Speaker 1: Scrap on your parachute. It's time for What Goes Up? Hello,
Speaker 1: and welcome to What Goes Up, a Bloomberg Weekly Markets podcast.
Speaker 1: I'm Mike Reagan, a senior editor at Bloomberg, and this
Speaker 1: week on the show, the alarming rise in treasury yields
Speaker 1: finally cooled off this week. But does this really the
Speaker 1: end or do rates have further room to move higher?
Speaker 1: And what does it all mean for this rotation into
Speaker 1: value in cyclical stocks. Our guest will share some thoughts
Speaker 1: on this issue, as well as explain why he's looking
Speaker 1: at stocks in the United Kingdom among other international markets.
Speaker 1: But before we get to that, since Sarah abandoned us
Speaker 1: all here sadly, I've decided we will bring in sort
Speaker 1: of a rotating cast of reporters, editors, and strategists from
Speaker 1: throughout the Bloomberg universe to fill in for her on
Speaker 1: a sort of rotating basis. And as listeners know, I
Speaker 1: can't resist a good gimmick, so I'm going to call
Speaker 1: it the mystery co host of the week. So Charlie
Speaker 1: Pellett take it away and tell us who this week's
Speaker 1: mystery co host is. This week's mystery co host is
Speaker 1: pretty gup dog Pretty as a reporter for Bloomberg's Market
Speaker 1: Live blog and a regular on Bloomberg TV and radio.
Speaker 1: She's a texting at heart and owns a dog that
Speaker 1: resembles an old man. It is true, and I'm very
Speaker 1: proud of it. Even when I got him as a puppy,
Speaker 1: he was only a month old, and he still looked
Speaker 1: like he had, you know, twenty years of experience, which,
Speaker 1: to be honest, is actually pretty interesting because when I
Speaker 1: was a little that's what my mom used to say
Speaker 1: about me. So I think it's only fitting that I
Speaker 1: got this dog. It's fitting for me because I'm an
Speaker 1: old man who looks like a dog. So I feel
Speaker 1: comradeship here. I think we all have our weak points. Mike,
Speaker 1: I'm just not going to comment on yours. So but anyways,
Speaker 1: though that's enough about my dog. I do want to
Speaker 1: introduce our guests though. This week's guests the head of
Speaker 1: investment strategy for City Personal Wealth Management. His name is
Speaker 1: Shawn Snyder. Sean, Welcome to the show. Thank you so
Speaker 1: much for joining us. I do want to dive right
Speaker 1: in here to the tech slash yields component, and we've
Speaker 1: been talking about it for weeks, this inverse correlation that
Speaker 1: you're seeing, and the narrative seems to be that if
Speaker 1: text kind of future earnings are based on longer term growth,
Speaker 1: based on this idea that all of their growth is
Speaker 1: coming in the future, therefore they're more going to be
Speaker 1: more sensitive to yield. But how can you make that
Speaker 1: argument when perhaps the last ten years of growth you've
Speaker 1: seen a tech isn't necessarily indicative of the same margin
Speaker 1: of growth you're going to see in the same sector
Speaker 1: for the next ten years. So how how do you
Speaker 1: how do you justify that? Sure? I think the most
Speaker 1: simplistic way to think about what's happening is essentially, if
Speaker 1: you have inflation rising, a dollar today is worth more
Speaker 1: than a dollar in the future. And technology stocks are
Speaker 1: generally considered long duration assets, so they're particularly sensitive to
Speaker 1: the rising yields. But not just us the rise in
Speaker 1: tenure nominal yields, but really the tenure real yield. That's
Speaker 1: what it matters the most. They've actually tracked fairly well
Speaker 1: together in an inverse correlation over the last say six
Speaker 1: months or so, so it's really what's happening to the
Speaker 1: real yell that matters most. For technology, I will argue
Speaker 1: that you are right. Technology today looks very different than
Speaker 1: it did in the past. Right when we had the
Speaker 1: technology bubble, you have really extreme valuations and not a
Speaker 1: lot of earnings. A lot of these companies now actually
Speaker 1: have significant earnings, so it is different. I would say
Speaker 1: that maybe a little bit less vulnerable than they were
Speaker 1: back then. Seans it's this all sort of the lynchpins
Speaker 1: who to all this rotation is in the bond market. Um.
Speaker 1: This week we did see that that ten year yield
Speaker 1: sort of come down a little bit. Walk us through
Speaker 1: what you're thinking about the long end of the curve
Speaker 1: and the yield curve. I know you've done some some
Speaker 1: work looking about looking at that and thinking about it.
Speaker 1: I don't think anyone is very confident that this surgeon
Speaker 1: yields is over yet. I mean, is this kind of
Speaker 1: a head fake that we're saying this week? What's your
Speaker 1: take on on this sort of uh many correction back
Speaker 1: lower yields that we're seeing. I think the last week
Speaker 1: or so it could probably be chalked up to COVID jitters.
