Speaker 1: Hello, and welcome to What Goes Up, a weekly markets podcast.
Speaker 1: My name is Mike Reagan. I'm a senior editor at
Speaker 1: Bloomberg and Ilana Hi reporter on the Cross Acid team.
Speaker 1: This week on the show, well, a few weeks ago,
Speaker 1: we talked about the U turn that had happened in markets,
Speaker 1: with some of the moves triggered by optimism about vaccines
Speaker 1: and the reopening of the economy reversing and going the
Speaker 1: other way. Well, strap on your chin straps because it's
Speaker 1: all going back the other way now. Value in cyclical
Speaker 1: stocks are outperforming once again and the yield curve is
Speaker 1: once again stepening. So what's going on? Is the new
Speaker 1: old the old new again? And can we expect these
Speaker 1: trends to continue? We'll get into it with Chris Gaffney,
Speaker 1: who's the head of World Markets at t I A
Speaker 1: A Bank and of Wars. Will close out the show
Speaker 1: with the craziest thing we saw in markets this week,
Speaker 1: And remember, if you see anything crazy, give us a
Speaker 1: call on the podcast hotline at six or six three
Speaker 1: to four, three four nine zero, leave us a voice,
Speaker 1: bail and maybe we'll play your craziest thing on the show. Well,
Speaker 1: don one thing that's crazy. Is this weather? This is
Speaker 1: the type of weather where an old guy like me
Speaker 1: is forced to ask the age old question. You're ready,
Speaker 1: I'm read well. I was actually just before we started chatting,
Speaker 1: I was reading a story from one of our colleagues
Speaker 1: and one of the quotes really struck me was about
Speaker 1: the heat wave that's hitting New York City this week
Speaker 1: where where I live, and it said all the cement
Speaker 1: is going to radiate heat indoors. It will be life,
Speaker 1: life threatening situation, which is my goodness, you just took
Speaker 1: this to a very dark place. I was hoping for
Speaker 1: some and now, well, the cement that's only to radiate
Speaker 1: heat indoors is that's the part that struck me. I
Speaker 1: probably shouldn't have read the second part. Didn't mean to
Speaker 1: scare you. Well. I like that your answer was grounded
Speaker 1: in well and well sourced reporting. They're not just not
Speaker 1: a nothing off the top of the head. For Wildonna,
Speaker 1: she comes with the actual reporting. My secret is, and Vildonna,
Speaker 1: this is something as a Jersey native you'll appreciate. My
Speaker 1: secret is Italian ice. I can take any type of
Speaker 1: weather as long as the Italian Ice store is open.
Speaker 1: And we got a good new one in town. So
Speaker 1: I don't think you've got as good of an Italian
Speaker 1: ice selection as we do here in New Jersey and
Speaker 1: New York. Are you talking about Rita's that's like New
Speaker 1: Jersey ridis is good. I'm talking about They're actually a
Speaker 1: friend of the family to Cosmos. They only have two stores.
Speaker 1: They've been making Italian ice, or as we call him,
Speaker 1: Philly Wooter ice w W O O D E R.
Speaker 1: What are ice s ide? No, no one knows what
Speaker 1: you're talking about, but in Philly they do uh hundred
Speaker 1: and five years they've been making Italian ice and Elizabeth
Speaker 1: and now new store. In a touching, I didn't mean
Speaker 1: this to be a plug for the Cosmos, but so
Speaker 1: me it. My friends, my local friends will laugh because
Speaker 1: I'm kind of obsessed with them. I I've got a
Speaker 1: bit of an Italian nice problem, but in this heat,
Speaker 1: it's the best remedy. Even if I don't know what
Speaker 1: the concrete is gonna start melting on us or something.
Speaker 1: You're telling me, honestly, you have me sold in the
Speaker 1: water ice water ice, What do I all? Right? Well,
Speaker 1: even with even with the melting concrete, that that should
Speaker 1: be enough to keep us. Cool, But let's bring in
Speaker 1: our guest, um first time on the show. As I said,
Speaker 1: he's from t I A A Back. His name is
Speaker 1: Chris Gaffney. Chris, welcome to the show. Thanks much. I
Speaker 1: appreciate you the invitation and I look forward to the
Speaker 1: discussion today. Yeah, Chris, I'm gonna start off with an
Speaker 1: easy question. I just want to know I'm not very
Speaker 1: familiar with the World Markets department of t I A Back. UM,
Speaker 1: I'm guessing note some four X services that that type
Speaker 1: of thing talk us through what what your your group
Speaker 1: does and what your role is there. So we offer
Speaker 1: individual investors the ability to invest into currencies um, both
Speaker 1: for transactional purposes and for an investments, and then precious metals.
Speaker 1: So I've run a currency and precious metals desk UM.
