WEBVTT - Episode 9: The 2016 Predictions Episode 0:00:15.040 --> 0:00:22.680 It's amazing if you believe, definitely, and I think a 0:00:22.720 --> 0:00:28.280 lot of fake. All Right, everyone, welcome to the Predictions 0:00:28.400 --> 0:00:31.600 episode of Odd Lots. We're gonna be talking about what 0:00:31.720 --> 0:00:35.000 the big stories are going to be in and what 0:00:35.040 --> 0:00:38.879 we think is going to happen. I'm Joe Wisenthal, Managing 0:00:38.960 --> 0:00:42.120 editor at Bloomberg Markets, and I'm Tracy Halloway, Executive editor 0:00:42.159 --> 0:00:45.040 at Bloomberg Market. So once again we've assembled an ace 0:00:45.080 --> 0:00:49.680 team of Bloomberg News reporters and editors. Last week we 0:00:49.880 --> 0:00:53.600 discussed what their favorite stories were for the year. As 0:00:53.680 --> 0:00:58.280 sort of a connoisseur of armageddon scenarios, I I sort 0:00:58.320 --> 0:01:01.400 of have to say that the August, the August August 0:01:01.480 --> 0:01:04.959 so often the stock markets. My favorite story so Valiant 0:01:05.040 --> 0:01:09.399 is sort of the bad boy of Farmer. Wait a 0:01:09.440 --> 0:01:11.640 second replaced? I know. I was just thinking they've been 0:01:11.680 --> 0:01:14.399 replaced lightly by cheering listening, but they were bigger and 0:01:14.760 --> 0:01:18.360 in some ways bader. So your favorite story is essentially 0:01:18.360 --> 0:01:21.399 the end of a story? Yeah, I think so. This 0:01:21.480 --> 0:01:25.160 story about furious saving really did strike me is encapsulating. 0:01:25.640 --> 0:01:27.039 This week, I think it's going to be a little 0:01:27.040 --> 0:01:28.840 more challenging because we're going to put them on the 0:01:28.880 --> 0:01:30.920 spot and ask them what they think is going to 0:01:30.959 --> 0:01:35.440 happen in in prediction is harder than looking back, and 0:01:35.440 --> 0:01:38.600 then presumably at the end of we're going to ridicule 0:01:38.640 --> 0:01:41.679 them mercilessly forgetting everything wrong. We're get it right. But yeah, 0:01:41.720 --> 0:01:44.760 we're definitely getting meat here exactly on this date again 0:01:45.360 --> 0:01:48.240 one year from now, to look back at the predictions 0:01:48.840 --> 0:01:52.320 and we'll see how they did. Let's have everyone introduced themselves. 0:01:52.800 --> 0:01:55.240 I'm Chris A. G. The managing editor for Stocks at 0:01:55.240 --> 0:01:58.560 Bloomberg News. And Matthew Bosa I cover the Federal Reserve 0:01:59.320 --> 0:02:02.440 it happened, I covered deals for Bloomboog News. I'm Mattlivian. 0:02:02.600 --> 0:02:06.440 I'm a columnist for Bloomberg View. Alright, so everybody wants 0:02:06.480 --> 0:02:08.920 to hear from the stocks guy about what's going to 0:02:09.000 --> 0:02:12.000 happen Chris and a G. You said last week that 0:02:12.040 --> 0:02:16.200 your favorite story for was the flash crash of August 0:02:17.080 --> 0:02:22.000 markets crater. What's what's your big prediction? So um, at 0:02:22.000 --> 0:02:25.359 the risk of of embarrassing, I mean, there's no doubt 0:02:25.360 --> 0:02:28.440 in my mind that the most the most variant view 0:02:28.480 --> 0:02:30.320 you could have right now coming into two thousand and 0:02:30.320 --> 0:02:32.120 sixteen is that stocks are going to go up. So 0:02:32.280 --> 0:02:34.640 what I did was trying to fashion some kind of thesis, 0:02:34.680 --> 0:02:37.760 sort of back reverse engineer, so that I could say 0:02:37.760 --> 0:02:40.120 that that was my opinion. I mean, I have no 0:02:40.160 --> 0:02:42.200 idea what's going to happen. But one thing that occurred 0:02:42.240 --> 0:02:44.639 to me over the weekend. Two things struck me. One 0:02:45.320 --> 0:02:48.079 was that everyone on Twitter was saying how much they 0:02:48.080 --> 0:02:50.519 loved the Big Short, and and my I was back 0:02:50.560 --> 0:02:52.160 with my family in Boston and a few people up 0:02:52.200 --> 0:02:53.840 there were talking about it when to Little Party and 0:02:53.880 --> 0:02:57.720 they talked about rereading it. And then I watched the 0:02:58.120 --> 0:03:01.600 Democratic debate with my mom and they were just going 0:03:01.639 --> 0:03:03.640 after Wall Street in a huge way. My mother, my 0:03:03.639 --> 0:03:05.240 mother at one point turned to me and said, they 0:03:05.280 --> 0:03:07.799 hate you, and I was like me and then work 0:03:07.840 --> 0:03:10.720 for Bloomberg, and she just meant sort of white males. 