Speaker 1: Strap on your parachute. It's time for What Goes Up
Speaker 1: with Sarah Ponziic and Mike Reagan. Hello and welcome to
Speaker 1: What goes Up, a Bloomberg Weekly Markets podcast. I'm Sarah Pons,
Speaker 1: reporter on the Cross Asset Team, and I'm Mike Reagan,
Speaker 1: a senior editor at Bloomberg. This week on the show,
Speaker 1: earning season is now in full swing, as is the
Speaker 1: new year, but the pace of the news flow and
Speaker 1: market action hasn't seemed to have slowed one bit. At
Speaker 1: the same time, this past week, the cyclical and small
Speaker 1: cap trade started to peter out as mega cap stocks
Speaker 1: made a run yet again. Head fake or a reversion
Speaker 1: to what's been the norm for so long, And Sarah,
Speaker 1: we will revert to our norm and finish the episode
Speaker 1: with the craziest things we saw in markets this week,
Speaker 1: and by all means, if you're a listener and you
Speaker 1: saw something crazy, give us a call on the Bloomberg
Speaker 1: Podcast Hotline at six four six three to four three
Speaker 1: four nine, oh, and leave us a voicemail and maybe
Speaker 1: we'll play your crazy thing on the show. I got
Speaker 1: a pretty good one, Sara, and it's not even Bitcoin related.
Speaker 1: My first non bitcoin crazy thing in a while, and
Speaker 1: quite a while. I trust that surprises right then though,
Speaker 1: it is absolutely absolutely get ready, Get Ready. But before that,
Speaker 1: we'll talk about the serious things facing the market this week,
Speaker 1: and we're very happy to have on the show the
Speaker 1: head of equity strategy at Wells Fargo Securities. His name
Speaker 1: is Chris Harvey. Chris, welcome to the show. Thank you
Speaker 1: very much, Thanks Mike, Thanks Sara. Great to be back. Great, great, Chris.
Speaker 1: I want to start up by saying, I'm I'm pretty
Speaker 1: sympathetic to strategists who are required to come out with
Speaker 1: a year end target for the SMP five because I
Speaker 1: feel like you can make a hundred great calls all year,
Speaker 1: get all the sectors right, get your factors right, get
Speaker 1: everything right. But every you know, why is Alex like
Speaker 1: me or just gonna ask you about that target? And uh,
Speaker 1: you know, I can't help. But notice this week SMP
Speaker 1: reaching thirty eight fifty, which is actually your year end target.
Speaker 1: So I'm curious how you're thinking about it. Is it
Speaker 1: are you attempted to go back to the drawing board
Speaker 1: on that, or is it He's one of those examples
Speaker 1: where the market has just gotten ahead of itself and
Speaker 1: you're sticking with that that type of forecast. So, Mike,
Speaker 1: we like to get things done ahead of time. So
Speaker 1: we figured it, let's get done the first three months. Congratulation,
Speaker 1: everyone waits another twelve months. Let's get it done. Let's
Speaker 1: get out of the way, and let's go forward. But
Speaker 1: what we do is we knew this is a very
Speaker 1: conservative target, and we prefer to have we we we
Speaker 1: buyas ourselves on the conservative side. We make very conservative estimates.
Speaker 1: Last year, we also had a lower target than the marketplace,
Speaker 1: and one of the things that was different from us
Speaker 1: is we had a lot of confidence in it. We
Speaker 1: never cut our price target, and when things got really dicey,
Speaker 1: we found real value and felt comfortable in and around
Speaker 1: the market lows telling people to put money to work. Also,
Speaker 1: at this time last year, we ran into a similar
Speaker 1: situation where people are saying, hey, Chris, are you gonna
Speaker 1: raise your price target? What are you gonna do? No,
Speaker 1: we said no, and right now the answer is no.
Speaker 1: But we also know we have very conservative EPs estimates.
Speaker 1: Part of that was we don't know what the tax
Speaker 1: regime is going to look like. It's a long year,
Speaker 1: and we'll say and we have no problems raising our
Speaker 1: targets or changing when when the information changes. What we
Speaker 1: really don't want to do is we really don't want
Speaker 1: to cut our target because we want We don't want
Speaker 1: to tell people there's value there when there really isn't.
Speaker 1: And so we we tend to error on the more
Speaker 1: conservative side. Like I said, we like to get things
Speaker 1: done sooner rather than later. You get right to it.
