WEBVTT - No End In Sight For Latest Meme Stock Frenzy 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day, we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.560 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.640 --> 0:00:18.479 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:21.960 at Bloomberg dot com slash podcast. Let's take a look 0:00:22.000 --> 0:00:24.239 at those meme stocks. I mean again, I think about 0:00:24.239 --> 0:00:27.360 the beginning of the meme stock mania, if you will. 0:00:27.560 --> 0:00:30.720 It was a lot of smaller cab mid cap stocks, 0:00:31.200 --> 0:00:35.680 high short interest, uh and easy for these Reddit traders 0:00:35.680 --> 0:00:37.760 to kind of force a short squeeze, if you will. 0:00:37.840 --> 0:00:40.640 And it was really exacerbated by social media. But it 0:00:40.680 --> 0:00:43.440 seems still broadened out a little bit from that limited 0:00:43.560 --> 0:00:47.320 kind of scope. Barry Billy Lipscholtz, equities reporter for Bloomberg News, 0:00:47.360 --> 0:00:49.680 joins us on the phone here. Bailey, thanks so much 0:00:49.680 --> 0:00:52.040 for joining us here. The meme stock craze, it was there, 0:00:52.640 --> 0:00:55.160 it kind of went away. I'm thinking game stop and 0:00:55.240 --> 0:00:58.160 things like that, but it's come back. What's what's going 0:00:58.200 --> 0:01:01.560 on these days? Well, the biggest difference we're seeing now 0:01:01.600 --> 0:01:04.679 compared to where it was back in early January or 0:01:04.720 --> 0:01:08.960 into late January. Really has been kind of this incessant 0:01:09.520 --> 0:01:12.280 desire to find the next hot stock, and we're seeing 0:01:12.319 --> 0:01:15.000 that with hedge funds dipping their toe into it. Obviously, 0:01:15.160 --> 0:01:18.720 people on Reddit or stock twits or especially Twitter these 0:01:18.800 --> 0:01:21.840 days UM are pumping up their newest bets um. It's 0:01:21.959 --> 0:01:24.759 it's been really interesting just because it's we're seeing one 0:01:24.800 --> 0:01:27.480 stock really pop off for a day or a week, 0:01:27.680 --> 0:01:31.360 and then very quickly the scope tends to shift, which 0:01:31.400 --> 0:01:33.800 is obviously, again very different than what we saw in 0:01:33.880 --> 0:01:38.720 late January, where game stop AMC costs express. We're all 0:01:38.959 --> 0:01:42.039 kind of mimicking each other. By the way, is that 0:01:42.120 --> 0:01:47.319 the order now is Twitter um the king of locations 0:01:47.480 --> 0:01:51.640 for the meme stock mafia, and then stock twits and 0:01:51.680 --> 0:01:55.000 then read it. I mean, how should we follow this best? 0:01:55.960 --> 0:01:59.559 I think it's still probably goes Reddit Twitter than stock twits. Twitter, 0:01:59.600 --> 0:02:02.760 though Death really has become more and more popular simply 0:02:02.800 --> 0:02:04.680 because of the way the platforms laid out in the 0:02:04.680 --> 0:02:09.560 ability to follow um individual accounts that may have more 0:02:09.600 --> 0:02:12.600 insider perceived insight than others. Read it still kind of 0:02:12.680 --> 0:02:15.239 is a wild wild West where there's a mega thread 0:02:15.280 --> 0:02:17.800 and a lot of game stop being pushed um and 0:02:17.800 --> 0:02:20.000 then I would say stock to it's probably his third 0:02:20.000 --> 0:02:22.520 in line. But we're definitely seeing more of a more 0:02:22.520 --> 0:02:25.480 of a focus on Twitter um over the last you know, 0:02:25.600 --> 0:02:27.959 month or so, just because again, I think that the 0:02:28.040 --> 0:02:31.919 layout kind of amends itself more toward a average gambler 0:02:32.000 --> 0:02:36.720 or an average investor excuse me, or average gambler attention. 