1 00:00:13,400 --> 00:00:16,759 Speaker 1: Hello, and welcome to What Goes Up, a weekly markets podcast. 2 00:00:16,920 --> 00:00:19,639 Speaker 1: I'm Mike Reagan, a senior editor at Bloomberg, and this 3 00:00:19,720 --> 00:00:22,760 Speaker 1: week on the show, Well, investors did sell in May, 4 00:00:22,880 --> 00:00:25,279 Speaker 1: but they didn't stay away very long, and now as 5 00:00:25,320 --> 00:00:28,680 Speaker 1: we speak, SMP is more or less unchanged for the month. 6 00:00:29,240 --> 00:00:31,920 Speaker 1: What exactly should we make of this pause in a 7 00:00:32,080 --> 00:00:35,400 Speaker 1: raging bull market, especially now that some of the economic 8 00:00:35,479 --> 00:00:39,440 Speaker 1: data is disappointing but inflation readings are surprising on the upside. 9 00:00:40,040 --> 00:00:43,240 Speaker 1: We'll get into it with a global market strategist in London, 10 00:00:43,800 --> 00:00:46,839 Speaker 1: but first, Charlie Pellett tell us who this week's mystery 11 00:00:46,880 --> 00:00:52,240 Speaker 1: co host is. This week's mystery co host is Eric Weener. 12 00:00:52,360 --> 00:00:55,280 Speaker 1: Weener is a markets editor for Bloomberg in New York 13 00:00:55,480 --> 00:00:58,320 Speaker 1: who actually wrote a history of modern Wall Street called 14 00:00:58,360 --> 00:01:01,840 Speaker 1: What Goes Up. He claims he's not bitter at all 15 00:01:01,920 --> 00:01:05,640 Speaker 1: that Mike Reagan stole the name for this podcast. His 16 00:01:05,760 --> 00:01:09,920 Speaker 1: hobbies include watching hockey and informing Reagan of all the 17 00:01:10,000 --> 00:01:14,280 Speaker 1: things he was wrong about. You know, Eric, I had 18 00:01:14,280 --> 00:01:16,240 Speaker 1: hope you actually had other hobbies, But I think that's 19 00:01:16,280 --> 00:01:19,400 Speaker 1: pretty much it right that those two that that pretty 20 00:01:19,480 --> 00:01:23,000 Speaker 1: much covers the whole thing. Um, basically sit around watching 21 00:01:23,040 --> 00:01:27,080 Speaker 1: hockey and then wondering what you're saying wrong. And I 22 00:01:27,600 --> 00:01:31,039 Speaker 1: managed to do both quite well. That's that you do, 23 00:01:31,200 --> 00:01:34,400 Speaker 1: you do, that's uh, you know. And I'm also I'm 24 00:01:34,520 --> 00:01:38,560 Speaker 1: conflicted about Charlie getting a promotion for your book into 25 00:01:38,600 --> 00:01:40,440 Speaker 1: that intro. I don't know how to feel about that. 26 00:01:40,880 --> 00:01:42,280 Speaker 1: As you know, one of the risks of being a 27 00:01:42,360 --> 00:01:45,000 Speaker 1: financial journalists is so many of your friends end up 28 00:01:45,000 --> 00:01:47,560 Speaker 1: having books and you have to sort of pretend like 29 00:01:47,600 --> 00:01:49,480 Speaker 1: you you've bought them and read them. But I'm gonna 30 00:01:49,480 --> 00:01:53,280 Speaker 1: tell you this, I'm gonna buy your What Goes Up? Book? Um. 31 00:01:53,320 --> 00:01:55,800 Speaker 1: I might even buy there's a collector's version of it 32 00:01:55,840 --> 00:01:58,320 Speaker 1: on Amazon that's actually cheaper than the regular version. I 33 00:01:58,360 --> 00:01:59,840 Speaker 1: don't know how that works, but I might buy that. 34 00:02:00,520 --> 00:02:04,720 Speaker 1: Go go just spend money, man. Uh. But whatever you 35 00:02:04,720 --> 00:02:07,400 Speaker 1: can possibly do. Because you did rip off my title, 36 00:02:08,200 --> 00:02:12,400 Speaker 1: which is how I sold the book. Um when the 37 00:02:12,960 --> 00:02:15,480 Speaker 1: original it was funny. I did it during the dot 38 00:02:15,520 --> 00:02:19,960 Speaker 1: com era, and the original title had a question mark. Uh. 39 00:02:20,000 --> 00:02:22,880 Speaker 1: And then as the whole thing fell apart, it just 40 00:02:22,960 --> 00:02:26,560 Speaker 1: became What Goes Up? Because at first it looked like 41 00:02:26,760 --> 00:02:29,120 Speaker 1: things were never gonna stop going up and well then 42 00:02:29,160 --> 00:02:33,320 Speaker 1: it stopped there you go. Well, without promoting your book 43 00:02:33,320 --> 00:02:35,120 Speaker 1: atty further, I will say it's a it's a very 44 00:02:35,120 --> 00:02:37,920 Speaker 1: interesting concept. You basically talked to a bunch of sort 45 00:02:37,919 --> 00:02:40,400 Speaker 1: of titans of Wall Street, and it's the whole history 46 00:02:40,400 --> 00:02:43,320 Speaker 1: of Wall Street told in their words, which I find interesting, 47 00:02:43,400 --> 00:02:45,800 Speaker 1: not because I don't find your words interesting, but I'm 48 00:02:45,840 --> 00:02:48,600 Speaker 1: I'm already a big consumer of your commentary, so I 49 00:02:48,880 --> 00:02:51,440 Speaker 1: would be interesting to see how how you did this. 50 00:02:51,480 --> 00:02:54,160 Speaker 1: So I'm excited. I'm excited to get that Amazon purchase 51 00:02:54,240 --> 00:02:57,680 Speaker 1: one of these days. Yeah, it was. It was actually fun, 52 00:02:57,840 --> 00:03:00,760 Speaker 1: but hard to do. I mean, you got to track down, like, uh, 53 00:03:01,000 --> 00:03:03,400 Speaker 1: thousands of the richest people in the world who are 54 00:03:03,440 --> 00:03:06,040 Speaker 1: very busy and really don't want to talk to you. Um, 55 00:03:06,080 --> 00:03:09,359 Speaker 1: But getting it in their words is very different than 56 00:03:09,639 --> 00:03:13,040 Speaker 1: having US journalists kind of explain it. So it's much 57 00:03:13,120 --> 00:03:16,240 Speaker 1: more like the story is being told to you in 58 00:03:16,280 --> 00:03:18,400 Speaker 1: a room full of all the most important people in 59 00:03:18,440 --> 00:03:20,880 Speaker 1: Wall Street history, and they're coming at you and sort 60 00:03:20,880 --> 00:03:24,239 Speaker 1: of telling you their view. So it's unique in that sense. 61 00:03:24,760 --> 00:03:26,840 Speaker 1: And it's uh, it's just because our guest this week 62 00:03:26,880 --> 00:03:30,080 Speaker 1: I recently had a similar experience with her for the 63 00:03:30,120 --> 00:03:34,200 Speaker 1: Business Week how to issue, where we basically UH reached 64 00:03:34,240 --> 00:03:36,960 Speaker 1: out to smart people to get in their words, how 65 00:03:37,000 --> 00:03:40,200 Speaker 1: they would how they would do certain things, and so 66 00:03:40,240 --> 00:03:43,360 Speaker 1: we talked about how to do sixty forty in in 67 00:03:43,400 --> 00:03:46,280 Speaker 1: this low interest rate environment, which is a perfect segue 68 00:03:46,360 --> 00:03:48,880 Speaker 1: to are very important Wall Street titan we have on 69 00:03:48,920 --> 00:03:52,160 Speaker 1: the show this week. She is the actually a city 70 00:03:52,160 --> 00:03:55,280 Speaker 1: of London titan, I guess if you consider Wall Street 71 00:03:55,520 --> 00:03:58,400 Speaker 1: running through London, which which I very much do. But 72 00:03:58,560 --> 00:04:02,920 Speaker 1: she is the chief strategy at Principal Global Investors. Her 73 00:04:03,000 --> 00:04:05,400 Speaker 1: name is Sema Shaw. Sema, welcome back to the show. 74 00:04:05,920 --> 00:04:09,280 Speaker 1: Thank you very much for having me back. Let's start 75 00:04:09,280 --> 00:04:12,200 Speaker 1: with that idea that I mentioned in the intro seem 76 00:04:12,280 --> 00:04:15,480 Speaker 1: in that it seems like this euphoric rally that we've 77 00:04:15,520 --> 00:04:19,120 Speaker 1: had uh someone hit the pause button in May. I'm 78 00:04:19,160 --> 00:04:23,040 Speaker 1: almost tempted to wonder, if you know, the whole reopening 79 00:04:23,040 --> 00:04:26,239 Speaker 1: of the economy is almost a sell the news event, 80 00:04:26,320 --> 00:04:29,160 Speaker 1: or at least not a continue to buy with both 81 00:04:29,200 --> 00:04:31,800 Speaker 1: fist type of events. But I'm curious what your perspective 82 00:04:31,960 --> 00:04:34,880 Speaker 1: is on this kind of sideways market that we've seen 83 00:04:35,000 --> 00:04:38,520 Speaker 1: over the last month, especially because it corresponds with really 84 00:04:38,560 --> 00:04:42,599 Speaker 1: the height of the economic reopenings, as well as some 85 00:04:42,800 --> 00:04:45,679 Speaker 1: data that's kind of lackluster, you know, uh, some misses 86 00:04:45,680 --> 