Speaker 1: It's kind of unique. You you know, the institutions play
Speaker 1: in that field a lot um, but typically investor individual investors, uh,
Speaker 1: you know, have a tougher time finding uh the availability
Speaker 1: of currency investments in and precious metals. So we're big
Speaker 1: on diversification obviously, so we we think they're they're good
Speaker 1: asset classes. And I've been in this uh doing this
Speaker 1: job for I guess, uh, thirty plus years, thirty five
Speaker 1: years now, so I've been in in a while, still
Speaker 1: a rookie, you huh. Yeah. And Chris, I was going
Speaker 1: to ask you. You and I chat from time to time,
Speaker 1: and I really enjoy our conversations. I always turned to
Speaker 1: you when something's going on with markets and I need
Speaker 1: an explainer, And so I was hoping you could sort
Speaker 1: of start us out just giving us a sense of
Speaker 1: how you're making sense with what's going on with the
Speaker 1: stock market, because coming into August, I remember, the was
Speaker 1: tons of fear about the sort of seasonal volatility factor.
Speaker 1: In August was supposed to be a much choppier month,
Speaker 1: and here we are, We're record highs. It's been sort
Speaker 1: of tranquil. So how are you making sense of everything
Speaker 1: that's going on? It's been great markets, I mean, and
Speaker 1: it all goes back to the economic environment here in
Speaker 1: the US. I mean, this is just a fantastic economic
Speaker 1: environment for companies, and and stock performance always goes back
Speaker 1: to the earnings to company earnings. So um, you know,
Speaker 1: we've got low interest rates, we've got um pent up demand,
Speaker 1: and then you've got extremely strong consumer and corporate balance sheets.
Speaker 1: So all those add up to markets that are you know,
Speaker 1: I use the words flogging higher because it's it's not
Speaker 1: a dramatic rise that we've seen. Certainly, the numbers are
Speaker 1: pretty eye popping when you compare it to you know,
Speaker 1: the depths of the fall. But uh um, you know
Speaker 1: we're just marching higher. Uh continually marching higher. And something
Speaker 1: you brought up about Choppingess, we we expected a lot
Speaker 1: more choppiness in these markets. I mean we we thought
Speaker 1: volatility was going to be pretty high, um with all
Speaker 1: the push pulls that we're seeing. But you know, we've
Speaker 1: we've really just seen a slow and steady increase in
Speaker 1: these markets, almost almost boring at times. I you know,
Speaker 1: I hate to use that because now we'll see a
Speaker 1: dramatic swing, but uh um, you know they've just been
Speaker 1: marching higher. Well, one shoppiness I'm guessing your team must
Speaker 1: have had their eye on was that that plunge and
Speaker 1: goal to start the week? Um, even before the week started.
Speaker 1: I guess what was it Sunday night? Uh? You know, yeah,
Speaker 1: the precious metals prices. You know, conspiracy theorists will tell
Speaker 1: you that, you know, they're they always move on the
Speaker 1: weekends because the markets are you know, uh, there's less
Speaker 1: liquidity out there, and the big moves always come on
Speaker 1: the weekends. And but honestly, we we you know, we
Speaker 1: we couldn't figure out exactly what drove that drop. Um
Speaker 1: maybe it was the jobs data, you know, the coming
Speaker 1: in stronger and um looking, you know, the the focus
Speaker 1: of investors shifted from a worry about you know, about
Speaker 1: a slowdown to act a strong labor, strong GDP growth,
Speaker 1: and that's not necessarily positive for for the precious metals.
Speaker 1: You know, gold is seen as a risk hedge and
Speaker 1: along with inflation hedge. So um, good strong markets, good
Speaker 1: strong labor growth probably weighed on the pricycle And Chris,
Speaker 1: you just mentioned you guys had thought that the market
Speaker 1: was going to be a lot more choppy. There's so
Speaker 1: many superlatives we can say about this market. One that
Speaker 1: has been standing standing out for me in recent days is,
Speaker 1: you know, we're up more than from the previous peak
Speaker 1: that we had reached before the pandemic. And so I'm
Speaker 1: just wondering why it's been so hard to call what's
Speaker 1: been going on with with the market, with stocks just
Speaker 1: continuing to I forget the word you used, trudge higher, Yes,
Speaker 1: slog higher. Yeah. Um, you know, I think it comes
Speaker 1: back to you know we expected shopping is because um,
Speaker 1: we're an unprecedented times obviously, and when when you're trying
Speaker 1: to project where the markets are going to go or
Speaker 1: even economic data, UM, you typically rely on models and
Speaker 1: the economic models. When when you have the dramatic shutdown
Speaker 1: of an economy and absolutely stopping everything, um, and then
Speaker 1: the fairly rapid recovery, those models just don't work. Um.
Speaker 1: So you know, trying to project where we're gonna be
Speaker 1: trying to even even free cash flows. I mean, you
Speaker 1: know when when companies have to shut down and then
Speaker 1: start back up. Um. You know, the the base effect
Speaker 1: on is one item that you know, the numbers were
Speaker 1: so bad that of course they're going to be really
Speaker 1: good on the recovery. Um. But another thing is the comparisons.
Speaker 1: You you just can't make those comparisons, and it's kind
Speaker 1: of thrown the models out of wax. So uh, projections.