0:02:37.160 --> 0:02:39.320 I think the average gambler is fine. Yeah, that's fine. 0:02:39.360 --> 0:02:43.359 I think even the apes would defined with that Billy 0:02:43.639 --> 0:02:45.800 talk to us about like, I'm starting to see some 0:02:45.840 --> 0:02:49.760 more reporting that it's not just the retail investors or 0:02:49.919 --> 0:02:52.720 you know, the Dave portnoise of the world from Barstool Sports, 0:02:52.919 --> 0:02:55.200 who's got a big social media following, but it might 0:02:55.240 --> 0:02:59.359 actually be some professional investors, hedge funds getting in it. 0:02:59.400 --> 0:03:02.200 Do we have evidence, said, Golden Sound algorithm? What's that 0:03:02.560 --> 0:03:04.919 Goldman's got an album? An algorithm? Right? So, I mean, 0:03:05.360 --> 0:03:08.400 what's the role of the professional investor in here, Bailey? 0:03:08.680 --> 0:03:11.320 I think they're kind of picking off where they can 0:03:11.560 --> 0:03:13.880 make money. Obviously, if you just look at Alane, some 0:03:13.960 --> 0:03:16.399 of the trading volume in these stocks, it's kind of 0:03:16.639 --> 0:03:19.480 hard to sit back and argue that a retail crowd 0:03:19.520 --> 0:03:22.320 is able, you know, to have trade hundreds of millions 0:03:22.360 --> 0:03:25.360 of shares of AMC while also investing in Wendy's and 0:03:25.400 --> 0:03:27.680 other parts of the market. So I do think, and 0:03:27.720 --> 0:03:29.760 we have been hearing more and more that hedge funds 0:03:29.760 --> 0:03:32.079 have to be playing some part in this, especially when 0:03:32.080 --> 0:03:34.560 you look at kind of some of the call option 0:03:34.639 --> 0:03:37.640 trading and the underlying stock trades. It can't really be 0:03:37.680 --> 0:03:39.480 in the consensus that I've been hearing more and more 0:03:39.840 --> 0:03:42.000 um from my sources is that it can't really be 0:03:42.240 --> 0:03:45.360 just a coordinated retail attack. It has to be folks 0:03:45.400 --> 0:03:48.120 on Wall Street, your professional traders who are kind of 0:03:48.200 --> 0:03:50.480 jumping in on these trades, and whether they're getting in 0:03:50.600 --> 0:03:53.960 earlier or later continuing to help ride some of the momentum, 0:03:54.000 --> 0:03:57.160 are definitely playing apart. I'm waiting for a hedge fund 0:03:57.160 --> 0:03:59.640 to embed people on Wall Street beats, you know. I 0:03:59.680 --> 0:04:02.600 saw the other day somebody posted a screenshot of his 0:04:02.680 --> 0:04:06.320 td A Meritorie account with a one million dollar investment 0:04:06.360 --> 0:04:09.280 in a meme stock, and I thought, this has got 0:04:09.280 --> 0:04:12.240 to be a hedge fund dude who just wants to 0:04:12.240 --> 0:04:15.680 to pretend he's among the masses and try and speak 0:04:15.720 --> 0:04:18.920 as insensitively as he can to to stir up some 0:04:19.080 --> 0:04:22.640 drama around his stock. Also, they don't want to call 0:04:22.640 --> 0:04:24.120 it a meme stock. A lot. I know a lot 0:04:24.160 --> 0:04:26.000 of people on Wall Street Best Now are saying, hey, 0:04:26.279 --> 0:04:28.599 of course there's not a meme stock. That's not fair. 0:04:28.920 --> 0:04:31.440 Do you hear that a lot too? Yeah? No, I 0:04:31.440 --> 0:04:33.799 think you're seeing a divide. I remember I wrote something 0:04:34.080 --> 0:04:37.320 we mentioned Bill the Bear in the meme stock basket 0:04:37.800 --> 0:04:39.960 back in January. The amount of people who emailed me 0:04:40.040 --> 0:04:41.920 saying Bill the Bear is not a meme stock and 0:04:42.040 --> 0:04:45.080 has a solid core business and we're fundamentally long it. 0:04:45.160 --> 0:04:48.120 I think the term memes stock gets thrown around a bit, 0:04:48.160 --> 0:04:50.640 and depending on who's investing in the company or what 0:04:50.760 --> 0:04:54.520 the company is, definitely does trigger push back um because 0:04:54.560 --> 0:04:56.760 they don't want to group you know, some of these 0:04:56.760 --> 0:04:59.760 other companies with the likes of you know, an AMC 0:05:00.000 --> 0:05:02.640 