00:04:48,280 Speaker 1: here and there. The city surprise index has come down, 87 00:04:48,720 --> 00:04:51,880 Speaker 1: but the inflation readings are are still pretty hot, you know, 88 00:04:52,279 --> 00:04:55,120 Speaker 1: transitory or not being the question on everyone's mind. But 89 00:04:55,160 --> 00:04:58,159 Speaker 1: I'm curious how you're sort of sizing up the environment 90 00:04:58,360 --> 00:05:01,240 Speaker 1: right now given that risk assets at least here in 91 00:05:01,279 --> 00:05:04,760 Speaker 1: the US are kind of sideways. Um, is it changing 92 00:05:04,800 --> 00:05:07,200 Speaker 1: any of the thinking about the main themes of this 93 00:05:07,320 --> 00:05:10,600 Speaker 1: year for you to see this pause? Well, I think 94 00:05:10,600 --> 00:05:13,000 Speaker 1: it's fair to say that the US is probably reaching 95 00:05:13,320 --> 00:05:17,680 Speaker 1: peak recovery. And having said that, look, the fundamentals are 96 00:05:17,760 --> 00:05:19,760 Speaker 1: really really strong. So although it hit a peak and 97 00:05:19,760 --> 00:05:24,960 Speaker 1: you're seeing activity um no longer probably accelerating as much 98 00:05:25,000 --> 00:05:28,359 Speaker 1: as it was, it's still resting at a really high level. 99 00:05:28,920 --> 00:05:30,560 Speaker 1: So I think that's the main thing to remember. So 100 00:05:30,640 --> 00:05:32,840 Speaker 1: fundamentals are still really strong. I think the key thing 101 00:05:32,880 --> 00:05:34,720 Speaker 1: here is those you know, when we all came into 102 00:05:35,920 --> 00:05:37,880 Speaker 1: we all knew or we all hopeful that there would 103 00:05:37,880 --> 00:05:41,160 Speaker 1: be an economic reopening. We were all hopeful about fiscal policy. 104 00:05:41,200 --> 00:05:42,839 Speaker 1: We all knew that there would be some kind of 105 00:05:42,880 --> 00:05:46,640 Speaker 1: inflatoring pressures at some point in one. But what we've 106 00:05:46,640 --> 00:05:48,880 Speaker 1: seen happen is that all of those things, all of 107 00:05:48,880 --> 00:05:52,400 Speaker 1: those factors and those themes were pushed forward to like 108 00:05:52,440 --> 00:05:55,080 Speaker 1: the Q one and Q two of this year, so 109 00:05:55,200 --> 00:05:57,520 Speaker 1: much much early, all compressed in a really short time scale. 110 00:05:57,520 --> 00:05:59,799 Speaker 1: And I think the market has just run out of Steve, 111 00:06:00,320 --> 00:06:04,360 Speaker 1: But that doesn't necessarily mean that there's a correction. So 112 00:06:04,480 --> 00:06:09,080 Speaker 1: when you look at Mike mentioned inflation, Uh, how do 113 00:06:09,160 --> 00:06:13,280 Speaker 1: you see this sort of reflation playing out? If you're 114 00:06:13,560 --> 00:06:18,000 Speaker 1: say a stock market investor, how do you respond when, 115 00:06:18,640 --> 00:06:20,799 Speaker 1: as you say, it's sort of played out in the US, 116 00:06:20,920 --> 00:06:23,080 Speaker 1: but there could be more coming and it looks like 117 00:06:23,120 --> 00:06:26,760 Speaker 1: prices are going to rise. Do you rotate into different 118 00:06:26,920 --> 00:06:30,120 Speaker 1: asset classes? How do you handle this? Yeah, this is 119 00:06:30,120 --> 00:06:33,520 Speaker 1: gonna be a really interesting dimension now for investors because 120 00:06:33,520 --> 00:06:36,640 Speaker 1: what we're seeing is inflation is clearly picking up, but 121 00:06:36,720 --> 00:06:40,800 Speaker 1: it isn't necessarily related to a continued acceleration and activity. 122 00:06:40,960 --> 00:06:43,880 Speaker 1: It's really down to those those transitory factors that that 123 00:06:44,279 --> 00:06:47,279 Speaker 1: policymakers are talking about. But of course as investor, you 124 00:06:47,320 --> 00:06:49,800 Speaker 1: can't just say, well, look, inflation is going to fade 125 00:06:49,800 --> 00:06:51,520 Speaker 1: out in the near future, so I'm just going to 126 00:06:51,600 --> 00:06:54,080 Speaker 1: sit back and watch it happening. You have to invest 127 00:06:54,480 --> 00:06:57,840 Speaker 1: for what the current environment is. So we think that 128 00:06:57,880 --> 00:07:00,440 Speaker 1: you need to have some kind of inflation pool portfolio 129 00:07:00,520 --> 00:07:04,560 Speaker 1: protection um. And what we've seen is that investors, after 130 00:07:04,600 --> 00:07:06,760 Speaker 1: a couple of decades of really not having to worry 131 00:07:06,760 --> 00:07:09,600 Speaker 1: about inflation, just don't have it in their portfolios. So 132 00:07:09,640 --> 00:07:12,160 Speaker 1: the increasing we have to start thinking about this. So 133 00:07:12,360 --> 00:07:14,920 Speaker 1: we see a couple of different things. Is so within equities, 134 00:07:15,240 --> 00:07:17,280 Speaker 1: one of the obvious places is going to be value 135 00:07:17,400 --> 00:07:20,760 Speaker 1: because there's still growth. There's still growth, you have rising 136 00:07:20,760 --> 00:07:24,560 Speaker 1: inflation pressures. That's a steaming yiel curve. So value specifically 137 00:07:24,600 --> 00:07:29,360 Speaker 1: financials should do very very well in this situation. Same 138 00:07:29,360 --> 00:07:31,400 Speaker 1: thing with cyclicals. You've got a reopening trade, You've got 139 00:07:31,440 --> 00:07:33,400 Speaker 1: people are rushing back in to spend. That does well 140 00:07:33,440 --> 00:07:35,960 Speaker 1: for cyclicals. But the other side of it is also 141 00:07:36,000 --> 00:07:39,000 Speaker 1: going to be real assets that you know, we hear 142 00:07:39,040 --> 00:07:42,200 Speaker 1: people talk about commodities all the time, like commodities have 143 00:07:42,440 --> 00:07:45,880 Speaker 1: got a tendency of being really volatile. So as an investor, 144 00:07:45,880 --> 00:07:47,760 Speaker 1: I don't know if that's the volatility that you want 145 00:07:47,800 --> 00:07:49,559 Speaker 1: to be taking on. So an easy way you're playing 146 00:07:49,560 --> 00:07:52,520 Speaker 1: this is real estate, and that is typically a good 147 00:07:52,520 --> 00:07:56,320 Speaker 1: diversifier and it does well in a rising but steady 148 00:07:56,360 --> 00:08:01,400 Speaker 1: inflation environment. Yes, I'm curious how you know. Obviously, if 149 00:08:01,400 --> 00:08:04,720 Speaker 1: you're an institutional investor, there's any number of ways to 150 00:08:04,880 --> 00:08:09,840 Speaker 1: play real estate. That's kind of an average investor, individual investor, 151 00:08:10,440 --> 00:08:12,400 Speaker 1: it's a little bit trickier. I mean, you know, one 152 00:08:12,400 --> 00:08:14,280 Speaker 1: thing you could do is buy a vacation home, say, 153 00:08:14,360 --> 00:08:17,320 Speaker 1: or buy a rental property, but that entails a whole 154 00:08:17,560 --> 00:08:21,840 Speaker 1: bunch of other work that you know and risks. So 155 00:08:21,920 --> 00:08:25,120 Speaker 1: how how could you play a real estate team? Is 156 00:08:25,120 --> 00:08:29,320 Speaker 1: it something as simple as reets or you know, other 157 00:08:29,400 --> 00:08:32,719 Speaker 1: equities tied to the real estate space. So reats is 158 00:08:32,760 --> 00:08:36,160 Speaker 1: a great place to be um. Generally speaking, in real 159 00:08:36,280 --> 00:08:38,719 Speaker 1: estate you have to be careful which sectors you're looking at. 160 00:08:39,320 --> 00:08:41,120 Speaker 1: We've seen a number of themes play out. If you 161 00:08:41,160 --> 00:08:44,320 Speaker 1: just think about the retail side during the pandemic. Unfortunately, 162 00:08:44,320 --> 00:08:47,839 Speaker 1: it really has declined from a real estate perspective, So 163 00:08:48,080 --> 00:08:50,800 Speaker 1: some of those big shopping centers, which were already struggling 164 00:08:50,800 --> 00:08:53,640 Speaker 1: in the run up to the pandemic, that deceleration just 165 00:08:53,920 --> 00:08:56,880 Speaker 1: almost accelerated through the last year. Or so what we're 166 00:08:56,880 --> 00:09:00,600 Speaker 1: seeing increased strengthen is data centers. If you think all 167 00:09:00,640 --> 00:09:02,920 Speaker 1: of these companies are ones that are really thrived or 168 00:09:02,960 --> 00:09:05,280 Speaker 1: even survived in the pandemic, they did so because they 169 00:09:05,320 --> 00:09:08,200 Speaker 1: used technology to pivot themselves, to pivot their business models. 