Speaker 1: But Chris, something that wasn't so conservative on your end
Speaker 1: was you and your team were very early to this
Speaker 1: cyclical value small cap call, I mean, what way ahead
Speaker 1: of the pack, and we've clearly seen it play out
Speaker 1: over the past couple of months. Lately there has been
Speaker 1: a bit of a topping off where we have seen
Speaker 1: big cap tech come back, we've seen small caps start
Speaker 1: to underperform. From your perspective, are we going to see
Speaker 1: this continuer? Is the catch up trade that we saw
Speaker 1: at the end of the beginning of one as well?
Speaker 1: I mean, was that what you guys were looking for?
Speaker 1: Was that all said and done? Well, a couple of
Speaker 1: things there. We had a heroic fourth quarter the last
Speaker 1: couple of months in the year with regard to small
Speaker 1: caps and COVID beta and encyclicality. To start the year,
Speaker 1: small caps are now I would say somewhere around the
Speaker 1: high single digits if you will right, we're closing in
Speaker 1: on double digits. Pretty good return. We think it continues,
Speaker 1: but obviously you're over bought here. Um, we got a
Speaker 1: very big bounce from from the sweep in Georgia's people
Speaker 1: think that it's going to be more stimulus and more steepener,
Speaker 1: and what we need to see is we really need
Speaker 1: to see the fundamentals fill in and for that to occur,
Speaker 1: numbers just have to come out and st a bit
Speaker 1: of the consolidation, a bit of the back and forth.
Speaker 1: Sure that that's not unusual, that's something we expect. But
Speaker 1: we still think there's another good six months to this trade.
Speaker 1: What I would say is we thought there was a
Speaker 1: good twelve to eighteen months in this trade. But with
Speaker 1: stimulus and with the sweep in Georgia, what we think
Speaker 1: is everything is now accelerated, right and the window is
Speaker 1: much shorter. Everyone's going to be concentrated. UM evaluation is
Speaker 1: still attractive, easy comps, and I think we're going to
Speaker 1: have a very healthy m and a cycle. We should
Speaker 1: help the group because it's a great point where you
Speaker 1: you made where you said, we we still don't really
Speaker 1: know what the corporate tax situation is going to be
Speaker 1: this year. And I think it's it's clear that uh,
Speaker 1: the you know, Joe Biden was inaugurated on Wednesday, the
Speaker 1: honeymoon doesn't look like it's gonna last very long. Already,
Speaker 1: there are some some Republicans coming out, even the moderates
Speaker 1: like Lisa Murkowski and Mitt Romney coming out and pushing
Speaker 1: back at the the size of that one point nine
Speaker 1: trillion dollar stimules planned from the White House. Um. Obviously,
Speaker 1: I think it's safe to assume they will push back
Speaker 1: at the at the tax uh equiporate tax increase too.
Speaker 1: I mean, is it's two or early to sort of
Speaker 1: start reading the tea leaves in Washington about what we
Speaker 1: can expect from Biden when it comes to taxes and spending. Um,
Speaker 1: where are you, you know, as we sort of begin
Speaker 1: to see the administration take shape, are there any takeaways
Speaker 1: yet that that you have that kind of you know,
Speaker 1: can illuminate what you're thinking about as far as stimulus
Speaker 1: and taxes, um, And as far as stimulus and taxes,
Speaker 1: the the issue here is we're going to get Obviously
Speaker 1: we're going to get more stimulus. Right now, the question
Speaker 1: is is it a trillion dollars? Is it more than
Speaker 1: trillion dollars? How much more for us? We don't care
Speaker 1: that much. Trillion was pretty big number, right, and you
Speaker 1: get that money into people, and what we know is
Speaker 1: it works, it's successful, and we have We're no longer
Speaker 1: talking about when the vaccine is going to come out.
Speaker 1: It is out, and now the question is when people
Speaker 1: want it or are capable of getting it right, and
Speaker 1: I think about June or July, the situation is going
Speaker 1: to look much different. But to get to the tax situation.
Speaker 1: One of the reasons why we say the window of
Speaker 1: opportunities much shorter is it appears to be a rent
Speaker 1: not owned type situation. We're super cheap right in trugal
Speaker 1: is a day is long. We don't want to stick
Speaker 1: around for the bill. You're going to have to pay
Speaker 1: that bill. You're going to have to do that before
Speaker 1: the midterm elections. So that's saying somewhere in the second
Speaker 1: half of this year were the beginning of next year,
Speaker 1: and so you know, we can talk about taxes. We
Speaker 1: can It's hard to say grnually what's going to occur.
Speaker 1: But we know that we've spent a lot of money,
Speaker 1: and sooner or later we do have to pay the bill,
Speaker 1: and we think it's coming, and so, unlike a lot
Speaker 1: of my peers, I'm a little bit worried about that
Speaker 1: because that's not gonna be a whole lot of fun.
Speaker 1: Usually when you raise taxes, it's not great for the
Speaker 1: capital markets and and it's it's not great for risk products.