0:03:10.760 --> 0:03:14.560 I think, um, but it's just it's one thing that 0:03:14.600 --> 0:03:16.640 could could happen as a result of these to the 0:03:16.639 --> 0:03:18.720 big election year obviously and whatever. The sort of a 0:03:18.720 --> 0:03:22.120 cultural event around the Big Short kind of is that 0:03:22.280 --> 0:03:25.720 sentiment towards Wall Street and the stock market is probably 0:03:25.760 --> 0:03:27.880 not going to improve a great deal in two thousand 0:03:27.880 --> 0:03:30.399 and sixteen. I think that, you know, there's a lot 0:03:30.400 --> 0:03:33.440 of a lot of opportunity for grand standing against banks 0:03:33.440 --> 0:03:36.640 and just sort of commerce in general. They'll probably be 0:03:36.720 --> 0:03:40.080 unable to resist. And in my opinion, that's the best 0:03:40.120 --> 0:03:42.360 thing that could happen to the stock market. This has 0:03:42.400 --> 0:03:45.160 been true since two thousand and eight, that, um, the 0:03:45.200 --> 0:03:47.360 easiest thing in the world has been turned around, bash 0:03:47.400 --> 0:03:51.280 American commerce and markets and banks and things like that, 0:03:51.400 --> 0:03:53.960 and as and what's happened since then, it's markets have 0:03:54.000 --> 0:03:57.920 staged one of the biggest rallies in their history. And 0:03:58.000 --> 0:04:00.240 I think, you know, anyone staring at it every day 0:04:00.320 --> 0:04:02.080 the way I do, the way you guys, is aware 0:04:02.120 --> 0:04:04.240 that that's part of the reason stocks have been able 0:04:04.240 --> 0:04:06.880 to go up is because this incredible wall of worry 0:04:06.920 --> 0:04:11.160 exists politically against them. It's almost seen as immoral that 0:04:11.240 --> 0:04:14.040 the market do well. And as a result of that, UM, 0:04:14.080 --> 0:04:15.640 I think it has done. It's been able to sort 0:04:15.640 --> 0:04:19.279 of convince lots of people periodically people everyone's basically a nonbeliever, 0:04:19.839 --> 0:04:21.040 and I think that there's going to be a lot 0:04:21.080 --> 0:04:23.320 of opportunity for nonbelief this year. There already is. There's 0:04:23.320 --> 0:04:25.560 a lot of pessimism coming into it, and it just 0:04:25.680 --> 0:04:27.920 seems like what happens a lot of the time when 0:04:27.920 --> 0:04:30.200 that's the case is that the market goes up. I 0:04:30.360 --> 0:04:33.000 couldn't agree more. It definitely feels like after the crash, 0:04:33.040 --> 0:04:36.800 there was this huge reservoir of hate and skepticism and 0:04:36.800 --> 0:04:39.200 pessimism that built up, and I don't think it's even 0:04:39.240 --> 0:04:42.359 close to having drained. And I think, you know, there 0:04:42.400 --> 0:04:45.360 are pockets of euphoria, like people were excited about Silicon 0:04:45.480 --> 0:04:47.640 Valley and startups, and for a while in Texas they're 0:04:47.640 --> 0:04:50.520 really excited about oil. I just don't think we're anywhere 0:04:50.600 --> 0:04:54.440 close to seeing the acceptance of the recovery in the 0:04:54.520 --> 0:04:58.200 bull market and any widespread level that you would expect 0:04:58.279 --> 0:05:00.280 to see you before it ends. But if isn't the 0:05:00.360 --> 0:05:02.839 really easy counter argument to all of that just to 0:05:02.880 --> 0:05:05.640 say that the recovery and the stock market rally was 0:05:05.920 --> 0:05:10.040 artificial and caused by the FEDS extraordinary measures. Certainly, I mean, 0:05:10.040 --> 0:05:13.040 there's there's absolutely convincing arguments on both sides of this thing. 