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Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox.

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Speaker 1: Along with my co host Lisa A. Bramowitz. Each day

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Speaker 1: we bring you the most important, noteworthy, and useful interviews

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Speaker 1: for you and your money, whether you're at the grocery

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Speaker 1: store or the trading floor. Find the Bloomberg p m

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Speaker 1: L Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com.

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Speaker 1: It is the story of the day, and it is

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Speaker 1: the person of the day who knows what to say

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Speaker 1: about this, and that is Shira Over, a Bloomberg opinion columnist,

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Speaker 1: wrote a terrific column about Apple and the surprise cut

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Speaker 1: to their first quarter forecast. Shia, thank you so much

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Speaker 1: for being here with us today. The big question is

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Speaker 1: is Apple facing something that is unique and surprising in China?

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Speaker 1: Or did something have been to the Chinese economy that

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Speaker 1: took a sort of spiral downward that is going to

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Speaker 1: affect the broader economy. What happened in two months? Yeah,

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Speaker 1: as usual, Lisa, you you ask exactly the right question

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Speaker 1: for which I do not have exactly the right answer.

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Speaker 1: But I agree with you that the explanation from Apple

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Speaker 1: needs more explanation. Right. So two months ago, um, when analysts.

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Speaker 1: When Apple held its quarterly earnings call, analysts asked Apple

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Speaker 1: about trends in China because it is no secret that

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Speaker 1: economic growth there has been slowing. It's no secret that

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Speaker 1: there's been a trade war between the US and China,

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Speaker 1: which may be unsettling consumers in China. Uh. And it's

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Speaker 1: no secret that smartphone buying trends are changing in China

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Speaker 1: as they are in the rest of the world. People

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Speaker 1: are are buying new devices less often. And the only

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Speaker 1: answer that investors seem to get from Tim Cook and

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Speaker 1: other exactly another Apple executives is that things are great

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Speaker 1: in China. Right. So the question is did economic conditions

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Speaker 1: substantially deteriorate in two months in China? Which is possible? Uh?

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Speaker 1: Did Apple simply not foresee that all of a sudden,

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Speaker 1: all of these trends that were blowing against it in

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Speaker 1: China finally started to show up in results. Um? Was

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Speaker 1: Apple simply not honest with investors about what it saw,

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Speaker 1: hoped things would improve in sales results in China and

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Speaker 1: didn't quite get there. I don't have an answer to

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Speaker 1: any of these questions, but I agree with you that

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Speaker 1: just blaming an economic growth slad and in China is

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Speaker 1: insufficient explanation for what is a pretty dramatic, uh deterioration

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Speaker 1: of revenue for the world's most valuable company. Sure does

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Speaker 1: Apple need to reevaluate their pricing? Is anyone going to

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Speaker 1: spend a thousand dollars just so that they can get

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Speaker 1: two hundred and fifty six gigabytes on an XX when

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Speaker 1: they can buy an XR and be very happy for

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Speaker 1: that upgrade. I I think that is a question that

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Speaker 1: Apple investors should be asking, and among many other hard

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Speaker 1: questions they should be asking of Apple right now. So

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Speaker 1: it's very clear that to Apple's credit, it charged an

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Speaker 1: an unprecedented price for iPhones the thousand dollars and up

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Speaker 1: in the last year plus, and people have been willing

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Speaker 1: to pay that price, and they weren't willing to pay

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Speaker 1: a thousand dollars up for other smartphones from Samsung, for example.

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Speaker 1: So there is a built in loyalty for Apple products,

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Speaker 1: built in um realization or belief that those phones offer

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Speaker 1: enough value to to justify a thousand dollars. But maybe

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Speaker 1: that near term gain for Apple, the revenue growth was

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Speaker 1: able to show only because it increased prices for iPhones

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Speaker 1: and some other devices. Uh maybe that gave a short

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Speaker 1: term revenue juice, and that's coming back to haunt Apple now. Uh,

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Speaker 1: in in addition to all these other factors that are

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Speaker 1: being on smartphone demand in general. So sure, it was

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Speaker 1: a rough period for Apple at the end of last year,

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Speaker 1: shares down more than nine percent. After they're reporting this

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Speaker 1: news after hours yesterday, at what point do we say, Okay,

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Speaker 1: the worst case scenario is baked in and actually people

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Speaker 1: are getting over their skis here. Yeah, that's again another

