1 00:00:12,840 --> 00:00:16,080 Speaker 1: Hello, and welcome to What Goes Up, a Bloomberg Weekly 2 00:00:16,120 --> 00:00:19,760 Speaker 1: Markets podcast. I'm Sarah Plants, a reporter on the Cross 3 00:00:19,760 --> 00:00:22,880 Speaker 1: Asset team, and I'm Mike Reagan, a senior editor on 4 00:00:22,960 --> 00:00:26,360 Speaker 1: the Markets team. Sort of the John Oates to Sarah's 5 00:00:26,440 --> 00:00:29,640 Speaker 1: Darryl Hall. And this is going to be a you're 6 00:00:29,680 --> 00:00:31,960 Speaker 1: going to keep coming up with. All right, let's keep 7 00:00:31,960 --> 00:00:33,839 Speaker 1: you going. Let's see how many weeks you can go 8 00:00:34,640 --> 00:00:36,880 Speaker 1: to this one, Like I'll grow a mustache and get 9 00:00:36,880 --> 00:00:40,360 Speaker 1: a perm um. I don't know if people get perms anymore. 10 00:00:40,680 --> 00:00:43,360 Speaker 1: Back in my day. You know, my classmates in high 11 00:00:43,360 --> 00:00:45,519 Speaker 1: school spent more on perms than they do on their 12 00:00:45,520 --> 00:00:48,519 Speaker 1: cars these day. I think. I don't think too many 13 00:00:48,520 --> 00:00:51,320 Speaker 1: people perms nowadays, Mike, at least not like the eighties. 14 00:00:51,360 --> 00:00:55,840 Speaker 1: At least not like the eighties. Coming anyway, are essential 15 00:00:55,920 --> 00:00:58,640 Speaker 1: for podcast posts. I don't think you can really be 16 00:00:59,600 --> 00:01:02,040 Speaker 1: a pie cats howse people trust? I think you're right, Ben, 17 00:01:02,320 --> 00:01:04,280 Speaker 1: I think right, And we might as well introduce that 18 00:01:04,400 --> 00:01:06,920 Speaker 1: voice there. That is our guest for the week. Very 19 00:01:06,959 --> 00:01:09,039 Speaker 1: happy to have him on the show. He does not 20 00:01:09,120 --> 00:01:11,160 Speaker 1: have a perm as far as I can tell from 21 00:01:11,200 --> 00:01:14,120 Speaker 1: the sum video, but his name is Ben Inker. He 22 00:01:14,240 --> 00:01:18,360 Speaker 1: is the head of asset allocation for GMO, the money 23 00:01:18,360 --> 00:01:21,520 Speaker 1: management firm in Boston. Ben, welcome to the show. Thanks 24 00:01:21,600 --> 00:01:23,839 Speaker 1: very much for having me. I think that means once 25 00:01:23,840 --> 00:01:26,040 Speaker 1: the lawns are open in each of our areas, each 26 00:01:26,080 --> 00:01:29,440 Speaker 1: of us will be going out and getting perms and 27 00:01:29,480 --> 00:01:32,319 Speaker 1: will confirm the next time we're all in the same 28 00:01:32,360 --> 00:01:35,840 Speaker 1: place together. But Ben, we're so excited to have you 29 00:01:35,920 --> 00:01:39,040 Speaker 1: on the show. And lately, this past week stocks have 30 00:01:39,120 --> 00:01:42,200 Speaker 1: been breaking out. The rally has been broadening out. All 31 00:01:42,240 --> 00:01:45,640 Speaker 1: of a sudden. We've seen smaller companies, value stocks, firms 32 00:01:45,640 --> 00:01:48,800 Speaker 1: really that have been hit hardest by the coronavirus. Well, 33 00:01:48,920 --> 00:01:52,400 Speaker 1: they're all of a sudden leading this charge higher. But 34 00:01:53,080 --> 00:01:55,560 Speaker 1: you over at GMO, you guys aren't buying it. So 35 00:01:55,760 --> 00:01:58,520 Speaker 1: we're excited to discuss with you why that is and 36 00:01:58,560 --> 00:02:00,760 Speaker 1: how you guys are going about changing your aff that 37 00:02:00,800 --> 00:02:04,040 Speaker 1: allocation strategies. Yeah. So, I mean there's part of what 38 00:02:04,160 --> 00:02:07,760 Speaker 1: you said that I think makes some sense. Uh, small 39 00:02:07,800 --> 00:02:13,400 Speaker 1: cap stocks and value stocks were really left behind. Uh 40 00:02:13,600 --> 00:02:15,840 Speaker 1: in the year up until now, they were underperforming on 41 00:02:15,880 --> 00:02:17,799 Speaker 1: the way down, they were underperforming on the way up. 42 00:02:18,320 --> 00:02:21,880 Speaker 1: They deserve to outperform. The thing we find a little 43 00:02:21,880 --> 00:02:27,880 Speaker 1: bit mystifying is the general upward move for the market. UM, 44 00:02:27,919 --> 00:02:31,720 Speaker 1: as near as we can see, the uncertainty about the 45 00:02:31,720 --> 00:02:35,680 Speaker 1: economy really hasn't gone away, and almost all of that 46 00:02:35,840 --> 00:02:40,280 Speaker 1: uncertainty is downside uncertainty. Uh. And yet you know, we're 47 00:02:40,360 --> 00:02:42,840 Speaker 1: we're sitting here with the S and P five hundred 48 00:02:42,919 --> 00:02:46,440 Speaker 1: downs something like five percent for the year in the 49 00:02:46,480 --> 00:02:51,640 Speaker 1: worst economic crisis since the Great Depression. That just doesn't 50 00:02:51,720 --> 00:02:55,440 Speaker 1: seem right, you know. But and I've read that you've 51 00:02:55,720 --> 00:02:59,160 Speaker 1: Sarah said you've de risked the portfolios at your firm. 52 00:02:59,280 --> 00:03:02,080 Speaker 1: I think I read the equity allocation of something like 53 00:03:03,280 --> 00:03:06,440 Speaker 1: right now. So what is the rest in right now? 54 00:03:06,440 --> 00:03:09,600 Speaker 1: I mean, obviously, Uh, you know, yields are so low 55 00:03:10,400 --> 00:03:14,320 Speaker 1: money market yields are barely there. Where do you hide 56 00:03:14,320 --> 00:03:18,160 Speaker 1: out in this environment? Yeah, that's a great question. And uh, 57 00:03:18,440 --> 00:03:21,320 Speaker 1: maybe that's an explanation for why the market is going up. 58 00:03:21,400 --> 00:03:25,280 Speaker 1: Maybe people are saying there is no alternative to owning equities. Uh, 59 00:03:25,360 --> 00:03:29,080 Speaker 1: we think there is a better alternative to owning the market. UM, 60 00:03:29,560 --> 00:03:33,079 Speaker 1: which comes back to the smaller cap stocks and the 61 00:03:33,200 --> 00:03:37,800 Speaker 1: value stocks that we were talking about earlier. UM. Value 62 00:03:37,840 --> 00:03:42,760 Speaker 1: stocks have had an absolutely horrendous twelve years relative to 63 00:03:42,800 --> 00:03:45,680 Speaker 1: the market. They came into this year trading at some 64 00:03:45,760 --> 00:03:48,440 Speaker 1: of the biggest valuation spreads we've ever seen, and then 65 00:03:48,480 --> 00:03:52,400 Speaker 1: they proceeded to underperform by double digits. UM. So what 66 00:03:52,520 --> 00:03:56,800 Speaker 1: we think makes more sense than just owning equities is 67 00:03:57,120 --> 00:04:01,240 Speaker 1: going along a portfolio of value stocks and short the market. 