0:05:13.080 --> 0:05:15.360 And as I say, I mean, who knows what's going 0:05:15.360 --> 0:05:18.159 to happen, obviously, but it just started this this one 0:05:18.240 --> 0:05:20.160 thing that isn't totally obvious to everym This thing that 0:05:20.240 --> 0:05:22.040 sort of sits in the background of the stock markets 0:05:22.120 --> 0:05:24.320 rally over the last five years, which is just incredibly 0:05:24.360 --> 0:05:27.480 negative sentent never repaired itself. If you look at like 0:05:27.720 --> 0:05:29.800 some of the worst sentiment readings in the history of 0:05:29.800 --> 0:05:32.040 the market were around the late August of this year, 0:05:32.080 --> 0:05:35.359 and if you were building a trading case on a 0:05:35.360 --> 0:05:37.680 contrarian case on that, you would have done well. You 0:05:37.720 --> 0:05:39.680 would have done well frequently in this market over the 0:05:39.760 --> 0:05:41.839 last five years if you bought when sentiment when just 0:05:41.839 --> 0:05:44.440 sort of you know, sort of mental sentiment guts to 0:05:44.520 --> 0:05:48.320 its lowest levels. All right, let's move on. Obviously, one 0:05:48.360 --> 0:05:53.599 of the big stories often was the Federal reserve raid hike, 0:05:54.080 --> 0:05:57.279 but nobody really knows what's going to happen with the future. 0:05:57.560 --> 0:06:02.000 Mad Bosler is rejoined us. Matt is our authoto reserve reporter. 0:06:02.160 --> 0:06:05.039 What's your what's your big prediction for? It doesn't have 0:06:05.120 --> 0:06:06.560 to be a FED thing. If you don't want well, 0:06:06.600 --> 0:06:09.720 it is a FED I think. I think the interesting 0:06:09.800 --> 0:06:14.320 thing for FED reporters on the beat in ten, especially 0:06:14.400 --> 0:06:17.800 in the first few weeks and months of seen, is 0:06:17.839 --> 0:06:21.040 going to be a rethink of the Federal reserves role 0:06:21.120 --> 0:06:24.760 in the money markets. Because you know, over the last 0:06:24.839 --> 0:06:26.839 year or two years, you know, they've been doing a 0:06:26.880 --> 0:06:28.880 lot of testing all these new tools to be able 0:06:28.920 --> 0:06:31.960 to raise rates and money markets flooded with cash um 0:06:32.000 --> 0:06:34.360 and especially in the repo market, they have this big 0:06:34.400 --> 0:06:37.800 new reverse repo facility that members of the Federal Open 0:06:37.839 --> 0:06:41.600 Market Committee have seemingly been very reluctant to employ too much, 0:06:42.360 --> 0:06:44.279 and they've you know, said things in the minutes of 0:06:44.320 --> 0:06:46.240 their meetings to the effect of this is going to 0:06:46.320 --> 0:06:49.479 be a very temporary facility. Are you know, intervention in 0:06:49.520 --> 0:06:52.039 repo markets is not going to last very long, and 0:06:52.080 --> 0:06:54.200 we're going to sort of wind it down shortly after 0:06:54.320 --> 0:06:56.960 lift off. But then you like sort of look at 0:06:57.000 --> 0:06:59.760 the numbers and it you know, some analysts, as you know, 0:07:00.000 --> 0:07:02.159 AC are saying that this thing could get to a 0:07:02.200 --> 0:07:04.719 trillion dollars a day, where the FED is borrowing a 0:07:04.760 --> 0:07:08.160 trillion dollars a day in the repo market. So I remember, 0:07:08.200 --> 0:07:10.960 the repo market used to be like when people talked 0:07:10.960 --> 0:07:14.840 about shadow banks. Essentially, the repo market was the shadow 0:07:14.880 --> 0:07:17.720 banking system. It was where banks and money market funds 0:07:17.760 --> 0:07:21.600 kind of fund each other by loaning out money against collateral, 0:07:22.040 --> 0:07:23.960 and the idea that the FETE is going to come 0:07:23.960 --> 0:07:27.000 in and basically crowd out all those old players and 0:07:27.040 --> 0:07:31.040 become the ultimate shadow banker is an interesting theme. I 0:07:31.080 --> 0:07:34.280 gotta play the role of the person listening to the 0:07:34.360 --> 0:07:37.400 podcast who like maybe hasn't been up on this stuff. 