Speaker 1: Strap on your parachute. It's time for What Goes Up
Speaker 1: with Sarah Ponzick and Mike Reagan. Hello and welcome to
Speaker 1: What goes Up, a Bloomberg Weekly Markets podcast. I'm Sarah Ponzak,
Speaker 1: a reporter on the Cross Asset team, and I'm Mike Reagan,
Speaker 1: a senior editor at Bloomberg. This week on the show,
Speaker 1: it was just last month that this episode's guests said
Speaker 1: this big tech will need to continue delivering and the
Speaker 1: tremendous equity market rally will remain vulnerable to the performance
Speaker 1: of a handful of companies. Well, in recent days, we've
Speaker 1: got in a firsthand look at just how vulnerable it
Speaker 1: may be. We discussed the possible causes of this and
Speaker 1: also the outlook from here, and as always, we will
Speaker 1: close out the episode with our tradition, the craziest thing
Speaker 1: I saw in markets this week, Sarah, I trust you
Speaker 1: saw some crazy things. Trust correctly, And I have to
Speaker 1: make up for last week. I came a little bit unprepared.
Speaker 1: Um so this week I came more prepared than last week.
Speaker 1: I can say that, Mike, Okay, that that's kind of
Speaker 1: a low hurdle to clear, So I know, but you
Speaker 1: you pulled one out at the last minute last week,
Speaker 1: so I even see that that was a nice save.
Speaker 1: But anyways, you said, very happy to have our guest
Speaker 1: back this week. I believe she was on the show
Speaker 1: once last year and before the world went crazy, uh,
Speaker 1: and we got her perspective on the velocity of risk
Speaker 1: and how it is accelerated. Boy um, that thesis was
Speaker 1: sure proven true in the age of COVID. So happy
Speaker 1: to have her back on the show. Her name is
Speaker 1: Sema Shaw. She is the chief strategist at Principal Global Investors.
Speaker 1: She joins US from London, where it's a little bit
Speaker 1: later than it is here in the US. So, Seema,
Speaker 1: I don't know if you're in your pajamas or what
Speaker 1: I've I've been in my pajamas since March, so it's
Speaker 1: it's totally fine if you are. It is my permanent
Speaker 1: uniform thesis, at least pajamas from the waist down, just
Speaker 1: in case you have any virtual meetings. No one, No
Speaker 1: one will know exactly exactly. It's important that the top
Speaker 1: of it is looking good. See, I'm gonna dispense. Usually
Speaker 1: I have about a twelve part question that I start with,
Speaker 1: but I'm gonna make it simple. Uh, this time what
Speaker 1: a wild summer. I mean, it was the biggest August
Speaker 1: gain for the US market. I don't know, Sarah wasn't.
Speaker 1: It's like the biggest August gain in since the while
Speaker 1: the whole country was basically more or less lockdown in quarantine.
Speaker 1: How would you explain what happened this summer and now
Speaker 1: that we're seeing sort of the bloom come off the rows,
Speaker 1: what's happening right now with this little correction in the
Speaker 1: U S exuity market and tech specifically. I mean, how
Speaker 1: do you just describe and explain a summer like that? Yeah,
Speaker 1: it's been absolutely astonishing. I don't think when all of
Speaker 1: this kicked off, when lockdowns were announced, that anyone would
Speaker 1: have entered dissipated the kind of summer performance that we've seen.
Speaker 1: I think a lot of the strength was down to
Speaker 1: three factors. One is the release of pent up demand
Speaker 1: that it clearly accumulated during lockdown. So what we've seen
Speaker 1: is a lot of easy gains, you know, people trying
Speaker 1: to return to some semblance of normality and that's propelled markets.
Speaker 1: And then the other two things is policy. So center
Speaker 1: banks clearly have you flooded the market with liquidity. It
Speaker 1: has no else to go, it just goes straight into
Speaker 1: capital markets. So that that's been key, and of course
Speaker 1: fiscal policy has helped with with improving confidence. But within
Speaker 1: all of this, those three factors have driven one sector.