68 00:04:01,840 --> 00:04:04,760 Speaker 1: And the reason why we like that is, well, if 69 00:04:05,440 --> 00:04:07,920 Speaker 1: the optimists are right in the economy can make a 70 00:04:08,000 --> 00:04:12,000 Speaker 1: V shaped recovery, Well, those stocks that have just underperformed 71 00:04:12,000 --> 00:04:14,760 Speaker 1: the market by double digits deserved to outperform the market 72 00:04:14,800 --> 00:04:17,840 Speaker 1: quite strongly, So you should still make money. UM. And 73 00:04:18,040 --> 00:04:22,120 Speaker 1: if the world gets disappointed, uh, and we don't make 74 00:04:22,160 --> 00:04:27,680 Speaker 1: that that miraculous V shaped recovery, UM. Value has a 75 00:04:27,800 --> 00:04:31,800 Speaker 1: lot of margin of safety here relative to the market. 76 00:04:32,640 --> 00:04:35,280 Speaker 1: We can get some very bad news and they still 77 00:04:35,320 --> 00:04:39,680 Speaker 1: don't deserve to underperform. And so as investors we love 78 00:04:40,000 --> 00:04:43,160 Speaker 1: having a margin of safety UM. And there's very few 79 00:04:43,200 --> 00:04:47,000 Speaker 1: assets today which offer a margin of safety. We do 80 00:04:47,240 --> 00:04:52,120 Speaker 1: think along short portfolio, long the cheap guys, and short 81 00:04:52,160 --> 00:04:55,400 Speaker 1: the broad market does actually have a margin of safety 82 00:04:55,560 --> 00:04:58,520 Speaker 1: and deserves to make money in the good times and 83 00:04:58,600 --> 00:05:02,320 Speaker 1: deserves to probably make money even if things do very badly, 84 00:05:02,920 --> 00:05:06,960 Speaker 1: if they're really really horrible. Uh, you know, we enter 85 00:05:07,120 --> 00:05:11,680 Speaker 1: the second Great Depression. Um, maybe they're not going to 86 00:05:11,720 --> 00:05:14,159 Speaker 1: outperform in that environment, but they're going to do an 87 00:05:14,160 --> 00:05:17,320 Speaker 1: awful lot better than a long equity position. So you 88 00:05:17,400 --> 00:05:19,440 Speaker 1: just gave us a sense of how you guys are positioning. 89 00:05:19,440 --> 00:05:22,880 Speaker 1: Now you short the broad market, go along the cheap guys. 90 00:05:23,160 --> 00:05:25,120 Speaker 1: Can you give us a little bit more detail on 91 00:05:25,160 --> 00:05:27,600 Speaker 1: how you guys are actually going about cutting that equity 92 00:05:27,640 --> 00:05:29,440 Speaker 1: exposure though? I mean I get the sense that if 93 00:05:29,440 --> 00:05:31,560 Speaker 1: you guys are shorting the broad market, then then you 94 00:05:31,600 --> 00:05:33,240 Speaker 1: have to be pulling out out of a lot of 95 00:05:33,320 --> 00:05:37,080 Speaker 1: large cap names, maybe those megacap tech names. I mean, 96 00:05:37,080 --> 00:05:41,559 Speaker 1: how are you going about restructuring these portfolios to get there? Yeah, 97 00:05:41,720 --> 00:05:46,359 Speaker 1: so you know the megacap tech. UM. I do find 98 00:05:46,400 --> 00:05:50,040 Speaker 1: a little bit mystifying. You know, the Googles and facebooks 99 00:05:50,080 --> 00:05:53,520 Speaker 1: of this world will certainly get through this. UM. But 100 00:05:53,720 --> 00:05:56,719 Speaker 1: if you were an advertising firm and the world is 101 00:05:56,839 --> 00:05:59,280 Speaker 1: entering a large recession, I don't think that's very good 102 00:05:59,279 --> 00:06:01,880 Speaker 1: for your ad rates. UM. So I don't really know 103 00:06:01,920 --> 00:06:08,960 Speaker 1: why these stocks should be going up, But UM, I 104 00:06:09,000 --> 00:06:15,159 Speaker 1: recognize the fact UM that they are much less bothered 105 00:06:15,760 --> 00:06:20,040 Speaker 1: by a really bad economic circumstance than most companies UH 106 00:06:20,080 --> 00:06:22,600 Speaker 1: Not only do they have very strong competitive positions they 107 00:06:22,600 --> 00:06:27,680 Speaker 1: are kind of largely monopolis, but they also have very 108 00:06:27,720 --> 00:06:30,200 Speaker 1: strong balance sheets, so we don't have to worry about 109 00:06:30,240 --> 00:06:33,000 Speaker 1: them from that. From that front, the market as a 110 00:06:33,040 --> 00:06:38,159 Speaker 1: whole uh has neither of those benefits. UM. But because 111 00:06:38,240 --> 00:06:40,720 Speaker 1: we didn't come into this owning a lot of US 112 00:06:40,800 --> 00:06:44,239 Speaker 1: stocks to begin with, UM, we didn't want to take 113 00:06:44,760 --> 00:06:49,520 Speaker 1: the so called basis risk of owning a bunch of 114 00:06:49,560 --> 00:06:53,840 Speaker 1: European and Japanese cheap stocks and then shorting the SMP 115 00:06:53,920 --> 00:06:57,119 Speaker 1: five hundreds. So what we actually did to take about 116 00:06:57,240 --> 00:07:01,800 Speaker 1: thirty points of net equity exposure off of our portfolios, 117 00:07:02,200 --> 00:07:07,919 Speaker 1: we shorted UM a lot of uh IFA stocks, so 118 00:07:08,120 --> 00:07:11,560 Speaker 1: non US developed market stocks, which haven't had quite as 119 00:07:11,560 --> 00:07:13,560 Speaker 1: strong a rally as the US but are still up 120 00:07:13,720 --> 00:07:18,800 Speaker 1: probably somewhere in the mid twenties from the lows UM 121 00:07:18,840 --> 00:07:22,520 Speaker 1: and are no longer really priced to deliver something particularly 122 00:07:22,520 --> 00:07:27,040 Speaker 1: close to an equity like return, So we have kind 123 00:07:27,080 --> 00:07:31,800 Speaker 1: of that value spread trade on in the developed world 124 00:07:31,840 --> 00:07:36,520 Speaker 1: outside of the US. UM. We do have a few 125 00:07:36,720 --> 00:07:40,920 Speaker 1: US stocks UM cyclicals that we bought in April, a 126 00:07:41,040 --> 00:07:45,280 Speaker 1: few kind of stocks in our special Opportunities portfolio, and 127 00:07:45,320 --> 00:07:47,640 Speaker 1: we chose to hedge those with S and P s UM. 128 00:07:48,080 --> 00:07:51,640 Speaker 1: But mostly it's a non US equity portfolio, so our 129 00:07:51,680 --> 00:07:57,600 Speaker 1: shorts are mostly non US equities as well. So Ben 130 00:07:57,640 --> 00:08:01,560 Speaker 1: I I certainly share your cause in about this market 131 00:08:01,680 --> 00:08:04,320 Speaker 1: right now, UH, As Sarah will tell you, I'm a 132 00:08:04,320 --> 00:08:07,440 Speaker 1: big fan of confirmation bias. So I'm happy to uh 133 00:08:07,480 --> 00:08:10,000 Speaker 1: to hear you speak a lot of the thoughts I've 134 00:08:10,000 --> 00:08:12,960 Speaker 1: been saying to UM. But I would say, you know, 135 00:08:13,000 --> 00:08:16,200 Speaker 1: if I'm gonna play Devil's advocate here and and lay 136 00:08:16,200 --> 00:08:19,800 Speaker 1: out the bullish case, it is pretty compelling simply the 137 00:08:19,800 --> 00:08:23,800 Speaker 1: the amount of money being thrown at the problem by 138 00:08:23,840 --> 00:08:26,200 Speaker 1: the government and the Federal Reserve. I mean, the FED 139 00:08:26,280 --> 00:08:30,880 Speaker 1: has