Speaker 1: You've seen some renewed lockdowns in Germany, although very short lived.
Speaker 1: I think they end. Uh. You know, you know, in
Speaker 1: a week or two. I think it's April eighteenth or something.
Speaker 1: I don't remember the exact date. But it's not a
Speaker 1: long lived lockdown. Uh. You saw it's a very similar
Speaker 1: thing in France. UH. And I think there's some concerns
Speaker 1: that these you know, new strains, UH, maybe spreading a
Speaker 1: bit more rapidly than we initially anticipated. So I don't
Speaker 1: think that delays the recovery significantly. You know, you heard
Speaker 1: President Biden talk about raising his goal from a hundred
Speaker 1: million shots to two million today. Um, they are on
Speaker 1: pace to get there at the current pace, about two
Speaker 1: and a half million doses per day. Uh. To get
Speaker 1: that extra seventy million needed to hit his target, it
Speaker 1: only takes about twenty eight days. But I do think
Speaker 1: that's sort of y Yields have kind of backed up
Speaker 1: a little bit, UM when you mentioned what's going to happen,
Speaker 1: and over the long run, this is not a new
Speaker 1: phenomenon to see the yield curve steepen. It's happened when
Speaker 1: the U. S economy exited recession during the last four recessions. UH,
Speaker 1: And eventually the spread between the ten year yield and
Speaker 1: the two year yield, which is what we call the
Speaker 1: yield curve, actually peaked at about two point four percenter.
Speaker 1: So during those last four recessions. Right now the spread
Speaker 1: is about one and a half percent, so that would
Speaker 1: imply there's probably further upside here to go. And if
Speaker 1: we look at the past four recessions again, it took
Speaker 1: about twenty two months on average from the end of
Speaker 1: the recession to the yield curve peaking. Now, the recession
Speaker 1: has probably ended a while ago, right it may have
Speaker 1: ended in September. I'm not the one who's the arbitr
Speaker 1: of when recession visually ended, but we're probably at least
Speaker 1: several months into the recovery, so some of this has
Speaker 1: already been priced in. The yield curve has already steep end,
Speaker 1: but we probably have further to run based on what's
Speaker 1: happened in historical example. That's fascinating that you say that,
Speaker 1: because you've talked about post recessionary periods. But something else
Speaker 1: that's pretty common in post recessionary periods is this idea
Speaker 1: that value stocks continue to rise. And I think the
Speaker 1: connection to that, for example, with the yield picture, is
Speaker 1: going to be that financials will rise as well in
Speaker 1: line with those yield curves. But how do you decide
Speaker 1: how long that that rally runs up? I mean it
Speaker 1: makes sense to buy things like financials like I mentioned,
Speaker 1: or commodities or e M for example. But when do
Speaker 1: you decide that that period about performance is over? When
Speaker 1: do you decide that we're now going to be in
Speaker 1: a growth environment? Again, that is an absolutely great question
Speaker 1: to determine when exactly something ends. I think there's further
Speaker 1: room to run if you just look on a very
Speaker 1: very basic level, the Russell one thousand growth index versus
Speaker 1: the Russell one thousand value index and you look at
Speaker 1: how they perform. Since the end of the growth index
Speaker 1: is up about the value index is only up about ten.
Speaker 1: So to me, that suggests that there's further room to
Speaker 1: run in the value space. And it really is picular
Speaker 1: for financials because you think that steepening yield curve benefits
Speaker 1: them through net interest income. And they also took a
Speaker 1: lot of loan loss reserves in anticipation of this pandemic
Speaker 1: causing credit issues, and because we've got so much significant stimulus,
Speaker 1: they really haven't quite seen that. So eventually that's going
Speaker 1: to be released, and that will turn into profits. Now,
Speaker 1: some of that's priced in, probably, but I still think
Speaker 1: there's some room to run there for financials, particularly for
Speaker 1: talking about another one percent higher or steepening in the
Speaker 1: yield curve. You're shut. I keep thinking of a word
Speaker 1: that I haven't used or heard in a in a
Speaker 1: long time, and that's goldilocks. I feel like the market
Speaker 1: is really hoping for sort of this goldilocks recovery. If
Speaker 1: it gets a little too hot, if inflation is a
Speaker 1: little too hot, that's obviously going to raise rates and
Speaker 1: be an issue. But as you point out now, with
Speaker 1: Germany locking down even here in my home state of
Speaker 1: New Jersey, they've kind of halted the reopening to some degree.