Speaker 1: Each one of them has gone into one sector, and
Speaker 1: that's tech. And when you look at the market recovery,
Speaker 1: it has been driven simply by take You know, it's
Speaker 1: such a narrow recovery. And I think all of that
Speaker 1: incredible exuberance around the big tech sector, which I have
Speaker 1: to say we have real beliefs in, but it went
Speaker 1: a little bit too frothy, and that's why you've seen
Speaker 1: this pullback over the last few days. I don't necessarily
Speaker 1: but there's any major fundamentals that have resulted in this
Speaker 1: jewel back. Seema. I likely spent the entire months of
Speaker 1: July in August writing about reasons for this unbelievable tech
Speaker 1: rally that we saw. Some being that many of these
Speaker 1: companies are beneficiaries of COVID nineteen. Like you mentioned, they
Speaker 1: stand to benefit. And the idea is that a lot
Speaker 1: of these trends have been accelerated by many stay at
Speaker 1: home orders well In recent weeks and days, there have
Speaker 1: been many reports about one soft bank buying many call options,
Speaker 1: and big tech companies also looking at small contract trades
Speaker 1: seeing tons and tons of options volume from the likes
Speaker 1: of small retail traders. And I feel like some are
Speaker 1: questioning if we can actually attribute much of the rally
Speaker 1: to the fact that these companies stand to benefit UH
Speaker 1: and their true earnings potential and their growth power. Is
Speaker 1: there reason to to question that narrative, if that at
Speaker 1: all had a play in this unbelievable run up, like
Speaker 1: like Mike said, the best August since the late eighties,
Speaker 1: or is there more to it than just the option story?
Speaker 1: You know, I think you just have to look at
Speaker 1: some of the charts of these companies performances and you
Speaker 1: can see that something weird went on in August. They
Speaker 1: just you know, they have performed extremely well through till July,
Speaker 1: and then in August they just took off, you know,
Speaker 1: the curves almost turned exponential. So I think there has
Speaker 1: to be something else to play there. Um and the
Speaker 1: option story I think is key. It probably isn't everything, though,
Speaker 1: you know, you have to look at some of the
Speaker 1: smaller orders that went on. They almost dwarf what we've
Speaker 1: seen the soft bank. So I think the retail investors,
Speaker 1: you know, you're the Robin Hood app. I think that's
Speaker 1: been a huge driver as well. These are companies that
Speaker 1: people have been watching from home seeing how amazingly the
Speaker 1: well they've been performing, and have tried to jump on
Speaker 1: the bandwagon. The problem is is that a lot of
Speaker 1: these investors and new time investors, this is probably the
Speaker 1: first time that they've experienced any kind of crisis and
Speaker 1: have less ability to try and analyze the fundamentals. So
Speaker 1: I think this has also been playing out, and it's
Speaker 1: again one of the reasons why you get this big
Speaker 1: snap up and then you also get the biggest snap down.
Speaker 1: You know. One theory I've I've seen floated for the
Speaker 1: correction in tech is that people are getting more confident
Speaker 1: that you know, that we're sort of over the hump
Speaker 1: of the COVID virus, that the rest of the struggling
Speaker 1: sectors of the economy, the sort of value stocks, if
Speaker 1: you will, or the you know, non tech parts of
Speaker 1: the economy, the cyclical parts that have really been hurt
Speaker 1: are poised to rebound, and maybe people are getting out
Speaker 1: of tech and preparing to to get back into you know,
Speaker 1: more cyclical and value oriented sectors. I don't know if
Speaker 1: I buy that, Sema. I mean, is that do you
Speaker 1: think that could be what's going on? Or was it
Speaker 1: just you know, this tech rally was bound to hit
Speaker 1: a wall, This melt up was bound to melt down eventually.
Speaker 1: You know what which which camper you on for for
Speaker 1: sort of the cattle to behind us? Yeah, So I
Speaker 1: think I think this is really interesting because actually I
Speaker 1: think there's both of them are true. I think the
Speaker 1: technicals are kind of momentum that you've seen in the market,
Speaker 1: the very overcrowding. With all of these positions evaluations together,
Speaker 1: you've created a story which is very very vulnerable to
Speaker 1: any kind of pullback, and that pullback can come from
Speaker 1: either deteriorating sentiment because of geopolitics. But another story is
Speaker 1: just actually the improving economy and also news of a
Speaker 1: potential vaccine. It has been a lot driven by a
Speaker 1: very strong demand for these technology companies over the summer
Speaker 1: as since lockdown was announced, and as a result, as
Speaker 1: soon as you hear news of a vaccine that it
Speaker 1: encourage people that look, we can maybe return to a
Speaker 1: more normal way of life. We will no longer need
Speaker 1: to be so dependent on companies to deliver our food.
Speaker 1: My husband was saying the other day that actually he's
Speaker 1: border delivering. He wants to go back to a supermarket.
Speaker 1: I mean, I don't share the same sentiment, but I
Speaker 1: think he speaks for a few people out there, so
Speaker 1: and I think so as you get that turned to
Speaker 1: the vaccine, then actually reliance and dependence on technology starts
Speaker 1: to pull back. And given that all those indicators together,
Speaker 1: we're building up an environment of vulnerability. It was almost
Speaker 1: a perfect storm to create that pullback. Maybe if he
Speaker 1: goes back to the grocery store, he just feels like
Speaker 1: his life will be one step closer to normal. I
Speaker 1: made the supermarkets want us all doing that too, because
Speaker 1: I know I went into Whole Foods the other day
Speaker 1: and I had like a list of three items I
Speaker 1: wanted to get, and I ended up with like eighty
Speaker 1: five things, uh in the check outlines. So I wonder
Speaker 1: if there's something, you know, there's something about that impulse
Speaker 1: purchasing power. I wonder that uh, you know, is being
Speaker 1: lost in this whole, this whole online regime. Yeah, the
Speaker 1: kids sweets are no longer in demand as the kids
Speaker 1: are walking past and demanding their parents by Yeah, I've
Speaker 1: got to say I made a Trader Joe's run the
Speaker 1: other weekend, and I left with many more treating suites
Speaker 1: than I planned on when I went in there, because
Speaker 1: they just, you know, they looked good. We're a stuck
Speaker 1: at home for the most part. I needed something extra.