0:07:37.400 --> 0:07:40.120 But you know, there's like a Reddit page called explain 0:07:40.200 --> 0:07:41.760 it to Me, Like I'm a five year old or 0:07:41.800 --> 0:07:44.560 something like that. So for those who haven't been in 0:07:44.600 --> 0:07:46.800 the weeds on this stuff, and when you talk about 0:07:46.800 --> 0:07:48.640 the fed's role in the money market and the reverse 0:07:48.680 --> 0:07:51.680 repo facility and stuff like that, what's the explain it 0:07:51.720 --> 0:07:54.320 to me, like I'm a five year old version and 0:07:54.560 --> 0:07:56.880 you gotta get to your prediction. Okay, So picking up 0:07:56.880 --> 0:08:00.160 where Tracy left off, right, shadow banks like these these 0:08:00.200 --> 0:08:03.440 money market funds that have just had this big cash 0:08:03.480 --> 0:08:06.520 pile that's been growing and growing for several years, and 0:08:06.600 --> 0:08:08.760 before the crisis, they were lending a lot of that 0:08:08.840 --> 0:08:11.000 to banks which were then taking it and doing all 0:08:11.040 --> 0:08:14.760 sorts of you know, like term very safe exactly, maturity 0:08:14.760 --> 0:08:17.160 transformation and whatnot, and that is, you know, sort of 0:08:17.400 --> 0:08:20.840 one of the things that people blame the financial crisis on. 0:08:21.080 --> 0:08:25.640 And so now the FED has essentially become the borrower 0:08:26.040 --> 0:08:28.480 in these markets, you know, of that cash, all that 0:08:28.560 --> 0:08:32.760 cash that money market funds have, and so they're saying like, Okay, 0:08:32.760 --> 0:08:34.240 we're not going to be doing a lot of this, 0:08:34.760 --> 0:08:36.640 But then some analysts are saying, yeah, you're gonna be 0:08:36.640 --> 0:08:39.320 doing a lot of this, And where the rubber hits 0:08:39.320 --> 0:08:41.840 the road is you kind of have to do this 0:08:41.920 --> 0:08:44.760 if you're going to keep your balance sheet large. And 0:08:44.840 --> 0:08:47.200 for a while, you know, even a few months ago, 0:08:47.280 --> 0:08:49.920 everybody thought, Okay, the FED is going to start winding 0:08:49.960 --> 0:08:53.000 down its balance sheets sometime in ten, maybe even the 0:08:53.000 --> 0:08:56.400 first half of but a lot of the comments we've 0:08:56.400 --> 0:08:58.680 gotten from FED officials in the last few months suggest 0:08:58.760 --> 0:09:01.520 that actually they're going to keep the balance sheet at 0:09:01.559 --> 0:09:06.640 a constant size until sometime in seventeen, maybe well into seventeen. 0:09:07.040 --> 0:09:09.640 So there's really going to be no opportunity for them 0:09:09.720 --> 0:09:13.400 to sort of scale back their intervention in repo markets 0:09:13.480 --> 0:09:15.920 anytime soon, and in the meantime, we could see a 0:09:15.920 --> 0:09:18.120 lot of big changes to the money where the prediction 0:09:18.240 --> 0:09:20.400 is so that the thing that we're going to come 0:09:20.440 --> 0:09:22.600 back here a year ago and saying was med Bosler 0:09:22.720 --> 0:09:25.240 right or wrong? Is okay, the FED is going to 0:09:25.280 --> 0:09:27.520 be borrowing, you know, at least a trillion dollars a 0:09:27.600 --> 0:09:33.440 day in the repo market. By you're so harsh, Jo, No, 0:09:33.520 --> 0:09:35.600 I mean it's like the Predictions episode. We can't just 0:09:35.800 --> 0:09:38.319 have someone here sit here and say smart things. We 0:09:38.440 --> 0:09:40.520 gotta have something that we could go back. We have 0:09:40.640 --> 0:09:42.840 to say them, have them say non smart things. No, 0:09:42.920 --> 0:09:44.520 they just have to say something that could either be 0:09:44.559 --> 0:09:47.800 shown right or wrong. All right, Um, let's turn to 0:09:48.240 --> 0:09:51.040 Mr Ed Hammond. I'm sure hundreds of M and A 0:09:51.080 --> 0:09:53.440 bankers are dying to know what you think is going 0:09:53.480 --> 0:09:55.840 to happen in that market next year. So the many 0:09:55.840 --> 0:09:57.600 bankers will think that next year will be better than 0:09:57.679 --> 0:09:59.920 this year. With seventeen, we better than the sixteen, it's 0:10:00.040 --> 0:10:02.040 one and so on. But they are always looking up, 0:10:02.080 --> 0:10:03.560 and I guess we're trying to be a bit more 0:10:03.559 --> 0:10:06.600 realistic on this show. Um, so what are my predictions? 