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Speaker 1: good question to which I did not have a great answer. Um. Yeah,

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Speaker 1: I was actually I wasn't sure whether the decline that

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Speaker 1: we've seen in Apple shares in the latter half of

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Speaker 1: was justified. There were also concerns a year earlier about

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Speaker 1: demand for the iPhone ten right, a similar set of

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Speaker 1: kind of reports out of the supply chain that demand

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Speaker 1: didn't seem to be that great, And then that didn't

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Speaker 1: really part of true, right, And so I was a

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Speaker 1: little bit skeptical, to be honest with you, about these

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Speaker 1: reports of of unsettled or waning or lower than expected

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Speaker 1: demand for the iPhone models that have been released towards

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Speaker 1: the tail. And it looks like those reports in this

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Speaker 1: case were accurate. UM. You know, growth expectations have obviously

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Speaker 1: been recut even before Wednesday, and they're being recut again today,

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Speaker 1: and I just don't know where the bottom is. The

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Speaker 1: worry for me is if Apple hasn't been honest with

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Speaker 1: itself or investors about what it's business look like, what

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Speaker 1: its business looks like, what a smartphone buying trends look like,

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Speaker 1: then I'm not sure people can have confidence in estimates

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Speaker 1: from the company or from the cell side analysts. Do

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Speaker 1: you believe that Alexa is also having an effect on

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Speaker 1: Apple because Siri is falling behind in terms of its popularity,

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Speaker 1: maybe on the margins, UM, maybe on the margins. It

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Speaker 1: is definitely a problem that Apple's Internet services and that

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Speaker 1: includes things like Siri, are not up to par with

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Speaker 1: competitors including UM, Amazon and Google, and that maybe hurting,

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Speaker 1: say ails on the margins. But the big thing that's

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Speaker 1: weighing on on Apple UM the generates. You know, Apple

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Speaker 1: generates two thirds of Daniel sales from iPhones, and the

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Speaker 1: smartphone market has permanently changed period, and that's largely what

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Speaker 1: we're seeing happen in China. The people that the easy

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Speaker 1: growth has gone there are fewer first time smartphone buyers

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Speaker 1: out there. People in many established countries are not switching

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Speaker 1: from my iPhone to Android or the reverse growth has gone.

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Speaker 1: Thank you very much, Shara Oviday, expert when it comes

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Speaker 1: to all things technology for Bloomberg Opinion. We've been getting

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Speaker 1: numbers for US sales out of the big automakers, General

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Speaker 1: Motors and Ford both reporting sales down. Joining us down

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Speaker 1: to talk about Alan Baum, auto analyst and principle of

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Speaker 1: Baum and Associates, General Motors shares in particular taking a

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Speaker 1: big hit down nearly three per cent. Why, well, that

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Speaker 1: the drop is is there? And of course, uh, you know,

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Speaker 1: since they've gone to quarterly reporting, Uh, the quarterly report

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Speaker 1: that we're seeing today becomes magnified since it has to

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Speaker 1: stand in for the previous two months. Alex Boum, can

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Speaker 1: you just describe sort of the overall tone of the

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Speaker 1: market for automobiles? What are we looking at? Seventeen million

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Speaker 1: vehicles sold? Over seventeen million for this year, probably about

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Speaker 1: seventeen point two. Um, I'm I'm looking at sixteen point

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Speaker 1: eight for next year. Yeah, it's a drop. Seventeen point

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Speaker 1: two is more or less flat with two thousand seventeen,

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Speaker 1: but obviously those are very strong numbers. UM. The concern

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Speaker 1: I have going forward, and we're starting to see a

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Speaker 1: little bit of it this year, is that retail sales

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Speaker 1: have slowed down there down for the year, even though

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Speaker 1: that the totals are flat UM and obviously profits are

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Speaker 1: are stronger on retail sales as opposed to fleets. UM.

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Speaker 1: I'm also concerned, uh with fleet sales being tied to

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Speaker 1: business UH business views and business UH expectations, and obviously

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Speaker 1: with the markets going all over the place, as well

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Speaker 1: as some real concerns about the coming year. In an

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Speaker 1: economic global economic sense, I think that that's going to

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Speaker 1: hurt the fleet sales side. Can you give us a

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Speaker 1: sense alan from your perspective, are auto sales being more

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Speaker 1: hampered by trade wars or just generally because the global

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Speaker 1: economy is slowing so much. Yeah, I don't think the

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Speaker 1: trade wars are hitting the consumer at this point. UM.