Speaker 1: I think most people thought economists weren't going to be
Speaker 1: able to really dial in where we were going. But uh, um,
Speaker 1: it's I'm glad to say we've been marching steadily high,
Speaker 1: you know. Chris I'm wonder the perspective of some of
Speaker 1: your clients, UM, who might be internationally focused. UM. You know, obviously,
Speaker 1: one of the big themes we heard a lot about
Speaker 1: earlier this year and and sort of at the beginning
Speaker 1: of the year, UM was a lot of people were
Speaker 1: bracing for sort of an outperformance of international equities outside
Speaker 1: of the US. UM. To some degree, we've kind of
Speaker 1: seen that, you know, I'm looking at the Bloomberg screen
Speaker 1: here of developed markets, US is about eleventh place out
Speaker 1: of twenty four. You know, there's a lot of European
Speaker 1: markets Austria, Sweden, Netherlands, France that mark doing doing better.
Speaker 1: What's kind of what's kind of the sentiment at this
Speaker 1: stage of the year in the game, is there has
Speaker 1: that bullishness for sort of the rest of the world
Speaker 1: worn off. I don't think so, you know, but personally
Speaker 1: I'm still bullish on your And it's really about the reopening.
Speaker 1: You know, the US was first to really really well.
Speaker 1: China was first, but then the US came in and
Speaker 1: reopened and uh, you know, with our vaccine policy or vaccinations,
Speaker 1: although it's stalled out now, we were able to reopen
Speaker 1: more quickly than Europe. Europe was a little slower to reopen,
Speaker 1: so you know, we we probably hit that reopening UM
Speaker 1: surge faster than Europe. And and I still think Europe
Speaker 1: is gonna gonna come back. And I think there's opportunities
Speaker 1: also valuations just favor UM some other UM, other markets
Speaker 1: besides the US. And then on top of all of that,
Speaker 1: you've got the dollar. And you know, anytime you you
Speaker 1: invest internationally, unless you had your currency exposure, you're also
Speaker 1: investing in the currency of of that market that you're
Speaker 1: investing in. So UM. You know, the dollar going into
Speaker 1: this UH was very strong and its not even stronger
Speaker 1: at the beginning of the pandemic because we saw a
Speaker 1: lot of safe haven buying of the US dollar. International
Speaker 1: investors into the dollar came to treasuries. UM we're still
Speaker 1: seeing them. The tenure market yesterday was was bought by
Speaker 1: UH central banks, so UM and and outside investors, so
Speaker 1: we're still seeing some of that. UM. The dollar declined
Speaker 1: over over last year, but so far this year it's
Speaker 1: starting to move higher again. So UM, I still think
Speaker 1: that we're going to see a dollar decline, and mainly
Speaker 1: due to interest rate differentials. UM. But UM, I do
Speaker 1: think there's opportunities overseas still, although the US market is
Speaker 1: still I think gonna gonna Marke car And speaking of
Speaker 1: international markets, I think you and your team are favorable
Speaker 1: towards China or and correct me if I'm wrong, But
Speaker 1: but I'm wondering if you think what's been happening and
Speaker 1: playing out with China over the last couple of weeks
Speaker 1: really is more of a localized event or maybe something
Speaker 1: that could potentially spill over into other parts of the world.
Speaker 1: And how are you thinking about the Chinese markets. I
Speaker 1: think there are randan by whichever you want to call it.
Speaker 1: The Chinese currency UM is still a goodbye. I think
Speaker 1: that it's it's a currency that will continue to perform
Speaker 1: if if the if the government of China lets it UM.
Speaker 1: I think that the Chinese markets, I mean, I mean
Speaker 1: it's it's the second largest some by some measures, the
Speaker 1: largest economy. UM. The delta baron is certainly probably having
Speaker 1: an impact there and so we could see some slow down.
Speaker 1: But uh, specifically on the regulation, I think it's you know,
Speaker 1: you can look at it two ways. It's it's either
Speaker 1: the Chinese government and being heavy handed and trying to
Speaker 1: get control UM of their economy, which in a way,
Speaker 1: you know, you understand that the governments want to control
Speaker 1: what's going on in their economy. Um, but you know,
Speaker 1: are they going to go too far and try to
Speaker 1: take it back into the communist I don't believe that.
Speaker 1: I I think that they'll continue to walk this tight
Speaker 1: rope between capitalism and communism and and try to keep
Speaker 1: their markets free and open. Uh as as much as
Speaker 1: they are. You could argue that they're not, but uh UM,
Speaker 1: I think the regulation is just a sign of a
Speaker 1: maturing economy and a maturing market. They know that in
Speaker 1: order to truly take their place among the world stage,
Speaker 1: investors have to rely and and trust on economic data,
Speaker 1: trust on company reports, trust that there's no fraud, if
Speaker 1: you will. And so some of the regulations that they're
Speaker 1: passing UM are actually positive and I think a sign
Speaker 1: that they are trying to you know, mature that market
Speaker 1: and trying to um be able to give investors confidence. Now,
Speaker 1: obviously it's caused the the opposite impact. Investors have worried
Speaker 1: that they're going to come in and maybe take control
Speaker 1: of certain industries, and that's certainly a concern and could
Speaker 1: grow into something bigger. UM. But right now, I think
Speaker 1: the Chinese economy continues to do very well, growing at
Speaker 1: a good clip, and as long as they don't get
Speaker 1: too heavy handed, I think it will continue. They've got
Speaker 1: just a huge consumer demand in China. UM got good
Speaker 1: uh good exports into the rest of Asia and in
Speaker 1: the US and Europe. So as the US and Europe recovers,
Speaker 1: I think China continues to do well. Yeah, the regulation,
Speaker 1: I mean that's made all the headlines, all all these
Speaker 1: every day you wake up to a new sort of
Speaker 1: crackdown on some industry in China, and and to me,
Speaker 1: that strikes me as at least for now dominantly a
Speaker 1: domestic risk to say Chinese assets, you know, equities, especially
Speaker 1: UM maybe to some degree to the equiporate bod market.