Speaker 1: So what's the allocation scenario for then? I mean, the
Speaker 1: understanding right now, at least as I've understood it, is
Speaker 1: that there are many who are still unsure if we're
Speaker 1: actually going to see a big change in the tax code,
Speaker 1: just considering that we did see a blue sweep by
Speaker 1: a very narrow margin. Then at the same time, it's
Speaker 1: just it's difficult to know what policy is really going
Speaker 1: to be in focus when it might hit. So when
Speaker 1: you guys think about policy proposals that are going to
Speaker 1: be coming down the pipeline over the next two years,
Speaker 1: over the next four years, when clients are possibly asking
Speaker 1: you about these changes, how soon do you have to
Speaker 1: actually start implementing allocation strategy to mirror what might happen
Speaker 1: when you're unsure at the time, and what would those
Speaker 1: changes actually look like. So, Sarah, it's a great question,
Speaker 1: right what we're looking at and what we typically use
Speaker 1: to to lead us into an allocation change or regime changes.
Speaker 1: The market is telling us we look for repricing. We've
Speaker 1: seen that repricing in bond proxies, in low volatility strategies,
Speaker 1: whether it's utilities or reads or or what have you.
Speaker 1: Then what we need to do is we need to
Speaker 1: find a catalyst, right and at this point in time,
Speaker 1: we don't have that catalyst. What we think is by
Speaker 1: the summertime we'll start to hear the talk of tax
Speaker 1: bubble up. That's the beginning of it. By that point
Speaker 1: in time, we also expect to see small caps having
Speaker 1: outperformed even more. We expect a lot of the good
Speaker 1: news that in and around earnings and fundamentals to be
Speaker 1: reflected in price, and we expect to see another leg
Speaker 1: up in the euphoria within the marketplace, and that will
Speaker 1: give us the opportunity to make that shift, that repricing,
Speaker 1: that catalyst in that timing juncture. Because I'm curious, if
Speaker 1: you're bullish on small caps, what sort of the best
Speaker 1: approach to executing on that is it would it be
Speaker 1: just a sort of a passive vehicle on eat TF
Speaker 1: for would you know, if you're an averag investor who
Speaker 1: sort of doesn't want to get into the nuts and
Speaker 1: bolts of all two thousand stocks and the russell, would
Speaker 1: you find an active fund or you know, how how
Speaker 1: would you sort of go about expressing a bullishness on
Speaker 1: small caps? So em bullishness on small caps. If you're
Speaker 1: a retail investor, there's there's probably one of two two
Speaker 1: ways to do it. You can do it in some
Speaker 1: open ended mutual funds, and I would look for funds
Speaker 1: that that will provide you this exposure but with low fees.
Speaker 1: Or you can do it on an exchange excuse me,
Speaker 1: exchange traded mutual fund or e t F right, and
Speaker 1: those are pretty tax efficient. The fees on those are
Speaker 1: quite low and you can get in and out rather quickly.
Speaker 1: So I prefer because of liquidity in e t F,
Speaker 1: but some people if you're going to buy and hold
Speaker 1: it for some period of time, mutual fund also also
Speaker 1: makes sense for a lot of retail investors. But you're right,
Speaker 1: buying two thousand stocks of the Russell is probably not
Speaker 1: your best use of your time. I feel like whenever
Speaker 1: we talk about small caps, oftentimes, especially the skeptics, bring
Speaker 1: up the term zombie companies, and especially coming off the
Speaker 1: back of COVID nineteen and worries about insolvency or debt
Speaker 1: repayment and companies not being able to bring up the
Speaker 1: cash that they need to actually move forwards from this
Speaker 1: point in time, even if we are going to see
Speaker 1: a rebound and earnings, UM, there's a concern there. So
Speaker 1: from your perspective, when you say that the concern about
Speaker 1: zombie companies at this stage is overblown, I mean particularly
Speaker 1: in the small cap space, or is it just a
Speaker 1: situation where if you're going to get into investing in
Speaker 1: small caps you just need to be aware of the
Speaker 1: risks that that are at stake. Uh. Sorry, I think
Speaker 1: the risk is overblown, And I think I had a
Speaker 1: conversation recently about bankruptcyes and the whole creative destructive process,
Speaker 1: and there were many companies that did go belly up
Speaker 1: or go bankrupt and when you needed that to clear
Speaker 1: out certain things, and we needed that creative destructive process
Speaker 1: too to reach a final end. I think there's more
Speaker 1: to go. But as far as investing in small caps,
Speaker 1: I don't see if you you look at the exposure,
Speaker 1: to look at the names in there, I don't think
Speaker 1: you haven't an obscene amount or even a significant amount
Speaker 1: of zombie companies or zombie risk there. The other thing
Speaker 1: to think about to know is that if you're a
Speaker 1: public company, access to the capital markets, credit is widely available.