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Speaker 1: You know, the the key thing that I say all

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Speaker 1: the time at nauseum, the people who buy new cars

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Speaker 1: are increasingly well to do in the United States, and

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Speaker 1: so these these changes that occur, UH that that could

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Speaker 1: really hurt consumer demand and expectations are probably on having

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Speaker 1: more impact, at least in the car market, on middle

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Speaker 1: income people who in fact aren't buying new cars anyway.

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Speaker 1: They're buying the three year old LEAs cars, getting a

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Speaker 1: heck of a deal and a very good vehicle. I'm

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Speaker 1: glad you mentioned leasing, because isn't that where it's getting

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Speaker 1: more expensive leasing a new car getting more expensive, rising

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Speaker 1: interest rates, and then you've got the lower projected resale values.

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Speaker 1: This makes the automakers actually charge more and cut back

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Speaker 1: on their promotions and tim It's actually more than that

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Speaker 1: because what it's also doing, um we are seeing obviously

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Speaker 1: the tip to crossovers and SUVs and pickups that's been

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Speaker 1: going on for a while. More of those cars are

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Speaker 1: coming back in trade. And what's happening is simple supply

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Speaker 1: and demand. People want the trucks. When they come back,

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Speaker 1: they are more of them. So when you go to

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Speaker 1: the dealer and turn in your three or four or

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Speaker 1: five year old SUV or CUV, everybody else is doing

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Speaker 1: the same thing and the value is going down, so

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Speaker 1: your trade in is worth less towards that it was before.

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Speaker 1: And as you state, the least rates because of interest rates,

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Speaker 1: and for that matter, because the residual values that are

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Speaker 1: expected going forward are also rates are up, values are down,

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Speaker 1: so obviously your cost is higher. And again, if we're

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Speaker 1: talking about upper middle and and and wealthy people buying

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Speaker 1: those cars, that's not as bad an issue as it

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Speaker 1: might be, but obviously it limits how far down the

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Speaker 1: income stream UH new car buyers can be. I want

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Speaker 1: to just get your perspective on the electric vehicle market,

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Speaker 1: because if US federal tax credit fell in half from

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Speaker 1: three seven fifty dollars, and we saw from Tesla yesterday

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Speaker 1: they were cutting their prices by two thousand dollars to

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Speaker 1: offset the lacks of the lack of a tax credit,

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Speaker 1: that some buyers a perspective buyers might get. Are we

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Speaker 1: seeing similar moves by other auto manufacturers in the US

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Speaker 1: or other types of ways to offset the lack of

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Speaker 1: this extra stimulus. Well, first of all, that's only affecting Tesla, UM,

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Speaker 1: it's affecting General Motors UH two quarters later. They hit

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Speaker 1: the two hundred thousand mark last quarter. But frankly, General

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Speaker 1: Motors is not selling a huge number of evs, so

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Speaker 1: I don't see it as a big deal. And the

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Speaker 1: other automakers have the full seventy because they're not even close,

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Speaker 1: with the exception of Nissan to the two hundred thousand mark.

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Speaker 1: The bigger issue is, uh, we still aren't seeing the

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Speaker 1: industry again with the exception of Tesla selling these vehicles

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Speaker 1: in high volume general motors. The Chevy Bolt is a

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Speaker 1: wonderful vehicle. Technically, it's not being marketed strongly. In fact,

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Speaker 1: a lot of it's going to fleets for for testing

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Speaker 1: on autonomy UM. And so Tesla really does have the

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Speaker 1: electric vehicle market not to itself. And and there's a

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Speaker 1: lot of vehicles coming, but clearly they're they're they're they're

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Speaker 1: serious about it because that's all they sell. Uh So,

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Speaker 1: so they're obviously moving forward. And uh it is an

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Speaker 1: issue obviously that they're gonna do two things. One they're

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Speaker 1: gonna eventually sometime in this year we think, get the

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Speaker 1: thirty five thousand dollar and change car out the short

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Speaker 1: range vehicle UM. But as of course that that text

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Speaker 1: credit is declining. Alan and what if you could comment

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Speaker 1: on changes in miles per gallon and fuel economy standards

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Speaker 1: and emission standards in the United States and what you