Speaker 1: Trader Chose has got to be the market leader and
Speaker 1: impulse purchases. They know what they're doing with their store layout.
Speaker 1: I can tell you that you go in without a
Speaker 1: shopping list and end up with five things. So I see,
Speaker 1: m I tell your husband I agree with him. I
Speaker 1: can relate. He'll be happy someone does. So see. I know,
Speaker 1: I know it's obviously so difficult to make short term
Speaker 1: market calls, but I just want to get your view. Yes,
Speaker 1: we got a an eleven percent correction in the NASDAC
Speaker 1: in a matter of three days. I mean it was
Speaker 1: the fastest correction from a record for the benchmark. Is
Speaker 1: that enough though, to really wash out the froth is
Speaker 1: optimistic sentiment and move forwards from here? I mean, you look,
Speaker 1: and we're still what more than sixty percent off belows
Speaker 1: from March. I mean that's obviously not a small number. No,
Speaker 1: I would agree. Look, I think there is still froth
Speaker 1: in the market, but ultimately, if there's a really strong
Speaker 1: circular growth story, I don't think that you're going to
Speaker 1: see significant drops from here. You know, chances are that
Speaker 1: you're not going to see the magnitudes of increases certainly
Speaker 1: that we've seen over the last six months. That's not
Speaker 1: going to be repeated. But do we expect the market
Speaker 1: to come tumbling down from here? I'm certainly not a
Speaker 1: buyer of that idea, and I think, as I said,
Speaker 1: the reason is is that we may have increased our
Speaker 1: aliance and we may pull back some of that dependence
Speaker 1: on technology, but a fundamental core of that is here
Speaker 1: to stay. And also in an environment where there is
Speaker 1: so much uncertainty, we still don't know what's around the corner.
Speaker 1: You still need companies that have got those really strong
Speaker 1: balance sheets and positive cash flows, and those make acap
Speaker 1: tex stocks meet that criteria seem you know. Let's turn
Speaker 1: our attention to the next big risk, which is on
Speaker 1: everyone's mind. It's the US elections in November. You and
Speaker 1: your colleagues at Principle had an interesting note looking at
Speaker 1: the elections, and you know, this sort of historical precedent
Speaker 1: is that it's pretty common for there to be volatility
Speaker 1: in the market, in the equity market ahead of a
Speaker 1: US presidential election. You know, I don't know what the
Speaker 1: percentage of that happening is, but it's it's pretty high
Speaker 1: and pretty you know, easily telegraphed and predictable. But that
Speaker 1: I'll tell you often typically calms down after the election,
Speaker 1: when investors have a sense of what the next administration's
Speaker 1: priorities are gonna be, what kind of policies may influence
Speaker 1: their portfolios. I have to wonder, though, this is a
Speaker 1: very unique environment leading up to this election. For one thing,
Speaker 1: all this froth that even after this correction still exists
Speaker 1: in the market. Also just the bizarre nature of the
Speaker 1: the election, where you know, the mail in bouting will
Speaker 1: be a big you. President Trump is already you know,
Speaker 1: raising a lot of suspicion at least he alleges as
Speaker 1: far as the you know, how how reliable the vote
Speaker 1: can be when it's done over the mail. In many elections,
Speaker 1: it seems like it's almost a no brainer to buy
Speaker 1: that pre election dip. I wonder if if you think
Speaker 1: that's the case this time. And also given the valuations
Speaker 1: of the market, is that volatility that dip before the
Speaker 1: election failed to be potentially a bigger than the normal
Speaker 1: one this time. Yeah, these are these are really good
Speaker 1: points that I think all investors are are starting to
Speaker 1: consider pretty deeply at this stage. Well, as you said,
Speaker 1: you know, it is still a pretty frothy market. Valuations
Speaker 1: is still very stretched, and in that environment you have
Speaker 1: created almost a perfect scenario where any kind of shifting
Speaker 1: sentiment can result in a sudden drop. Right, So this
Speaker 1: is a risk ve losty story that we talked about
Speaker 1: months ago. The thing is with US elections, typically you
Speaker 1: do see that volatility, but then the foltility fades and
Speaker 1: it goes back to fundamentals. So would have been fundamentals
Speaker 1: driving the markets over the last six seven months. You know,
Speaker 1: we spoke about it before. It's down really to center banks,
Speaker 1: to fiscal policy, but mainly center banks for markets, that's
Speaker 1: really been key. So, yes, we do anticipate a rise
Speaker 1: in volatility. Do we think that would be the right
Speaker 1: time to buy the dip? Actually, I don't think it's
Speaker 1: the right time to try and do any kind of
Speaker 1: trading around the election, because it's so difficult to anticipate
Speaker 1: and read what's going to happen, especially in scenario where
Speaker 1: you could potentially see the election result being questioned not
Speaker 1: just for a week or so, but for even a
Speaker 1: month or two after. So actually, from our perspective, you're
Speaker 1: better off just staying invested. You look away from all
Speaker 1: the noise, keep your positions, and keep your eyes on
Speaker 1: the fundamentals because past the election, coming into the things
Speaker 1: that are going to be driving the market is still
Speaker 1: gonna be the same stuff, and that's mainly the Federal Reserve.