Speaker 1: And if you want to issue stock, excuse me, well,
Speaker 1: you can issue stock, but if you want to issue
Speaker 1: dead you can do it at very low rates, and
Speaker 1: you can do it in significant size. So liquidit is
Speaker 1: really not an issue at this point in time. And
Speaker 1: I don't think the whole zombie risk is a big
Speaker 1: issue for smaller caps. Chris, I wanted to get back
Speaker 1: to your your head uh note and a few predictions
Speaker 1: you made. One is very productive provocative, So of course
Speaker 1: I'm gonna I'm gonna key in on that. But you
Speaker 1: wrote that Tesla in December of echoes A O. L
Speaker 1: in December of boy, that's that's gonna put some shivers
Speaker 1: up some spines, I think. But walk uster sort of
Speaker 1: unpacked that first. Why why you're making that comparison, right?
Speaker 1: So we're getting lots of things, getting the spidy senses
Speaker 1: starting to tingle. Right, I remember remember nine nine, and
Speaker 1: I remember what was happening. You had a lot of speculation,
Speaker 1: had a lot of retail investors getting involved. If you
Speaker 1: recall the phrase, I think it was each rade clicking
Speaker 1: in their steward, right, And we have a lot of
Speaker 1: a lot of funny things going on now. But what
Speaker 1: was what was amazing to me is a o L
Speaker 1: at the time, was was a game changer. Right, It's
Speaker 1: an amazing technology. The stock had an incredible run run
Speaker 1: I really hadn't seen before, and it was going into
Speaker 1: the SNP late in the year at a very large
Speaker 1: market cap or a very large waiting Okay, that that
Speaker 1: to me was the beginning of the end. Right. Ninety
Speaker 1: nine was a fantastic year for stocks. But but after
Speaker 1: ninety nine, many of your tech companies and many of
Speaker 1: your growth companies lost their value. Now you have another
Speaker 1: game changing technology right in Tesla, and you have a
Speaker 1: stock that has performed amazingly well, and it's going into
Speaker 1: the SMP December late in the year um at a
Speaker 1: very large waiting our market cap. Right, what this signals
Speaker 1: to me is this growth at any price. This this
Speaker 1: is signaling and that we're close to the end of
Speaker 1: the growth at any price type investment strategy. Right, it's
Speaker 1: not a call on a particular stock, but what it
Speaker 1: shows you is that we've reached a level. And so
Speaker 1: back in the late nineties, it took twelve months for
Speaker 1: that for the regime change to cur And what I'm
Speaker 1: telling clients now is everything is accelerating, right. Everything that
Speaker 1: I thought was going to happen more or less occurred,
Speaker 1: but just in a very compressed time period. So if
Speaker 1: it took twelve months um back in late nineties, we
Speaker 1: think it probably takes six months now for that regime
Speaker 1: change really to occur. And it was more. This is
Speaker 1: a signal, and what we're seeing, you know, funny enough,
Speaker 1: is I think the big pain trade for a lot
Speaker 1: of people on the buying side either a recovery or
Speaker 1: a strong recovery, because many people haven't traded in a
Speaker 1: post recessionary environment. Many people have been trading in a
Speaker 1: low growth recessionary environment, and when growth is abundant, different
Speaker 1: things happen. The market rewards value in small camps and cyclicals,
Speaker 1: and that could cause a lot of pain for much
Speaker 1: of the BI side, because they're so steeped in that
Speaker 1: growth trade. All I can hear is that a O
Speaker 1: L noise from back in the day, you know, the
Speaker 1: I still have an up and running a O L emailed,
Speaker 1: but it exists that I'm not going to tell you
Speaker 1: what it is. It's embarrassing, but you still have the
Speaker 1: floppy drives anymore. You get like five in the mail
Speaker 1: a day. And Uh, Chris, I want to ask you, though, so,
Speaker 1: if you believe that Tesla and its addition to the
Speaker 1: SMP five hundred marks a shift from this growth at
Speaker 1: any price regime, do you also believe that it signals
Speaker 1: a possibility that what we're experiencing now ends in a
Speaker 1: dot com crash fashion. I is something I find so
Speaker 1: amazing is that we have heard since June that many times,
Speaker 1: many people saying the markets in a bubble, there's plenty
Speaker 1: of euphoria. Then we go on to the summer, Then
Speaker 1: we see retail traders buying options. We hear it again
Speaker 1: that the markets very euphoric. We hear it again in December,
Speaker 1: and all of a sudden we're in the new year
Speaker 1: and months have gone by, markets have gone up. How
Speaker 1: many percentage points since the original euphoria calls and we're
Speaker 1: still sitting here. So even if that were the case,
Speaker 1: I mean, what can you even possibly do out right?
