 00:15:43,360 --> 00:15:47,280 Speaker 1: two percent target as as an average rather than sort 292 00:15:47,280 --> 00:15:52,000 Speaker 1: of a maximum of what they would tolerate for inflation. 293 00:15:52,320 --> 00:15:54,080 Speaker 1: See if I don't wonder, though, how big of a 294 00:15:54,120 --> 00:15:56,920 Speaker 1: deal is that, if we've struggled for so long to 295 00:15:57,040 --> 00:15:59,760 Speaker 1: hit two pc inflation, is there any reason to believe, 296 00:16:00,120 --> 00:16:04,239 Speaker 1: in your opinion, that we are in an accelerating inflationary 297 00:16:04,320 --> 00:16:08,680 Speaker 1: environment and that will really see that average inflation target 298 00:16:08,720 --> 00:16:11,320 Speaker 1: put into practice at any time in the near future. 299 00:16:11,880 --> 00:16:14,080 Speaker 1: You know, that's such a good question, you know, I 300 00:16:14,120 --> 00:16:15,640 Speaker 1: just want to take it out. Two years ago, at 301 00:16:15,640 --> 00:16:18,680 Speaker 1: the Global Milk and Conference, Christine the Guard spoke. She 302 00:16:18,800 --> 00:16:20,800 Speaker 1: wasn't yet the head of the CD, she's still at 303 00:16:20,800 --> 00:16:22,680 Speaker 1: the i m F, and she was asked on stage, 304 00:16:22,960 --> 00:16:25,160 Speaker 1: you know, what do you think about raising inflation targets? 305 00:16:25,200 --> 00:16:27,560 Speaker 1: Do you think that will help countries? And back then 306 00:16:27,600 --> 00:16:30,240 Speaker 1: she says she saw no sense, said, if you can't 307 00:16:30,280 --> 00:16:32,080 Speaker 1: reach two percent, what makes you think you can reach 308 00:16:32,120 --> 00:16:34,080 Speaker 1: three percent? And it made no sense to her to 309 00:16:34,160 --> 00:16:36,640 Speaker 1: move in that direction. So, and I think there is 310 00:16:36,680 --> 00:16:38,880 Speaker 1: a there is a clear argument there right, Why? Why 311 00:16:39,040 --> 00:16:41,000 Speaker 1: what are they doing which is so special? That means 312 00:16:41,000 --> 00:16:43,840 Speaker 1: that they're more likely to reach a higher target even now. 313 00:16:44,440 --> 00:16:46,640 Speaker 1: And I have to say that, given all the structural 314 00:16:46,760 --> 00:16:51,320 Speaker 1: factors that are underway at the moment, globalization, demographics, technology, 315 00:16:51,440 --> 00:16:55,560 Speaker 1: it's very difficult to come across another reason why there 316 00:16:55,560 --> 00:16:59,080 Speaker 1: should be higher inflation. And in a way, maybe the 317 00:16:59,120 --> 00:17:02,000 Speaker 1: only opportunity if they start to really embrace fiscal spending 318 00:17:02,040 --> 00:17:04,359 Speaker 1: even more than what you've already seen this yet, maybe 319 00:17:04,359 --> 00:17:06,520 Speaker 1: that's the only scenario where you see inflation hitting that 320 00:17:06,600 --> 00:17:09,520 Speaker 1: two percent target and even over shooting. You know, there 321 00:17:09,520 --> 00:17:11,960 Speaker 1: were some big names this past week talking about inflation, 322 00:17:12,320 --> 00:17:16,240 Speaker 1: Drucon Miller talking about the potential for a ten percent 323 00:17:16,720 --> 00:17:19,080 Speaker 1: inflation rate, and I know there was a lot of 324 00:17:19,119 --> 00:17:22,480 Speaker 1: pushback for many investors on this, uh, kind of along 325 00:17:22,520 --> 00:17:24,240 Speaker 1: the same lines of what you just said, Sema. I mean, 326 00:17:24,560 --> 00:17:26,719 Speaker 1: we haven't even been able to get to two percent 327 00:17:26,880 --> 00:17:29,560 Speaker 1: all these deflationary forces over the last couple of years. 328 00:17:29,560 --> 00:17:31,480 Speaker 1: What makes you think that all of a sudden we're 329 00:17:31,480 --> 00:17:35,240 Speaker 1: going to launch into an inflationary upward spiral. Do you 330 00:17:35,440 --> 00:17:39,159 Speaker 1: see potential for that at all? I mean, do you 331 00:17:39,200 --> 00:17:42,560 Speaker 1: see the potential for inflation to even get to the 332 00:17:42,600 --> 00:17:46,560 Speaker 1: point where the feed is actually going to step up 333 00:17:46,680 --> 00:17:49,440 Speaker 1: and say that they are going to raise rates off 334 00:17:49,480 --> 00:17:53,679 Speaker 1: of the zero lower bound and say the next five years. 