Speaker 1: But one thing I've read this week out of China
Speaker 1: that construct me is maybe something that the rest of
Speaker 1: the world needs to worry about, is the credit credit
Speaker 1: expansion credit and China growing at at sort of the
Speaker 1: weakest pace since the height of the pandemic. And I
Speaker 1: know this is something that a lot of internationally focused
Speaker 1: investors look at, is the credit impulse in China. UM
Speaker 1: as sort of a symbol of You know, for years
Speaker 1: we've all been focused on experts out of China, but
Speaker 1: you have to start thinking about that domestic demand, the
Speaker 1: imports into China, that consumer demand, like you talked about,
Speaker 1: is credit expansion in China, anything that you keep your
Speaker 1: eye on, is it any you know? Does this slowdown?
Speaker 1: Where are you at all? Yeah? It certainly does, because
Speaker 1: obviously the world runs on credit. Consumers, especially UM run
Speaker 1: on credit, so UM, you know, slowdown would mean our
Speaker 1: our would signal maybe a possible slowdown in the overall economy.
Speaker 1: Some of that is due to though them raining in
Speaker 1: some of the UM credit markets and tightening down control
Speaker 1: on some of the credit uh that that was going
Speaker 1: on there. So you know, slowdown isn't necessarily really concerning
Speaker 1: to me right now, but certainly keeping an eye on it.
Speaker 1: And it absolutely is something we we monitor across the
Speaker 1: global economy. It's one of the things that UM drives
Speaker 1: currency obviously and demand for currency, so certainly something we
Speaker 1: we monitor. And just to bring us back to the
Speaker 1: US and speaking of consumers, my team and I were
Speaker 1: looking at some research reports of just consumer behavior and
Speaker 1: credit card spending and Apple mobility data and some of
Speaker 1: those things just over the last week, over the last
Speaker 1: two weeks with the delta variant, and it's sort of
Speaker 1: a mixed picture right now. You know, you have reopenings obviously,
Speaker 1: but then at the same time mask man needs in
Speaker 1: certain areas and so on. So how should we be
Speaker 1: thinking about the delta variant, especially as it relates to
Speaker 1: the market. So yeah, I think the delta variant is
Speaker 1: really the largest risk to the to the markets right now. Um.
Speaker 1: And you know, as as we see UM hospitalizations climb,
Speaker 1: although you know they seem to be peaking now, it's
Speaker 1: certainly something that that concerns the market now. You know,
Speaker 1: I think Southwest recently announced that their bookings are down
Speaker 1: because of the delta variant. And if we start to
Speaker 1: see restrictions more restrictions and and um not, I don't
Speaker 1: think we're going to get the lockdowns. I just don't
Speaker 1: think uh of the public is going to uh going
Speaker 1: to go that route. Um, they're they're gonna um, you know,
Speaker 1: we we we've seen in St. Louis where I live,
Speaker 1: a big rise in in covid it in Missouri was
Speaker 1: one of the big hot states. So um, you know,
Speaker 1: we're starting to wear masks again. And and starting some
Speaker 1: of those, but the the more harsher lockdowns and closings
Speaker 1: that I don't think we're gonna get there, but it's
Speaker 1: certainly a risk and uh, you know, it's something that
Speaker 1: we're going to have to continue to deal with. Uh.
Speaker 1: And you know, the booster may be good or or
Speaker 1: just getting those those vactination rates up I think is
Speaker 1: the key and hopefully we'll we'll see that increase. You know, Chris,
Speaker 1: I wanted to get back to that that notion of
Speaker 1: of FX. You know, you made a great point that obviously,
Speaker 1: when you know, take an equity position in the in
Speaker 1: an overseas market, you're you're taking on that FX risk too.
Speaker 1: It's a bit of a pretty interesting year for the dollar,
Speaker 1: you know. I'm looking at this sort of the dollar
Speaker 1: versus all the major g T and currencies. It's pretty
Speaker 1: strongly against all of them on the year. But it's
Speaker 1: been kind of a wild ride, you know that the
Speaker 1: looking at the Bloomberg Dollar Index, it you know, started
Speaker 1: the first say court of the year very strong, that
Speaker 1: it came back down the sort of flat line. Now
Speaker 1: it's back up again near the highs of the year.