0:10:06.600 --> 0:10:08.360 I don't know. I always embarrass myself with these things, 0:10:08.400 --> 0:10:11.800 but maybe that's the point. Um. One general one would 0:10:11.800 --> 0:10:13.920 be that we're going to see a lot more oil 0:10:13.960 --> 0:10:16.600 and gas M and A. I think this year it's 0:10:16.600 --> 0:10:18.680 been a bit surprising that there hasn't been more. Obviously 0:10:18.760 --> 0:10:21.080 there have been some quite big ones attempted, Haliberton, Baker 0:10:21.160 --> 0:10:23.600 Hughes being obvious one of the if you look at 0:10:23.600 --> 0:10:25.160 the spread on that today, it now looks like it's 0:10:25.160 --> 0:10:27.320 probably gonna fall over. But I think a lot of 0:10:27.360 --> 0:10:30.040 the smaller, you know, sort of five to twenty billion 0:10:30.080 --> 0:10:33.960 dollar oil companies, I think we'll see them trade this year. 0:10:34.000 --> 0:10:37.160 There's there's a sort of a realization coming that they 0:10:37.200 --> 0:10:39.760 have diminished. They're not as important as they once were. 0:10:39.800 --> 0:10:41.640 There maybe a sort of third of the size that 0:10:41.679 --> 0:10:44.120 they were this time a year ago, and a lot 0:10:44.120 --> 0:10:45.800 of them are just under pressure, you know, whether it's 0:10:45.880 --> 0:10:47.679 it's the activists that's beginning to show up in a 0:10:47.720 --> 0:10:50.559 stock or whether it's kind of some sort of self 0:10:50.559 --> 0:10:53.920 realization that they actually need to do something and probably 0:10:54.000 --> 0:10:56.640 merging with a rival or selling themselves to a major 0:10:57.360 --> 0:10:59.120 is a very good way out of that. So I 0:10:59.160 --> 0:11:01.680 think oil and gas is somewhere we'll see a lot FIG. Also, 0:11:02.160 --> 0:11:05.600 what would happen in FIG? So that's financial institutions. Yeah, 0:11:05.760 --> 0:11:08.160 So I think we're probably still some way off from 0:11:08.200 --> 0:11:10.640 seeing any big bank M and A. But I think 0:11:10.640 --> 0:11:13.600 the insurers will continue to consolidate. We've seen a few 0:11:13.600 --> 0:11:15.400 deals in the second half of this year, notably the 0:11:15.440 --> 0:11:18.320 health insurers sort of get together, and I think we'll 0:11:18.320 --> 0:11:20.760 see that spread to other parts of the insurance market. 0:11:21.360 --> 0:11:24.600 And and you know, look, I suppose the confidence is 0:11:24.600 --> 0:11:27.240 there to do those deals. It's just through our regulatory 0:11:27.240 --> 0:11:28.920 issues that people haven't got their head around yet. But 0:11:28.920 --> 0:11:31.920 I think next year we'll see more of that. Conversely, 0:11:31.960 --> 0:11:34.199 I think healthcare has to slow down. It can't continue 0:11:34.240 --> 0:11:36.760 at the pace it's going. UM and some industries, Cable 0:11:36.800 --> 0:11:39.600 being the obvious example, have kind of reached endgames, certainly 0:11:39.600 --> 0:11:41.480 in terms of big consolidation, so that will come off. 0:11:41.520 --> 0:11:44.240 I think. In one other prediction, I know last week 0:11:44.280 --> 0:11:46.200 on here I beat up about Valiant and Bill Ackman, 0:11:46.480 --> 0:11:48.360 but just a specific prediction on that, I think we 0:11:48.360 --> 0:11:50.960 can be sure that Valiant will do another stupid deal 0:11:51.480 --> 0:11:54.680 within the next year, and that the sort of Bill Ackman, 0:11:54.760 --> 0:11:58.199 Mike Pierson, Laurel and Hardy show will have one more 0:11:58.240 --> 0:12:01.600 episode at least M like that one. How much does 0:12:01.800 --> 0:12:07.840 UM there's the there's the FED tightening cycle effect. One's 0:12:07.880 --> 0:12:10.640 forecast for M and A next year. I think at 0:12:10.679 --> 0:12:13.600 this point not a huge amount. It's so well factored 0:12:13.640 --> 0:12:16.040 in it's something that you know, everyone has been expecting 0:12:16.080 --> 0:12:18.600 and expecting and expecting. So I don't think there's gonna 0:12:18.640 --> 0:12:21.800 be any great surprise to think the thing that tends 0:12:21.880 --> 0:12:24.120 to have the most sort of material negative impact on 0:12:24.240 --> 0:12:26.559 M and A is surprised, right, So anything that is 0:12:26.559 --> 0:12:30.080 really unpredictable one for seeing that happens. Then you see 0:12:30.080 --> 0:12:32.959 sort of deals drop off, for at least investors being 0:12:33.000 --> 0:12:35.079 much less willing to reward companies for doing deals. But 0:12:35.120 --> 0:12:38.200 at the moment, I think everything is expected. Rates go up, 0:12:38.200 --> 0:12:39.880 but it's still going to be very, very cheap to borrow. 