basically inoculated the credit markets from the type of 140 00:08:31,520 --> 00:08:34,400 Speaker 1: real trauma that could really make this a lot worse 141 00:08:34,440 --> 00:08:38,960 Speaker 1: economically and and market wise. UM. People on unemployment now 142 00:08:39,080 --> 00:08:42,480 Speaker 1: are getting in many cases being paid more than they 143 00:08:42,480 --> 00:08:45,439 Speaker 1: were making before they lost their job, at least until 144 00:08:45,520 --> 00:08:51,320 Speaker 1: that that federal UH extra help expires in July UM. 145 00:08:51,360 --> 00:08:54,120 Speaker 1: But then unemployment claims being extended. There's a lot of 146 00:08:54,160 --> 00:08:57,920 Speaker 1: money being thrown at this problem. Um, is it possible 147 00:08:58,640 --> 00:09:02,360 Speaker 1: that you know it's it's problem solved given all the 148 00:09:02,440 --> 00:09:08,000 Speaker 1: support being thrown at this it's definitely problem helped. Uh. 149 00:09:08,240 --> 00:09:10,560 Speaker 1: Is it possible it's problem solved? I mean, you know, 150 00:09:10,679 --> 00:09:14,960 Speaker 1: nothing is impossible, so maybe it's it's problem solved. You know. 151 00:09:15,000 --> 00:09:19,920 Speaker 1: The reality with the credit markets is tighter credit spreads 152 00:09:19,960 --> 00:09:22,839 Speaker 1: are helpful, but at the end of the day, what 153 00:09:22,880 --> 00:09:26,360 Speaker 1: the credit markets need is corporate cash flow. Uh. And 154 00:09:26,480 --> 00:09:30,800 Speaker 1: corporate cash flow is tough when revenue is down a 155 00:09:30,840 --> 00:09:35,920 Speaker 1: ton um. And even as the economy opens up. I 156 00:09:35,960 --> 00:09:38,679 Speaker 1: don't know whether the economists were the ones who coined this, 157 00:09:38,720 --> 00:09:42,440 Speaker 1: but they talked about economy right, we can't get quite 158 00:09:42,440 --> 00:09:46,080 Speaker 1: all the way back. It will feel better than April did, um, 159 00:09:46,120 --> 00:09:50,679 Speaker 1: But until we can really get the pandemic behind us, 160 00:09:51,040 --> 00:09:53,480 Speaker 1: we can't go all the way back. And the problem 161 00:09:53,559 --> 00:09:59,160 Speaker 1: with being a economy is the economy was not built 162 00:09:59,440 --> 00:10:05,520 Speaker 1: to run at the operational gearing right relative to GDP 163 00:10:06,040 --> 00:10:12,000 Speaker 1: of corporate profits is large UM. So if the economy 164 00:10:12,040 --> 00:10:16,920 Speaker 1: is running at even the drop off in earnings should 165 00:10:17,000 --> 00:10:20,320 Speaker 1: be a multiple of that UM. But if you look 166 00:10:20,320 --> 00:10:23,800 Speaker 1: at the earnings forecast. Q four earnings forecast is down 167 00:10:23,920 --> 00:10:26,959 Speaker 1: six relative to Q four two nineteen, which was really 168 00:10:27,000 --> 00:10:32,160 Speaker 1: one of the best quarters in history. UM. And that 169 00:10:32,280 --> 00:10:39,559 Speaker 1: strikes us as wildly implausible. UM. The other issue where 170 00:10:39,559 --> 00:10:44,480 Speaker 1: I think it's hard to fix the entirety of the problem, UM, 171 00:10:44,600 --> 00:10:48,120 Speaker 1: is you can throw a lot of money around, but 172 00:10:48,320 --> 00:10:52,760 Speaker 1: it isn't so easy getting it to the right places. Uh. 173 00:10:52,760 --> 00:10:55,800 Speaker 1: And we've seen that with the p p P program, 174 00:10:55,880 --> 00:10:59,599 Speaker 1: where you know the money was going to the wrong businesses. 175 00:10:59,760 --> 00:11:02,800 Speaker 1: Bisness is that really were deserving of it. Couldn't get 176 00:11:02,840 --> 00:11:05,120 Speaker 1: banks to answer the phone, They couldn't get the website 177 00:11:05,160 --> 00:11:08,200 Speaker 1: to work. The money was not flowing and is still 178 00:11:08,240 --> 00:11:12,959 Speaker 1: not flowing to the small businesses where it really needs 179 00:11:13,000 --> 00:11:16,280 Speaker 1: to be. And frankly, on the unemployment side, the sad 180 00:11:16,320 --> 00:11:20,840 Speaker 1: truth about this country is the state unemployment benefits have 181 00:11:21,040 --> 00:11:26,760 Speaker 1: been made in many cases intentionally difficult to get right. 182 00:11:26,800 --> 00:11:28,120 Speaker 1: You have to jump through a lot of hoops, you 183 00:11:28,160 --> 00:11:30,040 Speaker 1: have to fill out a lot of forms. People don't 184 00:11:30,120 --> 00:11:33,880 Speaker 1: understand how, and not everybody who is eligible, not everybody 185 00:11:33,920 --> 00:11:37,400 Speaker 1: who should be getting the money is getting the money. Uh. 186 00:11:37,400 --> 00:11:41,160 Speaker 1: And then the last piece that I think is worrying 187 00:11:41,240 --> 00:11:43,760 Speaker 1: and Frankly, I worry about this more in the US 188 00:11:43,840 --> 00:11:46,280 Speaker 1: than I do in the rest of the world. UM. 189 00:11:47,960 --> 00:11:50,199 Speaker 1: I've been hearing a lot of people talk about the 190 00:11:50,240 --> 00:11:56,320 Speaker 1: idea of UM resilience and supply chains, and people have 191 00:11:56,559 --> 00:11:59,679 Speaker 1: learned from this that having a far flung supply chain 192 00:12:00,160 --> 00:12:02,959 Speaker 1: is an unacceptable risk and they're going to have to 193 00:12:03,000 --> 00:12:07,000 Speaker 1: do something about it. Honestly, I don't get that. Uh. 194 00:12:07,040 --> 00:12:11,439 Speaker 1: You know, just in time inventory works of the time, 195 00:12:11,840 --> 00:12:14,240 Speaker 1: So there's five percent of the time where it doesn't work, 196 00:12:14,280 --> 00:12:17,000 Speaker 1: and so you can't produce the stuff you want. But man, 197 00:12:17,080 --> 00:12:21,760 Speaker 1: the profitability on that five had better be awesome to 198 00:12:21,920 --> 00:12:25,120 Speaker 1: make up for the higher cost of good soul in 199 00:12:25,240 --> 00:12:30,000 Speaker 1: order to have that broadly resilient UH supply chain. On 200 00:12:30,040 --> 00:12:32,200 Speaker 1: the other hand, the one thing that the US has 201 00:12:32,280 --> 00:12:38,080 Speaker 1: done over the past twenty years is we've moved to 202 00:12:38,200 --> 00:12:43,480 Speaker 1: this just in time corporate cash flow management, where most 203 00:12:43,600 --> 00:12:47,440 Speaker 1: of the corporate system has levered themselves up in a 204 00:12:47,480 --> 00:12:52,520 Speaker 1: way that works if everything is happening smoothly, and suddenly 205 00:12:52,559 --> 00:12:55,240 Speaker 1: everything is not happening smoothly, and the wheels will not 206 00:12:55,360 --> 00:12:59,520 Speaker 1: come off in the first month or two, but over 207 00:12:59,520 --> 00:13:03,080 Speaker 1: the core of the next nine months, the next eighteen months. 