170 00:09:08,679 --> 00:09:10,920 Speaker 1: And that's not going to go into reverse, which means 171 00:09:10,920 --> 00:09:14,360 Speaker 1: that industrial data centers anywhere where they can house a 172 00:09:14,400 --> 00:09:18,720 Speaker 1: lot of those technology technology centers, that's going to do well. 173 00:09:18,840 --> 00:09:21,079 Speaker 1: So we would think they look at real estate, look 174 00:09:21,080 --> 00:09:32,719 Speaker 1: at reads, but really focus on the right sectors. So 175 00:09:32,920 --> 00:09:36,560 Speaker 1: the inflation idea is something that's just coming up a 176 00:09:36,600 --> 00:09:41,360 Speaker 1: ton among our readers and in the newsroom in general. Uh, 177 00:09:41,520 --> 00:09:44,240 Speaker 1: it's sort of the you know the topic jur as 178 00:09:44,280 --> 00:09:48,120 Speaker 1: you as you watch prices rise and the FED has 179 00:09:48,240 --> 00:09:52,320 Speaker 1: used the term transitory, which can mean a lot of things, 180 00:09:53,080 --> 00:09:56,680 Speaker 1: and to me, it's one thing. It's like with a bubble. 181 00:09:57,080 --> 00:10:01,000 Speaker 1: It's you can see where the bubble is, but timing 182 00:10:01,559 --> 00:10:04,040 Speaker 1: when it's going to end, when it's going to pop 183 00:10:04,400 --> 00:10:09,520 Speaker 1: is the challenge. Spotting it isn't so hard. The timing 184 00:10:09,559 --> 00:10:12,440 Speaker 1: of where it's going to play out is what does 185 00:10:12,640 --> 00:10:19,199 Speaker 1: transitory mean to you? And how transitory is this going 186 00:10:19,280 --> 00:10:23,160 Speaker 1: to be. You have horned in on the most important 187 00:10:23,160 --> 00:10:27,040 Speaker 1: point here. With inflation. We all know it's here, it's come. 188 00:10:27,120 --> 00:10:30,280 Speaker 1: You know, it's going to continue rising, and we, same 189 00:10:30,320 --> 00:10:32,240 Speaker 1: as the policymakers, think it's going to be short lived. 190 00:10:32,640 --> 00:10:35,120 Speaker 1: But as you said, nobody knows how long now coming 191 00:10:35,120 --> 00:10:37,680 Speaker 1: into this year, the general views it will last through 192 00:10:37,720 --> 00:10:40,280 Speaker 1: the summer and then come full a lot of those 193 00:10:40,679 --> 00:10:45,120 Speaker 1: UM inflation pressures driven by supply shortage shortages should fade away. 194 00:10:46,120 --> 00:10:48,280 Speaker 1: What we're starting to see now actually is a supply 195 00:10:48,360 --> 00:10:51,599 Speaker 1: shortages are worse than expected, the rising prices going a 196 00:10:51,640 --> 00:10:54,920 Speaker 1: little bit higher than more higher than expected UM and 197 00:10:55,080 --> 00:10:58,680 Speaker 1: on top of that we're also seeing inflation expectations increase. 198 00:10:58,920 --> 00:11:01,480 Speaker 1: So the key things to what to figure out how 199 00:11:01,480 --> 00:11:03,520 Speaker 1: long this is going to go on for is inflation 200 00:11:03,600 --> 00:11:07,720 Speaker 1: expectations and how much of these cost increases are being 201 00:11:07,760 --> 00:11:11,000 Speaker 1: passed onto consumers. That's going to tell you how sticky 202 00:11:11,000 --> 00:11:12,520 Speaker 1: inflation is going to be. And I've got to say 203 00:11:12,880 --> 00:11:16,520 Speaker 1: the jury is really out on that factor. Yeah, it's 204 00:11:16,559 --> 00:11:20,200 Speaker 1: interesting to me, see me because you you know, explained 205 00:11:20,200 --> 00:11:23,920 Speaker 1: about the sort of supply bottlenecks and shortages and I 206 00:11:23,960 --> 00:11:26,959 Speaker 1: hate to use and overuse cliche like a perfect storm. 207 00:11:27,000 --> 00:11:29,520 Speaker 1: But it's like this perfect storm for inflation because you 208 00:11:29,600 --> 00:11:33,000 Speaker 1: have those shortages and supply bottlenecks on the one end, 209 00:11:33,080 --> 00:11:36,559 Speaker 1: and then on the demand side, you've got the unleashing 210 00:11:36,600 --> 00:11:40,040 Speaker 1: of what was a bottleneck during the pandemic. Everyone now 211 00:11:40,200 --> 00:11:43,120 Speaker 1: is ready to spend and go out and travel again 212 00:11:43,240 --> 00:11:47,000 Speaker 1: and all that. So I'm trying to think of how 213 00:11:47,040 --> 00:11:50,520 Speaker 1: it looks on the other side when the that transitory 214 00:11:50,600 --> 00:11:53,200 Speaker 1: period is over, you know, whether it be later this 215 00:11:53,280 --> 00:11:58,400 Speaker 1: year or the first half. To me, there's almost a 216 00:11:58,520 --> 00:12:01,319 Speaker 1: risk of sort of a reversion back the other way 217 00:12:01,480 --> 00:12:05,839 Speaker 1: and and almost the transitory deflationary period on the other side. Um, 218 00:12:05,880 --> 00:12:09,080 Speaker 1: everyone seems to be worried about a more prolonged period 219 00:12:09,120 --> 00:12:13,439 Speaker 1: of inflation after you know, this year, But I wonder 220 00:12:13,440 --> 00:12:16,720 Speaker 1: if the risk is almost as good, Uh for thinking 221 00:12:16,720 --> 00:12:19,719 Speaker 1: we could see a transitory deflation period. So tell me 222 00:12:19,760 --> 00:12:22,079 Speaker 1: if I'm nuts for thinking that, ay, and uh, if 223 00:12:22,080 --> 00:12:25,120 Speaker 1: I'm not nuts, hopefully I'm not too crazy. How would 224 00:12:25,160 --> 00:12:26,719 Speaker 1: how would that play out in the markets? Would that 225 00:12:26,760 --> 00:12:28,559 Speaker 1: be a sort of about face and try to try 226 00:12:28,600 --> 00:12:31,400 Speaker 1: to go back to growth again? Uh? You know, how 227 00:12:31,400 --> 00:12:34,679 Speaker 1: are you thinking about that other side of the transitory period? 228 00:12:34,679 --> 00:12:38,160 Speaker 1: Of inflation well fastly. I don't think you're crazy. I 229 00:12:38,200 --> 00:12:41,000 Speaker 1: think that that is a possibility. You know, if we 230 00:12:41,040 --> 00:12:44,240 Speaker 1: think about that, the supply is they're going to be 231 00:12:44,280 --> 00:12:46,800 Speaker 1: looking at this unleashing of demand, and they could be 232 00:12:46,880 --> 00:12:49,160 Speaker 1: ramping up their supply the next couple of months. But 233 00:12:49,200 --> 00:12:51,400 Speaker 1: what if they go too far? What if they just 234 00:12:51,440 --> 00:12:53,320 Speaker 1: go too far? A lot of their demand it's gonna 235 00:12:53,320 --> 00:12:56,160 Speaker 1: be front loaded. Um as you see, it's it's about 236 00:12:56,240 --> 00:12:58,560 Speaker 1: unbleashing that demand that has been so contained for the 237 00:12:58,600 --> 00:13:00,679 Speaker 1: last number of months. So I think there is a 238 00:13:00,760 --> 00:13:03,360 Speaker 1: chance that supply goes too far, demand just doesn't essentially 239 00:13:03,440 --> 00:13:05,840 Speaker 1: meet it in the end, and then you get the 240 00:13:05,880 --> 00:13:09,320 Speaker 1: disinflationary pressure is coming. Well, what happens to the market, Well, 241 00:13:09,360 --> 00:13:11,360 Speaker 1: on one hand, I think the market really starts to 242 00:13:11,360 --> 00:13:15,280 Speaker 1: get a bit worried because ultimately, you've seen Montree policymakers, 243 00:13:15,280 --> 00:13:20,600 Speaker 1: you've seen fiscal policy makers throw everything they have this problem, 244 00:13:20,679 --> 00:13:24,240 Speaker 1: and if they still can't create some kind of inflation, 245 00:13:24,280 --> 00:13:26,280 Speaker 1: which is a healthy type of inflation, So around that 246 00:13:26,360 --> 00:13:30,040 Speaker 1: two percent level, I think the market will become quite concerned. 247 00:13:30,559 --> 00:13:33,000 Speaker 1: So I think from that perspective, the Fed is playing 248 00:13:33,000 --> 00:13:35,600 Speaker 1: a really difficult game here. They have to get the 249 00:13:35,600 --> 00:13:38,360 Speaker 1: balance right. Um, and if the market does get freaked 250 00:13:38,360 --> 00:13:41,200 Speaker 1: then of course we have to be shifting into safer assets. 