Speaker 1: So again, there there's a lot in that question that
Speaker 1: there's a lot to unpack. Um. And I'm gonna, like
Speaker 1: all good equity strategies, I'm gonna talk my book a
Speaker 1: little bit, and I'm gonna say I told you so, right,
Speaker 1: I had to, Um, but I gave you the disclaimer. Right.
Speaker 1: So at the beginning of the summer, what we told
Speaker 1: clients is we're expecting a market melt up. We're expecting
Speaker 1: tem per cent tem percent plus run. And what we
Speaker 1: said is we don't expect to sell off until we
Speaker 1: reach higher levels, um, because as we go higher, that
Speaker 1: makes the foundation a little less stable. We hear a
Speaker 1: lot of the talk about speculation and bubbles and so
Speaker 1: and so forth. I've been through several bubbles. Yeah, it's
Speaker 1: true that there's a lot of retail investors and I
Speaker 1: have friends that that now in theory trade better than
Speaker 1: George Soros and it's a day and all this other stuff, right, Um,
Speaker 1: But what we where we are? Right, if you go
Speaker 1: back to late nineties we were heading into a set ship.
Speaker 1: We've already had that recession, and if you go back
Speaker 1: to late nineties UM, there are many companies that really
Speaker 1: didn't have a business model. It was things like clicks
Speaker 1: and eyeballs and so and so forth. A lot of
Speaker 1: big tack, a lot of big growth. The underlying fundamentals
Speaker 1: are good, and what we're arguing about, what we're talking
Speaker 1: about is relative value relative performance. We think it's just
Speaker 1: stretched too far at this juncture. Typically when growth works,
Speaker 1: it is in a lower growth, lower rate environments, and
Speaker 1: it's because there's a scarcity value and there's no alternative. Well,
Speaker 1: now you have an alternative. The growth from any of
Speaker 1: these small cap and make cap stocks going to be,
Speaker 1: we we think, quite impressive. We think the reaction function
Speaker 1: is going to be quite strong. And what we think
Speaker 1: is there's probably a two tier market, which is what
Speaker 1: you're beginning to see. And one of the reasons why
Speaker 1: we haven't been so euphoric on our price target is
Speaker 1: we can see a big rotation up the capitalization with
Speaker 1: the ubercaps where people do rotate UM. A lot of
Speaker 1: the uber caps just trade water or perhaps even sell
Speaker 1: off as as people use them as a source of funds,
Speaker 1: but it's not this massive capitulation because the underlying pladimentals
Speaker 1: are actually okay. You will see certain strategies, whether it's
Speaker 1: momentum or other things, have some difficult time, and we'll
Speaker 1: see some you know, double digital corrections at some point
Speaker 1: in time. But I'm not in the camp that we're
Speaker 1: in a bubble and and this is this is terrible
Speaker 1: and it's all gonna end in a in a very
Speaker 1: sad story. Um, there's a lot of good values out there,
Speaker 1: but it really is more similar to the late nineties
Speaker 1: down the capitalization in those mad caps, in the places
Speaker 1: where COVID has really had had a significant effect. And
Speaker 1: as we go forward, what you pay for something is
Speaker 1: going to mean a lot more. And if you're trading
Speaker 1: at a hundred and fifty times earnings, yeah, suddenly the
Speaker 1: stocks will work, but most of them probably don't. And
Speaker 1: you can see a really healthy correction in some of
Speaker 1: these high flyers if you will. So, Chris, A lot
Speaker 1: of people listen to this podcast solely for my brilliant
Speaker 1: cryptocurrency analysis. It's true, right, that's it's I Actually, they
Speaker 1: they think whenever I whenever I mentioned it, people I
Speaker 1: think the listeners roll their eyes and shake their fists
Speaker 1: at their phone. Um, but uh, you did make an
Speaker 1: insitioning call on crypto and your look ahead peace. Let
Speaker 1: me read it here. We sturgence of interest in crypto
Speaker 1: as a preferred speculative instrument further presses the topic of
Speaker 1: institutionalization of digital assets. I'm curious if you can unpack
Speaker 1: that for us a little bit. Um. You know, I
Speaker 1: hear further install institutionalizing crypto and I worry, well, does
Speaker 1: that bring with it sort of systemic risk along for
Speaker 1: the ride? Um? So I'm wondering how you see that
Speaker 1: shaping up in one as far as the institutions embracing crypto.