Speaker 1: I'm wondering. You know, I always think of that that
Speaker 1: what they call the dollar smile theory. You know that
Speaker 1: it dollar does real well sort of in when the
Speaker 1: world's going to hell and everything's risk off, but then
Speaker 1: it also does really well when you know things are
Speaker 1: going well, but the U s seems to be doing
Speaker 1: even better than than the rest of the world. Is
Speaker 1: it that latter part that we're seeing now in the
Speaker 1: dollar strength and walk us through kind of what you
Speaker 1: think has been pushing the and pulling the dollar around
Speaker 1: this year? Uh? Well, this year, Yeah, it's definitely about
Speaker 1: the rebound and the US. The strong gains we saw
Speaker 1: in the US that that attracts investors, It attracts international investors,
Speaker 1: and of course to buy the stock market in the US,
Speaker 1: they have to buy dollars. So um, I think it's
Speaker 1: all about the strength we've seen so far this year
Speaker 1: is all about, um, the the equity performance and investors
Speaker 1: coming into the US and in the out performance maybe
Speaker 1: of of of our economy and early recovery. The main
Speaker 1: thing we look at for for currencies, though, one of
Speaker 1: the main things is interest rate differentials, and um, you know,
Speaker 1: we were in an odd place over the past uh,
Speaker 1: a few years, probably probably five to seven years where um,
Speaker 1: you know, the dollar was in US interest rates were
Speaker 1: actually lower. UM, are are higher than most of the
Speaker 1: rest of the world. So um, you know the interest rates.
Speaker 1: When when the US interest rates are higher, US investments
Speaker 1: usually are risk free, they're they're the cream of the crops.
Speaker 1: So usually the interest rates in the US are a
Speaker 1: little lower than the rest of the world. UM. That
Speaker 1: that changed, and with the Europe going negative interest rates
Speaker 1: and and a lot of you know, Japan going negative
Speaker 1: interest rates, we saw the US interest rates higher and
Speaker 1: that caused this dollar strength, and it caused a five
Speaker 1: or six years of dollar strength. UM that started to
Speaker 1: reverse last year. The mentality was, um, US was gonna start, um,
Speaker 1: you know, keep rates lower for longer. We kept hearing
Speaker 1: Paul say lower for longer, lower for longer. The US
Speaker 1: rates are gonna stay down here and the rest of
Speaker 1: the world starting to HiPE rates. UM. I think we're
Speaker 1: gonna get back to that thinking. Um, as the US
Speaker 1: holds holds the line on on interest rates, we're already
Speaker 1: starting to see you know, Norway and and some of
Speaker 1: the other Australia and New Zealand start talking about raising rates,
Speaker 1: even Canada. So as you see these other countries start
Speaker 1: raising interest rates and interest rate ferential is gonna switch
Speaker 1: back to the foreign currency. So that is is one
Speaker 1: of the things that I'm basing my thought that the
Speaker 1: dollar um will start sliding again as as you see
Speaker 1: those interest rates different will start to change. So UM,
Speaker 1: I think the dollar UM. You know, it's strong right now,
Speaker 1: and if if we see of some of these risks
Speaker 1: that we talked about come back, I think you'll see
Speaker 1: safe haven flows. Um. But again, in my opinion, you know,
Speaker 1: there's there's other markets that are going to start performing
Speaker 1: well as they come out of the pandemic, and that's
Speaker 1: going to help their currency. So I think the dollar
Speaker 1: will start to define again towards the end of the year. Mike,
Speaker 1: can I admit something embarrassing? Oh? Absolutely. I've asked Chris
Speaker 1: to to define interest rate differentials at least thirty different
Speaker 1: times for me, and every single time, I'm like, yep,
Speaker 1: I got it. But that was a really great explanation.
Speaker 1: I was hoping for something really embarrassing. Vildata like this embarrassing,
Speaker 1: like you're wearing bell bottom jeans or something. I don't
Speaker 1: know that that that's not just if I can It's
Speaker 1: not just straight interest rates. I mean, you know, you
Speaker 1: can go to Brazil and get you know, some pretty
Speaker 1: high interest rates, but they have high inflation also, So
Speaker 1: you have to look at the real interest rate. You
Speaker 1: have to look at the difference between UM between the
Speaker 1: nominal rate and and inflation rate, and uh, you know
Speaker 1: it's that's what really drives investors. So um, typically they're
Speaker 1: gonna go for the you know, they're the typical carry
Speaker 1: trade is where an investor goes for real interest rates
Speaker 1: that are higher UM, invest in the currency and and
Speaker 1: you know, thinks that the currency is gonna move higher
Speaker 1: and along with getting that positive carry on the on
Speaker 1: the interest rate. Yeah, because I wonder how noisy that
Speaker 1: potentially can can get when you've got you know, uh
Speaker 1: sort of the if you're a believer in that and
Speaker 1: that the supply bottlenecks are a big part of the
Speaker 1: inflation story right now, you know, as it seems to
Speaker 1: me like maybe bottlenecks could start resolving in certain bographies
Speaker 1: and not others. You know, where we're gonna have say, uh,
Speaker 1: transient inflation being a little bit longer in one spot
Speaker 1: than the other. You know, is is that a you know,
Speaker 1: is that a risk that of sort of false signals
Speaker 1: being sent by inflation data that comes back to earth
Speaker 1: in some places spikes up again and others, but but
Speaker 1: at all being sort of noise compared to what you know,
Speaker 1: we can expect in the longer term. Great point, And yeah,
Speaker 1: I agree with you. Um, it can be very tough.