Speaker 1: I wonder, you know which is sort of a more
Speaker 1: painful event for the market. Is it too hot of
Speaker 1: a recovery that that causes yields to rise and people
Speaker 1: bring forward their timeline for the fed UH normalizing policy,
Speaker 1: or is it that this recovery is not as robust
Speaker 1: as sort of this rotation and and the excitement over
Speaker 1: the rotation into cyclicals and value sort of implies, which
Speaker 1: which one kind of scares you more. I think what
Speaker 1: scares me the most is if we're wrong about the
Speaker 1: path of the virus, that changes everything, Right, If these
Speaker 1: strains come out spread more rapidly than we expect or
Speaker 1: aren't covered by the vaccines, then that's kind of a
Speaker 1: game change. Or now that's not the base case. It
Speaker 1: doesn't seem like that's happening, you know, And I do
Speaker 1: think that our treatment levels have improved greatly, number of hospitializations,
Speaker 1: deaths likely come down. And I think really importantly, you
Speaker 1: have a very significant portion of the sixty five plus
Speaker 1: population already vaccinated. So you know, I think they're right
Speaker 1: to be optimistic about the future. And you know, if
Speaker 1: we do get six and a half percent growth, like
Speaker 1: the fattest projecting, then you're looking at the strongest growth
Speaker 1: since the early nine and I think we will hit that.
Speaker 1: Um So, to me, I think that's the most important
Speaker 1: point of all of this. It's not rising bond yields.
Speaker 1: It's that we are exiting a recession and this is
Speaker 1: probably just the beginning of a new economic cycle, and
Speaker 1: those tend to last five, six years, maybe longer. That's
Speaker 1: really the important point because that's what's going to create earnings,
Speaker 1: and that's what's going to sustain the stock market over
Speaker 1: a longer period of time. Do you see corrections because
Speaker 1: of bond yields? Maybe, But at the end of the day,
Speaker 1: it's really about the economy recovering in the beginning of
Speaker 1: a new economic cycle. De Sean, what's the trade here?
Speaker 1: And here's why I ask. I'm on a team that's
Speaker 1: filled with X trader and they always ask me what's
Speaker 1: the trade? Uh? So I'm very curious when you have
Speaker 1: this risk, or this continuing risk of this virus of
Speaker 1: perhaps more variants, can you really dive into the deep
Speaker 1: end with the value play or do you still have
Speaker 1: to have some sort of exposure to things like tech,
Speaker 1: to things like utilities, those kind of names that you
Speaker 1: can really continue to rely on. Sure, I don't think
Speaker 1: you just abandoned technology or growth stocks. I mean, over time,
Speaker 1: they will continue to provide growth as they're called, uh
Speaker 1: and you will see positive earnings in those spaces. So
Speaker 1: I don't think it makes sense to completely get rid
Speaker 1: of technology. But you know, you have a lot of
Speaker 1: people that have been heavily invested in technology since the
Speaker 1: beginning of the pandemic, and that scenario where we're all
Speaker 1: staying at home is potentially unwinding. So it's not all
Speaker 1: technology companies, right. There's some that i've really strong cash
Speaker 1: cash on their balance sheet, they have strong curpet earnings.
Speaker 1: There's some that don't have a lot of earnings. There's
Speaker 1: also some that are uniquely benefiting from the pandemic exercise equipment.
Speaker 1: So it really it's not just tech, it's which type
Speaker 1: of tech. Yeah, I feel like the really the most
Speaker 1: speculative sort of earnings way off in the in the
Speaker 1: distant future type of tech. Uh, really the the arc
Speaker 1: you know, Cathy Woods type of of hopes and dreams
Speaker 1: type of stocks that are really getting hit the hardest.
Speaker 1: Is there something I mean? Is that all simply a
Speaker 1: reverse of the side of the coin to the yields picture?
Speaker 1: I mean, what would it take to get that kind
Speaker 1: of really gung ho, uh gusty spirit towards those those
Speaker 1: types of stocks brewing? Again? Is it? Is it just
Speaker 1: as a simple matter of which way rates are going now?
Speaker 1: I think it's valuations. I think if you see those
Speaker 1: stocks correct enough, you'll get people back into the space.
Speaker 1: I just don't think they feel completely confident yet that
Speaker 1: it's over, that it's corrected enough where the valuations are
Speaker 1: really appealing at this point. Uh, And it's not so
Speaker 1: that people are kind of nervous about how things look
Speaker 1: as we exit this recession. There's a lot of uncertainty.