Speaker 1: The election is less than two months away. I know,
Speaker 1: I can't believe it well, and the result or maybe
Speaker 1: conclusive results or maybe a year away, Sarah. So we hope, hopefully,
Speaker 1: we hope, hopefully we're going to be the inauguration day.
Speaker 1: That's my hope for this country. God help us. If
Speaker 1: we don't, we'll see what you mentioned the Federal Reserve.
Speaker 1: And of course we have the next FED meeting coming
Speaker 1: up next week, so the next really near term risk
Speaker 1: probably for the markets. Is there anything that you would
Speaker 1: expect or maybe you are looking out for that might
Speaker 1: be unexpected, especially after the release of the policy review
Speaker 1: and the latest speech from Powell in Jackson Hall. Well,
Speaker 1: I think there is one thing that Jerome really needs
Speaker 1: to to discuss, and he needs to give some parameters
Speaker 1: around this new inflation framework. That's what people want to know.
Speaker 1: You know, what is too high above two You know,
Speaker 1: at what point do they feel like, Okay, this is
Speaker 1: the time to stop pulling back. How long does it
Speaker 1: need to be over two percent? Uh? These are the
Speaker 1: things that I think investors need to get a better
Speaker 1: hold of. We're also going to be looking out for
Speaker 1: more information and pretend chill yield, curve control, any kind
Speaker 1: of explicit forward guidance, although at the stage, you know,
Speaker 1: having listened to the various FED presidents over the last
Speaker 1: couple of weeks, I'm not sure we're actually going to
Speaker 1: receive much more news. I feel like they are trying
Speaker 1: to pull back from providing too much information on anything
Speaker 1: and hoping that actually just the inflation framework itself is
Speaker 1: enough to get the market going. And I think it
Speaker 1: may be in some ways right, because you know, they've
Speaker 1: gone out of their way to make sure that people
Speaker 1: know there is no chance of FED rate hikes over
Speaker 1: the foreseeable future, and of course hopefully we'll get some
Speaker 1: more details on this sort of new inflation targeting regime
Speaker 1: that the FED has where they we're looking at that
Speaker 1: two percent target as as an average rather than sort
Speaker 1: of a maximum of what they would tolerate for inflation.
Speaker 1: See if I don't wonder, though, how big of a
Speaker 1: deal is that, if we've struggled for so long to
Speaker 1: hit two pc inflation, is there any reason to believe,
Speaker 1: in your opinion, that we are in an accelerating inflationary
Speaker 1: environment and that will really see that average inflation target
Speaker 1: put into practice at any time in the near future.
Speaker 1: You know, that's such a good question, you know, I
Speaker 1: just want to take it out. Two years ago, at
Speaker 1: the Global Milk and Conference, Christine the Guard spoke. She
Speaker 1: wasn't yet the head of the CD, she's still at
Speaker 1: the i m F, and she was asked on stage,
Speaker 1: you know, what do you think about raising inflation targets?
Speaker 1: Do you think that will help countries? And back then
Speaker 1: she says she saw no sense, said, if you can't
Speaker 1: reach two percent, what makes you think you can reach
Speaker 1: three percent? And it made no sense to her to
Speaker 1: move in that direction. So, and I think there is
Speaker 1: a there is a clear argument there right, Why? Why
Speaker 1: what are they doing which is so special? That means
Speaker 1: that they're more likely to reach a higher target even now.