Speaker 1: You know, back to my um previous comment about you know,
Speaker 1: we're an unprecedented times. Uh, the supply bottlenecks when you
Speaker 1: when you shut everything down and not everything can open
Speaker 1: up right away and then um, you know, shipping and
Speaker 1: and you know, even opening some of the commodity minds.
Speaker 1: It's tough. But uh, um, you know, the inflation I
Speaker 1: think is transient. A lot of the inflation is trans
Speaker 1: and and and I was I really liked Paul's explanation
Speaker 1: of what transient is. He was asked, uh at the
Speaker 1: at his last press conference about transient And it's not
Speaker 1: that the prices are going to go back down. He's
Speaker 1: we're not expecting prices to shift back down. They just
Speaker 1: won't keep increasing as quickly as we've seen. Now, you
Speaker 1: know what could make inflation not transient is is wage growth.
Speaker 1: If we if we see continued strong wage growth, UM,
Speaker 1: that puts more money and consumers pockets on a permanent
Speaker 1: basis um, and that will lead to higher prices as
Speaker 1: demand comes back. So um, the supply bottlenecks getting back
Speaker 1: to it though, Yes, absolutely, their supply bottlenecks in certain sectors.
Speaker 1: And uh that's gonna drive obviously, when you cut supply,
Speaker 1: you know, and demand is still there, you're gonna see
Speaker 1: um swings and prices in order to alleviate that the difference.
Speaker 1: So um, I think it's tough to read. Again, Uh,
Speaker 1: the economic data is pretty tough. It can be really noisy. Um.
Speaker 1: And you know, I'm looking forward to when we we
Speaker 1: get all this behind us and it starts, uh getting
Speaker 1: back to normal. If you will, Chris to educate Fildona
Speaker 1: on rate differentials, I'm gonna I'm gonna dig up some
Speaker 1: stories from the European debt crisis, Fildana, to show you
Speaker 1: how how ridiculous it can get. You know, that was
Speaker 1: that was that was fun times. I mean when when
Speaker 1: you had uh, um, you know, but again, you know,
Speaker 1: the the interest rates. Uh, we we remember back in
Speaker 1: the European debt crisis, I think it was Greece or
Speaker 1: Italy had uh interest rates. They were just riding on
Speaker 1: on the German backing the implicit German guarantee of their debt,
Speaker 1: and their their debt was trading well below US at
Speaker 1: at one point, which uh again drove the dollar higher,
Speaker 1: um because of that, you know, and and uh when
Speaker 1: you could buy US investments at at a better real
Speaker 1: interest rate than than Greece or Italy, it definitely uh
Speaker 1: moved the market. Well, you look at some of those
Speaker 1: spread back then, you know, double digit percentages. It looked
Speaker 1: like you're you know, it looked at the time like
Speaker 1: Europe was going to fail, that the euro Union was
Speaker 1: going to fail completely. And uh it's remarkable to think
Speaker 1: where we are now compared to that. I mean, I
Speaker 1: guess it's just the magic of the ECB money printer
Speaker 1: to some degree. I mean they stabilized it. I mean,
Speaker 1: you know, you go back to you know the Germans
Speaker 1: uh in in Uh the ECB boy, I just I
Speaker 1: just absolutely Uh it's not le guard It was did
Speaker 1: a great job. You know, he was gonna do anything
Speaker 1: he could to support the euro. Um. You know, you
Speaker 1: had the UK trying to leave at the time. So
Speaker 1: there was a lot going on those days, and uh, yeah,
Speaker 1: it was. It was volatile markets, very volatile markets. We
Speaker 1: saw some really wide swings and interest rates. Whatever you
Speaker 1: send me, Mike can be my end of some of
Speaker 1: the treating you'll have nightmares about. Uh. But that was
Speaker 1: that was the uh. That was the driver of all
Speaker 1: markets at time, was the spread between either Italian and
Speaker 1: German debt yields or Greek Greek in Portugal and the
Speaker 1: German yields. I will, we'll get you up to speed
Speaker 1: on that fill dot and then that's gonna be the
Speaker 1: thing you worry about the most. I guarantee it. I
Speaker 1: can't wait to meet it any how. We just get
Speaker 1: past stuff like that too, though, isn't it. I mean,
Speaker 1: that is in the rear view mirror and and nobody
Speaker 1: ever talks about it anymore. So it's it's it's kind
Speaker 1: of crazy how those those um, you know, situations that
Speaker 1: you think are going to be around, you know, and
Speaker 1: going to cause these dramatic swings all of a sudden
Speaker 1: go away. Yeah. I think that draggy posture of whatever
Speaker 1: it takes is. I think every central banker around the
Speaker 1: world wrote down those words in a notebook somewhere and said,
Speaker 1: that's that's the party line you gotta take at times
Speaker 1: like last year. Stand clear of the craziest things we
Speaker 1: saw in markets this week, Chris, Uh, great stuff. Really
Speaker 1: appreciate all your insights, but now comes the big test
Speaker 1: for you, and that is, uh, we got to hear
Speaker 1: the craziest thing you saw in markets this week. Um,
Speaker 1: You're not allowed on the podcast unless you come with
Speaker 1: a crazy thing. I've been in the business a long time.