335 00:17:54,640 --> 00:17:56,640 Speaker 1: I was going to say, what, which lot, which horizon 336 00:17:56,640 --> 00:17:58,960 Speaker 1: are you talking about? I mean, the thing is that 337 00:17:59,280 --> 00:18:02,680 Speaker 1: we look back to global financial crisis since then ten 338 00:18:02,800 --> 00:18:05,520 Speaker 1: years the father struggle to even hit the two percent level, 339 00:18:06,240 --> 00:18:09,159 Speaker 1: and they have thrown almost everything that they have and 340 00:18:09,240 --> 00:18:12,199 Speaker 1: there's still be no no successor So actually what they 341 00:18:12,240 --> 00:18:14,639 Speaker 1: probably need in order to reach a two percent telegate 342 00:18:14,720 --> 00:18:18,320 Speaker 1: level is a complete regime change. Now, the inflation framework 343 00:18:18,840 --> 00:18:21,480 Speaker 1: announcement is good, but it doesn't take you all the 344 00:18:21,480 --> 00:18:24,800 Speaker 1: way to a new regime change. So for me, the 345 00:18:24,880 --> 00:18:28,280 Speaker 1: idea of sending a temper cent inflation result is is 346 00:18:28,280 --> 00:18:30,520 Speaker 1: out of this world. Look, you have to assume that 347 00:18:30,600 --> 00:18:33,200 Speaker 1: inflation is fast asleep and it's suddy going to wake 348 00:18:33,240 --> 00:18:35,520 Speaker 1: up with a bounce. If you think inflation is going 349 00:18:35,600 --> 00:18:38,160 Speaker 1: to hit over three pc within the next couple of years, 350 00:18:54,520 --> 00:18:56,000 Speaker 1: I see if I wanted to get back to that 351 00:18:56,080 --> 00:18:58,280 Speaker 1: idea of velocity of risk, that's what we talked a 352 00:18:58,359 --> 00:19:01,240 Speaker 1: lot about that the first time you were on the podcast. 353 00:19:01,320 --> 00:19:04,520 Speaker 1: I find it to be a fascinating topic and correct 354 00:19:04,520 --> 00:19:07,199 Speaker 1: me if I bungle my description of of what you 355 00:19:07,240 --> 00:19:08,919 Speaker 1: mean by But it's, you know, as far as I 356 00:19:08,920 --> 00:19:12,439 Speaker 1: can tell, it's basically the notion that risks from the 357 00:19:12,480 --> 00:19:17,720 Speaker 1: economy or from markets are priced in much more quickly 358 00:19:17,800 --> 00:19:21,359 Speaker 1: now into markets than they had been before. And you know, 359 00:19:21,400 --> 00:19:25,359 Speaker 1: there's a variety of reasons, technology, the proliferation of social 360 00:19:25,400 --> 00:19:27,920 Speaker 1: media being one of them. But boy, you know, as 361 00:19:28,000 --> 00:19:30,240 Speaker 1: as Sarah points out, in journalism, we do we like 362 00:19:30,320 --> 00:19:33,040 Speaker 1: to deal with those superlatives, you know, the fastest correction 363 00:19:33,800 --> 00:19:38,400 Speaker 1: in uh An index ever or the you know, fastest 364 00:19:39,640 --> 00:19:42,600 Speaker 1: gain whatever. I feel like this year we've just been 365 00:19:42,800 --> 00:19:47,080 Speaker 1: filled with those type of superlatives on both the downside 366 00:19:47,080 --> 00:19:49,879 Speaker 1: and the upside for the markets. And I think it 367 00:19:49,960 --> 00:19:52,560 Speaker 1: kind of proves your point that, you know, markets are 368 00:19:52,560 --> 00:19:56,159 Speaker 1: moving a lot quicker than maybe they did in the past. 369 00:19:56,760 --> 00:20:01,560 Speaker 1: What has the this whole raised a year of COVID 370 00:20:01,920 --> 00:20:05,760 Speaker 1: and the recession taught you or what have you learned 371 00:20:06,400 --> 00:20:09,119 Speaker 1: about the velocity of risk from this crazy year that 372 00:20:09,160 --> 00:20:13,000 Speaker 1: we've had. Well, I spoke to you back in January. 