Speaker 1: And I have to say that, given all the structural
Speaker 1: factors that are underway at the moment, globalization, demographics, technology,
Speaker 1: it's very difficult to come across another reason why there
Speaker 1: should be higher inflation. And in a way, maybe the
Speaker 1: only opportunity if they start to really embrace fiscal spending
Speaker 1: even more than what you've already seen this yet, maybe
Speaker 1: that's the only scenario where you see inflation hitting that
Speaker 1: two percent target and even over shooting. You know, there
Speaker 1: were some big names this past week talking about inflation,
Speaker 1: Drucon Miller talking about the potential for a ten percent
Speaker 1: inflation rate, and I know there was a lot of
Speaker 1: pushback for many investors on this, uh, kind of along
Speaker 1: the same lines of what you just said, Sema. I mean,
Speaker 1: we haven't even been able to get to two percent
Speaker 1: all these deflationary forces over the last couple of years.
Speaker 1: What makes you think that all of a sudden we're
Speaker 1: going to launch into an inflationary upward spiral. Do you
Speaker 1: see potential for that at all? I mean, do you
Speaker 1: see the potential for inflation to even get to the
Speaker 1: point where the feed is actually going to step up
Speaker 1: and say that they are going to raise rates off
Speaker 1: of the zero lower bound and say the next five years.
Speaker 1: I was going to say, what, which lot, which horizon
Speaker 1: are you talking about? I mean, the thing is that
Speaker 1: we look back to global financial crisis since then ten
Speaker 1: years the father struggle to even hit the two percent level,
Speaker 1: and they have thrown almost everything that they have and
Speaker 1: there's still be no no successor So actually what they
Speaker 1: probably need in order to reach a two percent telegate
Speaker 1: level is a complete regime change. Now, the inflation framework
Speaker 1: announcement is good, but it doesn't take you all the
Speaker 1: way to a new regime change. So for me, the
Speaker 1: idea of sending a temper cent inflation result is is
Speaker 1: out of this world. Look, you have to assume that
Speaker 1: inflation is fast asleep and it's suddy going to wake
Speaker 1: up with a bounce. If you think inflation is going
Speaker 1: to hit over three pc within the next couple of years,
Speaker 1: I see if I wanted to get back to that
Speaker 1: idea of velocity of risk, that's what we talked a
Speaker 1: lot about that the first time you were on the podcast.
Speaker 1: I find it to be a fascinating topic and correct
Speaker 1: me if I bungle my description of of what you
Speaker 1: mean by But it's, you know, as far as I
Speaker 1: can tell, it's basically the notion that risks from the
Speaker 1: economy or from markets are priced in much more quickly
Speaker 1: now into markets than they had been before. And you know,
Speaker 1: there's a variety of reasons, technology, the proliferation of social
Speaker 1: media being one of them. But boy, you know, as
Speaker 1: as Sarah points out, in journalism, we do we like
Speaker 1: to deal with those superlatives, you know, the fastest correction
Speaker 1: in uh An index ever or the you know, fastest
Speaker 1: gain whatever. I feel like this year we've just been
Speaker 1: filled with those type of superlatives on both the downside
Speaker 1: and the upside for the markets. And I think it
Speaker 1: kind of proves your point that, you know, markets are
Speaker 1: moving a lot quicker than maybe they did in the past.
Speaker 1: What has the this whole raised a year of COVID
Speaker 1: and the recession taught you or what have you learned
Speaker 1: about the velocity of risk from this crazy year that
Speaker 1: we've had. Well, I spoke to you back in January.
Speaker 1: It was when coronavirus was starting to spread, but we
Speaker 1: had no idea about what was in store for us
Speaker 1: now the velocity of risk. You know, of course when
Speaker 1: we wrote the paper, we had no idea of course
Speaker 1: that COVID is on the way, But yes, it worked
Speaker 1: out exactly to the point that we we had set out.
Speaker 1: And as you said, you know, we came into evaluation
Speaker 1: very very stretched. We had social media being used widely
Speaker 1: and also enabling the spreading of of news that maybe
Speaker 1: governments didn't want to share. We have technology very very
Speaker 1: heavily weighted, and then we had very complex global supply
Speaker 1: chains which were able to transmit shocks from one part
Speaker 1: of the world in one sector to a completely different
Speaker 1: part of the world in a totally different sector. And
Speaker 1: I think that's why you all such very very sharp
Speaker 1: movements down. But at the same time it's bounced right
Speaker 1: back up again, and we're almost back to where we
Speaker 1: were at the beginning of the Yet if not even
Speaker 1: more stretched. You know, if we look at some of
Speaker 1: our own valuation indicators, if you look at the MSCI
Speaker 1: Growth Index, you have never ever been more expensive than
Speaker 1: we are today. The same thing with the SP five
Speaker 1: it's never been more expensive. So evaluations are still very
Speaker 1: very stretched, even more than that technology is even even
Speaker 1: bigger waiting. I hear people keep using the words during
Speaker 1: the crisis, it was bread, water and fangs, and I
Speaker 1: think that just gives a distinction of how important have become.