0:12:40.000 --> 0:12:42.680 The cliche is that bankers, or when people say, is 0:12:42.679 --> 0:12:44.960 that bankers, you know, have these waves where they encourage 0:12:44.960 --> 0:12:47.920 companies to get soolidated, and then after they've all consolidated 0:12:47.960 --> 0:12:50.360 and they encourage spinoff something like that so they can 0:12:50.360 --> 0:12:53.520 get fees going in and out both directions. Is that 0:12:53.679 --> 0:12:56.760 something that you see likely to accelerate? Do you mean 0:12:56.880 --> 0:13:03.480 sort of general historic banker? I think it'll continue. I 0:13:03.480 --> 0:13:05.040 don't know if it has much room to grow, but 0:13:05.080 --> 0:13:08.240 I think it will definitely continue. I think we're not 0:13:08.280 --> 0:13:10.280 necessarily at the point that we're bank because sort of 0:13:10.320 --> 0:13:14.040 lobbying their clients to split and sell. But I think 0:13:14.080 --> 0:13:15.880 we are at this point where, you know, activism pressure 0:13:15.920 --> 0:13:18.080 is growing. Obviously, the funds on the management way up 0:13:18.120 --> 0:13:19.560 from where they were a year ago. So we will 0:13:19.559 --> 0:13:22.360 see many more activist campaigns next year, and the banks will, 0:13:22.400 --> 0:13:25.200 as they always do, will position themselves between the kind 0:13:25.200 --> 0:13:27.800 of the demands and the pressure on the companies and 0:13:27.960 --> 0:13:32.000 ensure that the raw stuff. Think greed has peaked. I 0:13:32.000 --> 0:13:36.840 think greed has peaked. I do actually think that what 0:13:36.920 --> 0:13:38.959 we'll see in the next few years is like the 0:13:39.320 --> 0:13:42.199 cultural shakeout from the financial crisis is still going on 0:13:42.720 --> 0:13:47.280 and has has um has surprised me in its in 0:13:47.320 --> 0:13:50.880 its intensity. Like I it's somewhat facetious to say greed 0:13:50.920 --> 0:13:52.559 has peaked, but I think, like, you know, well's being 0:13:52.600 --> 0:13:55.120 really is changing in terms of will bankers keep you know, 0:13:55.160 --> 0:13:57.400 lobbying to do deals like of course they will. And 0:13:57.440 --> 0:14:00.280 you see like the Dad Point deal is like at 0:14:00.280 --> 0:14:02.560 the same time the merger in the splitting right two 0:14:02.640 --> 0:14:05.520 giant companies and the plan is emerge and then immediately 0:14:05.559 --> 0:14:07.719 break up in the three separate companies. Yeah, it's you know, 0:14:07.800 --> 0:14:09.280 the M and A cycle kind of like goes on 0:14:09.360 --> 0:14:11.600 and gets bigger and bigger deals, and you reach a 0:14:11.600 --> 0:14:14.719 point where you just can't do a bigger deal, so 0:14:14.760 --> 0:14:16.800 you have the like fusion and efficient at the same 0:14:16.840 --> 0:14:20.680 time deal and then like you know, you've solved that problem. 0:14:20.760 --> 0:14:24.040 Do you have a big prediction for next year? Well, 0:14:24.080 --> 0:14:27.280 people still be worried about bond market liquidity. Oh yeah, 0:14:27.360 --> 0:14:29.080 of course. The thing is like we need to have 0:14:29.160 --> 0:14:33.400 the next crisis before people will stop talking about the world. 