373 00:20:13,680 --> 00:20:17,159 Speaker 1: It was when coronavirus was starting to spread, but we 374 00:20:17,200 --> 00:20:19,920 Speaker 1: had no idea about what was in store for us 375 00:20:20,840 --> 00:20:23,399 Speaker 1: now the velocity of risk. You know, of course when 376 00:20:23,440 --> 00:20:25,720 Speaker 1: we wrote the paper, we had no idea of course 377 00:20:25,720 --> 00:20:28,800 Speaker 1: that COVID is on the way, But yes, it worked 378 00:20:28,800 --> 00:20:31,560 Speaker 1: out exactly to the point that we we had set out. 379 00:20:32,040 --> 00:20:35,600 Speaker 1: And as you said, you know, we came into evaluation 380 00:20:35,920 --> 00:20:40,120 Speaker 1: very very stretched. We had social media being used widely 381 00:20:40,160 --> 00:20:44,080 Speaker 1: and also enabling the spreading of of news that maybe 382 00:20:44,119 --> 00:20:47,880 Speaker 1: governments didn't want to share. We have technology very very 383 00:20:47,880 --> 00:20:50,760 Speaker 1: heavily weighted, and then we had very complex global supply 384 00:20:50,840 --> 00:20:53,800 Speaker 1: chains which were able to transmit shocks from one part 385 00:20:53,840 --> 00:20:56,359 Speaker 1: of the world in one sector to a completely different 386 00:20:56,359 --> 00:20:58,959 Speaker 1: part of the world in a totally different sector. And 387 00:20:59,000 --> 00:21:01,160 Speaker 1: I think that's why you all such very very sharp 388 00:21:01,240 --> 00:21:05,240 Speaker 1: movements down. But at the same time it's bounced right 389 00:21:05,280 --> 00:21:07,239 Speaker 1: back up again, and we're almost back to where we 390 00:21:07,240 --> 00:21:09,800 Speaker 1: were at the beginning of the Yet if not even 391 00:21:09,800 --> 00:21:12,000 Speaker 1: more stretched. You know, if we look at some of 392 00:21:12,040 --> 00:21:14,440 Speaker 1: our own valuation indicators, if you look at the MSCI 393 00:21:14,600 --> 00:21:18,159 Speaker 1: Growth Index, you have never ever been more expensive than 394 00:21:18,200 --> 00:21:21,600 Speaker 1: we are today. The same thing with the SP five 395 00:21:21,960 --> 00:21:24,359 Speaker 1: it's never been more expensive. So evaluations are still very 396 00:21:24,440 --> 00:21:27,879 Speaker 1: very stretched, even more than that technology is even even 397 00:21:27,880 --> 00:21:31,720 Speaker 1: bigger waiting. I hear people keep using the words during 398 00:21:31,760 --> 00:21:35,359 Speaker 1: the crisis, it was bread, water and fangs, and I 399 00:21:35,359 --> 00:21:38,520 Speaker 1: think that just gives a distinction of how important have become. 400 00:21:39,160 --> 00:21:41,920 Speaker 1: So now we're getting back to the point where any 401 00:21:42,000 --> 00:21:45,439 Speaker 1: kind of moving sentiment, any kind of large event, is 402 00:21:45,560 --> 00:21:49,359 Speaker 1: really opening the door to a potentially significant move. No, 403 00:21:49,560 --> 00:21:51,080 Speaker 1: we don't know what that event is going to be. 404 00:21:51,640 --> 00:21:53,480 Speaker 1: This time it was COVID. Who knows what it's going 405 00:21:53,520 --> 00:21:56,680 Speaker 1: to be next year. But I do think that we've 406 00:21:56,680 --> 00:22:00,160 Speaker 1: almost learn nothing in terms of policy making because went 407 00:22:00,200 --> 00:22:03,160 Speaker 1: back to where we were at the beginning of bread, 408 00:22:03,200 --> 00:22:05,960 Speaker 1: water and things. I love that I've never heard that, 409 00:22:08,119 --> 00:22:11,120 Speaker 1: but it really does. It feels like everything has happened 410 00:22:11,520 --> 00:22:14,280 Speaker 1: in warp speed. And I wonder. I know, when you 411 00:22:14,440 --> 00:22:18,000 Speaker 1: initially we're studying the velocity of risk, you laid out 412 00:22:18,000 --> 00:22:20,919 Speaker 1: a couple of factors that would exacerbate it going forwards. 413 00:22:21,080 --> 00:22:22,960 Speaker 1: Is there any one factor that you feel like really 414 00:22:22,960 --> 00:22:26,520 Speaker 1: played an outsize role in this year? It's an interesting question. 