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Speaker 1: believe that will bring in the future. Well, it seems

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Speaker 1: like the the auto I should say the oil industry

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Speaker 1: is getting its wish. There's been a lot of reporting

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Speaker 1: on that. Uh. The auto industry is getting more than

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Speaker 1: its bargained for. Uh and UH, and what I mean

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Speaker 1: by that is they're getting the The e p A

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Speaker 1: Nit's A plan is freezing the requirements at two thousand

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Speaker 1: twenty values, which puts the US well out of step

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Speaker 1: with the rest of the world. The obvious issue there

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Speaker 1: is the automakers are global and they can't just say, oh, well,

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Speaker 1: never mind, we were just not do that anymore. Uh.

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Speaker 1: They've got to move forward. Um. Obviously, they they like

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Speaker 1: a little bit of relief. What they don't like, like

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Speaker 1: every other major corporation, is uncertainty. And they're gonna get

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Speaker 1: that in spades because obviously there's gonna be a lot

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Speaker 1: of legal action once these standards are put into place,

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Speaker 1: you think in April. The not the least of which,

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Speaker 1: of course, will be the state of California, who is

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Speaker 1: expecting it's uh, it's waiver to be pulled. Uh. And

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Speaker 1: the bad news about that is not just what the

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Speaker 1: effect might be, but the timing. Obviously, the legal process

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Speaker 1: will be long, and automakers can't sit on their hands

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Speaker 1: and wait for that. They've got to move forward. Thanks

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Speaker 1: very much for helping us understand the industry. Alan Baum

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Speaker 1: is a principle of Baum and Associates based in West Bloomfield, Michigan.

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Speaker 1: Talking about the automobile industry, what should investors do as

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Speaker 1: the S and P five hundred, the Dow Jones industrial leverage,

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Speaker 1: and the NASDAK declined. Well, one thing they should do

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Speaker 1: is probably ask Matt Mainly. He's the equity strategist for

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Speaker 1: Miller tay Backing Company and he joins us now from Newton,

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Speaker 1: mass Matt Maylee, thanks very much for being with us.

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Speaker 1: What do you tell customers and clients who call and say,

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Speaker 1: I bought stock in eighteen Everything I bought is now

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Speaker 1: less expensive? Should I buy more? Well? Maybe not every

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Speaker 1: everything you you had bought, because you have a lot

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Speaker 1: of stocks, especially in the fang stocks. Uh that I

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Speaker 1: think we'll have a tough time bouncing back the same way.

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Speaker 1: Uh they did last February when the market bounced back. Uh.

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Speaker 1: So Uh the key is don't panic, um and don't

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Speaker 1: just uh sell stocks willy nilly, I think things. I

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Speaker 1: think you know, the bounce we've seen until today we've

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Speaker 1: seen over the last week or so. We'll continue for

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Speaker 1: a little bit a while because I think the market

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Speaker 1: got way washed out, and uh, I think that when

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Speaker 1: the market continues to rally, you might want to when

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Speaker 1: you go back into the market, go back into more

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Speaker 1: defensive names, and especially names that will pay you to wait.

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Speaker 1: In other words, names to pay a decent dividend and

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Speaker 1: the companies that not only pay good divn in but

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Speaker 1: have a history of of increasing their diven in every

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Speaker 1: year over over time. You know, Matt, it does seem

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Speaker 1: like there was a knee jerk plunge down and that

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Speaker 1: it seemed like it was almost irrational at the end

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Speaker 1: of the year. But perhaps it was a little bit

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Speaker 1: more rational than some had written it off as because,

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Speaker 1: for example, Delta just came out and also cut its

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Speaker 1: revenue forecasts based on disappointing ticket pricing among other aspects,

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Speaker 1: as follows Apple's cut its first quarter forecasts. I mean,

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Speaker 1: it seems like there is actually something legitimate here that's

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Speaker 1: going on with respect to a slowdown that we're seeing

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Speaker 1: in the actual numbers. There's no question. I mean, it's

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Speaker 1: something that I'm going into, uh into October, when the

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Speaker 1: when the downturn started in the stock market, I've been

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Speaker 1: quite cautious. And one of the reasons was, you know,

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Speaker 1: whenever the FED gets involved in a tightening uh program. Uh,

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Speaker 1: there's always a delay from when they start raising rates

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Speaker 1: to when it finally has an impact on the stock