Speaker 1: And you know, if I can add throw one more
Speaker 1: in there, if you know Gary Gensler as the uh,
Speaker 1: if he gets confirmed for the SEC, if that plays
Speaker 1: any role in how that all shapes out? You know,
Speaker 1: the best I can tell is he probably knows more
Speaker 1: about crypto than probably most government regulators. I'm not sure
Speaker 1: if that ends up being good or bad. I it's
Speaker 1: kind of a two handed economist with it as far
Speaker 1: as I can tell. But how do you see it
Speaker 1: all shaping out? Yep? Um? How do I see it
Speaker 1: all shaping on. It's um. It's still very murky, right.
Speaker 1: But the point that we were trying to make it
Speaker 1: at the end of the year is cryptos are are
Speaker 1: here and people are beginning to accept them more and more. Um.
Speaker 1: Whether you look in the NFL and an NFL player
Speaker 1: wants to be paid in crypto, right, Um that you
Speaker 1: look at and when I go out and I talk
Speaker 1: to people. One of my associates, um part of is
Speaker 1: a millennial. She and our friends have been involved in
Speaker 1: cryptos for some time. And now what you're seeing is
Speaker 1: some of the larger institutions talk about it, say we're
Speaker 1: going to put it in our mutual funds, and there
Speaker 1: is a more of an acceptance to it, right. And
Speaker 1: so what you would expect to see is more regulation, um,
Speaker 1: but more liquidity. You should expect to see a lot
Speaker 1: of volatility, right. There has been and continues to be
Speaker 1: a lot of volatility, but over time that that volatility
Speaker 1: to come down somewhat. And I think what you would
Speaker 1: also expect to see is a widowing out of a
Speaker 1: lot of there's a ton of cryptos out there. I
Speaker 1: think what will happen is there will be some sort
Speaker 1: of consolidation and you'll have just a handful of cryptos
Speaker 1: that people really want to try transact on. But it
Speaker 1: really still is, you know, and I don't want to
Speaker 1: be evasive, but it really still is wide open, and
Speaker 1: it's just developed so quickly. And the point being is
Speaker 1: it's going to be accepted to some degree. It has
Speaker 1: lots to change, there's lots to do um but it's
Speaker 1: an exciting part of the market. And by the same token,
Speaker 1: a lot of people are using it, we think, are
Speaker 1: using it to speculate, and that could cause a lot
Speaker 1: more volatilities we go forward. But when when we talk
Speaker 1: about institutional acceptance, I mean, even just this past week,
Speaker 1: for example, black Rock came out and filed these updated
Speaker 1: perspectus is to make bitcoin an eligible investment in two
Speaker 1: of their funds. So just shows I mean, people are
Speaker 1: clearly thinking differently about it. But Chris, before we get
Speaker 1: to sharing our crazy things, Uh, there's one more prediction
Speaker 1: that I wanted to call you out on and then
Speaker 1: ask you if it's made you kind of think about
Speaker 1: any of your other predictions, and that just being the
Speaker 1: one that's already occurred about the Georgia runoffs, the idea
Speaker 1: that you had predicted that the GOP would retain Senate control.
Speaker 1: We're now when this runs twenty two days into a
Speaker 1: cross one off the list. Are you second guessing any
Speaker 1: of your other top ten predictions at this point or
Speaker 1: is it too early to say? Um, not not second guessing.
Speaker 1: So again, full disclosure and and and full responsibility and accountability.
Speaker 1: We were wrong, right we we expected GOP to hold
Speaker 1: onto the Senate, But to be quite honest, we weren't
Speaker 1: wrong by very much. UM. And I have to say
Speaker 1: that it's helped our book. It's helped small caps, it's
Speaker 1: helped high COVID beta, it's helped the cyclical trade more
Speaker 1: so than I ever would have thought. UM. With regard
Speaker 1: to the rest of our prediction, it's a long year.
Speaker 1: What we tend to do is we want to be
Speaker 1: more than last year. I think we were somewhere around seventy,
Speaker 1: which was a great year. This year, yeah, it's I
Speaker 1: can't say it feels good to lose one right out
Speaker 1: of the gate, but by the same token, uh, it's
Speaker 1: really helped our book a lot. UM And I think
Speaker 1: you know the point that we're just talking about this
Speaker 1: is more what we're trying to do is predict things
Speaker 1: that you know, I have a high degree of probability,
Speaker 1: are a little out there, but have a high degree
Speaker 1: of probability of occurring. And the crypto is a good
Speaker 1: example of that. So yeah, a little painful, um, but
Speaker 1: I'm not going to change this yet. In the next night,
Speaker 1: and I will say I hit rate of s which
Speaker 1: I think many people were surprised by the entire year.