251 00:13:41,600 --> 00:13:44,960 Speaker 1: We're talking about growth again. Technology if you're looking at 252 00:13:45,000 --> 00:13:47,960 Speaker 1: lower bond deals, and technology is typically your your best 253 00:13:48,000 --> 00:13:52,440 Speaker 1: place to hide out. So you mentioned the idea of 254 00:13:52,520 --> 00:13:56,840 Speaker 1: stickiness of inflation, and that that intrigues me just the 255 00:13:56,880 --> 00:14:02,160 Speaker 1: difference between flexible pricing versus sticky I saying, Um, what 256 00:14:02,320 --> 00:14:06,000 Speaker 1: are you looking at in terms of the cues for 257 00:14:06,640 --> 00:14:11,160 Speaker 1: what's a real inflation move, What's a real like hard 258 00:14:11,240 --> 00:14:16,120 Speaker 1: inflationary move versus you know, so with sticky prices, it's 259 00:14:16,160 --> 00:14:18,880 Speaker 1: something like the cost of getting your car fixed doesn't 260 00:14:18,960 --> 00:14:22,440 Speaker 1: change no matter what happens in the economy, whereas you know, 261 00:14:22,480 --> 00:14:25,480 Speaker 1: the cost of gas is very very reactive to the economy. 262 00:14:25,720 --> 00:14:29,040 Speaker 1: What are you looking at in terms of gauging how 263 00:14:29,120 --> 00:14:34,640 Speaker 1: severe things get or how how how much less we 264 00:14:34,680 --> 00:14:37,920 Speaker 1: need to be concerned about it. So to us, there's 265 00:14:38,040 --> 00:14:40,640 Speaker 1: there's a couple of key things to be watching out for, 266 00:14:40,760 --> 00:14:42,880 Speaker 1: which is going to give us an idea of how sticky, 267 00:14:43,240 --> 00:14:46,120 Speaker 1: so really how long this higher inflation is going to last? 268 00:14:46,120 --> 00:14:49,400 Speaker 1: For um, the first thing is inflation expectations. You've got 269 00:14:49,400 --> 00:14:52,280 Speaker 1: to be looking at not only market inflation expectations, but 270 00:14:52,360 --> 00:14:55,800 Speaker 1: all the various surveys, because what we have seen the 271 00:14:55,840 --> 00:14:59,520 Speaker 1: threat of is as consumers start to see higher prices, 272 00:15:00,120 --> 00:15:04,360 Speaker 1: they start to expect themselves that they react in that way, 273 00:15:04,560 --> 00:15:07,880 Speaker 1: and that brings forward or extends that inflation pressures that 274 00:15:07,880 --> 00:15:10,120 Speaker 1: they've already been witnessing. So then it becomes part of 275 00:15:10,120 --> 00:15:13,320 Speaker 1: the system and you're seeing permanently higher prices. But the 276 00:15:13,360 --> 00:15:16,560 Speaker 1: second thing is is companies, how are they going to respond? 277 00:15:16,840 --> 00:15:18,840 Speaker 1: Now this is gonna be really interesting because over the 278 00:15:18,920 --> 00:15:23,600 Speaker 1: last year we've seen savings in the US increased significantly, 279 00:15:24,200 --> 00:15:26,840 Speaker 1: So you have a new consumer subset who are extremely 280 00:15:26,880 --> 00:15:31,480 Speaker 1: financially resilient, and consumers and companies are very aware of this. 281 00:15:32,040 --> 00:15:35,360 Speaker 1: So if companies decide that, look, our consumers are clients 282 00:15:35,600 --> 00:15:38,520 Speaker 1: now very financially resilient. We can pass on all of 283 00:15:38,560 --> 00:15:42,520 Speaker 1: the cost increases that we're experiencing to our consumers, then 284 00:15:42,560 --> 00:15:46,560 Speaker 1: you are looking at inflationary spiral, not to the kind 285 00:15:46,560 --> 00:15:49,080 Speaker 1: of five or six percent level, that inflationary spiral in 286 00:15:49,120 --> 00:15:52,040 Speaker 1: the current term meaning kind of the two to two 287 00:15:52,080 --> 00:15:54,240 Speaker 1: and a half to three percent level, which of course 288 00:15:54,280 --> 00:15:56,520 Speaker 1: as we know from the first perspective, is a little 289 00:15:56,520 --> 00:15:59,560 Speaker 1: bit above where they wanted to be. I just want 290 00:15:59,560 --> 00:16:02,160 Speaker 1: to read in a little bit and reiterate that Sema said, 291 00:16:02,280 --> 00:16:05,560 Speaker 1: I'm not crazy Eric. You know, no matter what Eric says, 292 00:16:06,000 --> 00:16:08,800 Speaker 1: I've got Sema on my owner said, I'm happy about that. 293 00:16:08,840 --> 00:16:11,560 Speaker 1: But uh uh see, I want to switch gears a 294 00:16:11,600 --> 00:16:16,200 Speaker 1: little bit um and talk about the vaccination rates. I 295 00:16:16,200 --> 00:16:18,040 Speaker 1: know it's something you've kept an eye on. I think 296 00:16:18,080 --> 00:16:22,720 Speaker 1: everyone you know who's got their eye on global markets 297 00:16:22,880 --> 00:16:26,240 Speaker 1: is kind of seeing where the sort of advantages are 298 00:16:26,280 --> 00:16:30,080 Speaker 1: and disadvantages are in vaccination rates. And obviously in the US, 299 00:16:30,400 --> 00:16:35,040 Speaker 1: uh we got out to a strong start on that front. Um. 300 00:16:35,040 --> 00:16:37,600 Speaker 1: Currently now we're at about I think a little bit 301 00:16:37,600 --> 00:16:41,000 Speaker 1: over fifty of the population has had at least one 302 00:16:41,080 --> 00:16:44,280 Speaker 1: shot of the vaccines. Um. But you know, as we 303 00:16:44,320 --> 00:16:46,560 Speaker 1: all know, one of the big growth industries in the 304 00:16:46,640 --> 00:16:52,960 Speaker 1: US is conspiracy theories and skepticism towards science and experts 305 00:16:53,080 --> 00:16:55,520 Speaker 1: and that sort of thing. So there, I think there's 306 00:16:55,560 --> 00:16:58,440 Speaker 1: this concern that we might plateau out a little bit 307 00:16:58,480 --> 00:17:01,960 Speaker 1: on on vaccination rates that you know, the people left 308 00:17:02,000 --> 00:17:04,720 Speaker 1: who are unvaccinated are those who are reluctant to get 309 00:17:04,720 --> 00:17:08,760 Speaker 1: it for for whatever reason. Um, And I'm curious, you know, 310 00:17:09,520 --> 00:17:12,280 Speaker 1: if you're seeing that in other countries, is that mainly 311 00:17:12,320 --> 00:17:14,680 Speaker 1: a US phenomenon. It's it seems like we are sort 312 00:17:14,720 --> 00:17:18,520 Speaker 1: of the epicenter of that potential issue of skepticism and 313 00:17:18,600 --> 00:17:21,320 Speaker 1: reluctance to get a vaccine. But I'm curious if you're 314 00:17:21,320 --> 00:17:24,000 Speaker 1: seeing it anywhere else or if it is kind of 315 00:17:24,080 --> 00:17:26,280 Speaker 1: unique to the US. But also, how much does it 316 00:17:26,359 --> 00:17:29,800 Speaker 1: really matter if we do get say above fift vaccinated. 317 00:17:29,880 --> 00:17:33,000 Speaker 1: I mean, you know, should the reopening of the economy 318 00:17:33,160 --> 00:17:37,520 Speaker 1: and the return to normal continue apace even if there 319 00:17:37,720 --> 00:17:40,880 Speaker 1: is a certain segment of the population that might still 320 00:17:40,920 --> 00:17:43,720 Speaker 1: be struggling with covid um If there are enough people 321 00:17:43,720 --> 00:17:47,679 Speaker 1: are vaccinated that, you know, businesses feel comfortable, uh, going 322 00:17:48,119 --> 00:17:51,520 Speaker 1: full capacity and and getting back to normal. How much 323 00:17:51,520 --> 00:17:53,880 Speaker 1: does it matter if if we sort of plateau here 324 00:17:53,880 --> 00:17:56,800 Speaker 1: in the US on vaccination rates. Well, I think you're 325 00:17:56,880 --> 00:17:58,639 Speaker 1: right that the U s really is the epicent two 326 00:17:58,680 --> 00:18:00,520 Speaker 1: of that, but that's because the US is so far 327 00:18:00,560 --> 00:18:02,800 Speaker 1: ahead with this vaccination process, so you're kind of the 328 00:18:02,800 --> 00:18:06,280 Speaker 1: guinea pigs here. What we are seeing though, is in Europe, 329 00:18:06,280 --> 00:18:09,720 Speaker 1: for example, they do have a lot of vaccine hesitancy. UM. 330 00:18:09,800 --> 00:18:12,520 Speaker 1: It's really not unusual even for for COVID. Actually you 331 00:18:12,600 --> 00:18:15,800 Speaker 1: typically see in countries like France, they've always been very 332 00:18:15,800 --> 00:18:18,720 Speaker 1: reluctant even to take the annual flu vaccine. So this 333 00:18:18,840 --> 00:18:21,680 Speaker 1: is something that we were expecting, and of course the 334 00:18:22,040 --> 00:18:23,960 Speaker 1: very side effects that have been reported from a couple 335 00:18:23,960 --> 00:18:27,800 Speaker 1: of the vaccines haven't