415 00:22:26,560 --> 00:22:28,560 Speaker 1: So so I think, I mean, the clear one was 416 00:22:28,600 --> 00:22:31,920 Speaker 1: just valuations. They were just so stretched that it could 417 00:22:31,920 --> 00:22:34,800 Speaker 1: have been almost anything that tipped it over. And unfortunately 418 00:22:34,840 --> 00:22:36,840 Speaker 1: ended up being you know, one of the most significant 419 00:22:36,880 --> 00:22:39,200 Speaker 1: social and economic crisis in the world that pushed things 420 00:22:39,240 --> 00:22:41,880 Speaker 1: over the edge. I think more interesting was actually what 421 00:22:42,160 --> 00:22:46,199 Speaker 1: didn't trigger it. We actually helped insulate the job, and 422 00:22:46,240 --> 00:22:49,560 Speaker 1: that was actually the proliferation of technology. You know, when 423 00:22:49,560 --> 00:22:52,199 Speaker 1: we talked about this, originally we thought like, look, technologies, 424 00:22:52,600 --> 00:22:55,280 Speaker 1: it's so big that if you have one disappointment from 425 00:22:55,280 --> 00:22:57,760 Speaker 1: any one of those big companies, it's going to drag 426 00:22:57,800 --> 00:23:00,680 Speaker 1: everyone down. What we didn't foresee is in an event 427 00:23:00,760 --> 00:23:04,960 Speaker 1: like this, actually technology becomes so important. But actually that 428 00:23:05,000 --> 00:23:08,159 Speaker 1: outperforms and it stopped the whole index from completely dropping. 429 00:23:08,720 --> 00:23:11,240 Speaker 1: So it worked in the opposite way. But unfortunately, again 430 00:23:11,240 --> 00:23:13,520 Speaker 1: as I set it, as it go back up again, 431 00:23:13,760 --> 00:23:17,080 Speaker 1: that vulnerability has only increased. You know, Sea Before we 432 00:23:17,080 --> 00:23:20,080 Speaker 1: get to the craziest things, we sometimes run the risk 433 00:23:20,119 --> 00:23:23,960 Speaker 1: of being the typical American UH podcast who's only cares 434 00:23:23,960 --> 00:23:25,840 Speaker 1: about what's going on in the U. S. Stock market. 435 00:23:26,240 --> 00:23:28,840 Speaker 1: So I wanted to touch on a note. UH. You 436 00:23:28,920 --> 00:23:32,640 Speaker 1: and your colleagues had out about emerging markets in Asia 437 00:23:33,400 --> 00:23:37,160 Speaker 1: and sort of the legacy of the trade tensions and 438 00:23:37,200 --> 00:23:41,600 Speaker 1: the sort of anti globalization and nationalization push that we've 439 00:23:41,640 --> 00:23:45,879 Speaker 1: seen this year. I wonder you know, obviously there's the 440 00:23:46,160 --> 00:23:49,400 Speaker 1: trade wars created a new set of risks as far 441 00:23:49,480 --> 00:23:54,399 Speaker 1: as you know positioning in international equities markets, the threat 442 00:23:54,560 --> 00:23:58,440 Speaker 1: of you know, politics interfering with free markets, that sort 443 00:23:58,440 --> 00:24:01,960 Speaker 1: of thing. What us through how you're looking at that risk. 444 00:24:02,119 --> 00:24:06,520 Speaker 1: Is it something that goes away should Donald Trump be 445 00:24:06,640 --> 00:24:10,440 Speaker 1: defeated in November or is it something um that perhaps 446 00:24:10,440 --> 00:24:13,959 Speaker 1: his legacy is that that even if he loses, that 447 00:24:14,040 --> 00:24:16,280 Speaker 1: type of risk is here to stay, that type of 448 00:24:16,680 --> 00:24:20,840 Speaker 1: sort of the world being a little less connected at 449 00:24:20,880 --> 00:24:24,120 Speaker 1: least according to the politicians and the trade policies. Talk 450 00:24:24,200 --> 00:24:27,959 Speaker 1: to us about how you're thinking about that issue going forward. 451 00:24:28,359 --> 00:24:31,159 Speaker 1: So from our perspective, the U S. China tensions that 452 00:24:31,200 --> 00:24:33,200 Speaker 1: are here to stay. It doesn't matter who comes into 453 00:24:33,200 --> 00:24:36,760 Speaker 1: the administration. Um, it doesn't matter if you're talking today 454 00:24:36,840 --> 00:24:40,159 Speaker 1: four years down the line, these tensions are going to 455 00:24:40,200 --> 00:24:42,359 Speaker 1: be with us for a really long time. So I 456 00:24:42,400 --> 00:24:46,080 Speaker 1: think as investors, you know, what we need to do is, firstly, 457 00:24:46,119 --> 00:24:47,879 Speaker 1: you have to at least from the beginning of the 458 00:24:48,080 --> 00:24:50,639 Speaker 1: you have to have taken away a bit of growth 459 00:24:50,640 --> 00:24:54,960 Speaker 1: from China's forecast going forward. Now that doesn't necessarily mean 460 00:24:55,200 --> 00:24:59,280 Speaker 1: it's the end of investing in Emerging Asia or something 461 00:24:59,280 --> 00:25:02,720 Speaker 1: investing in China. They still have huge growth potential, is 462 00:25:02,760 --> 00:25:04,879 Speaker 1: just a little bit lower than what it was before. 