Speaker 1: It's pretty impressive. I was gonna say, I like that
Speaker 1: Chris grades his previous year and seventy is you got
Speaker 1: a grade these on a curve? Seventy percent is pretty
Speaker 1: dark good I think for for this, for this type
Speaker 1: of thing, if you're you know you're you're winning. Yeah,
Speaker 1: I would be lying if I wasn't surprised as well.
Speaker 1: I was looking for and we've got somewhere I'll take
Speaker 1: you stand clear of the craziest things we saw in
Speaker 1: markets this week. Well, Sarah, I think it's that time.
Speaker 1: Have you come for pared? I did come prepared, I've
Speaker 1: I always come prepared. Mike, I'm just trying to increase
Speaker 1: the drama a little bit. Does that mean I'm kicking
Speaker 1: us off? Alright? So I don't have a price is right.
Speaker 1: But I do have a bit of a trivia question
Speaker 1: for you. If you had to guess what's the best
Speaker 1: performing stock in the SMP five this year, what would
Speaker 1: you say? Oh, man, best performing? I know the worst
Speaker 1: is Twitter? So if you're short the Twitter is uh
Speaker 1: the worst? The best performing, I'm gonna say one of
Speaker 1: the banks? I don't know that. All right, good guess Chris.
Speaker 1: Do you have any thoughts? I would say game Stop,
Speaker 1: but I'm not sure a game Stop is in the
Speaker 1: SP five, So let's go with Western Digital. Alright, So
Speaker 1: a bit surprising at least I was caught off guard.
Speaker 1: Your best to performing stocks in the SMP five hundred
Speaker 1: this year General Motors and Ford and each is up
Speaker 1: more than thirty Interesting. What a change. That's quite to change.
Speaker 1: I mean, there's been a lot of talk of technological
Speaker 1: investments and Microsoft teaming up there with with GM and
Speaker 1: getting into the autonomous car space. But still I think, uh,
Speaker 1: I mean, clearly, as we just discovered, I think many
Speaker 1: people would be surprised by that very young. But you
Speaker 1: know what I wonder, is it back in the day
Speaker 1: it used to be every day there is a different
Speaker 1: speculation about who is going to buy Tesla. Maybe now
Speaker 1: everyone's speculating on who Tesla is gonna buy, just throwing
Speaker 1: it out there. That's some good speculation, Mike. It's one
Speaker 1: way to wrap up production just by Ford, By four, GM, Volkswagen.
Speaker 1: They could probably buy all of them at this point.
Speaker 1: It's secondary offering and just take out the entire car
Speaker 1: industry that don't listen to me by listeners, by the way,
Speaker 1: none of that's going to happen. That's that's just me. Uh,
Speaker 1: that's that's my prediction. We'll see that he's gonna bank
Speaker 1: his entire predictions that he'll get his zero percent or
Speaker 1: if he gets real lucky. That's that's a good one,
Speaker 1: though I did not know Ford and GM interesting. How
Speaker 1: about you? Christis witness anything crazy in the past week
Speaker 1: or so? So that one of the craziest things I've
Speaker 1: seen over the last couple of days and over the
Speaker 1: last week has been the reaction um or the performance
Speaker 1: of some of the heavily shorted consumer stocks. These stocks
Speaker 1: are going up many days at double double digit returns,
Speaker 1: and the amount of short or short interest in these
Speaker 1: stocks is obscene, and so I think this can continue.
Speaker 1: But I haven't seen this kind of movement in a
Speaker 1: number of a group of stocks in a long, long time,
Speaker 1: and it is very consistent, and it speaks to um
Speaker 1: heavily shorted stocks being covered and covered rapidly. And I'll
Speaker 1: have read on this a little bit more because I
Speaker 1: know you. When I asked you what the best performing
Speaker 1: stock in the SMP five hundred was, you guest, game
Speaker 1: stop and game stop. I mean, just a couple of
Speaker 1: days ago, or about a week ago on the four teen,
Speaker 1: short interest as a percentage of shares outstanding was and
Speaker 1: now it's already come down to about sixty seven percenter.
Speaker 1: So and like you said, I mean it's almost at
Speaker 1: least last week, every single daycent game fifty seven percent Game.
Speaker 1: I mean, it's just it's it's remarkable to watch. It's
Speaker 1: it's amazing to me someone would short a stock that's
Speaker 1: already that heavily shorted. I mean, you know, I don't know,
Speaker 1: it's have you not heard of these guys on Reddit
Speaker 1: that are going to take you to the cleaners on this?