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Speaker 1: market and then on the economy. Me. Uh, it's usually

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Speaker 1: anywhere from eighteen months to two years. Sorry. Uh, let's

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Speaker 1: say the Fed's fault. I mean, I think it was

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Speaker 1: something that FED had to do. The FED. You know,

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Speaker 1: people want to blame the FED. I mean, we don't

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Speaker 1: have a god given right to have the stock market

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Speaker 1: go up forever, every single year forever. Uh. We they

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Speaker 1: added a lot of liquidity at a time when we

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Speaker 1: needed it to save the financial system. At some point

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Speaker 1: they we all knew at some point they had to

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Speaker 1: withdraw that liquidity, at least some of it, uh, and

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Speaker 1: uh that it was gonna be painful. I mean to

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Speaker 1: think it wouldn't be painful to see how much it

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Speaker 1: helped asset prices go up. To remove some of that

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Speaker 1: liquidity is the right thing to do. And I point

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Speaker 1: back to what happened with the with the chairman vocal

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Speaker 1: several decades ago. When he when he made us take

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Speaker 1: our medicine a little bit, and although it was very

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Speaker 1: painful over the near term, it was something that was

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Speaker 1: very very helpful allowed the economy to get back and

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Speaker 1: and you know, take the trains wheels off and and

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Speaker 1: and be on its own. And that's something we need

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Speaker 1: to do. So even though I think we will could

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Speaker 1: see some lower loads, as I mentioned, I think on

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Speaker 1: a short term basis, I think we can see the

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Speaker 1: arket rally, especially Apple, touching a very important support level

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Speaker 1: here which should hold. Uh. But still I think we'll

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Speaker 1: be a tough year this year. But that's okay for

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Speaker 1: the longer term. Um, we can blame the FED all

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Speaker 1: we want, but I in many ways I think they're

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Speaker 1: doing what they need to do a lot of people

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Speaker 1: said they should have done it a lot earlier. Either way,

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Speaker 1: it needs to be done at some point. We can't

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Speaker 1: have massive liquidity injections forever because when we get another

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Speaker 1: two thousand and date all over again. Matt Maylee, you

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Speaker 1: began by saying, don't panic, don't sell Willie Nilly, don't

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Speaker 1: buy willy nilly. So who's doing this willy nilly selling

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Speaker 1: right now? With the SMP five hundred down two and

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Speaker 1: a quarter percent. Who are the sellers? Well, I mean,

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Speaker 1: you know, I don't want to spend too much time

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Speaker 1: blaming the algos, but that's certainly has had an impact. Um,

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Speaker 1: but I think it's who are these mysterious algos that

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Speaker 1: are able to move the market to such a large extent. Well,

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Speaker 1: it's you know, the machine driven whether whether they be

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Speaker 1: hedge funds, but there are some uh other uh investors

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Speaker 1: that besides his hedge funds whore involved, who are engaged

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Speaker 1: in these things. And when the market gets moving in

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Speaker 1: one direction, it exacerbates it. Now the thing that that

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Speaker 1: it's not just selling though, it's also because of all

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Speaker 1: the uncertainty. And remember back in the beginning of two

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Speaker 1: thousand and sixteen, the market did bottom, but there was

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Speaker 1: really only once uncertainty out there. It was oil. Oil

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Speaker 1: was crashing, you know, and that was affecting the high

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Speaker 1: yield market, and so those two things were getting knocked

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Speaker 1: down and hurting the market. So once oil stabilized and

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Speaker 1: bounce back, uh, it was fine. Right now, we have

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Speaker 1: a lot of other uncertainties we have, whether it be

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Speaker 1: the said we have trade, we have a brexit, we

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Speaker 1: have you know, slower growth, et cetera. So many uncertainties

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Speaker 1: out there, so there's a you know a basically, uh,

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Speaker 1: you have buyers stepping back, so we have a lack

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Speaker 1: of buyers, and you have these algalis selling the thing

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Speaker 1: that the whole thing is exascerbated these people. With all

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Speaker 1: the uncertainty out there, you have a lot of people

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Speaker 1: sitting on their hands, and that's why I think we

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Speaker 1: had these wild swings. Matt Mayley, thank you so much

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Speaker 1: for being with us. Matt Mayory, equities trategist for Miller

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Speaker 1: t back In Company. It has been called the flash rally,