really helped the situation. Now. What 336 00:18:27,960 --> 00:18:30,600 Speaker 1: we are expecting to see though, for example in the US, 337 00:18:31,600 --> 00:18:33,640 Speaker 1: is that we are hitting we're close to hitting your 338 00:18:33,680 --> 00:18:38,000 Speaker 1: peak vaccination numbers. You can have people who are reluctant, 339 00:18:38,080 --> 00:18:40,600 Speaker 1: you can have people who simply aren't eligible maybe because 340 00:18:40,600 --> 00:18:43,040 Speaker 1: of age UM, and then those can be the other 341 00:18:43,080 --> 00:18:45,080 Speaker 1: ones who say, well, you know, everyone else surround us 342 00:18:45,160 --> 00:18:48,000 Speaker 1: is vaccinated, so why would we could have bothered? Would 343 00:18:48,040 --> 00:18:49,679 Speaker 1: come around to when it When it works for us, 344 00:18:50,119 --> 00:18:54,000 Speaker 1: it doesn't really matter from an economic perspective, in the 345 00:18:54,000 --> 00:18:56,680 Speaker 1: best case scenario, No, it doesn't really matter, because all 346 00:18:56,680 --> 00:19:00,600 Speaker 1: the government cares about UM is of course they want 347 00:19:00,600 --> 00:19:03,159 Speaker 1: to reopen the economy. It's really if those hospitalizations that 348 00:19:03,400 --> 00:19:04,879 Speaker 1: that they start to get concerns. So if you've got 349 00:19:04,920 --> 00:19:07,560 Speaker 1: a lot of people vaccinated, then they will continue to 350 00:19:07,560 --> 00:19:10,680 Speaker 1: push forward with the reopening. The concern starts to arise 351 00:19:10,720 --> 00:19:13,680 Speaker 1: though if you get some more of these variants start 352 00:19:13,760 --> 00:19:17,359 Speaker 1: to circulate UM, and if those various circulate, then it 353 00:19:17,400 --> 00:19:20,080 Speaker 1: becomes more of a concern for the population that isn't vaccinated, 354 00:19:20,440 --> 00:19:22,199 Speaker 1: And then you get to a point where maybe the 355 00:19:22,200 --> 00:19:24,240 Speaker 1: government was to take a bit of a stand still 356 00:19:24,440 --> 00:19:26,720 Speaker 1: on that on that factor. And I would point to 357 00:19:26,760 --> 00:19:30,480 Speaker 1: the UK here on this where although we have vaccinated 358 00:19:30,600 --> 00:19:33,600 Speaker 1: a very high percentage of people, we have the variant 359 00:19:33,600 --> 00:19:35,719 Speaker 1: from India is circulating in the UK and they are 360 00:19:35,760 --> 00:19:39,280 Speaker 1: talking already about stopping the reopening. So when you talk 361 00:19:39,320 --> 00:19:43,240 Speaker 1: about vaccination rates UM, the FED has pointed to a 362 00:19:43,320 --> 00:19:46,919 Speaker 1: vaccination rates as something that it's looking at in terms 363 00:19:47,000 --> 00:19:53,280 Speaker 1: of when to react to QUEI and whatever UM. Are 364 00:19:53,359 --> 00:19:57,480 Speaker 1: we getting close to a point where the FED would 365 00:19:57,480 --> 00:20:00,679 Speaker 1: feel comfortable? I mean obvious there are a bunch of 366 00:20:00,680 --> 00:20:04,640 Speaker 1: other numbers that go go into that UM, but they've 367 00:20:04,680 --> 00:20:08,680 Speaker 1: act they've not really been looking at necessarily the whole 368 00:20:08,760 --> 00:20:12,440 Speaker 1: data and talking about more of this societal function. Are 369 00:20:12,480 --> 00:20:15,480 Speaker 1: we close to that point where the FED can react 370 00:20:15,560 --> 00:20:20,680 Speaker 1: based on being comfortable that the population is vaccinated. I 371 00:20:20,720 --> 00:20:22,680 Speaker 1: think we are getting close to that point. But what 372 00:20:22,720 --> 00:20:25,520 Speaker 1: we are increasingly seeing is that policymakers are saying that 373 00:20:27,000 --> 00:20:30,000 Speaker 1: our country may be pretty healthy, doing pretty well with vaccinations, 374 00:20:30,359 --> 00:20:32,639 Speaker 1: but they have to look at all the countries and 375 00:20:32,800 --> 00:20:35,160 Speaker 1: not just even next to them, but all around because 376 00:20:35,200 --> 00:20:38,879 Speaker 1: there are continued threats coming in from other countries. You know, 377 00:20:38,920 --> 00:20:41,520 Speaker 1: we just have to think about India, about Brazil. Um. 378 00:20:42,040 --> 00:20:46,119 Speaker 1: So I think policymakers will remain pretty cautious until this 379 00:20:46,160 --> 00:20:48,720 Speaker 1: fight is over, and I unfortunately think that fight is 380 00:20:48,720 --> 00:21:09,159 Speaker 1: going to continue into So you know, there's kind of 381 00:21:09,160 --> 00:21:13,280 Speaker 1: this growing I wouldn't necessarily call it a consensus perhaps yet, 382 00:21:13,359 --> 00:21:17,879 Speaker 1: but growing speculation that, uh, the Jackson Hall meeting in 383 00:21:17,920 --> 00:21:21,440 Speaker 1: August will be when the FED at least admits their 384 00:21:21,560 --> 00:21:26,360 Speaker 1: thinking about talking about maybe whispering about tapering. Um. How 385 00:21:26,400 --> 00:21:27,920 Speaker 1: are you looking at that meeting? Do you think it's 386 00:21:28,040 --> 00:21:30,119 Speaker 1: it's a live one that that we're all going to 387 00:21:30,160 --> 00:21:32,480 Speaker 1: have to keep an eye on, or I guess just 388 00:21:32,520 --> 00:21:35,800 Speaker 1: wait and see. I think that we have to be 389 00:21:35,840 --> 00:21:39,680 Speaker 1: watching Jackson Hole very very carefully. You know, when we've 390 00:21:39,720 --> 00:21:41,840 Speaker 1: talked about the FED, you know, we know that of 391 00:21:41,880 --> 00:21:44,520 Speaker 1: course with the econom reopening, with the kind of pace 392 00:21:44,600 --> 00:21:47,639 Speaker 1: of growth that we're saying we're seeing, and they must 393 00:21:47,680 --> 00:21:50,560 Speaker 1: be talking about tapering behind closed doors. They must be 394 00:21:50,600 --> 00:21:53,200 Speaker 1: talking about it. But this is a very very careful 395 00:21:53,280 --> 00:21:55,560 Speaker 1: process that they're going to take. Where they started, as 396 00:21:55,560 --> 00:21:57,920 Speaker 1: you said, they start to whisper about it, we start 397 00:21:57,960 --> 00:22:01,840 Speaker 1: to hear hints, and then at Jackson Hole, hopefully they 398 00:22:01,840 --> 00:22:04,119 Speaker 1: talk a little bit more openly to the market and 399 00:22:04,119 --> 00:22:06,040 Speaker 1: prepare the market for the start. So it didn't start 400 00:22:06,040 --> 00:22:08,880 Speaker 1: in Jackson Hole, but it starts a couple of months later. 401 00:22:09,440 --> 00:22:11,560 Speaker 1: And I think over the last number of years we 402 00:22:11,640 --> 00:22:14,359 Speaker 1: have become accustomed to Jackson Hole being that one event 403 00:22:14,440 --> 00:22:18,000 Speaker 1: that all market makers, all investors need to watch very carefully. 404 00:22:19,560 --> 00:22:23,160 Speaker 1: So now that we're talking about Jackson Hole in the FED, UH, 405 00:22:23,240 --> 00:22:27,240 Speaker 1: if you're a bond investor, how do you view this? 406 00:22:27,400 --> 00:22:31,000 Speaker 1: Now you've you know, we were at zero or close 407 00:22:31,080 --> 00:22:35,840 Speaker 1: to it, uh, and now we're coming well off those levels. Uh. 408 00:22:35,880 --> 00:22:40,360 Speaker 1: And you know, yields are going up, UM, bonds are falling, 409 00:22:40,600 --> 00:22:44,119 Speaker 1: and it just sort of seems like an inexorable rise. 410 00:22:45,880 --> 00:22:50,040 Speaker 1: How if you are a fixed income guy or a woman, 411 00:22:51,240 --> 00:22:55,119 Speaker 1: how do you position yourself to handle this? If this 412 00:22:55,200 --> 00:22:57,679 Speaker 1: is going to be ongoing and the FED is actually 413 00:22:57,680 --> 00:23:01,200 Speaker 1: going to start doing some cube, you know, getting rid 414 00:23:01,200 --> 00:23:04,240 Speaker 1: of some of that stimulus. Yeah. Absolutely, when we when 415 00:23:04,240 --> 00:23:07,040 Speaker 1: we think about this, if you think the tapering is inevitable, 416 00:23:07,080 --> 00:23:08,840 Speaker 1: even if you're worried about the timing, is such as 417 00:23:08,880 --> 00:23:11,679 Speaker 1: we think is inevitable, in which case there will be 418 00:23:11,840 --> 00:23:14,479 Speaker 1: upper pressure on bond yield from here. So what does 