Speaker 1: I go to a lot of investment conferences and back
Speaker 1: in the day, Um, there was an investment booth that
Speaker 1: was selling ostro j egg's and it was back in
Speaker 1: the mid nineties. You can and buy a buy an
Speaker 1: ostro jag, and they were encouraging people to become ostrich ranchers,
Speaker 1: and literally ostro jags that were going for I think
Speaker 1: fifteen bucks apiece all of a sudden shot up. I
Speaker 1: mean it was just everybody was getting into the market
Speaker 1: and they shot up to three thousand dollars. Um. This
Speaker 1: was back in the mid nineties. But then as everything
Speaker 1: does it like the Toolip craze, it it met a
Speaker 1: very dramatic end and those three thousand dollars ostro jiggs Uh,
Speaker 1: you know went back to uh fifteen or or twenty bucks,
Speaker 1: so it was a dramatic fault. Well, I just read
Speaker 1: an article where they're starting to come back. I guess
Speaker 1: people that you know, we're during COVID wanted new paths,
Speaker 1: are wanting to find a way to to make some
Speaker 1: extra money around the house and and so especially in
Speaker 1: taxas where there's bigger ranching. Um. We we're seeing a
Speaker 1: lot of um interest in the in the ostra Jack's. Unfortunately,
Speaker 1: I think it may end up um the same way
Speaker 1: as before. I mean, you know, but we're starting to
Speaker 1: see people, uh, doctors and lawyers starting to try to
Speaker 1: flip ostriches. Uh. This might be my favorite craziest thing
Speaker 1: of in the history of crazy. Well, I gotta find
Speaker 1: the prices of the Ostrojacks. I don't think we have
Speaker 1: the ticker on the Bloomberg. I couldn't find it on Bloomberg.
Speaker 1: They're not what what what would what would be the ticker?
Speaker 1: I don't know. We got we gotta have you ever
Speaker 1: seen one? They're huge jaggs. I mean, and this this
Speaker 1: boot used to have them right there on. You know,
Speaker 1: they would show you what the Oscar jagg looked like.
Speaker 1: But you know they're used for meat and leather and
Speaker 1: so there's some good uses. But I think they're pretty
Speaker 1: mean birds too. So I was gonna say, yeah, well,
Speaker 1: we gotta find the data set on this. I need
Speaker 1: some price discovery on on Oscar jaggs. And yeah, I was.
Speaker 1: I always sat there, pretty wordery birds. I don't know
Speaker 1: if i'd want one as a pet. And what do
Speaker 1: you get? You gotta go out and sit on an
Speaker 1: Oscar jagg yourself for for a few days. That's you
Speaker 1: gotta go steal it. And then I guess you you know,
Speaker 1: you steal it from the bird, and they don't like that.
Speaker 1: I don't think this, this is fantastic. I gotta look
Speaker 1: further into that. This that is my kind of story
Speaker 1: right there. If they'll thought it, we'll do it. That's
Speaker 1: a hard one to follow. I gotta say, I know
Speaker 1: that's really that's a really good one. If if you
Speaker 1: admit it, if you had a real time price quote
Speaker 1: for me, it would have been better. But I I'll
Speaker 1: we'll get that. We'll get that. I'll get I'll find
Speaker 1: a broker. I'll find a broker somewhere. Yeah, that one,
Speaker 1: that one was really I can't can't really follow. I
Speaker 1: was gonna give us my my favorite headline that I
Speaker 1: saw on the Bloomberg terminal this week, which is about
Speaker 1: the garages that are being sold in New York City.
Speaker 1: So they're going for about three d fifty dollars per
Speaker 1: parking spot in certain for certain garages in the city,
Speaker 1: which is just crazy. But I was going to ask you, Mike,
Speaker 1: how you think that stacks up with the the the
Speaker 1: average the medium price of of single family homes, which
Speaker 1: is another number that came out this week, which which
Speaker 1: is higher, Yeah, which is higher parking space in Manhattan
Speaker 1: or a single family home. Man, that's a that's a
Speaker 1: tough one. I know, I know the single family home
Speaker 1: price has been going up. I'm gonna say the parking
Speaker 1: space at three fifty is still still a little higher
Speaker 1: than the median home price. Not much, but a little bit.
Speaker 1: It's not it's not the median home price is slightly higher,
Speaker 1: but they're just about even. So the number that came
Speaker 1: out this week for the median home price is that
Speaker 1: the prices rose something like which is another crazy story.
Speaker 1: But but yeah, they rose to to an all time
Speaker 1: high three fifty seven thousand dollars, so just slightly above.