Speaker 1: We don't know what's going to happen with inflation. We
Speaker 1: think we know you can look at gasoline prices alone
Speaker 1: and that will point towards the CPI that's about three
Speaker 1: for the remainder of the year. So there's really high
Speaker 1: probability that we get higher inflation, but we don't know
Speaker 1: if it's simply going to be for a couple of
Speaker 1: quarters and then moderate, or if it's going to be
Speaker 1: something more significant. And that's really the uncertainty that keeps
Speaker 1: you from maybe going all back in on these high
Speaker 1: valuation areas. So tell me you talked about valuations. How
Speaker 1: much does liquidity play into this, because I think in
Speaker 1: the middle parts of last year have to say there
Speaker 1: were companies who were just in free access of the
Speaker 1: debt market here. I mean you had airlines really basing
Speaker 1: a cash bunch and then getting these kind of massive
Speaker 1: amounts of cash and issuing these bonds for ten premiums.
Speaker 1: Tech coming in issuing bonds for literally no premium So
Speaker 1: what here's the role here of those extra cash cushions
Speaker 1: that tech may have, but now other kind of battered
Speaker 1: sectors have to from airlines to cruise, lene etcetera. Where
Speaker 1: does the liquidity piece of the equation come in? Sure?
Speaker 1: So I'm not sure I'm going to answer this exactly
Speaker 1: the way you'd want me to. But if you think
Speaker 1: of how much stimulus has been done, you've seen personal
Speaker 1: income rise one point one trillion dollars last year for
Speaker 1: the nation as a whole, and a lot of that
Speaker 1: money went into some of these technology things, exercise equipment,
Speaker 1: all those stay at home type stock. So that is
Speaker 1: liquidity in the sense that it actually reached consumers. Consumers
Speaker 1: actually spent it. But are they going to continue that
Speaker 1: same behavioral pattern or they going to move towards the
Speaker 1: services sector the economy. Are they going to start booking trips?
Speaker 1: Are they going to start going back to hotels? Are
Speaker 1: they're going to do those types of things? Um So,
Speaker 1: to me, that's kind of where the liquidity plays. And
Speaker 1: you're absolutely right when you talk about technology and airlines
Speaker 1: and some of these with debt. But if you look
Speaker 1: at the SP five, nowhere near the same performance for
Speaker 1: the other four hundred and ninety stocks. Right, So you
Speaker 1: had significant run up, maybe a hundred and thirty percent
Speaker 1: return in those top five stocks, and then maybe not
Speaker 1: even half of that, maybe six and the other four.
Speaker 1: So when I hear about liquidity just insanely driving up
Speaker 1: the market, it's not all of the market. There's plenty
Speaker 1: of areas that are still beaten down. Yeah, So I
Speaker 1: wanted to get to that notion about the value in
Speaker 1: in overseas markets, and you would pointed out the UK market,
Speaker 1: you know, looking at the foot see here. Uh never
Speaker 1: did quite reclaim that that record back I think it
Speaker 1: was two thousand and eighteen. I mean, I guess there's
Speaker 1: always handwringing over Brexit and the trade situation and that
Speaker 1: sort of thing. But yeah, we're still down a good
Speaker 1: fifteen percent for the foot see from from that peak, Um,
Speaker 1: walk us through what is attractive there? Obviously, valuations, I'm
Speaker 1: sure part of it is it is a kind of
Speaker 1: hand in hand with the the rotation into the more
Speaker 1: cyclical parts of the of the market. Is that kind
Speaker 1: of the story for the UK and and a lot
Speaker 1: of the bullishness towards uh, you know the rest of
Speaker 1: the world compared to the US at this point. Yeah,
Speaker 1: that's right. So what I think of UK equities, I'm
Speaker 1: not thinking that it's going to be some hot stock
Speaker 1: so to speak, that you get rich on, right. This
Speaker 1: is not one of those types of investments. But what
Speaker 1: it is is something that trades about fourteen times earnings,
Speaker 1: which is about discount the U S stocks UH significant
Speaker 1: weighting of the foot Seed one hundred is an energy
Speaker 1: and financials which are both positively correlated with yields. That
Speaker 1: means the fields go up, those sectors tend to benefit,
Speaker 1: and it doesn't have a lot of exposure to technology.