463 00:25:05,400 --> 00:25:07,240 Speaker 1: The things that we do need to look out for, though, 464 00:25:07,960 --> 00:25:11,359 Speaker 1: is what does the US do with regards to uh 465 00:25:11,440 --> 00:25:14,800 Speaker 1: to Asian technology companies? How much pressure did they put 466 00:25:14,800 --> 00:25:16,840 Speaker 1: on them, Because again, just as it is for the 467 00:25:16,920 --> 00:25:19,280 Speaker 1: U S, technology is also really important for the emerging 468 00:25:19,359 --> 00:25:22,240 Speaker 1: Asian region as well. It's a new growth step sector. 469 00:25:22,520 --> 00:25:25,720 Speaker 1: They have got a huge wealth of expertise that has 470 00:25:25,760 --> 00:25:29,760 Speaker 1: been driving forward. They've been taking advantage of the fact 471 00:25:29,760 --> 00:25:31,600 Speaker 1: that there is a growing middle class and they're more 472 00:25:31,640 --> 00:25:35,160 Speaker 1: people demanding these kind of tech things. So I think 473 00:25:35,280 --> 00:25:36,760 Speaker 1: that's the first thing we need to look out for. 474 00:25:37,160 --> 00:25:39,760 Speaker 1: But the second thing, and perhaps this is more important, 475 00:25:39,880 --> 00:25:42,520 Speaker 1: is is the politics going to start getting in the 476 00:25:42,560 --> 00:25:44,600 Speaker 1: way of capital markets? And what I mean by that 477 00:25:44,680 --> 00:25:47,040 Speaker 1: is do they start to intervene, do they start to 478 00:25:47,040 --> 00:25:50,600 Speaker 1: put pressure on US organizations to pull back from investing 479 00:25:50,720 --> 00:25:53,399 Speaker 1: in China? And if that happens, and yes, we would 480 00:25:53,400 --> 00:25:56,080 Speaker 1: have major concerns, and then we would need to revisit 481 00:25:56,160 --> 00:25:58,879 Speaker 1: this idea that we have that E. M. MAJA is 482 00:25:58,920 --> 00:26:02,800 Speaker 1: still a long term strategic allocation that investors should have. 483 00:26:03,800 --> 00:26:06,240 Speaker 1: As an example, you look at the TikTok saga going 484 00:26:06,280 --> 00:26:09,359 Speaker 1: on right now, um, but is still ongoing. But I 485 00:26:09,359 --> 00:26:11,959 Speaker 1: mean China tech and its relationship with the United States, 486 00:26:12,400 --> 00:26:15,160 Speaker 1: that's right, you know, the the intervention almost it feels 487 00:26:15,160 --> 00:26:18,960 Speaker 1: like sometimes it knows no bounds. Um. And Yet one 488 00:26:19,000 --> 00:26:21,560 Speaker 1: of the areas is we've seen the trade wall moved 489 00:26:21,600 --> 00:26:24,919 Speaker 1: to a technology war. What we worry about is the 490 00:26:24,960 --> 00:26:28,040 Speaker 1: new wall going to be moving into capital markets? Um? 491 00:26:28,200 --> 00:26:30,680 Speaker 1: So are we going to see a lot of firms, 492 00:26:30,720 --> 00:26:33,840 Speaker 1: pension funds being asked pulled back stop investing in these 493 00:26:33,920 --> 00:26:37,359 Speaker 1: Chinese assets if that happens, And we just have to 494 00:26:37,440 --> 00:26:40,680 Speaker 1: question how much strength a lot of these places can have. 495 00:26:40,920 --> 00:26:42,400 Speaker 1: We hope that's not going to be the case because 496 00:26:42,400 --> 00:26:45,199 Speaker 1: at the moment there is so much growth potential in 497 00:26:45,200 --> 00:26:48,640 Speaker 1: that region. Well, only time we'll tell and as time 498 00:26:48,680 --> 00:26:50,760 Speaker 1: goes on. In our podcast, Mica, I think you know 499 00:26:50,760 --> 00:26:54,960 Speaker 1: what time it is? Very very well, it is that 500 00:26:55,000 --> 00:26:58,760 Speaker 1: time that sounds really genuine. Charlie Pellett tell us what 501 00:26:58,840 --> 00:27:02,159 Speaker 1: time it is? Damn clear. Of the craziest things we 502 00:27:02,240 --> 00:27:06,000 Speaker 1: saw in markets this week all right, Sarah. We haven't 503 00:27:06,040 --> 00:27:08,960 Speaker 1: gotten many calls to the hotline, so hopefully people are 504 00:27:09,000 --> 00:27:10,960 Speaker 1: not too shy to call and leave us a voicemail 505 00:27:11,080 --> 00:27:15,600 Speaker 1: on the hotline and tell us the crazy thing you saw. Um, 506 00:27:15,640 --> 00:27:19,920 Speaker 1: I did get text from a friend of mine about 507 00:27:19,920 --> 00:27:22,960 Speaker 1: a crazy thing he saw, So John Miller, this one's 508 00:27:23,000 --> 00:27:24,959 Speaker 1: for you. He's an avid listener of the show, Sarah. 