419 00:23:14,480 --> 00:23:18,000 Speaker 1: the fixed income investity will look It is undoubtedly is 420 00:23:18,040 --> 00:23:22,080 Speaker 1: a challenging environment for a fixed income investor. But what 421 00:23:22,119 --> 00:23:23,720 Speaker 1: we think you need to do now is be a 422 00:23:23,760 --> 00:23:28,040 Speaker 1: little bit innovative, start thinking a little bit outside the box. Um, 423 00:23:28,280 --> 00:23:32,000 Speaker 1: you need to get that additional yield with thinking prefer securities, 424 00:23:32,000 --> 00:23:36,480 Speaker 1: were thinking emerging market debt, high yield, private credit, anywhere 425 00:23:36,480 --> 00:23:40,480 Speaker 1: where you can get that additional pickup because increasingly that 426 00:23:40,680 --> 00:23:44,040 Speaker 1: is so difficult to find within fixed income. And that 427 00:23:44,040 --> 00:23:46,440 Speaker 1: that allows me to talk my book a little bit here, 428 00:23:46,560 --> 00:23:49,879 Speaker 1: Eric too and read Seema's thoughts on in last week's 429 00:23:49,880 --> 00:23:52,479 Speaker 1: Business Week where she talks about the barbell with em 430 00:23:52,480 --> 00:23:55,080 Speaker 1: and corporate credit on one side and save treasuries on 431 00:23:55,119 --> 00:23:57,600 Speaker 1: the other. I think that's ah an interesting way to 432 00:23:57,640 --> 00:24:00,600 Speaker 1: approach it. Um, see, well, one more thing and then 433 00:24:00,600 --> 00:24:04,240 Speaker 1: we'll end this interrogation. Sometimes I feel like we were interrogating, uh, 434 00:24:04,560 --> 00:24:07,639 Speaker 1: someone like the FBI does. So I apologize for all 435 00:24:07,640 --> 00:24:09,600 Speaker 1: these questions, but one more and then we'll get to 436 00:24:09,640 --> 00:24:13,439 Speaker 1: the crazy things. Um. You had a really interesting point 437 00:24:13,680 --> 00:24:17,880 Speaker 1: in a note recently in which you talked about UM 438 00:24:18,000 --> 00:24:21,280 Speaker 1: and I'll just read straight from your note. Uh. This 439 00:24:21,320 --> 00:24:25,240 Speaker 1: has basically been the largest US fiscal injections since World 440 00:24:25,240 --> 00:24:30,200 Speaker 1: War Two. What's interesting is though it boosts the global economy. UM, 441 00:24:30,600 --> 00:24:33,440 Speaker 1: And I wonder I think that's a point that that's 442 00:24:33,560 --> 00:24:36,320 Speaker 1: lost on a lot of US based investors. Is how 443 00:24:36,680 --> 00:24:40,000 Speaker 1: you know US prosperity can can be a boom for 444 00:24:40,080 --> 00:24:44,639 Speaker 1: emerging markets other developed markets around the world. Talk to 445 00:24:44,680 --> 00:24:49,200 Speaker 1: us about that spillover effect from a really buoyant US consumer. 446 00:24:49,520 --> 00:24:51,440 Speaker 1: I mean, is is it as simple as a matter 447 00:24:51,480 --> 00:24:54,800 Speaker 1: of just, you know, going going long on the countries 448 00:24:54,880 --> 00:24:57,880 Speaker 1: where we run big trade deficits with or is it 449 00:24:57,920 --> 00:24:59,320 Speaker 1: is there more to it? How would you how do 450 00:24:59,359 --> 00:25:04,879 Speaker 1: you sort express a global bullishness based on US consumers 451 00:25:04,920 --> 00:25:08,520 Speaker 1: with these inflated savings rates and lots of stimulus money 452 00:25:08,600 --> 00:25:12,159 Speaker 1: slashing around. You know, it's funny because when we do 453 00:25:12,240 --> 00:25:15,800 Speaker 1: these presentations at global presentations, this year, increasingly we are 454 00:25:15,840 --> 00:25:18,600 Speaker 1: talking about the US, and the reason is that the 455 00:25:18,760 --> 00:25:24,119 Speaker 1: US is it's absolutely reinstating that global reflation narrative. And 456 00:25:24,200 --> 00:25:27,359 Speaker 1: as you said, that American Rescue Act, as one of 457 00:25:27,400 --> 00:25:30,760 Speaker 1: the largest government interventions since World War Two, is so 458 00:25:30,840 --> 00:25:34,000 Speaker 1: significant that the spillovers to the rest of the world 459 00:25:35,040 --> 00:25:38,080 Speaker 1: actually pick up growth in other countries. So if we 460 00:25:38,119 --> 00:25:40,320 Speaker 1: look at the o e. C D, for example, has 461 00:25:40,320 --> 00:25:42,640 Speaker 1: done a couple of studies on this, and they think 462 00:25:42,680 --> 00:25:45,920 Speaker 1: that the American rescue plan on its own lifts global 463 00:25:45,920 --> 00:25:48,720 Speaker 1: growth this year by one percent. And if you're thinking 464 00:25:48,720 --> 00:25:51,760 Speaker 1: about the closest countries that Canda, Mexico, that's around one 465 00:25:51,800 --> 00:25:54,639 Speaker 1: to one point to five percent just from that fiscal 466 00:25:54,680 --> 00:25:58,639 Speaker 1: stimulus in the US, all the way to China to Europe, 467 00:25:58,640 --> 00:26:01,480 Speaker 1: where it's about nor point five per it. So together 468 00:26:01,520 --> 00:26:03,920 Speaker 1: this is really important. And you know what we've seen 469 00:26:04,160 --> 00:26:06,400 Speaker 1: this year in the US is that you have had 470 00:26:06,480 --> 00:26:11,920 Speaker 1: this perfect conduction of vaccinations enabling that reopening, plus this 471 00:26:12,000 --> 00:26:15,280 Speaker 1: incredible fiscal stimulus. So now you have a combination of 472 00:26:15,400 --> 00:26:18,560 Speaker 1: not just the opportunity to spend because of reopening, but 473 00:26:18,680 --> 00:26:22,600 Speaker 1: also the ability to spend, and together those two factors 474 00:26:22,720 --> 00:26:26,840 Speaker 1: create such a strong push into the U. S. Economy 475 00:26:26,880 --> 00:26:29,920 Speaker 1: and then leaking out the rest of the world. Yeah, 476 00:26:30,040 --> 00:26:32,080 Speaker 1: that's it's really you know, it's I think it's a 477 00:26:32,240 --> 00:26:36,760 Speaker 1: point that a lot of Americans, we we Americans speak, 478 00:26:36,840 --> 00:26:39,399 Speaker 1: can be very self reflective and we forgot about the 479 00:26:39,400 --> 00:26:40,800 Speaker 1: rest of the world sometimes, And I think that's a 480 00:26:40,920 --> 00:26:45,000 Speaker 1: very interesting way to play the sort of pumped up 481 00:26:45,000 --> 00:26:47,880 Speaker 1: savings of the American consumer and all the stimulus money 482 00:26:47,880 --> 00:26:52,159 Speaker 1: going around. So uh, definitely good food for thought. Um 483 00:26:52,200 --> 00:26:56,840 Speaker 1: as is our next segment, which fans of the podcast, no, Well, 484 00:26:56,840 --> 00:27:00,840 Speaker 1: the craziest things we saw in markets this week stand 485 00:27:00,880 --> 00:27:04,720 Speaker 1: clear of the craziest things we saw in markets this week, 486 00:27:05,520 --> 00:27:08,000 Speaker 1: I'm gonna get things started, um Seman. I got a 487 00:27:08,000 --> 00:27:11,120 Speaker 1: sneak peek at Eric's crazy things. I will say both 488 00:27:11,160 --> 00:27:13,800 Speaker 1: of ours involved real assets, which I know you're you're 489 00:27:13,840 --> 00:27:16,360 Speaker 1: bullish on. Probably I'm gonna go out on a limb 490 00:27:16,359 --> 00:27:18,400 Speaker 1: and say probably not the type of real assets you're 491 00:27:18,480 --> 00:27:21,880 Speaker 1: you would be bullishawn, necessarily, especially Eric's, but mine. Maybe 492 00:27:22,119 --> 00:27:24,640 Speaker 1: I'll start with mine because I I find it interesting. 