Speaker 1: It's under a two percent waiting in the index of
Speaker 1: the foot So it's not that it's necessarily going to
Speaker 1: make you rich instantly, but if you're looking for an
Speaker 1: area that is still offers value probably as upside to hear,
Speaker 1: we think it's attractive. And I also want to point
Speaker 1: out that this has been a rolling healthcare crisis the
Speaker 1: entire time. Right it started in China, then it spread
Speaker 1: to Italy, then it spread to the U S. We're
Speaker 1: essentially seeing the reversive that now where you're going to
Speaker 1: have lots of vaccinations in the US, then you're going
Speaker 1: to have vaccinations in Europe that maybe it moves to
Speaker 1: Latin America, so those areas will recover, but slower and
Speaker 1: later than we do in the US. I love that
Speaker 1: you brought up vaccinations because that's been something that people saying,
Speaker 1: how do you trade on this? Uh? Something back in
Speaker 1: that was happening is people were trading to the opposite
Speaker 1: direction about in terms of case counts. They were buying
Speaker 1: US markets because Europe and China was more supposed to
Speaker 1: the virus in the US was at the time, and
Speaker 1: then it kind of got flipped on its head. So
Speaker 1: how do you trade the opposite We're to talk about vaccinations,
Speaker 1: for example, where you have perhaps the US or even
Speaker 1: the UK leading in those vaccinations. But like you said,
Speaker 1: e M is not well. I guess one way to
Speaker 1: think about it in the gain not sure and perfectly
Speaker 1: answering the question. But the more vaccinations you have, then
Speaker 1: it's more likely that you're going to pull back on
Speaker 1: some of the stimulus over time. Right, So eventually these
Speaker 1: central banks are going to start to exit from the
Speaker 1: massive amounts of stimulus they've provided, and I think that
Speaker 1: that will be a considered not necessarily immediately we hear
Speaker 1: in Fuss just talking about it in the US right now.
Speaker 1: What the Federal Reserve is gonna do. Are they really
Speaker 1: going to wait until the end of three to raise
Speaker 1: interest rates or they're going to do it towards the
Speaker 1: end of Will they start to taper asset purchases at
Speaker 1: the end of this year or is it early? And
Speaker 1: I think those things will be issues for markets down
Speaker 1: the road. UM. So as far as vaccinations increasing, it's
Speaker 1: a great thing. We all want to get back to life.
Speaker 1: I think that's important, um. And I also would point
Speaker 1: out economy is not the stock market. Stock market is
Speaker 1: not the economy that old adage. Um. I think there
Speaker 1: may be more truth to that as we get further
Speaker 1: along in this where the vaccinations increase the economic outlook
Speaker 1: and the growth outlook, but kind of decreases the amount
Speaker 1: of stimulus that we're seeing in the market. You know, Sean,
Speaker 1: I think it's a it's a fascinating time to try
Speaker 1: to figure out what the Federal reserves next move will be.
Speaker 1: As you point out, you know, everyone trying to determine
Speaker 1: when that tapering begins. I mean, it seems to me
Speaker 1: that they're gonna have a hard time tapering, uh, without
Speaker 1: causing some adjecta, as they say, in the market one
Speaker 1: way or the other. But I also wonder, you know,
Speaker 1: is there an equal chance that we get a surprise
Speaker 1: from them in the other directions, some kind of yield
Speaker 1: curve control or some kind of operation twist to keep
Speaker 1: those that long end tam is that I wonder if
Speaker 1: the market is in some way almost begging for that
Speaker 1: or wishful thinking for that type of scenario. What do
Speaker 1: you think? Yeah, I think it's fascinating that you bring
Speaker 1: that up. I was thinking about this the other day,
Speaker 1: and you know, it almost feels like investors are kind
Speaker 1: of this mindset that the Federal Reserve is on the
Speaker 1: sidelines and they're not going to help us out and
Speaker 1: can't count on them anymore. But if you think about
Speaker 1: what they're saying, they're saying, we need to see either
Speaker 1: substantial for the progress and the recovery or a market
Speaker 1: deterioration in financial conditions. What would get you a market
Speaker 1: deterioration and financial conditions is if the stock market sells
Speaker 1: off sharply. So if the stock market sells sells off
Speaker 1: sharply and corrects because of these rising bond yields, then
Speaker 1: you actually have more impetus for the FETE to step
Speaker 1: in and do a program like QI twist where it
Speaker 1: would actually once again help markets. So I think there's
Speaker 1: support there that people are maybe ignoring. It's almost like
Speaker 1: the the proverbial poal put. You know, we're we're all
Speaker 1: trying to figure out what that type of altility would
Speaker 1: look like to to get us there. I don't. I
Speaker 1: guess no one knows once we see, right. I mean
Speaker 1: maybe if you get you know, real tenure treasury yields
Speaker 1: in your zero, that would maybe be concerning. I don't
Speaker 1: think there's much appetite for a positive real yield or
Speaker 1: if you saw stock market sell off, you know, I
Speaker 1: do think you'd see action. So it's not like they're
Speaker 1: completely gone. The Federal Reserve has not disappeared. They're comfortable
Speaker 1: with their stance for now, but things could change. So
Speaker 1: speaking of a fifteen stock correction, what might be the
Speaker 1: catalyst of that if not the FED and a deterioration
Speaker 1: from there, and what else could possibly create that kind
Speaker 1: of move. That's a really good question. I do think
Speaker 1: the tapering is something that you know, I don't think
Speaker 1: it would create a bear market. I just don't see that.