creating at the market capital is at now or something 0:05:02.680 --> 0:05:06.000 like Express. It is definitely fascinating. Bailey, thanks so much 0:05:06.000 --> 0:05:09.120 for joining us. Bailey lip Schultz, equities reporter for Bloomberg News. 0:05:09.120 --> 0:05:11.200 I tell you can lose time. I went on Wall 0:05:11.200 --> 0:05:13.200 Street Bets the other day and I looked up and 0:05:13.240 --> 0:05:15.080 all of a sudden hour had passed. It was like 0:05:15.120 --> 0:05:21.479 I was playing Red Dead, Redemption two or something. When 0:05:21.600 --> 0:05:25.040 Chairman pal does speak this afternoon in two thirty Wall 0:05:25.080 --> 0:05:28.919 Street time, which Bloomberg will bring to you live, investors 0:05:28.960 --> 0:05:32.560 will be focusing uh many topics, but clearly inflation is 0:05:32.640 --> 0:05:35.880 top of the list, as the Fed chairman continue to 0:05:35.880 --> 0:05:38.360 believe that the inflation we are seeing in this economy 0:05:38.920 --> 0:05:42.120 is transitory or is it perhaps something more that will 0:05:42.200 --> 0:05:44.880 certainly be key. Let's check in with Marcus Schomer. He's 0:05:44.920 --> 0:05:48.479 a chief economist for pine Bridge Investments. Marcus, I'll love 0:05:48.520 --> 0:05:53.000 to get your thoughts here on inflation, um, and how 0:05:53.080 --> 0:05:55.200 you're viewing it and maybe what we might hear from 0:05:55.240 --> 0:06:00.400 Chairman Powell on this issue. Well, I it's not to 0:06:00.400 --> 0:06:03.599 be back on the show, um, And you know those 0:06:03.600 --> 0:06:05.960 are the themes that I talked a lot of our 0:06:06.040 --> 0:06:08.440 clients about as well. UM. I don't think we're going 0:06:08.480 --> 0:06:11.560 to hear much from from the feeding from Power today. 0:06:11.640 --> 0:06:14.080 I think they they still have enough time to hide 0:06:14.120 --> 0:06:20.520 behind the transitory sense that they've built around this issue. UM. 0:06:20.839 --> 0:06:22.920 I've sort of been quite critical of this because we're 0:06:22.920 --> 0:06:26.359 seeing inflation everywhere, right, and we shouldn't forget what the 0:06:26.400 --> 0:06:29.680 Fed is doing is they're choosing the smallest, narrowest and 0:06:29.800 --> 0:06:34.599 slowest inflation measure that we have where everywhere else outside 0:06:34.640 --> 0:06:36.760 of the PC to fate that which they prefer as 0:06:36.800 --> 0:06:40.840 the inflation measure in CPI and PPI, in financial markets 0:06:40.839 --> 0:06:43.680 and the housing market everywhere else, inflation is wanting much 0:06:43.760 --> 0:06:46.800 much higher than what they measure. Um but we kind 0:06:46.800 --> 0:06:50.200 of know that they're hiding behind this this CPS, this 0:06:50.360 --> 0:06:54.120 PC into a corner, Marcus. I mean a lot of 0:06:54.120 --> 0:06:56.360 people are starting to say, you know, they can't get 0:06:56.360 --> 0:06:59.479 out now without royally markets. I don't think it's a 0:06:59.520 --> 0:07:02.080 corner that they don't see it that way. They want 0:07:02.120 --> 0:07:03.920 to be there. I mean, I think what they're telling 0:07:03.960 --> 0:07:06.360 us is actually honest. They think running the economy hot 0:07:06.440 --> 0:07:09.560 is a good idea, Whereas if you look at the economy, 0:07:09.560 --> 0:07:11.120 I'm not so sure that it is such a good 0:07:11.120 --> 0:07:14.160 idea because I start to see more and more science 0:07:14.200 --> 0:07:18.119 that rising inflation, rising prices are now slowing growth. Because 0:07:18.120 --> 0:07:22.040 that's also the answer to this question, is inflation transitory, 0:07:22.120 --> 0:07:24.960 And in my view, inflation is always transitory if it 0:07:25.040 --> 0:07:28.680 doesn't also translate into higher wages, because if prices go up, 0:07:28.920 --> 0:07:31.760 purchase and tall goes down, and consumption will slow. And 0:07:31.800 --> 0:07:33.840 I think that's what start, that's what starting to see. 0:07:34.120 --> 0:07:36.200 I'm getting more nervous about the growth outlook in the 0:07:36.280 --> 0:07:39.480 US in the second half because of the surgeon prices 0:07:39.480 --> 0:07:42.080 that you've seen and the lack of follow up in wages. 