509 00:27:25,200 --> 00:27:27,400 Speaker 1: He listens to us on like double speed, though, which 510 00:27:27,440 --> 00:27:29,680 Speaker 1: I and then I think whenever I see him and 511 00:27:29,720 --> 00:27:31,760 Speaker 1: I'm talking at normal speed, I think I sound weird 512 00:27:31,800 --> 00:27:33,520 Speaker 1: to him. He's like, you, all right, you're feeling okay. 513 00:27:35,080 --> 00:27:38,040 Speaker 1: It likes us a squeaky, sped up mike. Yeah, yeah, 514 00:27:38,040 --> 00:27:40,720 Speaker 1: it's weird. I gotta work on talking faster, I guess 515 00:27:40,760 --> 00:27:43,520 Speaker 1: for when I'm hanging out with him. This is only 516 00:27:43,600 --> 00:27:47,240 Speaker 1: ten generally market related. In fact, by ten generally I 517 00:27:47,440 --> 00:27:49,960 Speaker 1: may mean not really at all, but it's so good 518 00:27:50,000 --> 00:27:53,359 Speaker 1: I want to share it anyway. It's about an art dealer, 519 00:27:53,680 --> 00:27:55,840 Speaker 1: and as you know, Sarah, art dealers are my my 520 00:27:55,960 --> 00:28:00,440 Speaker 1: favorite source of crazy market things. Alternative alternative as that's 521 00:28:00,840 --> 00:28:06,120 Speaker 1: this guy. Forrest Fen, a millionaire art dealer, hid a 522 00:28:06,200 --> 00:28:10,920 Speaker 1: treasure chest holding gold nuggets and precious gems in the 523 00:28:11,040 --> 00:28:14,240 Speaker 1: Rocky Mountains about a decade ago, just for fun, just 524 00:28:14,320 --> 00:28:18,320 Speaker 1: took what's estimated at two million dollars worth of golden gems, 525 00:28:18,880 --> 00:28:22,639 Speaker 1: hit it in the Rocky Mountains. And he left not 526 00:28:22,720 --> 00:28:28,040 Speaker 1: many clues, some some poem and a map. This is all, 527 00:28:28,080 --> 00:28:30,920 Speaker 1: by the way, acquitting to a story on MPR dot org. 528 00:28:31,560 --> 00:28:35,000 Speaker 1: And apparently thousands of people have been out there looking 529 00:28:35,040 --> 00:28:39,280 Speaker 1: for this forty pound treasure chest. Several people died in 530 00:28:39,360 --> 00:28:43,040 Speaker 1: fact looking for it. And uh, crazy news is someone 531 00:28:43,080 --> 00:28:46,680 Speaker 1: actually found it recently. They have not stepped forward to 532 00:28:46,760 --> 00:28:50,120 Speaker 1: say who they are, but someone buried two million in 533 00:28:50,160 --> 00:28:52,160 Speaker 1: treasure in the Rocky Mountains. And and the best part 534 00:28:52,200 --> 00:28:55,200 Speaker 1: is some guy actually found it, using this guy's poem 535 00:28:55,240 --> 00:28:58,640 Speaker 1: in a map to go find it again. Not market related, 536 00:28:58,720 --> 00:29:01,560 Speaker 1: but pretty crazy. It sounds like a Nicolas Cage movie 537 00:29:01,560 --> 00:29:04,760 Speaker 1: to me, right, National Treasure it is, or that show 538 00:29:04,800 --> 00:29:07,000 Speaker 1: Outer Banks. My kids are watching Outer Banks, which is 539 00:29:07,000 --> 00:29:09,480 Speaker 1: a big treasure hunt show. It's pretty it's pretty good. 540 00:29:09,680 --> 00:29:11,640 Speaker 1: I'll to check it out. And remember, if you do 541 00:29:11,680 --> 00:29:13,440 Speaker 1: want to give us a call at the podcast hotline, 542 00:29:13,440 --> 00:29:16,680 Speaker 1: that number is six four six three two four three 543 00:29:16,800 --> 00:29:19,120 Speaker 1: four nine. Oh and if you tell us something good. 544 00:29:19,320 --> 00:29:22,680 Speaker 1: We might even play it on the next episode. Alright, sorry, 545 00:29:22,680 --> 00:29:24,640 Speaker 1: you're turning, you're in the hot seat. You hyped up 546 00:29:24,640 --> 00:29:27,600 Speaker 1: your crazy thing. Let's let's hear it. Alright, Well, I 547 00:29:27,640 --> 00:29:30,400 Speaker 1: figured I would