Speaker 1: I think there's such strong tail winds right now, but
Speaker 1: a goat, any change in the path of the virus
Speaker 1: would be something to consider. Maybe if earning is really
Speaker 1: disappoint maybe if you saw these rising yields become a
Speaker 1: credit market issue, which I don't think there's really signs
Speaker 1: of that yet, um, but it could be something. It's
Speaker 1: it's always tough to say what exactly the catalyst is
Speaker 1: going to be when you have stretched valuations. It doesn't
Speaker 1: always take a whole lot, and it usually comes out
Speaker 1: of nowhere, you know. Sure, I am picturing the clients,
Speaker 1: the city wealth clients as being you know what, sophisticated
Speaker 1: as far as individual investors somewhat let's imagine deeper account
Speaker 1: balances than the robin Hood set out there. Um. But
Speaker 1: there's a lot of speculation these days about what the
Speaker 1: individual investor is gonna do next, especially all these you know,
Speaker 1: new gung ho younger retail traders on Reddit and on
Speaker 1: robin Hood. Is there any insight you have from sort
Speaker 1: of the clients how you deal with like again, I
Speaker 1: think it's not exactly a complete overlap with that that
Speaker 1: type of trader, but you know, just from the sense
Speaker 1: of individuals kind of what their their sentiment is like
Speaker 1: that these days are they are they still willing to
Speaker 1: chase this rally to embrace risk, or you know, is
Speaker 1: that sort of wearing off to some degree. I think
Speaker 1: it's wearing off to some degree. You've actually seen retail
Speaker 1: investors seemingly step back a little bit over the past
Speaker 1: few weeks or so. Uh. And I have to tell you,
Speaker 1: someone just asked me to speak to their high school
Speaker 1: because there the student the students in the fine dance
Speaker 1: club are all, you know, just talking to each other
Speaker 1: about hot stock tips and trying to figure out what
Speaker 1: to do. And they're trying to convince them that that's
Speaker 1: not how you invest, that you should look over the
Speaker 1: long term and not just risk money at any any
Speaker 1: throw it at anything. So it's still going on. I
Speaker 1: think it's encouraging to actually have retail investors in the market.
Speaker 1: It's just when you get into these speculative areas, Uh,
Speaker 1: you really need to know your risk tolerance. And I
Speaker 1: don't think people actually understand their risk tolerance until it
Speaker 1: really collapses on them. And I'm not sure that that's
Speaker 1: going to happen anytime soon. Um, but you know, it
Speaker 1: almost feels too like that check that landed in people's
Speaker 1: and it feels like house money to some degree, I
Speaker 1: imagined to some traders, you know, what better use of
Speaker 1: it than to to let it ride on something risky
Speaker 1: I suppose, right, Yeah, stimulus chocks, And I know there's
Speaker 1: other banks that put out research saying that you know,
Speaker 1: at least a portion of that is going to go
Speaker 1: into retail trading. So let me ask you how insulated
Speaker 1: or not insulated is the market from that, because I
Speaker 1: mean we saw just a few weeks ago during this
Speaker 1: whole game stop saga, the market literally sold off because
Speaker 1: of that. They were freaking out, is what is what
Speaker 1: my understanding was, to what extent is some of these
Speaker 1: bigger tech stocks, for example, that have these bigger waitings
Speaker 1: insulated from the retail bid who maybe can't afford a
Speaker 1: share of Amazon with their checks. You know, I don't
Speaker 1: think it anything that would lead to broad market contagion.
Speaker 1: And the reason I say that is when you think
Speaker 1: of the company that you just mentioned, Uh, there's just
Speaker 1: about zero point seven percent of the market cap is
Speaker 1: shorted names, so it's not a huge section. So there's
Speaker 1: opportunity to kind of, you know, create this scenario where
Speaker 1: you can drive it up. But it's not in a
Speaker 1: lot of names. It's only a few names that you
Speaker 1: can actually do that in. Luckily, thank you, miss I
Speaker 1: guess it would be a crazy world if if it
Speaker 1: uh for other eyes, which is our perfect segue, pretty
Speaker 1: to the craziest things we saw in markets this week,
Speaker 1: as Charlie Pelt will tell us, stand clear of the
Speaker 1: craziest things we saw in markets this week. Pretty, no
Speaker 1: pressure on you. This is your first one co hosting
Speaker 1: bin'd lie. There's a lot of pressure on you. I'm
Speaker 1: expecting you to bring it with the crazy thing. But
Speaker 1: before we get to that, I know we have a
Speaker 1: voicemail into the hotline, So let's let's listen to that
Speaker 1: and see what that's all about. Hey guys, it's Katie
Speaker 1: gray Slid. I couldn't resist popping by because the craziest
Speaker 1: thing I've seen in markets this week and just in
Speaker 1: general is the Suez Canal situation, and I'm dying to
Speaker 1: talk about it. Basically, there's a boat as long as
Speaker 1: the Eiffel Tower is stuck in the Suez and it's
Speaker 1: causing this whole thing. There's oil tankers and container ships
Speaker 1: piled up behind it, calling a mess in the crude market.