208 00:13:03,880 --> 00:13:07,200 Speaker 1: We have an awful lot of capital structures that were 209 00:13:07,240 --> 00:13:12,440 Speaker 1: not designed to handle even a normal recession, let alone 210 00:13:12,679 --> 00:13:16,480 Speaker 1: a very severe one. So it sounds like you're not 211 00:13:16,679 --> 00:13:19,680 Speaker 1: a believer in this whole idea of uh sort of 212 00:13:20,080 --> 00:13:25,080 Speaker 1: reflation as companies on shore overseas manufacturing again, I mean 213 00:13:25,080 --> 00:13:28,680 Speaker 1: in a way that's that would be you know, assuming 214 00:13:28,760 --> 00:13:30,719 Speaker 1: that pandemics or something and we're gonna have to deal 215 00:13:30,760 --> 00:13:32,800 Speaker 1: with on a semi regular basis, you know, kind of 216 00:13:32,840 --> 00:13:35,480 Speaker 1: fighting the last war rather than preparing for the future. 217 00:13:35,480 --> 00:13:38,959 Speaker 1: I guess yeah, I mean, pandemics are something we will 218 00:13:39,000 --> 00:13:42,600 Speaker 1: have to deal with periodically, a truly global pandemic. It 219 00:13:42,640 --> 00:13:46,520 Speaker 1: doesn't matter a ton where your supply chain is, unless 220 00:13:46,520 --> 00:13:50,560 Speaker 1: we're talking about you know, medical necessities where uh, you know, 221 00:13:50,720 --> 00:13:53,319 Speaker 1: nationalism may become an issue and you really want to 222 00:13:53,360 --> 00:13:57,880 Speaker 1: be producing your masks and and your swabs in the country. 223 00:13:58,760 --> 00:14:01,439 Speaker 1: If everybody is having a mom it doesn't matter whether 224 00:14:01,679 --> 00:14:05,920 Speaker 1: you're getting your stuff from Michigan or while the world 225 00:14:06,080 --> 00:14:10,520 Speaker 1: is a smaller place than it used to be. Um, 226 00:14:10,800 --> 00:14:14,880 Speaker 1: it's not obvious to me that, oh, pandemics are now 227 00:14:14,960 --> 00:14:18,440 Speaker 1: something we should expect to happen once a decade, and 228 00:14:18,480 --> 00:14:20,280 Speaker 1: I think that we can all hope that next time 229 00:14:20,320 --> 00:14:24,240 Speaker 1: we will all be more prepared, considering now that pretty 230 00:14:24,320 --> 00:14:26,560 Speaker 1: much every country around the globe has been through this. 231 00:14:27,000 --> 00:14:30,320 Speaker 1: But Mike laid out the bowl case for us, and 232 00:14:30,360 --> 00:14:32,480 Speaker 1: I'm just curious what you think, Ben, I mean, when 233 00:14:32,520 --> 00:14:38,080 Speaker 1: does that reality actually strike then, of the realization of 234 00:14:38,480 --> 00:14:42,160 Speaker 1: the depth of the recession that we are actually facing. 235 00:14:42,200 --> 00:14:44,640 Speaker 1: I mean, I've seen this chart floating around this past 236 00:14:44,680 --> 00:14:47,480 Speaker 1: week of the price liquidity ratio. So you have the 237 00:14:47,520 --> 00:14:50,640 Speaker 1: market cap of the SMP plotted against them two money 238 00:14:50,680 --> 00:14:53,320 Speaker 1: supply and people saying, look, it's below average. There's so 239 00:14:53,440 --> 00:14:57,040 Speaker 1: much cash flooding the system. There actually is a lot 240 00:14:57,080 --> 00:15:00,440 Speaker 1: of room potentially for upside in the market. I with 241 00:15:00,600 --> 00:15:04,240 Speaker 1: that case, with that argument out there, when when is 242 00:15:04,280 --> 00:15:08,400 Speaker 1: the reality of the depth of the recession actually take 243 00:15:08,480 --> 00:15:12,000 Speaker 1: over and hit? Honestly, I don't entirely know. You know, 244 00:15:12,040 --> 00:15:14,680 Speaker 1: the interesting thing about where we are right that this 245 00:15:14,800 --> 00:15:21,480 Speaker 1: is we are beyond the depths of this recession. Right. 246 00:15:21,520 --> 00:15:23,240 Speaker 1: We may get a w we may get an l 247 00:15:23,280 --> 00:15:28,680 Speaker 1: who knows um, but probably the worst fall was March 248 00:15:28,720 --> 00:15:32,600 Speaker 1: and April UM So it's a weird recession from that standpoint. 249 00:15:32,840 --> 00:15:35,680 Speaker 1: The funny thing is, if you think about past recessions, 250 00:15:36,360 --> 00:15:39,200 Speaker 1: most of the time, when you are two months into 251 00:15:39,240 --> 00:15:44,200 Speaker 1: a recession, nobody has any idea the recession has occurred. Right. 252 00:15:44,240 --> 00:15:46,440 Speaker 1: It is only well after the fact that we say, oh, 253 00:15:46,480 --> 00:15:52,240 Speaker 1: guess what, this recession started in you know, December two 254 00:15:52,280 --> 00:15:56,600 Speaker 1: thousand seven, and you didn't know it until September two eight. 255 00:15:56,640 --> 00:16:03,200 Speaker 1: But the recession was really there. Um. So I think 256 00:16:03,520 --> 00:16:09,440 Speaker 1: at some level, um, we haven't come to grips with 257 00:16:10,800 --> 00:16:18,320 Speaker 1: the kind of the depth of the lasting problem here. 258 00:16:18,400 --> 00:16:21,280 Speaker 1: There's been so much of a fixation on the acute 259 00:16:21,480 --> 00:16:26,880 Speaker 1: problem um, and much less on the issue that you know, 260 00:16:26,960 --> 00:16:30,440 Speaker 1: for all the money that is being thrown around, GDP 261 00:16:30,720 --> 00:16:34,400 Speaker 1: is down a bunch, right, There is simply a lot 262 00:16:34,520 --> 00:16:43,040 Speaker 1: less output happening. Um. And again, corporations thrive on output. 263 00:16:43,560 --> 00:16:48,120 Speaker 1: The other thing that corporations rather desperately need is enough 264 00:16:48,200 --> 00:16:53,479 Speaker 1: certainty to cause people to want to make investments. Um. 265 00:16:53,520 --> 00:16:59,840 Speaker 1: And you know, maybe I am the person here who 266 00:17:00,200 --> 00:17:05,119 Speaker 1: uh is just is kind of has has failed to 267 00:17:05,240 --> 00:17:09,120 Speaker 1: drink the kool aid that everybody else has. But if 268 00:17:09,280 --> 00:17:13,879 Speaker 1: I was running a kind of traditional business right now, 269 00:17:14,440 --> 00:17:16,720 Speaker 1: I would not want to be doing a lot of investing. 