Speaker 1: I didn't realize they had gone up that much. I
Speaker 1: knew they were in the three hundreds this year, but jeesus,
Speaker 1: that's that's what you really want a car in New
Speaker 1: York City, though, I guess just to get away on
Speaker 1: the weekends. I would never want to drive in that city. Ever.
Speaker 1: I might buy one of those parking spots and then
Speaker 1: I'll buy one of those tiny homes you know, have
Speaker 1: you seen these things, and I'll park it in the
Speaker 1: parking spot, and I might have that. I might end
Speaker 1: up with the nicest place in Manhattan with that. I
Speaker 1: don't know, what do you think you can open up
Speaker 1: your your I'm doing quotes backyard for drinks and tap
Speaker 1: us or something like that. Yeah, we have lots of
Speaker 1: Western boys. So I was amazed one of my first
Speaker 1: trips to New York and I had never seen him
Speaker 1: stacked cars, um, you know, and open parking lots, and
Speaker 1: I was like, what the heck is that? And yeah,
Speaker 1: there were all these just parking condos. I guess it's
Speaker 1: you know, and elevators up, and I thought that was
Speaker 1: just the wildest thing. Ever, but I see, I guess
Speaker 1: there's there's huge demand this. That's amazing. Three for parking,
Speaker 1: I imagine you have to pay some monthly you know,
Speaker 1: parking spot sweeping fee on top of that too. It's
Speaker 1: probably a thousand bucks a month. But these are these
Speaker 1: are both pretty good. I'll give you mine. I think
Speaker 1: I might end up taking the bronze in this episode,
Speaker 1: but I'll give you mine. But that As you know,
Speaker 1: I've been keeping a very close eye on AMC the
Speaker 1: movie theater stock just because you talk about crazy things.
Speaker 1: And uh, this week it reported earnings. Uh. The CEO
Speaker 1: obviously has really embraced the whole Reddit day trader crowd,
Speaker 1: which I think you have to if you're that guy.
Speaker 1: I mean, uh, you know your company is gonna win
Speaker 1: or fail based on what Reddit decides to do next.
Speaker 1: So on this conference call after the earnings, he decided
Speaker 1: to take questions from individual retail traders. I think they
Speaker 1: only took one question from an analyst and the rest
Speaker 1: of were from They call themselves the Apes, you know,
Speaker 1: the the AMC faithful are known as the Apes. I
Speaker 1: think it's a reference to the planet of the Apes.
Speaker 1: So here's my question, um My favorite question from one
Speaker 1: of the apes, uh, and the executive the CFO read
Speaker 1: out the question from a guy named Aaron and it said,
Speaker 1: Aaron asks, and I promised, this is not a sarcastic question,
Speaker 1: but can you guys make the AMC mascot officially a gorilla?
Speaker 1: And the response from the CEO atam Aaron is just
Speaker 1: so priceless, you know, He's like, how do you answer
Speaker 1: these questions? You don't want to offend any of these guys,
Speaker 1: and it's like, uh, well, it's an interesting question. I
Speaker 1: don't know. I don't think we're ready for a mascot though. Uh.
Speaker 1: You said, we're gonna watch what I're doing doing with
Speaker 1: our marketing programs, and I think you'll be pleased with
Speaker 1: what AMC is gonna do. But he wouldn't commit Bilboa
Speaker 1: to making an ape mascot, which I think might explain
Speaker 1: that the drop in the stock price after the conference call.
Speaker 1: I don't know. I'm just saying, well, our our Boomberg
Speaker 1: opinion colleague Mount Levin had a hilarious column about this
Speaker 1: where he laid out a bunch of those questions, and honestly,
Speaker 1: I was I was laughing reading it. And you're right.
Speaker 1: The very last question I believe was from an analyst,
Speaker 1: and there was only one, but it begs the question,
Speaker 1: do you think we need a mascot for the podcast? Oh, definitely,
Speaker 1: let's open it up to the Twitter Twitter Ostrich an Ostrich.
Speaker 1: I think an Ostrich is in Uh, is definitely in contention.
Speaker 1: And if we get anything, Chris has got a deal
Speaker 1: for us. Bill Donna, you're just gonna have to sit
Speaker 1: on the egg in your apartment for a few months.
Speaker 1: You can do that, right, If I sit on it,
Speaker 1: I'll break the egg. I don't know, but I have
Speaker 1: a feeling that they probably sit on their eggs for
Speaker 1: like years or something. Yeah, I wouldn't do. The good
Speaker 1: thing is that if we get anything wrong, we can
Speaker 1: just bury our head in the ground. And uh And
Speaker 1: kind of didn't happen, but all right with if and
Speaker 1: if you anyone on Twitter, call the hotline if you
Speaker 1: have a better mascot for us than an Ostrich. But
Speaker 1: I think that's the lead. That's our lead mascot contender
Speaker 1: at the moment. Sure, So thanks for that, Chris, and
Speaker 1: we really appreciate your time on the show this week.
Speaker 1: Really insightful stuff and hopefully we can get you back
Speaker 1: to do it again. I look forward to it. I'd
Speaker 1: love to come back. What Goes Up We'll be back
Speaker 1: next week. And so that you can find us on
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