0:14:33.440 --> 0:14:35.760 Where I think we're still so scarred by the by 0:14:35.840 --> 0:14:38.920 the last crisis that the idea of of of of 0:14:39.040 --> 0:14:41.480 not worrying about like a big bogeyman is just not 0:14:42.080 --> 0:14:44.240 It's gonna be a long time. But you you're skeptical 0:14:44.440 --> 0:14:46.560 on this bond market liquidity that it's actually going to 0:14:46.640 --> 0:14:48.200 be a big deal, right, Like I When you're write 0:14:48.200 --> 0:14:51.040 about it, you sort of have a bemused tone that 0:14:51.200 --> 0:14:54.160 suggests to me that you don't. It doesn't confirm you 0:14:54.200 --> 0:14:56.360 too much. I think it's an interesting story, Like I 0:14:56.400 --> 0:14:59.600 think that, um, there are very interesting dynamics in terms 0:14:59.600 --> 0:15:02.640 of like arket structure and how we trade financial instruments. 0:15:02.680 --> 0:15:06.320 They're very interesting dynamics. Again in Wall Street culture, right 0:15:06.360 --> 0:15:08.640 like banks used to be these big warehouses of risk, 0:15:09.080 --> 0:15:12.560 and now they're not, and that has um caused sort 0:15:12.600 --> 0:15:15.320 of both financial and cultural anxieties, like those are like 0:15:15.400 --> 0:15:18.200 real things, and and that that changes I think meaningful 0:15:18.560 --> 0:15:22.000 in terms of will it be the catastrophe run risk 0:15:22.160 --> 0:15:25.520 that causes the next recession? That seems really unlikely to me? 0:15:25.640 --> 0:15:27.200 But do you think it will be a bigger story 0:15:27.240 --> 0:15:36.000 in than it was? No, okay, here's will go back? Um, 0:15:36.040 --> 0:15:38.320 I think who knows? But like I think that, like 0:15:38.520 --> 0:15:40.480 you know, we keep having little tests of it, and 0:15:40.520 --> 0:15:43.280 those tests, you know, it seemed okay. So I think 0:15:43.880 --> 0:15:45.840 I think it'll it'll fade as the tests go on 0:15:45.920 --> 0:15:49.960 and they don't break the market. Well, we have lots 0:15:49.960 --> 0:15:52.400 of predictions to think about. I think we should. I 0:15:52.440 --> 0:15:55.280 think you and I know I was trying to escape it. No, 0:15:55.480 --> 0:15:59.440 it's only fair, No, alright, Well, I predict everything in 0:15:59.480 --> 0:16:02.760 my portfolio is going to do really well. Tracy owns 0:16:02.760 --> 0:16:06.080 like a lot of physical silver, not by choice, so 0:16:06.160 --> 0:16:11.320 that's good for the precious metal. And piggyback on Chris 0:16:11.440 --> 0:16:15.480 n Age's prediction about how this deep wall of worry 0:16:15.520 --> 0:16:17.680 that still exists will mean it's another good year for 0:16:17.680 --> 0:16:20.480 the stock market. I was thinking like, in this whole 0:16:20.600 --> 0:16:23.440 narrative that we've had since the crisis, the one thing 0:16:23.520 --> 0:16:26.840 that perma Bears skeptics have always said, it's like, oh, 0:16:26.880 --> 0:16:28.560 there's no way the FED will be able to do 0:16:28.600 --> 0:16:31.880 a tightening cycle without causing like a huge economic or 0:16:31.920 --> 0:16:35.720 market collapse. And the perma bears have been so humiliated 0:16:35.760 --> 0:16:38.240 throughout the years that this has got to be the 0:16:38.280 --> 0:16:40.880 last chapter because if this could happen, then they truly 0:16:40.920 --> 0:16:43.600 will have to be banished. They'll all have to unplug 0:16:43.640 --> 0:16:45.720 their computers, throw them into salt water and never be 0:16:45.760 --> 0:16:48.400 heard from again. Delete their Twitter, delete their Twitter cout. 0:16:48.440 --> 0:16:50.400 So I think this is the final chapter and their 0:16:50.480 --> 0:16:57.320 humiliation and without market armageddon, but capitulation is usually the 0:16:57.520 --> 0:16:59.840 ultimate journey, and then and then after and then we'll 0:16:59.840 --> 0:17:02.280 get a turning point, like we haven't had the final 0:17:03.040 --> 0:17:06.840 nail in the common steak and the heart event for them, 0:17:06.880 --> 0:17:08.560 and so I think that this is the year for that. 0:17:08.680 --> 0:17:11.480 So your prediction is that people will stop talking because 0:17:11.480 --> 0:17:16.399 they've been proven y, I don't think that will come 0:17:16.480 --> 0:17:27.560 from You've literally just negated our next year's predictions episode. Oh, Tracy, 0:17:27.680 --> 0:17:30.920 look who showed up to join us? It's Dan Moss, Dan, 0:17:31.280 --> 0:17:34.959 who are you. I'm the executive editor for Global Economics, 0:17:35.040 --> 