270 00:17:17,000 --> 00:17:19,639 Speaker 1: You know, I might have to invest in some ppe 271 00:17:19,800 --> 00:17:22,040 Speaker 1: so people can come back to work or something. But 272 00:17:22,440 --> 00:17:24,520 Speaker 1: I'm not going to build a new factory, you know, 273 00:17:24,680 --> 00:17:28,400 Speaker 1: I'm not. I'm certainly not going to sign a long 274 00:17:28,520 --> 00:17:32,560 Speaker 1: term lease for new office space because suddenly I've realized, well, actually, 275 00:17:32,640 --> 00:17:35,680 Speaker 1: maybe people can work from home. Maybe that actually is 276 00:17:35,720 --> 00:17:40,480 Speaker 1: a thing that can happen. UM. So you know, you know, 277 00:17:40,520 --> 00:17:45,000 Speaker 1: the two biggest pieces of uh G d P are 278 00:17:45,720 --> 00:17:50,840 Speaker 1: consumption and corporate investment. UH. And I don't see how 279 00:17:50,840 --> 00:17:55,800 Speaker 1: corporate investment gets to normal until corporations are truly seeing Okay, 280 00:17:56,040 --> 00:18:00,280 Speaker 1: I know what the future looks like, and it's good. Um. 281 00:18:00,320 --> 00:18:07,680 Speaker 1: And frankly, even if currently unemployment benefits are pretty good, uh, 282 00:18:07,720 --> 00:18:11,400 Speaker 1: I would think precautionary savings should be going up right now. 283 00:18:12,119 --> 00:18:15,719 Speaker 1: Your certainty about what those benefits are going to be 284 00:18:15,840 --> 00:18:20,399 Speaker 1: is pretty low. Um. Your certainty about your job situation 285 00:18:20,600 --> 00:18:23,600 Speaker 1: is pretty low. I don't know whether. I mean. One 286 00:18:23,640 --> 00:18:27,800 Speaker 1: of the things, um that could be going on, UM 287 00:18:28,440 --> 00:18:32,440 Speaker 1: is that this recession, even more than normal recessions, has 288 00:18:32,520 --> 00:18:39,399 Speaker 1: cost jobs from the lower paid segment of the workforce. UM. 289 00:18:39,960 --> 00:18:43,080 Speaker 1: And you know, the rich people can work from home, 290 00:18:43,560 --> 00:18:47,080 Speaker 1: and that's working okay for them as long as they 291 00:18:47,160 --> 00:18:51,399 Speaker 1: have some child care somehow. Um. And and so maybe 292 00:18:51,480 --> 00:18:54,720 Speaker 1: this just doesn't seem so bad if you are if 293 00:18:54,760 --> 00:18:57,160 Speaker 1: you're working from home and uh, you know you've got 294 00:18:57,200 --> 00:19:00,400 Speaker 1: some time back on your commute. Um, if you are 295 00:19:00,480 --> 00:19:03,720 Speaker 1: not sure whether the businesses that you work for are 296 00:19:03,760 --> 00:19:06,439 Speaker 1: ever going to come back and where your job is 297 00:19:06,480 --> 00:19:12,600 Speaker 1: going to be Um if they don't. UM, I'd say, 298 00:19:12,960 --> 00:19:16,680 Speaker 1: even if you're getting a surprisingly good unemployment check, which 299 00:19:16,680 --> 00:19:21,560 Speaker 1: not everybody is, uh, i'd want to be saving some 300 00:19:21,640 --> 00:19:38,680 Speaker 1: of that. You know. It's you make a great point 301 00:19:38,720 --> 00:19:41,520 Speaker 1: about not having to date this recession or no one's 302 00:19:41,560 --> 00:19:45,240 Speaker 1: waiting for the NBER to come out and officially officially 303 00:19:45,240 --> 00:19:48,119 Speaker 1: give us the start date of this one. Um. But 304 00:19:48,119 --> 00:19:51,400 Speaker 1: you know what I think of the reasons why recessions 305 00:19:51,440 --> 00:19:54,720 Speaker 1: and bear markets always go hand in hand. Obviously, you 306 00:19:54,760 --> 00:19:59,560 Speaker 1: know that their earnings damage uh causes valuations to be 307 00:19:59,640 --> 00:20:02,159 Speaker 1: less a tractive to investors in the equity market. But 308 00:20:02,200 --> 00:20:04,879 Speaker 1: I also think part of it might be, you know, 309 00:20:05,040 --> 00:20:07,960 Speaker 1: stocks for a lot of individuals become sort of a 310 00:20:07,960 --> 00:20:11,000 Speaker 1: piggy bank where you have to cash out if you 311 00:20:11,040 --> 00:20:14,399 Speaker 1: had lost your job, you know, maybe cash out some 312 00:20:14,440 --> 00:20:17,159 Speaker 1: of that retirement money to pay your mortgage, to to 313 00:20:17,200 --> 00:20:19,840 Speaker 1: pay those tuition bills whatever it is, you know when 314 00:20:19,840 --> 00:20:22,600 Speaker 1: and on the institutional side, um, maybe you have head 315 00:20:22,720 --> 00:20:25,119 Speaker 1: hedge funds that you know have to de risk for 316 00:20:25,160 --> 00:20:27,520 Speaker 1: a variety of reasons, margin calls and that sort of thing. 317 00:20:27,920 --> 00:20:30,720 Speaker 1: So I what's weird about this one, and Sarah's written 318 00:20:30,800 --> 00:20:33,280 Speaker 1: a lot about this, is we keep hearing sort of 319 00:20:33,280 --> 00:20:35,920 Speaker 1: the opposite that all of a sudden, this retail trader, 320 00:20:36,920 --> 00:20:41,879 Speaker 1: retail investor is super engaged in this market, uh Matt Levine. 321 00:20:41,880 --> 00:20:44,280 Speaker 1: Sarah had a funny reference to your one of your 322 00:20:44,320 --> 00:20:48,240 Speaker 1: stories saying, there's no other entertainment left, you know, everyone's 323 00:20:48,280 --> 00:20:51,639 Speaker 1: done Netflix. So people are so bored they're they're firing 324 00:20:51,720 --> 00:20:55,760 Speaker 1: up there their e trades and their schwab accounts. Um. 325 00:20:55,800 --> 00:21:00,000 Speaker 1: I think he calls it b MH boredom, market boredom, 326 00:21:00,040 --> 00:21:03,520 Speaker 1: the market hypothesis. So you know, but I wonder if 327 00:21:03,560 --> 00:21:05,640 Speaker 1: you've given any thoughts to that, is that sort of 328 00:21:05,760 --> 00:21:09,159 Speaker 1: you know, the people that are getting a little extra 329 00:21:09,359 --> 00:21:12,800 Speaker 1: unemployment insurance uh cash, then they would have made otherwise 330 00:21:12,840 --> 00:21:16,560 Speaker 1: everyone who got their stimulus check from the government. Is 331 00:21:16,600 --> 00:21:18,720 Speaker 1: that part of this sort of little sugar high we've 332 00:21:18,720 --> 00:21:22,159 Speaker 1: seen in this rebound. And if so, I mean to 333 00:21:22,200 --> 00:21:24,640 Speaker 1: me that seems like it has an expiration date on 334 00:21:24,720 --> 00:21:28,600 Speaker 1: it that is fast approaching. You know, the federal unemployment 335 00:21:28,880 --> 00:21:33,040 Speaker 1: supplement I think expires in July. So, um, you know 336 00:21:33,080 --> 00:21:35,600 Speaker 1: that seems like a little bit of euphoria that could 337 00:21:35,920 --> 00:21:38,880 Speaker 1: get sapped out of the market pretty quickly. Yeah, I did. 338 00:21:38,960 --> 00:21:46,200 Speaker 1: I did. Uh read that peace and quite enjoyed it. UM. 339 00:21:46,240 --> 00:21:49,680 Speaker 1: In general, day traders don't have a lot of money 340 00:21:49,720 --> 00:21:51,720 Speaker 1: and are not putting a lot of money to work, 341 00:21:52,400 --> 00:21:58,919 Speaker 1: So I haven't seen the the hard data on it, UM, 342 00:21:58,960 --> 00:22:03,280 Speaker 1: but I wouldn't be surprised if they were driving the 343 00:22:03,359 --> 00:22:08,760 Speaker 1: performance of some of the particularly volatile stocks UM. But 344 00:22:08,920 --> 00:22:12,000 Speaker 1: for them to be driving