Speaker 1: And I'm at home with my family this week and
Speaker 1: they're tired of hearing me talk about it, so I
Speaker 1: thought i'd tell you, guys. I hope the show is
Speaker 1: going well. I love Katie's enthusiasm for this story. She
Speaker 1: she's bored the parents and her boyfriend at home talking
Speaker 1: about it. I can't. I'll talk about it all day.
Speaker 1: I think it's fascinating. This is the commodity traffic jam
Speaker 1: that I did not see coming, and I love it.
Speaker 1: And I love that Katie obsesses about it, because after
Speaker 1: the show, I'm going to message her about it. And
Speaker 1: it's fascinating that it's the size of, or bigger than
Speaker 1: the size of the Eiffel Tower, which is honestly beyond
Speaker 1: uh beyond imagination. I mean, the memes alone just make
Speaker 1: the story so interesting. Um. I think what's interesting about
Speaker 1: it for me, the craziest thing in market is the
Speaker 1: fact that people are actually playing this. Now. You ousually
Speaker 1: saw a little bit of an oil pop on it,
Speaker 1: because you know oils backed up. It makes that just
Speaker 1: a little bit more create a little bit more demand.
Speaker 1: But there's this e t F that I really thought
Speaker 1: was interesting. Shout out to Rachel Evans who pointed this
Speaker 1: out to me, called b Dry b d r Y.
Speaker 1: That's the ticker is the Baltic Dry Shipping Index, and
Speaker 1: on this news it's a it's biggest inflow in years now.
Speaker 1: This isn't the A t F that necessarily moves market.
Speaker 1: This isn't the q q Q or anything. But I
Speaker 1: thought it was interesting that people are actively trading on
Speaker 1: this idea that there's a ship stuck in a canal.
Speaker 1: It is. It's fantastic that the JP Morgan's famous strategist
Speaker 1: Marco Klonovitch even had a note out on it saying
Speaker 1: there's a chance the ship could just break that in
Speaker 1: the process of delodging it, they'll just break the thing
Speaker 1: and then the canal will be closed for weeks or months,
Speaker 1: and it could cause shipping rates to go up, oil
Speaker 1: to go up. And he's got trades, like you said,
Speaker 1: recommended uh based on on the potential for that hedge
Speaker 1: hedge with oil and oil stop. It's so funny because
Speaker 1: our colleague Joe Wisenthal wrote about this that this is
Speaker 1: actually a function of ships just getting bigger and bigger
Speaker 1: and bigger. Into was like economies of scale. No one
Speaker 1: actually thought that maybe they should account for the size
Speaker 1: of the actual canal. I think the canal a little wider,
Speaker 1: and yeah it is. It's certainly one of the craziest things.
Speaker 1: And we've seen a lot of crazy things here what
Speaker 1: goes up in the rest here. But that's pretty good, Seurean.
Speaker 1: How about you got anything crazy first? Well, Katie came
Speaker 1: in and stole mine, and I have a couple other ones,
Speaker 1: but it is absolutely Fascinating's like the butterfly effect where
Speaker 1: wind blows the ship and gets it stuck right. It's nuts,
Speaker 1: isn't It completely screws up to the market. So I
Speaker 1: have two things, and one is ready to n f
Speaker 1: t S, and I'll be really quick on that one
Speaker 1: because it's probably been beaten to death. I was watching
Speaker 1: sixty Minutes the other day where people actually said he
Speaker 1: thought the n f t S were in an asset bubble,
Speaker 1: which which I find fascinating because I think no one
Speaker 1: would know about n f t S and it wasn't
Speaker 1: for people beyond that. And this is ripped from the
Speaker 1: headlines and Bloomberg news the world is potentially facing a
Speaker 1: coffee deficit because of again and supplied and so coffee
Speaker 1: supplies in the US are actually shrinking due to a
Speaker 1: shortage of shipping containers and supply bottlenecks, and the coffee
Speaker 1: stockpiles have sunk to a six year low. So, now
Speaker 1: who knows what that happens to. You know what happens
Speaker 1: to coffee inflation. But if you're going to get gas
Speaker 1: at the gas station, that prices there have went up,
Speaker 1: and then you cup of coffee price goes up. Wait,
Speaker 1: so does that mean my cup of coffee could actually
Speaker 1: be more expensive than the five dollars I already spend
Speaker 1: on a great cup of coffee? Maybe you millennials will
Speaker 1: never be able to afford the house now if they
Speaker 1: haven't hedged their costs. And just when I was going
Speaker 1: to give up avocado toast, come on, that's unrelated to
Speaker 1: the Suez Canal. That's just a separate that's pretty good,
Speaker 1: all right, Well, you guys are good. I don't think
Speaker 1: I can beat it, but I've got a good one
Speaker 1: that's kind of out of left field here, And this
Speaker 1: is courtesy of the always brilliant Matt Levine's Money Stuff newsletter,
Speaker 1: and he wrote a about the SEC and the Justice
Speaker 1: Department started investigating the quote unquote dark web, which I
Speaker 1: always hear about. I don't really know much about that.