493 00:27:25,320 --> 00:27:29,199 Speaker 1: You know, obviously, for an investor, the biggest nightmare you 494 00:27:29,240 --> 00:27:32,320 Speaker 1: could ever have is a hundred percent loss, right, would 495 00:27:32,320 --> 00:27:35,600 Speaker 1: you guys agree with that? Yes? What what could be 496 00:27:35,600 --> 00:27:38,720 Speaker 1: worse than a hundred percent loss? Well, in Las Vegas, 497 00:27:38,880 --> 00:27:41,880 Speaker 1: there's some innovation on this where we've got a story 498 00:27:41,880 --> 00:27:45,439 Speaker 1: about a loss bigger than a hundred and twenty percent 499 00:27:45,560 --> 00:27:48,240 Speaker 1: loss on a Las Vegas mall loan. And I'm just 500 00:27:48,240 --> 00:27:50,960 Speaker 1: gonna read the top of the story by our colleague 501 00:27:50,960 --> 00:27:54,800 Speaker 1: Adam Tempkin, a loan side to a beleaguered mall outside 502 00:27:54,800 --> 00:27:57,040 Speaker 1: of Las Vegas realized a loss of a hundred and 503 00:27:58,240 --> 00:28:01,160 Speaker 1: after the shopping center sold for the same price as 504 00:28:01,200 --> 00:28:04,359 Speaker 1: a condo, the loan, which had a current bounce of 505 00:28:04,400 --> 00:28:07,600 Speaker 1: sixty two point two million, was completely written down after 506 00:28:07,640 --> 00:28:10,800 Speaker 1: the Prism outlets were liquidated for just over four hundred 507 00:28:10,800 --> 00:28:14,560 Speaker 1: thousand dollars. When accounting for eleven point five million in 508 00:28:14,640 --> 00:28:19,320 Speaker 1: fees and reimbursements owned to the Nester services for advances made, 509 00:28:19,400 --> 00:28:22,320 Speaker 1: the realized loss came out to seventy four millions. So 510 00:28:22,400 --> 00:28:25,360 Speaker 1: you investors lost seventy four million on a sixty two 511 00:28:25,400 --> 00:28:28,280 Speaker 1: million dollar loan because of all the fees and whatnot. 512 00:28:28,440 --> 00:28:31,720 Speaker 1: But seem it's to your point. Someone bought a full 513 00:28:31,800 --> 00:28:34,840 Speaker 1: shopping center in Las Vegas for four hundred grand the 514 00:28:34,920 --> 00:28:37,760 Speaker 1: price of a two bedroom condo on the on the 515 00:28:37,840 --> 00:28:42,280 Speaker 1: Vegas Strip. So bargains galore in real estate if you 516 00:28:42,320 --> 00:28:45,440 Speaker 1: have the the ability to pounce on them. It's fascinating. 517 00:28:46,160 --> 00:28:48,200 Speaker 1: And of course you know there are people short this 518 00:28:48,440 --> 00:28:51,640 Speaker 1: the credit here, Uh, Carl Icon, I think making a 519 00:28:51,720 --> 00:28:55,400 Speaker 1: fortune being short the credit index associated with this. But 520 00:28:55,560 --> 00:28:58,440 Speaker 1: uh uh to your point, seem, I think it talks 521 00:28:58,480 --> 00:29:01,560 Speaker 1: to it speaks to the the sort of distress real 522 00:29:01,640 --> 00:29:04,360 Speaker 1: state that that is a great opportunity out there still, 523 00:29:04,400 --> 00:29:07,640 Speaker 1: even at this point of the reopening, it is. It 524 00:29:07,760 --> 00:29:09,480 Speaker 1: is that there are a lot of opportunities, but there's 525 00:29:09,520 --> 00:29:12,840 Speaker 1: a lot of potholes. So so pick your investment, even 526 00:29:12,880 --> 00:29:17,040 Speaker 1: in real estate, very very wisely, right right, And Eric's 527 00:29:17,040 --> 00:29:19,800 Speaker 1: gonna talk to us about another real asset, which which 528 00:29:20,000 --> 00:29:22,120 Speaker 1: I gotta give it to Terrik first time in the 529 00:29:22,120 --> 00:29:23,880 Speaker 1: show when you came big with the crazy thing. This 530 00:29:23,920 --> 00:29:27,760 Speaker 1: is a good one. Well, this was something that actually 531 00:29:28,120 --> 00:29:30,600 Speaker 1: is near and dear and seem I really hope you 532 00:29:30,640 --> 00:29:34,760 Speaker 1: actually aren't tracking this. Uh, this is something that's near 533 00:29:34,760 --> 00:29:38,040 Speaker 1: and dear to my family's heart. My son is a 534 00:29:38,080 --> 00:29:40,840 Speaker 1: big animal lover and took classes at the New York 535 00:29:40,920 --> 00:29:46,280 Speaker 1: Zoological Society and is a major, majorly involved in anti poaching. 536 00:29:47,000 --> 00:29:51,080 Speaker 1: And what what I noticed, for what we saw was 537 00:29:51,120 --> 00:29:57,000 Speaker 1: this the rise. It's called the Rhizotope project where uh 538 00:29:57,200 --> 00:30:01,920 Speaker 1: there's poaching of rhinos for their urns in South Africa. 539 00:30:02,120 --> 00:30:06,280 Speaker 1: Last year alone, four hundred were killed illegally um and 540 00:30:06,320 --> 00:30:10,480 Speaker 1: it's because the horns are used in traditional medicine and 541 00:30:10,920 --> 00:30:15,600 Speaker 1: have value beyond what the actual animal is, so they'll 542 00:30:15,680 --> 00:30:19,280 Speaker 1: kill the animal just to take the horns. So what 543 00:30:19,400 --> 00:30:24,200 Speaker 1: they're doing, or what they're testing, is injecting the horns 544 00:30:24,360 --> 00:30:29,080 Speaker 1: with radio active material in order to make the horns 545 00:30:29,280 --> 00:30:34,479 Speaker 1: less desirable. Because if you're using them for medicine and 546 00:30:34,560 --> 00:30:37,800 Speaker 1: you have radioactive material, that sort of defeats the purpose. 547 00:30:38,280 --> 00:30:41,720 Speaker 1: So they're starting to do this in in South Africa 548 00:30:42,080 --> 00:30:46,200 Speaker 1: where and it's a Russian company and another private organization 549 00:30:46,720 --> 00:30:51,080 Speaker 1: are literally tracking uh there are a bunch of different 550 00:30:51,080 --> 00:30:56,160 Speaker 1: trackers that track rhino movements and they're now catching them 551 00:30:56,360 --> 00:31:00,040 Speaker 1: injecting them with this radioactive material. And the question is 552 00:31:00,080 --> 00:31:03,720 Speaker 1: whether the material actually gets into their bodies and poisons 553 00:31:03,800 --> 00:31:07,520 Speaker 1: these rhinos, basically subverting the entire idea of the project, 554 00:31:08,000 --> 00:31:10,880 Speaker 1: or if this is a way to get people to 555 00:31:11,440 --> 00:31:15,640 Speaker 1: no longer by rhino horns. Uh. And I just thought 556 00:31:15,640 --> 00:31:18,320 Speaker 1: it was a fascinating, you know, damned if you do, 557 00:31:18,440 --> 00:31:21,320 Speaker 1: damned if you don't kind of story where they're they're 558 00:31:21,320 --> 00:31:23,800 Speaker 1: trying to save these rhinos and uh, you know, it's 559 00:31:23,840 --> 00:31:25,680 Speaker 1: like we may have to burn the village in order 560 00:31:25,720 --> 00:31:30,200 Speaker 1: to save it. Go ahead, see M I know, I, 561 00:31:29,120 --> 00:31:34,680 Speaker 1: I know you're not investing in rhino horns, but please don't. 562 00:31:34,760 --> 00:31:38,040 Speaker 1: That is incredible, So you know, I worry. I worry 563 00:31:38,080 --> 00:31:40,960 Speaker 1: on many different parts of that. But I just also 564 00:31:41,000 --> 00:31:44,960 Speaker 1: hope that the material doesn't make them give them super bowers. 565 00:31:45,040 --> 00:31:49,880 Speaker 1: I have been changed rhino in Kenya before and it 566 00:31:50,240 --> 00:31:54,240 Speaker 1: was a scary, scary experience, So let's hope they can't 567 00:31:54,280 --> 00:31:56,280 Speaker 1: run even faster than than they did that that for 568 00:31:57,120 --> 00:31:59,080 Speaker 1: that was my thought to Semo. I don't know if 569 00:31:59,080 --> 00:32:02,080 Speaker 1: they showed The Incredible Hulk in in England back in 570 00:32:02,120 --> 00:32:04,480 Speaker 1: the day, but Eric and I grew up watching The 571 00:32:04,480 --> 00:32:06,320 Speaker 1: Incredible Hulk. I think all of us who saw that 572 00:32:06,320 --> 00:32:09,600 Speaker 1: show realize you do not mess with radioactivity like that. 573 00:32:09,640 --> 00:32:12,120 Speaker 1: If you do not want an Incredible Hulk rhino on 574 00:32:12,160 --> 00:32:16,080 Speaker 1: the loose. No, no, nobody wants to. But My other 575 00:32:16,120 --> 00:32:18,520 Speaker 1: thought is, and I agree with you, Eric Comman, Animal 576 00:32:18,680 --> 00:32:20,800 Speaker 1: Lover two. I hate the idea of poaching, but as 577 00:32:20,840 --> 00:32:24,000 Speaker 1: a markets guy, I I like that story. I felt 578 00:32:24,000 --> 00:32:26,440 Speaker 1: it was lacking in the price discovery aspect though, in 579 00:32:26,720 --> 00:32:29,760 Speaker 1: that what does a rhino horn cost? And I feel like, 580 00:32:29,840 --> 00:32:31,400 Speaker 1: and I hate to I hate to be the guy 581 00:32:31,400 --> 00:32:33,960 Speaker 1: to say this, but I feel like this project could 582 00:32:33,960 --> 00:32:37,920 Speaker 1: be bullish for rhino horn prices if they reduce the 583 00:32:38,320 --> 00:32:41,960 Speaker 1: supply of rhinos that are not incredible hulk radioactive rhinos. 