the overall market would be 345 00:22:12,320 --> 00:22:15,639 Speaker 1: an impressive feat. Um. It takes a lot of money 346 00:22:15,640 --> 00:22:18,840 Speaker 1: to do that. Uh. And And frankly, one of the 347 00:22:18,880 --> 00:22:23,119 Speaker 1: things I'm impressed by. In recent years, the only buyer 348 00:22:23,240 --> 00:22:27,960 Speaker 1: of note of US equities have been US corporations buying 349 00:22:27,960 --> 00:22:32,199 Speaker 1: back their own stock um, and there has got to 350 00:22:32,320 --> 00:22:36,560 Speaker 1: be an awful lot less of that going on right now. UM. 351 00:22:36,720 --> 00:22:39,920 Speaker 1: So I will say I am impressed by the market's 352 00:22:39,960 --> 00:22:47,640 Speaker 1: ability to go up without its big driver of demand there. UM. 353 00:22:47,680 --> 00:22:50,679 Speaker 1: But UM, you know, there's the old saying that in 354 00:22:50,720 --> 00:22:53,359 Speaker 1: the short term the market is a voting machine and 355 00:22:53,400 --> 00:22:56,639 Speaker 1: the long term it is a weighing machine. UM. And 356 00:22:56,920 --> 00:23:02,840 Speaker 1: the biggest reason why markets have a strong tendency to 357 00:23:03,000 --> 00:23:08,800 Speaker 1: get cheap in really bad economic times, UM is because 358 00:23:09,800 --> 00:23:13,240 Speaker 1: of the coincidence. And it's not a coincidence, it's it's 359 00:23:14,040 --> 00:23:18,400 Speaker 1: completely causal. But UM, corporate cash flow drives up at 360 00:23:18,440 --> 00:23:22,919 Speaker 1: the same time that people's other sources of income drives up. 361 00:23:23,480 --> 00:23:25,399 Speaker 1: And the reason why there needs to be an equity 362 00:23:25,480 --> 00:23:28,080 Speaker 1: risk premium is not just because equities are volatile. It's 363 00:23:28,160 --> 00:23:31,320 Speaker 1: the circumstances in which equities are going to give you 364 00:23:31,400 --> 00:23:39,800 Speaker 1: really bad returns UM. And I don't see that there's 365 00:23:39,880 --> 00:23:46,359 Speaker 1: any way to unhook that in the longer term. UM. 366 00:23:46,720 --> 00:23:51,520 Speaker 1: If stock prices, you know, stay up and and push higher, well, 367 00:23:51,560 --> 00:23:56,680 Speaker 1: corporate cash flow is clearly worse. UM. Then I guess 368 00:23:56,720 --> 00:23:59,920 Speaker 1: it could be that people are prepared to own equities 369 00:24:00,119 --> 00:24:04,600 Speaker 1: much lower returns than they used to be UM. And 370 00:24:04,600 --> 00:24:09,439 Speaker 1: and maybe that can work, and maybe that can be sustainable. 371 00:24:10,160 --> 00:24:13,959 Speaker 1: We heard that story in two thousand UM part of 372 00:24:13,960 --> 00:24:16,399 Speaker 1: the pitch for why the stock market made its sense 373 00:24:16,520 --> 00:24:20,840 Speaker 1: was that there shouldn't be an equity risk premium. Um. Uh. 374 00:24:21,800 --> 00:24:24,159 Speaker 1: It always struck me as a very strange thing because 375 00:24:24,160 --> 00:24:26,840 Speaker 1: at the time, if you asked the people who were 376 00:24:26,840 --> 00:24:30,719 Speaker 1: buying stocks, what returns were you expecting from stocks, they 377 00:24:30,720 --> 00:24:33,440 Speaker 1: were expecting extraordinarily high returns. They weren't saying, Hey, I 378 00:24:33,480 --> 00:24:36,040 Speaker 1: think I'm going to get you know, two percent plus inflation, 379 00:24:36,080 --> 00:24:39,520 Speaker 1: but I'm good with that. Uh. And I haven't heard 380 00:24:39,600 --> 00:24:43,040 Speaker 1: anybody saying, you know what, I'm buying Google today because 381 00:24:43,080 --> 00:24:46,359 Speaker 1: I think it's going to give me two percent real um. 382 00:24:46,400 --> 00:24:49,080 Speaker 1: And in this world, I'm fine with two percent real. 383 00:24:49,320 --> 00:24:56,679 Speaker 1: If we were getting that, UM, I would be a 384 00:24:56,680 --> 00:25:02,080 Speaker 1: little bit less scared for the market. Uh. Then if 385 00:25:02,119 --> 00:25:04,040 Speaker 1: people are saying, well, look, with the Fed here, the 386 00:25:04,040 --> 00:25:07,800 Speaker 1: market can't help but go up. And so all I 387 00:25:07,840 --> 00:25:11,680 Speaker 1: care about is is the short term, I think scared 388 00:25:11,760 --> 00:25:14,119 Speaker 1: for the market, we can we can leave it at that. 389 00:25:14,119 --> 00:25:19,840 Speaker 1: That's your segway. We're living in unique times, crazy times. 390 00:25:19,840 --> 00:25:23,280 Speaker 1: In the short term. This podcast is your place for 391 00:25:23,520 --> 00:25:26,280 Speaker 1: thoughtful analysis. It's here in the long term, it's really 392 00:25:26,280 --> 00:25:28,800 Speaker 1: a place just for crazy market stories that that we've 393 00:25:28,840 --> 00:25:32,280 Speaker 1: all witnessed. It's so that's what people come for. They 394 00:25:32,280 --> 00:25:35,520 Speaker 1: want their return on crazy things. So, um, I think 395 00:25:35,560 --> 00:25:38,880 Speaker 1: we got a call into what goes Up hotline from 396 00:25:38,880 --> 00:25:42,920 Speaker 1: a listener down in your state of sunny Florida. Let's 397 00:25:42,960 --> 00:25:45,600 Speaker 1: give that a listen my neck of the woods. Well, 398 00:25:45,640 --> 00:25:48,040 Speaker 1: my name is Morgan Hill, calling from Bookerts from Florida. 399 00:25:48,359 --> 00:25:52,359 Speaker 1: My mestwor is for what goes Up? Uh blue Berg podcast? 400 00:25:53,440 --> 00:25:56,720 Speaker 1: What's crazy about this market? What I've noticed just here 401 00:25:56,720 --> 00:26:03,560 Speaker 1: on Tuesday is uh, the change in which driving market returns. Um, 402 00:26:03,840 --> 00:26:07,760 Speaker 1: you know through yesterday, Uh, you know youre to day, 403 00:26:07,800 --> 00:26:13,960 Speaker 1: we witnessed technology really providing the buffer for you know, 404 00:26:14,040 --> 00:26:17,520 Speaker 1: overalltly returns, and you know through Tuesday, real estate and 405 00:26:17,520 --> 00:26:21,280 Speaker 1: industrials are kind of leading the way, you know, followed 406 00:26:21,280 --> 00:26:25,359 Speaker 1: by financials and you know, communication services. So it's it's 407 00:26:25,440 --> 00:26:28,520 Speaker 1: quite interesting to see the change of of you know, 408 00:26:28,560 --> 00:26:31,520 Speaker 1: the wave. But I think that's that's pretty crazy. Everybody 409 00:26:31,520 --> 00:26:33,840 Speaker 1: has a great week. Yeah, but that sounds a little 410 00:26:33,880 --> 00:26:36,600 Speaker 1: bit like the value rotation you were talking about, right, Uh, 411 00:26:36,760 --> 00:26:41,240 Speaker 1: financials industrials at least, Um, I guess you'd throw energy 412 00:26:41,240 --> 00:26:43,760 Speaker 1: into into that group as well. Yeah, I would. Uh, 413 00:26:43,800 --> 00:26:48,320 Speaker 1: And and again that's the economic reflation trade. And I 414 00:26:48,359 --> 00:26:52,919 Speaker 1: don't know whether it's right from a timing perspective, but 415 00:26:54,080 --> 00:26:57,280 Speaker 1: I mean, there is something weird about a market where 416 00:26:57,359 --> 00:27:00,159 Speaker 1: tech was leading on the way up, tech leads the 417 00:27:00,160 --> 00:27:02,399 Speaker 1: way down, and then tech leads on the way up again. 