Speaker 1: I don't think I've ever actually been on the dark Web.
Speaker 1: I don't know how to get there if I need
Speaker 1: a different computer or something. I don't know much about it,
Speaker 1: but it's fascinating. And they found some message board where
Speaker 1: people were trading insider tips insider stock tips and paying
Speaker 1: each other in bitcoin as one does you know what
Speaker 1: else are you gonna pay uh for for something shady
Speaker 1: like that? Um. So they caught this guy who's actually
Speaker 1: a employee of SpaceX, of of Elon Musk's SpaceX. He's
Speaker 1: an engineer for them, and they arrested him for collecting
Speaker 1: payment and bitcoin for insider tips. But here's the crazy
Speaker 1: part is they were fake insider tips, and the SEC
Speaker 1: said he's being fraudulent by selling insider tips that were
Speaker 1: actually fake. It was just stuff that you know, the
Speaker 1: guy I think found in public documents and whatnot and
Speaker 1: purported it to be insider tips. Uh. And the fraud,
Speaker 1: according to the SEC and the Justice Pariment is like
Speaker 1: these are fake inside your tips. You can't do this.
Speaker 1: So I thought that was pretty good. You know what
Speaker 1: that reminds me of, if I can just throw in
Speaker 1: my little two cents here is so I'm a big
Speaker 1: fan of anything related to the Royals, which I know
Speaker 1: when this gets published, I'm going to get a ton
Speaker 1: of backlash on I just know it. But there's this
Speaker 1: thing that I saw on like a Hallmark movie of
Speaker 1: the Royals, where a prince who shall be unnamed, put
Speaker 1: out you know, a secret, a fake secret, to see
Speaker 1: who his real friends were and who's worked. And this
Speaker 1: kind of sounds a little similar to similar to that,
Speaker 1: to see if there is actually good behavior out there
Speaker 1: or or people are just tricked. I guess that's pretty good. Well,
Speaker 1: I'm glad you like the Royals. Well, we'll have to
Speaker 1: talk about my kids. Apparently on TikTok the young kids
Speaker 1: are all fascinated with Prince Philip for some reason, I
Speaker 1: don't know. I don't know why, but I read his
Speaker 1: wook PD page. What a fascinating the guy. The guy's
Speaker 1: got more titles than anyone I know. He's the print.
Speaker 1: He was the Prince of Denmark and Greece, and then
Speaker 1: he married Elizabeth and they made him Prince of the
Speaker 1: UK too. He's got more never never get the king
Speaker 1: title apparently, but enough more titles than anyone else I've
Speaker 1: ever heard. Well, as long as it's not like Overlord
Speaker 1: of the World, we'll save that title for you. Critty,
Speaker 1: you work your way up. I'm gonna hold you up
Speaker 1: and I'm gonna hold you to it. But with that,
Speaker 1: I think that's all the time we had. Seawan as
Speaker 1: always a great pleasure to have you on the show.
Speaker 1: We hope you can come back again. Uh really enjoy
Speaker 1: your insights and you're good humor. Thank you. I'd love
Speaker 1: to thank you and Critty, thank you for filling in
Speaker 1: for Sara there admirably. We'll have you back as well.
Speaker 1: Thank you for having me this one programming note, What
Speaker 1: Goes Up is taking next week off for spring break.
Speaker 1: We'll see you again on Friday, April ninth. Until then,
Speaker 1: you can find us on the Bloomberg Terminal website and
Speaker 1: app or wherever you get your podcasts. We'd love it
Speaker 1: if you took the time to rate and review the
Speaker 1: show on Apple Podcasts so more listeners can find us.
Speaker 1: And you can find us on Twitter, follow me, at Reaganonymous.
Speaker 1: Pretty is at at Pretty Groupta News. You can also
Speaker 1: follow Bloomberg Podcasts at at podcasts and thank you to
Speaker 1: Charlie Pellett of Bloomberg Radio and the voice of the
Speaker 1: New York City Subway system. What Goes Up is produced
Speaker 1: by Tofur Foreheads. The head of Bloomberg Podcasts is Francesco Levy.
Speaker 1: Thanks for listening, See you next time.