Speaker 1: So now we're getting back to the point where any
Speaker 1: kind of moving sentiment, any kind of large event, is
Speaker 1: really opening the door to a potentially significant move. No,
Speaker 1: we don't know what that event is going to be.
Speaker 1: This time it was COVID. Who knows what it's going
Speaker 1: to be next year. But I do think that we've
Speaker 1: almost learn nothing in terms of policy making because went
Speaker 1: back to where we were at the beginning of bread,
Speaker 1: water and things. I love that I've never heard that,
Speaker 1: but it really does. It feels like everything has happened
Speaker 1: in warp speed. And I wonder. I know, when you
Speaker 1: initially we're studying the velocity of risk, you laid out
Speaker 1: a couple of factors that would exacerbate it going forwards.
Speaker 1: Is there any one factor that you feel like really
Speaker 1: played an outsize role in this year? It's an interesting question.
Speaker 1: So so I think, I mean, the clear one was
Speaker 1: just valuations. They were just so stretched that it could
Speaker 1: have been almost anything that tipped it over. And unfortunately
Speaker 1: ended up being you know, one of the most significant
Speaker 1: social and economic crisis in the world that pushed things
Speaker 1: over the edge. I think more interesting was actually what
Speaker 1: didn't trigger it. We actually helped insulate the job, and
Speaker 1: that was actually the proliferation of technology. You know, when
Speaker 1: we talked about this, originally we thought like, look, technologies,
Speaker 1: it's so big that if you have one disappointment from
Speaker 1: any one of those big companies, it's going to drag
Speaker 1: everyone down. What we didn't foresee is in an event
Speaker 1: like this, actually technology becomes so important. But actually that
Speaker 1: outperforms and it stopped the whole index from completely dropping.
Speaker 1: So it worked in the opposite way. But unfortunately, again
Speaker 1: as I set it, as it go back up again,
Speaker 1: that vulnerability has only increased. You know, Sea Before we
Speaker 1: get to the craziest things, we sometimes run the risk
Speaker 1: of being the typical American UH podcast who's only cares
Speaker 1: about what's going on in the U. S. Stock market.
Speaker 1: So I wanted to touch on a note. UH. You
Speaker 1: and your colleagues had out about emerging markets in Asia
Speaker 1: and sort of the legacy of the trade tensions and
Speaker 1: the sort of anti globalization and nationalization push that we've
Speaker 1: seen this year. I wonder you know, obviously there's the
Speaker 1: trade wars created a new set of risks as far
Speaker 1: as you know positioning in international equities markets, the threat
Speaker 1: of you know, politics interfering with free markets, that sort
Speaker 1: of thing. What us through how you're looking at that risk.
Speaker 1: Is it something that goes away should Donald Trump be
Speaker 1: defeated in November or is it something um that perhaps
Speaker 1: his legacy is that that even if he loses, that
Speaker 1: type of risk is here to stay, that type of
Speaker 1: sort of the world being a little less connected at
Speaker 1: least according to the politicians and the trade policies. Talk
Speaker 1: to us about how you're thinking about that issue going forward.
Speaker 1: So from our perspective, the U S. China tensions that
Speaker 1: are here to stay. It doesn't matter who comes into
Speaker 1: the administration. Um, it doesn't matter if you're talking today
Speaker 1: four years down the line, these tensions are going to
Speaker 1: be with us for a really long time. So I
Speaker 1: think as investors, you know, what we need to do is, firstly,
Speaker 1: you have to at least from the beginning of the
Speaker 1: you have to have taken away a bit of growth
Speaker 1: from China's forecast going forward. Now that doesn't necessarily mean
Speaker 1: it's the end of investing in Emerging Asia or something
Speaker 1: investing in China. They still have huge growth potential, is
Speaker 1: just a little bit lower than what it was before.
Speaker 1: The things that we do need to look out for, though,
Speaker 1: is what does the US do with regards to uh
Speaker 1: to Asian technology companies? How much pressure did they put
Speaker 1: on them, Because again, just as it is for the
Speaker 1: U S, technology is also really important for the emerging
Speaker 1: Asian region as well. It's a new growth step sector.
Speaker 1: They have got a huge wealth of expertise that has
Speaker 1: been driving forward. They've been taking advantage of the fact
Speaker 1: that there is a growing middle class and they're more
Speaker 1: people demanding these kind of tech things. So I think
Speaker 1: that's the first thing we need to look out for.
Speaker 1: But the second thing, and perhaps this is more important,
Speaker 1: is is the politics going to start getting in the
Speaker 1: way of capital markets? And what I mean by that
Speaker 1: is do they start to intervene, do they start to
Speaker 1: put pressure on US organizations to pull back from investing
Speaker 1: in China? And if that happens, and yes, we would
Speaker 1: have major concerns, and then we would need to revisit
Speaker 1: this idea that we have that E. M. MAJA is
Speaker 1: still a long term strategic allocation that investors should have.