418 00:27:02,480 --> 00:27:08,480 Speaker 1: There's at some point that has to end. And the 419 00:27:08,520 --> 00:27:11,000 Speaker 1: groups he was talking about, our groups that have been 420 00:27:11,000 --> 00:27:17,280 Speaker 1: pre beaten down and we'll recover at some point. Um 421 00:27:17,280 --> 00:27:20,520 Speaker 1: whether we have enough data to say, oh, few the 422 00:27:20,560 --> 00:27:23,679 Speaker 1: worst is behind us. Uh, let's go off to the 423 00:27:23,760 --> 00:27:29,000 Speaker 1: races now with the more economically sensitive ones. You have 424 00:27:29,080 --> 00:27:30,800 Speaker 1: to be you have to have a better crystal ball 425 00:27:30,840 --> 00:27:33,640 Speaker 1: than I to be confident that that's the right thing 426 00:27:33,680 --> 00:27:36,600 Speaker 1: to do. But a change of leadership in the market, 427 00:27:37,240 --> 00:27:39,960 Speaker 1: my god, is at least well overdue. Is what we 428 00:27:40,000 --> 00:27:42,720 Speaker 1: saw this past week. Do you think it's uh what 429 00:27:42,840 --> 00:27:45,680 Speaker 1: it might look like for the market on the way up? 430 00:27:45,760 --> 00:27:48,879 Speaker 1: Just a bit too soon? I mean, considering how you 431 00:27:48,920 --> 00:27:51,560 Speaker 1: describe how you guys were positioning earlier on in the show, 432 00:27:51,640 --> 00:27:55,560 Speaker 1: even though you are reducing your net equity exposure, I mean, 433 00:27:55,920 --> 00:27:58,639 Speaker 1: is this what we should expect? Though, once we do 434 00:27:58,720 --> 00:28:00,840 Speaker 1: get to that point when we're out of the woods, 435 00:28:01,640 --> 00:28:05,480 Speaker 1: it certainly could be a lot of it depends on 436 00:28:05,600 --> 00:28:09,280 Speaker 1: what the world looks like when we finally can see 437 00:28:09,280 --> 00:28:14,920 Speaker 1: our way through. UM. But ordinarily, in you know, the 438 00:28:15,040 --> 00:28:20,639 Speaker 1: recovery from a bear market in recessionary low, it would 439 00:28:20,640 --> 00:28:24,880 Speaker 1: be the smaller cap stocks, uh, and the more economically 440 00:28:24,920 --> 00:28:29,720 Speaker 1: sensitive companies that would lead the way. So that that 441 00:28:29,800 --> 00:28:34,520 Speaker 1: does make some sense. UM. It does not necessarily mean 442 00:28:34,560 --> 00:28:39,080 Speaker 1: the markets, right, but it would make sense. Alright, Sarah, 443 00:28:39,120 --> 00:28:43,760 Speaker 1: let's see you make sense with some your craziest thing, alright. So, UH, 444 00:28:44,160 --> 00:28:46,920 Speaker 1: I have a statistic. We talked about the speed a 445 00:28:47,000 --> 00:28:50,000 Speaker 1: lot of the recovery that we've seen and really just 446 00:28:50,040 --> 00:28:54,320 Speaker 1: how unbelievable it has been. And this statistic comes from 447 00:28:54,440 --> 00:28:58,040 Speaker 1: Sundale Capital Research, and this past week we saw the 448 00:28:58,160 --> 00:29:00,800 Speaker 1: SMP move not only above three dolls in, but also 449 00:29:00,840 --> 00:29:03,640 Speaker 1: above it's two hundred day moving average. And what they 450 00:29:03,720 --> 00:29:07,200 Speaker 1: found was that typically, on average, if you fall in 451 00:29:08,440 --> 00:29:11,200 Speaker 1: from a high, the time it takes to get back 452 00:29:11,360 --> 00:29:15,600 Speaker 1: above that two hundred day moving average is typically over 453 00:29:15,640 --> 00:29:18,360 Speaker 1: two hundred days. Well, this time we've done it in 454 00:29:18,440 --> 00:29:21,480 Speaker 1: fifty six days, fifty six trading sessions. UM. So that 455 00:29:21,560 --> 00:29:25,840 Speaker 1: kind of just shows you how quick the snap back 456 00:29:26,520 --> 00:29:29,120 Speaker 1: really really has been. And then I also have one 457 00:29:29,160 --> 00:29:32,640 Speaker 1: that's a bit more fun. Uh. The SpaceX launch moved 458 00:29:32,640 --> 00:29:36,440 Speaker 1: to Saturday. But I think we're all sitting back waiting 459 00:29:36,440 --> 00:29:39,720 Speaker 1: with bated breath on the launch. And I mean pretty 460 00:29:39,720 --> 00:29:42,320 Speaker 1: crazy that we're going to have the first launch with 461 00:29:42,400 --> 00:29:46,200 Speaker 1: an American company off of US soil UM to the 462 00:29:46,200 --> 00:29:50,760 Speaker 1: International Space Station. Since even that is pretty cool. That's 463 00:29:50,760 --> 00:29:53,280 Speaker 1: pretty cool, I gotta admit. And I don't know if 464 00:29:53,280 --> 00:29:55,040 Speaker 1: they warned you about our gimmick, but have you seen 465 00:29:55,080 --> 00:29:59,840 Speaker 1: any crazy stories in the market this week? Nothing? Nothing 466 00:29:59,840 --> 00:30:05,520 Speaker 1: that specific this week. I mean the craziest action I 467 00:30:05,560 --> 00:30:10,480 Speaker 1: think I have seen, uh this year other than oil 468 00:30:10,560 --> 00:30:19,520 Speaker 1: going negative, uh, is what happened to Wayfair, which is 469 00:30:19,680 --> 00:30:22,720 Speaker 1: a company that there is that one of the pms 470 00:30:22,720 --> 00:30:26,680 Speaker 1: of my firm has quite liked UM and from the 471 00:30:26,720 --> 00:30:30,760 Speaker 1: middle of January to the middle of March it went 472 00:30:30,840 --> 00:30:34,960 Speaker 1: down something like eight uh. And he was scratching his hat. 473 00:30:35,000 --> 00:30:38,719 Speaker 1: He's like, I don't understand why they're why it's doing this, 474 00:30:38,800 --> 00:30:43,640 Speaker 1: because these guys should be beneficiaries of stay at home, right. 475 00:30:43,680 --> 00:30:45,480 Speaker 1: If you can't go to furniture stores, you have to 476 00:30:45,520 --> 00:30:48,600 Speaker 1: shop for your furniture online. Uh. And well, they're all 477 00:30:48,640 --> 00:30:52,640 Speaker 1: they're all sourced out of China, though right mainly not 478 00:30:52,720 --> 00:30:54,640 Speaker 1: everything is sourced out of China, And it would have 479 00:30:54,640 --> 00:30:57,160 Speaker 1: been weird if that had driven them to bankruptcy. M 480 00:30:57,760 --> 00:31:02,400 Speaker 1: But speaking of the speed of recovery, um, from that 481 00:31:02,600 --> 00:31:07,320 Speaker 1: low in the middle of March of twenty three and 482 00:31:07,360 --> 00:31:10,640 Speaker 1: a half, it then went up to a hundred and 483 00:31:10,760 --> 00:31:17,080 Speaker 1: ninety in less than two months. Um. And I mean, 484 00:31:17,680 --> 00:31:19,840 Speaker 1: if that is not a market with some kind of 485 00:31:19,880 --> 00:31:23,239 Speaker 1: a d h D problem, I don't know what is, 486 00:31:24,880 --> 00:31:28,320 Speaker 1: you know. I think it was wayfair. Uh that was 487 00:31:28,600 --> 00:31:32,440 Speaker 1: advertising to me on Instagram this past week with pictures 488 00:31:33,080 --> 00:31:37,240 Speaker 1: of saunas and big saunas to have in your homes. 