just take a sequel from my last 548 00:29:30,480 --> 00:29:33,760 Speaker 1: minute last week's entry. Um. So, last week I talked 549 00:29:33,760 --> 00:29:38,400 Speaker 1: about measures of implied volatility moving up with stocks. Well, 550 00:29:39,200 --> 00:29:43,360 Speaker 1: on Tuesday, the day that we saw the nasdack drop, 551 00:29:43,880 --> 00:29:46,600 Speaker 1: I mean close to five percent, we actually saw the 552 00:29:46,680 --> 00:29:50,800 Speaker 1: VX and fall alongside it, which is very very rare, 553 00:29:51,280 --> 00:29:54,600 Speaker 1: clearly something odd going on in the connection, but also 554 00:29:54,720 --> 00:29:59,600 Speaker 1: just an easy one. I'll bring a double whammy this week. 555 00:30:00,720 --> 00:30:03,680 Speaker 1: We always kind of look back to Tesla. It's an easy, 556 00:30:03,680 --> 00:30:07,080 Speaker 1: wonderful crazy things out of But Tuesday down more than 557 00:30:07,840 --> 00:30:12,200 Speaker 1: the worst day in Tesla's existence. Um so pretty wild, 558 00:30:13,280 --> 00:30:17,760 Speaker 1: that is, that is pretty wild. Uh. Tesla is another 559 00:30:17,800 --> 00:30:20,760 Speaker 1: source of perennial source of crazy things. So we thank 560 00:30:20,840 --> 00:30:23,240 Speaker 1: them for that. Thank you Ellen Reliable, Thank you Elon 561 00:30:23,320 --> 00:30:29,880 Speaker 1: Musk short short shorts, and uh whatever else. How about 562 00:30:29,880 --> 00:30:33,960 Speaker 1: you still lost the same value as Morgan Stanley on Tuesday. Loan, 563 00:30:34,280 --> 00:30:37,440 Speaker 1: that's my, it's my, it's mind boggling. That's a that's 564 00:30:37,440 --> 00:30:39,600 Speaker 1: a great way to put it in perspective, Sema like, 565 00:30:39,680 --> 00:30:43,400 Speaker 1: well done. But have you seen any crazy things in 566 00:30:43,440 --> 00:30:47,520 Speaker 1: the past week? So crazier than Tesla? Yes, So again, 567 00:30:47,800 --> 00:30:49,760 Speaker 1: this is looking back a couple of weeks in fairness, 568 00:30:49,760 --> 00:30:51,920 Speaker 1: so it's not just this week. But I thought I'm 569 00:30:51,960 --> 00:30:54,840 Speaker 1: taking a little bit international um and I want to 570 00:30:54,840 --> 00:30:59,200 Speaker 1: look at reservations, seated diners and restaurants and ask you 571 00:30:59,240 --> 00:31:02,080 Speaker 1: what you think the year and unit of changes in 572 00:31:02,120 --> 00:31:04,640 Speaker 1: the UK. So at the end of August this year 573 00:31:04,640 --> 00:31:06,840 Speaker 1: compared to last year, what was a year and year change? 574 00:31:06,920 --> 00:31:09,560 Speaker 1: And just to give you a little bit of a hint, 575 00:31:10,160 --> 00:31:14,360 Speaker 1: the US number was six down on this time last year. 576 00:31:15,040 --> 00:31:18,800 Speaker 1: Oh boy, I think for it to be crazy, I'm 577 00:31:18,800 --> 00:31:21,560 Speaker 1: gonna say they were positive somehow. I don't know how, 578 00:31:22,040 --> 00:31:24,160 Speaker 1: but that would be the craziest outcome. I would think, 579 00:31:24,360 --> 00:31:26,800 Speaker 1: aren't you getting paid to eat out? Right? Now? That's right? 580 00:31:27,760 --> 00:31:32,600 Speaker 1: So is it positive? It is positive. I'm going to 581 00:31:32,640 --> 00:31:35,160 Speaker 1: tell you the number. It's actually it was up six 582 00:31:36,600 --> 00:31:40,680 Speaker 1: and that time last year. Now, it's unbelievable. It really 583 00:31:40,880 --> 00:31:45,000 Speaker 1: speaks to the the fact that people are willing to 584 00:31:45,040 --> 00:31:48,400 Speaker 1: put away all of their health considerations just to save 585 00:31:48,480 --> 00:31:51,400 Speaker 1: ten pounds per person to eat out. So the Chancellor 586 00:31:51,440 --> 00:31:54,360 Speaker 1: had introduced a scheme called eat out to help out, 587 00:31:54,800 --> 00:31:57,040 Speaker 1: and each diner on a Monday, Tuesday and Wednesday was 588 00:31:57,280 --> 00:31:59,920 Speaker 1: getting about up to ten pounds off on each mail 589 00:32:00,120 --> 00:32:03,920 Speaker 1: that they that they had out. Um and you know, 590 00:32:04,000 --> 00:32:05,800 Speaker 1: I can tell you it was a