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Speaker 1: It has been called some weird activity happening in the

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Speaker 1: Witching hour and the Asian hours of trading. But what

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Speaker 1: happened with the Japanese yen has caught the attention of

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Speaker 1: FX traders across walls, treading across the globe. Joining us

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Speaker 1: now to explain everything that we just saw and explain

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Speaker 1: it way so that we have perfect clarity, has been Signarella,

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Speaker 1: he's global macro strategist for Bloomberg. What the heck happened

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Speaker 1: with the end um hesitates to call it a flash crash,

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Speaker 1: to be honest, that would assume that people were very

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Speaker 1: long dollars and trying to get out of that position,

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Speaker 1: and then as the sort of the box and the

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Speaker 1: Algo trip it and there's this major sell off that happens,

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Speaker 1: they were probably, you know, a reasonable amount of long

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Speaker 1: dollar positions. I don't think the market was overbought. It

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Speaker 1: tended to happen in a bit of an ill liquid

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Speaker 1: market in Tokyo. With the markets closed, the writing kind

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Speaker 1: of was on the wall. But I have to tell

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Speaker 1: you that the extent of the move really surprised me.

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Speaker 1: As we handed off into Singapore last night, I did

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Speaker 1: say to my counterpart, you're gonna have some fun today

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Speaker 1: and watch the end after this Apple news, because the

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Speaker 1: end being the haven currencies is where traders would want

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Speaker 1: to go. But it was completely overdone by al Goes

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Speaker 1: pushing it. And what they do is the program basically

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Speaker 1: is a momentum model. It will continue to push in

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Speaker 1: one direction until it ostensibly reaches some sort of resistance,

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Speaker 1: and then it's literally programmed to just just repeat and

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Speaker 1: rinse and go back the other way. And the interesting

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Speaker 1: thing actually, from what I've seen in trading this morning

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Speaker 1: is as traded sideways all day, we've seen yields continue

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Speaker 1: to extend declines, UH equities continue to sell off. All

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Speaker 1: of these things would have suggested the end should have

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Speaker 1: rallied further in the US markets. And what that's telling

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Speaker 1: me is markets courts short and wrong, and this sideways

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Speaker 1: trading would suggest we might see a little bit of

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Speaker 1: a bounce sometime in the next day or so. Vincent,

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Speaker 1: can you just describe for people that may have and

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Speaker 1: a sleep while all this happened, what actually went on? Well,

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Speaker 1: it really is a situation where there are no there

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Speaker 1: are no more market makers. I mean when you look

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Speaker 1: at the when you look at the floor of the

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Speaker 1: New York Stock Exchange and you see news reporters picture

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Speaker 1: the same concept in the FX market. There are no

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Speaker 1: market makers. The the vocal rule and government regulations has

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Speaker 1: pushed all of those folks out of the business, so

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Speaker 1: that when someone comes in and does size and tries

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Speaker 1: to move a bit into the market, there's no one

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Speaker 1: to really there's no supply to to smooth that move,

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Speaker 1: so to speak, So it just basically leaps to a

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Speaker 1: point until it hits a pocket of liquid. Right, But

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Speaker 1: I just want to know what happened. We just described

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Speaker 1: people that don't know what happened to the value of

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Speaker 1: the yen against the Aussie dollar, against the Turkish era,

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Speaker 1: what happened last night, But there was a major programs

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Speaker 1: buying yen selling other currencies simply as a haven flow

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Speaker 1: to to protect against what looks like a trade war

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Speaker 1: that could get even worse given what Apple's earnings were.

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Speaker 1: So if you if if you have somebody like Apple

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Speaker 1: downgrading earnings going forward, and you'd expect that that then

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Speaker 1: to um spread across other corporations. It doesn't look if

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Speaker 1: a few direquity earnings and people are looking for haven

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Speaker 1: flows and they choose the end because it tends to

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Speaker 1: be a liquid market. Not so liquid last night, but

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Speaker 1: it tends to be a liquid and there is a

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Speaker 1: four day holiday in Japan that could be exacerbating this.

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Speaker 1: Another factor that was blamed was retail investors in Japan.

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Speaker 1: I see you already see the skepticism dripping over your face.