489 00:31:37,240 --> 00:31:40,120 Speaker 1: And I always think of furniture, and I'm like, what 490 00:31:40,280 --> 00:31:43,560 Speaker 1: is is sauna now being classified as stay at home furniture? 491 00:31:43,640 --> 00:31:46,480 Speaker 1: You can't get out to your sauna. I really was 492 00:31:46,800 --> 00:31:50,400 Speaker 1: intrigued by it. Well, I'm witing for our air conditioner 493 00:31:50,520 --> 00:31:52,320 Speaker 1: to be services, so it's kind of like a sauna 494 00:31:52,400 --> 00:31:56,360 Speaker 1: here in my house. Hopefully they'll they'll get out here soon. Um. Well, 495 00:31:56,520 --> 00:31:59,520 Speaker 1: that's a good one, Ben, I like that wayfair stock 496 00:32:00,160 --> 00:32:02,960 Speaker 1: a d h D. That's a pretty good one. Sarah 497 00:32:03,000 --> 00:32:05,120 Speaker 1: I'll give you mine, But first, Sarah, I gotta say. 498 00:32:05,160 --> 00:32:09,520 Speaker 1: I reached out to our chief crazy things correspondent, vil 499 00:32:09,560 --> 00:32:12,800 Speaker 1: Donna Hirich and and because she'd really been slacking on 500 00:32:12,840 --> 00:32:14,920 Speaker 1: the job, I hadn't heard a single crazy thing from 501 00:32:14,920 --> 00:32:19,200 Speaker 1: her since the pandemic hit. And her response was, Oh, 502 00:32:19,280 --> 00:32:22,960 Speaker 1: that's unfair. I've been feeding Sarah crazy things this whole time, 503 00:32:23,320 --> 00:32:27,200 Speaker 1: like three yesterday, And I'm like, what what, Mike, You 504 00:32:27,200 --> 00:32:29,480 Speaker 1: know what it is. She just she trusts me with 505 00:32:29,520 --> 00:32:32,360 Speaker 1: the content more more than she does with you. But yeah, 506 00:32:32,400 --> 00:32:38,120 Speaker 1: we've we've been we've been wrong and uttered that I'm 507 00:32:38,200 --> 00:32:41,840 Speaker 1: I also have outswerced my crazy thing this week, um 508 00:32:42,400 --> 00:32:46,560 Speaker 1: to a listener in Buenos Aireas, Argentina. And yes, this 509 00:32:46,640 --> 00:32:48,960 Speaker 1: is partially just a flex on our part that we 510 00:32:49,000 --> 00:32:51,320 Speaker 1: have listeners in Argentina, which I think is really cool. 511 00:32:51,720 --> 00:32:53,800 Speaker 1: So a little bit of a flex. As the kids say, hope, 512 00:32:53,800 --> 00:32:58,000 Speaker 1: hopefully I'm using that that right. Um, you're using it right, Mike. 513 00:32:58,800 --> 00:33:01,400 Speaker 1: You know, I like to illusion that I'm a young hipster. 514 00:33:02,080 --> 00:33:05,480 Speaker 1: His name is Manuel Goody Luque. He's a lawyer at 515 00:33:05,480 --> 00:33:10,520 Speaker 1: Baker Mackenzie and Buenos Aireas, and he points out in Argentina, 516 00:33:10,720 --> 00:33:14,520 Speaker 1: rather than worry about the effects of UH low oil 517 00:33:14,560 --> 00:33:17,240 Speaker 1: prices on the economy, they just pegged the price of 518 00:33:17,240 --> 00:33:19,760 Speaker 1: oil at at forty five dollars of barrel. They called 519 00:33:19,760 --> 00:33:23,600 Speaker 1: the barrel creola CREOLEO. I'm not I'm not pronouncing it right, 520 00:33:23,600 --> 00:33:27,360 Speaker 1: but the barrel creoleo. UH. And the government's basically pegged 521 00:33:27,840 --> 00:33:30,720 Speaker 1: oil at forty five So if you're a refiner in 522 00:33:31,320 --> 00:33:34,920 Speaker 1: UH refinery in Argentina, you have to pay forty five 523 00:33:34,960 --> 00:33:37,400 Speaker 1: bucks of barrel. And the idea is to sort of 524 00:33:37,440 --> 00:33:42,360 Speaker 1: support UH. You know they're big their domestic industry. YPF 525 00:33:42,400 --> 00:33:46,320 Speaker 1: is the big producer. Um ben I don't know about 526 00:33:46,320 --> 00:33:51,520 Speaker 1: this though. UM, you support your your upstream oil production. 527 00:33:51,680 --> 00:33:54,240 Speaker 1: But you look at the Argentine pays so what it's 528 00:33:54,240 --> 00:33:57,400 Speaker 1: been doing lately, and you're gonna make it basically unaffordable 529 00:33:57,400 --> 00:34:00,320 Speaker 1: to fill your tank. I think in Argentina, what what 530 00:34:00,360 --> 00:34:04,800 Speaker 1: do you make to that move? Unfortunately, that doesn't sound 531 00:34:05,040 --> 00:34:08,920 Speaker 1: that far out of the norm for Argentina. UM, I 532 00:34:09,120 --> 00:34:11,840 Speaker 1: have a good point. Argentina has done a lot of 533 00:34:11,880 --> 00:34:15,000 Speaker 1: things like that over the years. Right. They used to 534 00:34:15,080 --> 00:34:21,000 Speaker 1: have people coming in before the economists were calculating UH. 535 00:34:21,040 --> 00:34:27,000 Speaker 1: The inflation rate to reprice goods in stores UM, which 536 00:34:27,000 --> 00:34:31,640 Speaker 1: would then be repriced exactly afterwards. UM. So Argentina unfortunately 537 00:34:31,760 --> 00:34:35,239 Speaker 1: doesn't necessarily want to live in the world as it is, 538 00:34:35,719 --> 00:34:38,719 Speaker 1: but the world that they would like it to be. UM, 539 00:34:39,719 --> 00:34:42,920 Speaker 1: and that may have something to do with why they 540 00:34:42,960 --> 00:34:45,840 Speaker 1: seem to have now just defaulted for the third time 541 00:34:46,680 --> 00:34:50,480 Speaker 1: in the last twenty years. Well, it's uh, it's certainly interesting. 542 00:34:50,520 --> 00:34:53,920 Speaker 1: But I am highly certain that we won't have forty 543 00:34:53,920 --> 00:34:57,520 Speaker 1: five pegged oil here in the US at any time 544 00:34:58,440 --> 00:35:02,359 Speaker 1: in our lifetimes. Likely I'll agree with you on that, 545 00:35:02,760 --> 00:35:06,080 Speaker 1: although whoever thought we'd see negative oil prices, so who knows? 546 00:35:06,840 --> 00:35:10,040 Speaker 1: That's also true. That's also true. But with that said, 547 00:35:10,040 --> 00:35:12,160 Speaker 1: Ben Ankara, thank you so much for coming on the 548 00:35:12,200 --> 00:35:14,279 Speaker 1: show today. We really appreciate it. Thanks very much for 549 00:35:14,320 --> 00:35:24,720 Speaker 1: having me. What goes up? 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