struggle to get 591 00:32:05,800 --> 00:32:08,800 Speaker 1: any bookings and we tried our hardest to make the 592 00:32:08,840 --> 00:32:11,280 Speaker 1: most of it. My husband used it five times in 593 00:32:11,320 --> 00:32:15,320 Speaker 1: one day, five times in one day. He's one of 594 00:32:15,320 --> 00:32:21,160 Speaker 1: those people adding those seated diners. So he's saving ten 595 00:32:21,200 --> 00:32:24,000 Speaker 1: pounds and going to gain ten pounds on on the 596 00:32:24,040 --> 00:32:31,520 Speaker 1: other end, ten pounds to spend about two that's pretty good. Well, 597 00:32:31,560 --> 00:32:35,400 Speaker 1: I wonder is part of that because London typically clears 598 00:32:35,440 --> 00:32:38,640 Speaker 1: out in August and everyone goes to the Mediterranean, and 599 00:32:38,920 --> 00:32:40,760 Speaker 1: that didn't happen that year. Is added play at all, 600 00:32:40,800 --> 00:32:43,720 Speaker 1: do you think? Well, actually, interestingly, because it's the only 601 00:32:43,800 --> 00:32:46,800 Speaker 1: few months where London has really good weather, nobody goes 602 00:32:46,800 --> 00:32:49,880 Speaker 1: away in July and August we will stay here. So 603 00:32:49,920 --> 00:32:53,000 Speaker 1: actually usually the restaurant dinings is really high in August. 604 00:32:53,080 --> 00:32:56,440 Speaker 1: So it just goes to show the very very significant 605 00:32:56,440 --> 00:32:59,200 Speaker 1: impact that there's eat out to help out. Scheme had 606 00:32:59,440 --> 00:33:02,120 Speaker 1: pretty interest. It really is shocking, I mean because I know, 607 00:33:02,600 --> 00:33:05,000 Speaker 1: at least from my perspective. I mean, this past week 608 00:33:05,040 --> 00:33:07,560 Speaker 1: they announced that indoor dining can open in New York 609 00:33:07,600 --> 00:33:10,080 Speaker 1: City soon at capacity, and there are still a lot 610 00:33:10,120 --> 00:33:12,880 Speaker 1: of people who are very hesitant um to go. So 611 00:33:12,960 --> 00:33:16,680 Speaker 1: the fact that in London uh seeded dinners are up 612 00:33:17,760 --> 00:33:21,680 Speaker 1: from a year prior the value of money right, it's 613 00:33:21,720 --> 00:33:25,320 Speaker 1: a really innovative introduction because actually what it does it 614 00:33:25,440 --> 00:33:28,120 Speaker 1: reminds people how much they like to eat out, and 615 00:33:28,160 --> 00:33:30,600 Speaker 1: actually it reminds them that they it's not as dangerous 616 00:33:30,640 --> 00:33:33,040 Speaker 1: as maybe they have in their heads. So it was 617 00:33:33,080 --> 00:33:35,479 Speaker 1: it was a clever move. Well that's a good one, 618 00:33:35,480 --> 00:33:38,240 Speaker 1: Seema Sarah, we might have to give it. Give Sema 619 00:33:38,360 --> 00:33:41,760 Speaker 1: the the gold medal this week. Thank you so so 620 00:33:41,840 --> 00:33:44,280 Speaker 1: much for joining us this week from London. It was 621 00:33:44,280 --> 00:33:55,320 Speaker 1: my pleasure. Thanks for having me on What Goes Up. 622 00:33:55,360 --> 00:33:58,200 Speaker 1: We'll be back next week. Until then, you can find 623 00:33:58,320 --> 00:34:01,240 Speaker 1: us on the Bloomberg Terminal, website, an app, or wherever 624 00:34:01,320 --> 00:34:03,720 Speaker 1: you get your podcasts. We'd love it if you took 625 00:34:03,720 --> 00:34:06,400 Speaker 1: the time to rate and interview the show on Apple Podcasts, 626 00:34:06,560 --> 00:34:09,120 Speaker 1: so more listeners can find us and you can find 627 00:34:09,160 --> 00:34:12,560 Speaker 1: us on Twitter, follow me at Sarah pont Sack, Mike 628 00:34:12,760 --> 00:34:16,359 Speaker 1: is that Reaganonymous, and you can also follow Bloomberg Podcasts 629 00:34:16,360 --> 00:34:19,760 Speaker 1: at podcasts. Also thank you to Charlie Pellett of Bloomberg 630 00:34:19,840 --> 00:34:22,880 Speaker 1: Radio and the voice of the New York City Subway system. 631 00:34:22,920 --> 00:34:25,640 Speaker 1: What Goes Up is produced by Jordan Gaspore. The head 632 00:34:25,640 --> 00:34:29,200 Speaker 1: of Bloomberg podcast is Francesco Levie. Thanks for listening, See 633 00:34:29,239 --> 00:34:29,839 Speaker 1: you next time.