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Speaker 1: I mean, but basically the idea that retail investors in

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Speaker 1: Japan are still reaching for yield, so they're going into

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Speaker 1: currencies like the Turkish lira and the Aussee dollar, and

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Speaker 1: they're inherently short the yen, and they were caught off

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Speaker 1: sides with the big move on the heels of the

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Speaker 1: Apple announcement. You know it, I don't because the problem

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Speaker 1: with that is we've already seen a pretty decent appreciation

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Speaker 1: in the end, So we've gone up to the dollars

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Speaker 1: traded up to sort of one twelve thirteen, down to

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Speaker 1: one oh seven before, and then higher up to back

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Speaker 1: one o eight, one or nine before this came back

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Speaker 1: down again. That's not a market that we're an appetite for.

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Speaker 1: Retail investor tends to be that those type of swings

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Speaker 1: um tend to to to trip margin calls way sooner

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Speaker 1: than they would in the institutional market or pension funds

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Speaker 1: or or the like. So a retail investor, while they

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Speaker 1: love volatility um love volatility and sort of one direction

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Speaker 1: momentum sense, they can't really handle the up and down

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Speaker 1: movement so much because they get taken out of positions

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Speaker 1: very quickly. So they would have had probably small positions,

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Speaker 1: I would guess going into this, So the suggestion that

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Speaker 1: they would be the cause is probably not correct, and

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Speaker 1: it has to do with the fact that the end

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Speaker 1: at one point broke one oh five. Yeah, right, I

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Speaker 1: mean one oh four eight seven against the dollar. That

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Speaker 1: was an early Asian trading. Yeah, and you had a

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Speaker 1: couple of standard deviation move And again when the program

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Speaker 1: see something like that and it's a big stretched trade,

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Speaker 1: as they try to push it, if they can't push

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00:25:00,280 --> 00:25:04,320
Speaker 1: it any further, it just simply reverses. Uh. And you

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Speaker 1: know when you say retail investors or anyone else, it's

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00:25:06,800 --> 00:25:08,800
Speaker 1: really difficult for human beings to get involved in that

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00:25:08,880 --> 00:25:11,520
Speaker 1: kind of trade because by the time you're looking at

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00:25:11,920 --> 00:25:15,240
Speaker 1: selling near the lows, it's probably already bounced going the

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00:25:15,240 --> 00:25:17,840
Speaker 1: other way. So there are times when traders get caught

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00:25:17,920 --> 00:25:19,920
Speaker 1: long and even before they can cut the trade at

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00:25:19,920 --> 00:25:23,720
Speaker 1: a loss, they're back in profit because it bounced self viciously.

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00:25:24,119 --> 00:25:27,639
Speaker 1: That it's better lucky than good sometimes and that helps

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Speaker 1: you if you're going to be called out on a margin. Yeah, absolutely.

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00:25:30,920 --> 00:25:33,480
Speaker 1: I mean sometimes sometimes you can't even get out of

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00:25:33,480 --> 00:25:36,840
Speaker 1: the trade after you've breached your margin fast enough and

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00:25:36,880 --> 00:25:39,320
Speaker 1: it either will continue or come back in your favor.

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00:25:39,359 --> 00:25:41,480
Speaker 1: In this case, if down at the lows, it would

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Speaker 1: have come back in your favor. And again, I think

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Speaker 1: the trading sideways movement today is suggestive of um some

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00:25:48,520 --> 00:25:52,880
Speaker 1: other programs being caught short at bad levels. Who are

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00:25:53,400 --> 00:25:56,359
Speaker 1: momentums who tried to push it in and weren't successful.

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00:25:56,480 --> 00:25:59,400
Speaker 1: Well the end currently trading it one oh seven eight

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Speaker 1: again the US dollar. Thanks very much, Vincent Cignarella, he

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Speaker 1: is our global macro strategist for Bloomberg News. Thanks for

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Speaker 1: listening to the Bloomberg P and L podcast. You can

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00:26:13,680 --> 00:26:17,520
Speaker 1: subscribe and listen to interviews at Apple Podcasts, SoundCloud, or

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00:26:17,560 --> 00:26:21,040
Speaker 1: whatever podcast platform you prefer. I'm pim Fox. I'm on

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Speaker 1: Twitter at pim Fox. I'm on Twitter at Lisa abramoits

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00:26:25,280 --> 00:26:28,320
Speaker 1: one before the podcast. You can always catch us worldwide

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00:26:28,320 --> 00:26:29,280
Speaker 1: on Bloomberg Radio