Speaker 1: As an example, you look at the TikTok saga going
Speaker 1: on right now, um, but is still ongoing. But I
Speaker 1: mean China tech and its relationship with the United States,
Speaker 1: that's right, you know, the the intervention almost it feels
Speaker 1: like sometimes it knows no bounds. Um. And Yet one
Speaker 1: of the areas is we've seen the trade wall moved
Speaker 1: to a technology war. What we worry about is the
Speaker 1: new wall going to be moving into capital markets? Um?
Speaker 1: So are we going to see a lot of firms,
Speaker 1: pension funds being asked pulled back stop investing in these
Speaker 1: Chinese assets if that happens, And we just have to
Speaker 1: question how much strength a lot of these places can have.
Speaker 1: We hope that's not going to be the case because
Speaker 1: at the moment there is so much growth potential in
Speaker 1: that region. Well, only time we'll tell and as time
Speaker 1: goes on. In our podcast, Mica, I think you know
Speaker 1: what time it is? Very very well, it is that
Speaker 1: time that sounds really genuine. Charlie Pellett tell us what
Speaker 1: time it is? Damn clear. Of the craziest things we
Speaker 1: saw in markets this week all right, Sarah. We haven't
Speaker 1: gotten many calls to the hotline, so hopefully people are
Speaker 1: not too shy to call and leave us a voicemail
Speaker 1: on the hotline and tell us the crazy thing you saw. Um,
Speaker 1: I did get text from a friend of mine about
Speaker 1: a crazy thing he saw, So John Miller, this one's
Speaker 1: for you. He's an avid listener of the show, Sarah.
Speaker 1: He listens to us on like double speed, though, which
Speaker 1: I and then I think whenever I see him and
Speaker 1: I'm talking at normal speed, I think I sound weird
Speaker 1: to him. He's like, you, all right, you're feeling okay.
Speaker 1: It likes us a squeaky, sped up mike. Yeah, yeah,
Speaker 1: it's weird. I gotta work on talking faster, I guess
Speaker 1: for when I'm hanging out with him. This is only
Speaker 1: ten generally market related. In fact, by ten generally I
Speaker 1: may mean not really at all, but it's so good
Speaker 1: I want to share it anyway. It's about an art dealer,
Speaker 1: and as you know, Sarah, art dealers are my my
Speaker 1: favorite source of crazy market things. Alternative alternative as that's
Speaker 1: this guy. Forrest Fen, a millionaire art dealer, hid a
Speaker 1: treasure chest holding gold nuggets and precious gems in the
Speaker 1: Rocky Mountains about a decade ago, just for fun, just
Speaker 1: took what's estimated at two million dollars worth of golden gems,
Speaker 1: hit it in the Rocky Mountains. And he left not
Speaker 1: many clues, some some poem and a map. This is all,
Speaker 1: by the way, acquitting to a story on MPR dot org.
Speaker 1: And apparently thousands of people have been out there looking
Speaker 1: for this forty pound treasure chest. Several people died in
Speaker 1: fact looking for it. And uh, crazy news is someone
Speaker 1: actually found it recently. They have not stepped forward to
Speaker 1: say who they are, but someone buried two million in
Speaker 1: treasure in the Rocky Mountains. And and the best part
Speaker 1: is some guy actually found it, using this guy's poem
Speaker 1: in a map to go find it again. Not market related,
Speaker 1: but pretty crazy. It sounds like a Nicolas Cage movie
Speaker 1: to me, right, National Treasure it is, or that show
Speaker 1: Outer Banks. My kids are watching Outer Banks, which is
Speaker 1: a big treasure hunt show. It's pretty it's pretty good.
Speaker 1: I'll to check it out. And remember, if you do
Speaker 1: want to give us a call at the podcast hotline,
Speaker 1: that number is six four six three two four three
Speaker 1: four nine. Oh and if you tell us something good.
Speaker 1: We might even play it on the next episode. Alright, sorry,
Speaker 1: you're turning, you're in the hot seat. You hyped up
Speaker 1: your crazy thing. Let's let's hear it. Alright, Well, I
Speaker 1: figured I would just take a sequel from my last
Speaker 1: minute last week's entry. Um. So, last week I talked
Speaker 1: about measures of implied volatility moving up with stocks. Well,
Speaker 1: on Tuesday, the day that we saw the nasdack drop,
Speaker 1: I mean close to five percent, we actually saw the
Speaker 1: VX and fall alongside it, which is very very rare,
Speaker 1: clearly something odd going on in the connection, but also
Speaker 1: just an easy one. I'll bring a double whammy this week.