Speaker 1: But that's that's pretty good though. And I wonder, you know, Chris,
Speaker 1: I wonder if it's just people looking at the vaccine
Speaker 1: coming and stimulus coming and and just getting over excited
Speaker 1: about these consumer names. To some degree, I think that
Speaker 1: could be part of it. Um, there could be some
Speaker 1: liquidations that are going on, and obviously the fundamentals are
Speaker 1: changing and and that's all playing into it. But you're right, well,
Speaker 1: when you're you're that heavily shorted, funny things can happen,
Speaker 1: and that's exactly what's occurring. Yeah, well that's pretty good, alright, Sarah.
Speaker 1: I'm ready for for prices right. We'll see how Chris
Speaker 1: does that the prices right game here in the alternative
Speaker 1: assets space, and this is really alternative, Sarah. You know
Speaker 1: those little stickers you get on a banana, you know,
Speaker 1: it'll say like dold banana, like Ecuador, Panama, wherever. Don't
Speaker 1: don't tell me that banana stickers are now being auctioned
Speaker 1: in some strange marketplace sort of sort of. So one
Speaker 1: of those stickers ended up on a twenty dollar bill
Speaker 1: and it wasn't just placed there by someone. It was
Speaker 1: landed on there during the printing process of this twenty
Speaker 1: dollar bill at some you know, government printing facility in
Speaker 1: Texas in to the point where you know that little
Speaker 1: the seal of the treasury and the serial number are
Speaker 1: both printed over top of the the dull banana sticker.
Speaker 1: And you can make your own jokes about banana republics
Speaker 1: if you want. I will not. I will not make
Speaker 1: that joke. But so, my favorite part about the story,
Speaker 1: and this is on CNN dot com, by the way, UM,
Speaker 1: is the theories on how it got there. Uh. One
Speaker 1: guy saying, well, it might have been sort of part
Speaker 1: of their quality control process. Someone put it on there
Speaker 1: to see if it could get through and they forgot
Speaker 1: to weed it out. Another guy's like, no, I'm pretty
Speaker 1: sure it's just a joke. Someone just did a practical joke,
Speaker 1: put the banana sticker on the twenty and it got printed.
Speaker 1: Of course, as you can probably guess, that twenty dollar
Speaker 1: bill is now up for auction. UM and collectors of
Speaker 1: these types of things loved mistakes like this, Like if
Speaker 1: you're collecting a coin or a piece of currency, if
Speaker 1: there's some a steak involved, Uh, it totally raises the
Speaker 1: value of the item. And clearly this is about his
Speaker 1: hilarious sized mistakes can get. So, what's the what's the bid? Sarah?
Speaker 1: If you're playing prices white, what would you bid for
Speaker 1: a twenty dollar bill with a banana sticker embedded into
Speaker 1: it underneath the Treasury seal. All right, not what I
Speaker 1: would bid, but maybe what one of these fanatics who
Speaker 1: love mistakes would bid. I'm gonna go. I'm gonna go
Speaker 1: with nine hundred. I'm gonna keep my my poker face.
Speaker 1: But Chris, what's your what's your bid on the twenty
Speaker 1: dollar bill with the banana stickers? Since I love bomb
Speaker 1: Bombarker and prices, right, I'm gonna go nine one. That's
Speaker 1: how you play. That's how you play the game exactly.
Speaker 1: That's a that's how you play. Current bid and this
Speaker 1: is Heritage Auctions in Dallas. Current bid fifty seven thousand dollars.
Speaker 1: Are you serious? Yeah? Well, there's like some sellers speed too,
Speaker 1: so it's closer to sixty nine or the buyer's premium.
Speaker 1: They caught these auctions, so seventy grand for the bill.
Speaker 1: The last the last few times around, I had done
Speaker 1: really well with learning my lessons about overshooting. Now after today,
Speaker 1: I'm going to start overshooting again, and then I start
Speaker 1: being way off once again. Wise move. I love the
Speaker 1: nine and one. That's how you play it. That's that's
Speaker 1: this guy's congratulations. We gotta get Chris on Prices right,
Speaker 1: sponsor him all right, well, Chris Harvey, winner Price is right.
Speaker 1: We'll have to catch up again sometime soon and also
Speaker 1: at the end of so we can see if you
Speaker 1: get that higher hit rate again. Predictions for the year
Speaker 1: of a Chris Harvey of Wells Fargo Securities, Thanks so
Speaker 1: much for joining the show today What Goes Up. We'll
Speaker 1: be back next week. Until then, you can find us
Speaker 1: on the Bloomberg Terminal, website and app, or wherever you
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Speaker 1: us on Twitter, follow me at at Sarah Pontzack, Mike
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Speaker 1: The head of Bloomberg Podcasts is Francesco Levi. Thanks for listening.
Speaker 1: See you next time.