584 00:32:41,960 --> 00:32:44,120 Speaker 1: I'm just gonna throw that out there. I had not 585 00:32:44,240 --> 00:32:48,040 Speaker 1: even considered that, what if it's the unintended consequence to see, 586 00:32:48,040 --> 00:32:50,080 Speaker 1: This is what economics is all about. These are the 587 00:32:50,120 --> 00:32:54,280 Speaker 1: externalities that you don't predict, where suddenly, you know, the 588 00:32:54,280 --> 00:32:58,520 Speaker 1: the idea of uncontaminated rhino horns makes them even more valuable. 589 00:32:58,560 --> 00:33:01,480 Speaker 1: And now we're going to go after the uh, non 590 00:33:01,640 --> 00:33:06,480 Speaker 1: radioactive rhinos in order to really to really do this. Yeah, 591 00:33:06,640 --> 00:33:11,600 Speaker 1: it's freaking and actually, you know, I feel like Jeff 592 00:33:11,680 --> 00:33:16,160 Speaker 1: Goldbloom in Jurassic Park with all the philosophical connotations going 593 00:33:16,160 --> 00:33:17,680 Speaker 1: through my head. But all I can tick of is 594 00:33:17,720 --> 00:33:20,600 Speaker 1: the bullish price work. As for rhino horns as a 595 00:33:20,640 --> 00:33:25,320 Speaker 1: reason we were warned. We were alright, Seema, I I 596 00:33:25,360 --> 00:33:27,120 Speaker 1: know you've been on the show before and you've always 597 00:33:27,120 --> 00:33:30,120 Speaker 1: delivered with a crazy thing. Eric's I gotta say, Eric 598 00:33:30,280 --> 00:33:34,400 Speaker 1: is tough, the tough, the top. Despite the nebulous market connection, 599 00:33:34,440 --> 00:33:38,360 Speaker 1: I'm okay with that as as regular listeners know it. 600 00:33:38,360 --> 00:33:40,480 Speaker 1: It is a market. There's a market for rhino horns, 601 00:33:40,480 --> 00:33:42,840 Speaker 1: so so we'll allow. But Seema, what's the craziest thing 602 00:33:42,840 --> 00:33:46,080 Speaker 1: you've seen recently? There's a market for everything that. Let's 603 00:33:46,160 --> 00:33:50,040 Speaker 1: remember that mine is boring by comparison, because mine is 604 00:33:50,040 --> 00:33:53,520 Speaker 1: playing little markets again, I just want to celebrate ourselves, 605 00:33:53,640 --> 00:33:58,440 Speaker 1: congratulate ourselves for for not talking cryptocurrency on this one. 606 00:33:59,760 --> 00:34:02,520 Speaker 1: So in a in an area where we're not you know, 607 00:34:02,720 --> 00:34:05,760 Speaker 1: governments are no longer worried about deficits, that they're happy 608 00:34:05,800 --> 00:34:08,000 Speaker 1: to spend as much as necessary. Let me take you 609 00:34:08,080 --> 00:34:12,080 Speaker 1: back ten years or so, when when the Greek sovereign 610 00:34:12,080 --> 00:34:15,920 Speaker 1: debt crisis happened and markets really already cared about how 611 00:34:16,040 --> 00:34:20,560 Speaker 1: much how much government they had, government debt they had. Well, 612 00:34:20,800 --> 00:34:25,000 Speaker 1: fast forward to today. You have a Greek government debt 613 00:34:25,719 --> 00:34:30,560 Speaker 1: over two GDP and yet the spread of Greek tenure 614 00:34:30,600 --> 00:34:34,200 Speaker 1: yields over butins has fallen to its narrowest level since 615 00:34:34,239 --> 00:34:36,600 Speaker 1: two thousand and eight. It's just a hundred and seven 616 00:34:36,680 --> 00:34:41,799 Speaker 1: basis points. And that is despite having government debt accelerate 617 00:34:42,080 --> 00:34:44,839 Speaker 1: from from that point ten years ago. So something has 618 00:34:44,880 --> 00:34:47,239 Speaker 1: turned upside down in markets, and to me, that is 619 00:34:47,360 --> 00:34:49,319 Speaker 1: pretty crazy. If you have that good memory of ten 620 00:34:49,400 --> 00:34:53,359 Speaker 1: years ago. I'm completely fascinated with that as well. I mean, 621 00:34:53,400 --> 00:34:56,000 Speaker 1: what that's spread peak that I don't know what was it, 622 00:34:57,000 --> 00:34:58,800 Speaker 1: dred basis points or something like that. Way back in 623 00:34:59,080 --> 00:35:01,960 Speaker 1: two thousands, anybody it was above a temper cent spread. 624 00:35:02,520 --> 00:35:06,320 Speaker 1: I remember hitting the eight or so at one point 625 00:35:06,320 --> 00:35:10,439 Speaker 1: one day. But so I guess the question, and I've 626 00:35:10,440 --> 00:35:13,239 Speaker 1: asked others on the on the show about this too. 627 00:35:13,520 --> 00:35:15,640 Speaker 1: To me, that leads me to believe that the whole 628 00:35:15,800 --> 00:35:18,759 Speaker 1: notion of austerity is kind of dead in Europe now. 629 00:35:19,520 --> 00:35:22,840 Speaker 1: Is that you think that's true? Or is it people 630 00:35:22,880 --> 00:35:28,160 Speaker 1: just playing that the temporary retirement of austerity. I think 631 00:35:28,160 --> 00:35:30,960 Speaker 1: in Europe it's temporary. You know, we talked, we've seen 632 00:35:31,000 --> 00:35:34,040 Speaker 1: at european ecty markets do really really well the last 633 00:35:34,080 --> 00:35:36,399 Speaker 1: few weeks, and everyone's very hopeful for the sum which 634 00:35:36,400 --> 00:35:39,600 Speaker 1: I share probably the optimism for the summer. But beyond that, 635 00:35:40,560 --> 00:35:43,759 Speaker 1: I think it returns to its position as perennial disappointment 636 00:35:43,840 --> 00:35:47,360 Speaker 1: party because it will refer to that fiscal tightening again 637 00:35:47,440 --> 00:35:50,360 Speaker 1: and it cannot let go of the feeling where they 638 00:35:50,400 --> 00:35:52,920 Speaker 1: need to hold them to their fiscal purses. Yeah, I 639 00:35:53,960 --> 00:35:57,319 Speaker 1: tend to agree. Yeah, and I just so I that 640 00:35:57,360 --> 00:36:00,480 Speaker 1: seems like a rented sort of temporary trade be bullish 641 00:36:00,520 --> 00:36:03,640 Speaker 1: Greek debt, you know, until until that this phase passes, 642 00:36:03,680 --> 00:36:07,160 Speaker 1: I guess, yeah, right right, that Greek market as long 643 00:36:07,160 --> 00:36:12,480 Speaker 1: as you can. I think Germany isn't going away right then. 644 00:36:12,719 --> 00:36:17,000 Speaker 1: They're constantly Austerian, So as soon as things level out, 645 00:36:17,040 --> 00:36:20,040 Speaker 1: I would assume we'll start hearing from them about the 646 00:36:20,080 --> 00:36:24,040 Speaker 1: need for austerity economics again. Absolutely well, speaking of writing 647 00:36:24,080 --> 00:36:26,000 Speaker 1: things as far as we can, I think we've written 648 00:36:26,040 --> 00:36:28,480 Speaker 1: this podcast as far as we can see. It is 649 00:36:28,480 --> 00:36:30,680 Speaker 1: always such a great pleasure to to catch up with 650 00:36:30,719 --> 00:36:32,719 Speaker 1: you and hear your thoughts. You know, you're always welcome 651 00:36:32,760 --> 00:36:34,200 Speaker 1: back on the show, and hopefully we can we can 652 00:36:34,200 --> 00:36:36,759 Speaker 1: get you back again soon. Thank you so much. It's 653 00:36:36,760 --> 00:36:38,920 Speaker 1: such a pleasure to be back with you. Guys, and 654 00:36:39,120 --> 00:36:41,759 Speaker 1: Eric Weener. You can message me with everything I got 655 00:36:41,760 --> 00:36:48,200 Speaker 1: wrong on this afterwards. I've been taking I'm just kidding, 656 00:36:48,280 --> 00:36:50,160 Speaker 1: thank you, but it's been a it's been a real treat. 657 00:36:58,200 --> 00:37:00,480 Speaker 1: What Goes Up. We'll be back next week. Until then, 658 00:37:00,520 --> 00:37:02,919 Speaker 1: you can find us on the Bloomberg Terminal, website and app, 659 00:37:03,080 --> 00:37:05,719 Speaker 1: or wherever you get your podcasts. We'd love it if 660 00:37:05,719 --> 00:37:07,600 Speaker 1: you took the time to rate and review the show 661 00:37:07,640 --> 00:37:11,040 Speaker 1: on Apple Podcasts so more listeners can find us, and 662 00:37:11,160 --> 00:37:14,240 Speaker 1: you can find us on Twitter. Follow me at Reaganonymous. 663 00:37:14,640 --> 00:37:18,080 Speaker 1: Eric Weiner is at Eric J. Weener one. You can 664 00:37:18,120 --> 00:37:22,200 Speaker 1: also follow Bloomberg Podcasts at podcasts. I thank you to 665 00:37:22,239 --> 00:37:24,000 Speaker 1: Charlie Paul to Bloomberg Radio in the voice of the 666 00:37:24,000 --> 00:37:27,040 Speaker 1: New York City subway System. What Goes Up is produced 667 00:37:27,040 --> 00:37:30,840 Speaker 1: by Tofur Foreheads ahead of Bloomberg Podcasts is Francesco Levie. 668 00:37:31,600 --> 00:37:33,120 Speaker 1: Thanks for listening, See you next time.