Speaker 1: We always kind of look back to Tesla. It's an easy,
Speaker 1: wonderful crazy things out of But Tuesday down more than
Speaker 1: the worst day in Tesla's existence. Um so pretty wild,
Speaker 1: that is, that is pretty wild. Uh. Tesla is another
Speaker 1: source of perennial source of crazy things. So we thank
Speaker 1: them for that. Thank you Ellen Reliable, Thank you Elon
Speaker 1: Musk short short shorts, and uh whatever else. How about
Speaker 1: you still lost the same value as Morgan Stanley on Tuesday. Loan,
Speaker 1: that's my, it's my, it's mind boggling. That's a that's
Speaker 1: a great way to put it in perspective, Sema like,
Speaker 1: well done. But have you seen any crazy things in
Speaker 1: the past week? So crazier than Tesla? Yes, So again,
Speaker 1: this is looking back a couple of weeks in fairness,
Speaker 1: so it's not just this week. But I thought I'm
Speaker 1: taking a little bit international um and I want to
Speaker 1: look at reservations, seated diners and restaurants and ask you
Speaker 1: what you think the year and unit of changes in
Speaker 1: the UK. So at the end of August this year
Speaker 1: compared to last year, what was a year and year change?
Speaker 1: And just to give you a little bit of a hint,
Speaker 1: the US number was six down on this time last year.
Speaker 1: Oh boy, I think for it to be crazy, I'm
Speaker 1: gonna say they were positive somehow. I don't know how,
Speaker 1: but that would be the craziest outcome. I would think,
Speaker 1: aren't you getting paid to eat out? Right? Now? That's right?
Speaker 1: So is it positive? It is positive. I'm going to
Speaker 1: tell you the number. It's actually it was up six
Speaker 1: and that time last year. Now, it's unbelievable. It really
Speaker 1: speaks to the the fact that people are willing to
Speaker 1: put away all of their health considerations just to save
Speaker 1: ten pounds per person to eat out. So the Chancellor
Speaker 1: had introduced a scheme called eat out to help out,
Speaker 1: and each diner on a Monday, Tuesday and Wednesday was
Speaker 1: getting about up to ten pounds off on each mail
Speaker 1: that they that they had out. Um and you know,
Speaker 1: I can tell you it was a struggle to get
Speaker 1: any bookings and we tried our hardest to make the
Speaker 1: most of it. My husband used it five times in
Speaker 1: one day, five times in one day. He's one of
Speaker 1: those people adding those seated diners. So he's saving ten
Speaker 1: pounds and going to gain ten pounds on on the
Speaker 1: other end, ten pounds to spend about two that's pretty good. Well,
Speaker 1: I wonder is part of that because London typically clears
Speaker 1: out in August and everyone goes to the Mediterranean, and
Speaker 1: that didn't happen that year. Is added play at all,
Speaker 1: do you think? Well, actually, interestingly, because it's the only
Speaker 1: few months where London has really good weather, nobody goes
Speaker 1: away in July and August we will stay here. So
Speaker 1: actually usually the restaurant dinings is really high in August.
Speaker 1: So it just goes to show the very very significant
Speaker 1: impact that there's eat out to help out. Scheme had
Speaker 1: pretty interest. It really is shocking, I mean because I know,
Speaker 1: at least from my perspective. I mean, this past week
Speaker 1: they announced that indoor dining can open in New York
Speaker 1: City soon at capacity, and there are still a lot
Speaker 1: of people who are very hesitant um to go. So
Speaker 1: the fact that in London uh seeded dinners are up
Speaker 1: from a year prior the value of money right, it's
Speaker 1: a really innovative introduction because actually what it does it
Speaker 1: reminds people how much they like to eat out, and
Speaker 1: actually it reminds them that they it's not as dangerous
Speaker 1: as maybe they have in their heads. So it was
Speaker 1: it was a clever move. Well that's a good one,
Speaker 1: Seema Sarah, we might have to give it. Give Sema
Speaker 1: the the gold medal this week. Thank you so so
Speaker 1: much for joining us this week from London. It was
Speaker 1: my pleasure. Thanks for having me on What Goes Up.
Speaker 1: We'll be back next week. Until then, you can find
Speaker 1: us on the Bloomberg Terminal, website, an app, or wherever
Speaker 1: you get your podcasts. We'd love it if you took
Speaker 1: the time to rate and interview the show on Apple Podcasts,
Speaker 1: so more listeners can find us and you can find
Speaker 1: us on Twitter, follow me at Sarah pont Sack, Mike
Speaker 1: is that Reaganonymous, and you can also follow Bloomberg Podcasts
Speaker 1: at podcasts. Also thank you to Charlie Pellett of Bloomberg
Speaker 1: Radio and the voice of the New York City Subway system.
Speaker 1: What Goes Up is produced by Jordan Gaspore. The head
Speaker 1: of Bloomberg podcast is Francesco Levie. Thanks for listening, See
Speaker 1: you next time.