0:07:42.640 --> 0:07:46.480 So Marcus, but as you were suggesting here, wage inflation, 0:07:46.520 --> 0:07:49.440 we haven't generally seen it. And even before the pandemic, 0:07:49.880 --> 0:07:53.200 when we're running in you know, effectively, you know, full employment, 0:07:53.800 --> 0:07:56.440 wage inflation was only you know, three and a half percent. 0:07:56.480 --> 0:07:59.400 I mean that that didn't seem too terrible. Do you 0:07:59.440 --> 0:08:01.960 think wage inflation is a material risk for this U 0:08:02.000 --> 0:08:06.640 S economy? Um? No, I think it's it's the opposite, right. 0:08:06.720 --> 0:08:10.440 If we were to get wage inflation, then this growth 0:08:10.440 --> 0:08:13.200 story can continue. We would have a different narrative. Then 0:08:13.280 --> 0:08:15.280 we would have we we have to talk about too 0:08:15.320 --> 0:08:18.520 much inflation and too much growth potentially, and that would 0:08:18.560 --> 0:08:20.280 be a problem for the FED. But I think what 0:08:20.320 --> 0:08:22.880 we're seeing right now is prices are going up because 0:08:22.920 --> 0:08:25.880 we have supplied issues and we have to stimulants fuel 0:08:25.960 --> 0:08:28.960 demand surge. At the same time, but wages are not 0:08:29.040 --> 0:08:32.360 keeping up to consumer purchasing powers going down. Real incomes 0:08:32.440 --> 0:08:36.120 are declining, and that would slow growth in the second half, 0:08:36.120 --> 0:08:38.840 and that I think feeds very well into that position 0:08:38.880 --> 0:08:41.400 to FED is in they don't care about the inflation. 0:08:41.800 --> 0:08:44.000 They want interest rate to stay low. And if the 0:08:44.000 --> 0:08:46.240 economy actually slows a little bit in the second half, 0:08:46.440 --> 0:08:49.679 that plays perfectly into their narrative. And they're going to 0:08:49.760 --> 0:08:51.800 be sitting there doing nothing, nothing for the rest of 0:08:51.840 --> 0:08:56.040 the year. So Muhammad Arian writes a piece for US today. 0:08:56.480 --> 0:09:00.400 He basically says what the FED should be doing is 0:09:00.440 --> 0:09:04.480 start now reducing exposure to a more risky posture by 0:09:04.520 --> 0:09:08.040 moving forward with a partial pivot I'm quoting directly from 0:09:08.080 --> 0:09:11.640 his op ed in light of the change circumstances, thereby 0:09:11.720 --> 0:09:16.680 keeping their options open and better balancing risk um and 0:09:16.679 --> 0:09:19.959 and but that's not what they're going to do, and 0:09:20.160 --> 0:09:23.240 he says that really they risk both an economic recession 0:09:23.320 --> 0:09:27.720 and financial market instability, especially the latter. Marcus, the concern 0:09:27.800 --> 0:09:31.439 that financial market instability is one of the big risks 0:09:31.679 --> 0:09:35.840 is something we're hearing echoed across global Wall Street, because 0:09:36.640 --> 0:09:40.480 you know, with rates this low, everybody gets such cheap money. 0:09:40.720 --> 0:09:45.160 You know, junk bonds are trading at their tightest spreads 0:09:45.200 --> 0:09:51.040 in all time, and um, it just seems like, you know, uh, 0:09:51.320 --> 0:09:54.440 ratings agencies are coming out upgrading everybody because they don't 0:09:54.440 --> 0:09:56.840 have to pay very much the service this debt. But 0:09:57.040 --> 0:10:00.400 meanwhile leverage is growing and growing and growing. Isn't it 0:10:00.440 --> 0:10:04.880 a worry? I think it should be a worry on 0:10:05.000 --> 0:10:06.960 the Fat's radio screen. That's true, But I think, well, 0:10:06.960 --> 0:10:10.400 hammaga