0:17:38.520 And what is your prediction. It's a little bit contrarian, 0:17:38.880 --> 0:17:41.359 but what the heck we like contrary in here. My 0:17:41.440 --> 0:17:48.160 prediction is that Brazil stabilizes and possibly bounces sentiment towards 0:17:48.240 --> 0:17:52.240 that country, which is an enormous economy, is so beaten down. 0:17:52.320 --> 0:17:56.959 And then there's been this relentless march of negative headlines 0:17:57.600 --> 0:18:03.520 all through relating to whether the president gets impeached, relating 0:18:03.560 --> 0:18:08.160 to contraction in the economy, relating to the budget deficit, 0:18:08.280 --> 0:18:11.960 relating to the beating that stocks and the real that's 0:18:12.000 --> 0:18:17.640 their currency have taken. But perhaps things are oversold. There's 0:18:17.640 --> 0:18:20.560 been a lot of attention recently on the resignation of 0:18:20.600 --> 0:18:25.639 Finance Minister Wha. Kim Levy and his replacement with Planning 0:18:25.680 --> 0:18:30.600 Minister Nelson Barbosa. Now, Levy had this kind of market 0:18:30.640 --> 0:18:34.320 halo over him. He came right from investment banking a 0:18:34.400 --> 0:18:37.680 year ago, and he was seen as the market friendly 0:18:37.800 --> 0:18:42.320 force of Dilma's government. However, he had all sorts of 0:18:42.359 --> 0:18:48.280 troubles getting his fiscal targets to stick. His relationships in 0:18:48.440 --> 0:18:54.040 Congress weren't terrific. Barbosa, on the other hand, is seen 0:18:54.080 --> 0:18:59.040 as closer to Dilma, closer to the party, And you've 0:18:59.040 --> 0:19:04.200 got to ask yourself what's better what's worse? Here? A 0:19:04.359 --> 0:19:09.320 Levy with a great resume but perhaps ineffective and Bob 0:19:09.320 --> 0:19:14.040 Bobosa who doesn't quite have that market lineage, but my 0:19:14.240 --> 0:19:18.400 end up being politically more affected. Is this call Brazil 0:19:18.600 --> 0:19:21.960 specific or can you are you almost on the verge 0:19:21.960 --> 0:19:24.720 of calling a bottom in emerging markets across the board? 0:19:25.240 --> 0:19:28.000 I'm not quite at that point. I thought we could 0:19:28.000 --> 0:19:29.719 go to you into it. But this is like a 0:19:29.720 --> 0:19:32.359 pretty big call because you have to imagine that at 0:19:32.400 --> 0:19:36.240 the end of TWI, the people who got this call right, 0:19:36.359 --> 0:19:38.920 especially if there is a turnaround, are going to be 0:19:39.000 --> 0:19:41.480 some of the big heroes on Wall Street. And what 0:19:41.520 --> 0:19:44.159 I want to know specifically, since the plan is that 0:19:44.200 --> 0:19:46.479 we're going to all be back here next year at 0:19:46.480 --> 0:19:50.000 this time reviewing calls, what is the measure that we 0:19:50.000 --> 0:19:53.360 should use to see whether this call turned out right? 0:19:53.440 --> 0:19:56.080 Is it a real level? Is it a what what 0:19:56.160 --> 0:20:00.000 should be uh Brazilian government? What should we say, Okay, 0:20:00.240 --> 0:20:02.480 this um, this was the right call? How should we 0:20:02.520 --> 0:20:04.680 measure that? Well? You can know whether you're right or 0:20:04.720 --> 0:20:08.200 wrong or year. Well, look in terms of market metrics, 0:20:08.480 --> 0:20:11.760 look at the real look at Brazilian bonds, look at 0:20:11.760 --> 0:20:15.000 Brazilian stocks. But also by the time we're sitting here 0:20:15.000 --> 0:20:18.600 in twelve months time, we'll know whether the president has survived. 0:20:19.040 --> 0:20:21.960 We're hearing a lot in the Brazilian Congress about impeachment. 0:20:23.280 --> 0:20:25.000 I think a lot of things are probably going to 0:20:25.080 --> 0:20:27.840 become clear. We're in the Maelstrom now. I like this 0:20:27.880 --> 0:20:30.199 call because, as you said, it is contraryan but I 0:20:30.280 --> 0:20:34.280 also like the reasoning that while everyone else is concerned 0:20:34.520 --> 0:20:37.600 that this very credible finance minister has gone, that there 0:20:37.640 --> 0:20:40.159 may be a silver lining to this person who's more 0:20:40.200 --> 0:20:42.199