Aaron still looking at the old world. Right, Remember 0:10:10.480 --> 0:10:12.520 a couple of years ago when when Jannet Yellen was 0:10:12.600 --> 0:10:15.200 raising raids, the argument was, well, we need to raise 0:10:15.280 --> 0:10:18.040 rights so we can custom again, right, we need to 0:10:18.120 --> 0:10:20.200 refill the arsenal so we can do something in the 0:10:20.200 --> 0:10:23.520 next crisis. The Power Fat doesn't think that way at all. 0:10:23.559 --> 0:10:25.599 They think, right now, we're fine. We're only going to 0:10:25.679 --> 0:10:28.360 do something if there really is a problem on the rise, 0:10:28.400 --> 0:10:30.480 and then we will change. So where we are today 0:10:30.760 --> 0:10:33.679 is normal, is neutral. This is where we're gonna stay 0:10:33.960 --> 0:10:37.280 until something changes. There's no idea that, oh, if things 0:10:37.320 --> 0:10:38.960 are not so bad anymore, we need to go back 0:10:39.000 --> 0:10:41.280 to something as neutral. That's not the way power the 0:10:41.320 --> 0:10:43.600 power FET looks at it. So I think we will 0:10:43.679 --> 0:10:48.760 get nothing from the feed for the foreseeable future marks 0:10:48.800 --> 0:10:52.599 just real quick thirty seconds here, Um do you is? 0:10:52.640 --> 0:10:55.640 I mean, how do you view GDP for the remainder 0:10:55.679 --> 0:10:59.240 this year and next year? What's your forecast? Well? I 0:10:59.240 --> 0:11:02.160 actually think we're we're gonna That's why I was seeing earlier. 0:11:02.160 --> 0:11:04.120 I think there's a bit of a downside risk emerging 0:11:04.200 --> 0:11:07.480 here for g d p UM. But you know, the 0:11:07.559 --> 0:11:10.400 numbers are so high, so much above what what's normal. 0:11:10.520 --> 0:11:12.600 What we all think is sort of the underlying potential 0:11:12.600 --> 0:11:14.960 growth with whether it's gonna be five percent or six 0:11:14.960 --> 0:11:17.439 percent or seven that's of the range of all the forecasts. 0:11:17.679 --> 0:11:20.280 Our number is five point nine, but I don't have 0:11:20.320 --> 0:11:22.880 a lot of confidence in that number. Next year's number 0:11:22.880 --> 0:11:25.679 will also be significantly about potential. I think that's all 0:11:25.720 --> 0:11:29.560 that matters, all right, Marcus, thanks very much for joining us. 0:11:29.640 --> 0:11:33.480 Marcus Schomer, their chief economist at pine Bridge Investments, talking 0:11:33.520 --> 0:11:34.960 to us about the FED. We're all going to be 0:11:35.000 --> 0:11:38.360 watching the special coverage starting today at one thirty pm 0:11:38.400 --> 0:11:41.560 Wall Street Time with Tom Keene and Lisa Obramo. It's 0:11:41.600 --> 0:11:47.559 this is Bloomberg. I want to bring in Daniel d 0:11:47.679 --> 0:11:50.280 Martino Booth. We've been waiting to hear from her all days. 0:11:50.280 --> 0:11:53.720 Cee On, director of intelligence at Quill Intelligence, a former 0:11:53.760 --> 0:11:56.600 advisor of the Dallas Fed, also a Bloomberg Opinion contributor, 0:11:56.600 --> 0:11:58.559 and she's got a lot to say about what we 0:11:58.559 --> 0:12:02.280 should expect today. Danielle Um. There has been a brewing 0:12:03.760 --> 0:12:09.600 I guess, uh brewing opinion um anti to the Fed, 0:12:10.160 --> 0:12:15.960 to the Fed's outcome based framework, coming from Peter Hooper 0:12:15.960 --> 0:12:18.680 at Deutsche Bank, Andy hal Dane at the Bank of England, 0:12:18.679 --> 0:12:20.720 now from Muhammad al Arian as well, that he's been 0:12:20.720 --> 0:12:23.320 writing about this for a while, saying that they're they're 0:12:23.360 --> 0:12:26.240 really taking a huge risk and really getting into danger 0:12:26.360 --> 0:12:31.120 by sticking to um this policy of of watching and 0:12:31.200 --> 0:12:34.680 waiting for inflation transitory. So they say to to to 0:12:34.760 --> 0:12:38.560 go back away. What do you think, well, Um, I 0:12:38.600 --> 0:12:41.360 think you have to look at the fact that the 0:12:41.360 --> 0:12:44.640 Fed is taking comfort from certain silos, if you will, 0:12:45.360 --> 0:12:48.120 of inflation. If you look at the c RBND, for example, 0:12:48.120 --> 0:12:50.840 it's down on the week, and we've we've seen the 0:12:50.960 --> 0:12:54.640 number of commodities that are rising come down appreciably, So 0:12:54.760 --> 0:12:56.680 the Fed's going to take comfort in that pocket. On 0:12:56.720 --> 0:13:00.319 the other hand, we're seeing the kind of inflayation that 0:13:00.400 --> 0:13:05.920 becomes sticky, becomes very problematic. Zillo reported that rents are 0:13:06.040 --> 0:13:09.720 up two plus percent uh in in May over April 0:13:09.720 --> 0:13:13.360 in the in the largest cities largest the top eight 0:13:13.360 --> 0:13:15.960 cities of the in the United States that were fift 0:13:17.600 --> 0:13:21.480 So if this starts to percolate through, it's the largest 0:13:21.520 --> 0:13:25.319 input to inflation, that Fed's gonna have a serious problem 0:13:25.360 --> 0:13:28.520 on its hand, especially because it's playing chicken with the 0:13:29.400 --> 0:13:32.920 millions of people who are slowly flowing back into the 0:13:33.000 --> 0:13:36.320 labor pool. That that process won't end, if you will, 0:13:36.480 --> 0:13:40.360 until after schools is fully reopened and the supplemental unemployment 0:13:40.360 --> 0:13:44.319 benefits have fully expired nationwide. So Danielle, before I ask 0:13:44.400 --> 0:13:46.520 this next question, I have to prefaces by saying you 0:13:46.559 --> 0:13:49.559 are the author of a book entitled fed Up and 0:13:49.679 --> 0:13:52.720 Insiders take on why the Federal Reserve is bad for America. 0:13:52.800 --> 0:13:55.959 So my question is has to FED. I mean, are 0:13:56.000 --> 0:13:59.800 they basically done? Should they just step away here and say, Okay, 0:13:59.800 --> 0:14:02.600 we did our job here. Now we're gonna let this 0:14:02.679 --> 0:14:07.040 economy kind of go on its own. I think that 0:14:07.080 --> 0:14:09.360 if the FED was to do a full rip off 0:14:09.360 --> 0:14:12.120 the band Aid approach that the harm that would be 0:14:12.160 --> 0:14:16.560 created given stocks remain of the nine percentile historically would 0:14:16.600 --> 0:14:20.920 be would would would do more damage than they're acknowledging 0:14:21.320 --> 0:14:25.160 that inflation has become problematic. They have a very elegant solution, however, 0:14:25.440 --> 0:14:26.880 and that is that they can pull back from their 0:14:26.880 --> 0:14:31.880 mortgage backed security. Uh, I'm very damning optically the housing market. 0:14:32.040 --> 0:14:35.640 Nobody doubts that housing has run off the rails, and 0:14:35.840 --> 0:14:37.960 they could say, you know what, we and and in fact, 0:14:38.040 --> 0:14:41.200 yesterday the New York Fed released a statement saying that 0:14:41.200 --> 0:14:43.720 they were gonna be test driving. They're gonna be testing 0:14:43.760 --> 0:14:50.160 out selling, outright selling mortgage backed securities starting next week. Um, 0:14:50.200 --> 0:14:53.840 will that do anything to help the housing market? Well, 0:14:54.600 --> 0:14:58.600 if the housing market has overheated, right, too much stimulus 0:14:58.680 --> 0:15:00.920 or too little stimulus can break housing. And that's what 0:15:01.000 --> 0:15:03.640 we've learned in the current episode, that too much stimulus 0:15:03.680 --> 0:15:08.000 can actually break housing. So it's the objective is to 0:15:08.040 --> 0:15:10.280 take some of the heat out of the market. You 0:15:10.320 --> 0:15:13.440 would certainly do that by reducing the mortgage back securities 0:15:13.480 --> 0:15:16.640 market and getting the FED out of the mortgage market. Danielle, 0:15:16.640 --> 0:15:18.880 how do you view the labor market here? You know, 0:15:18.880 --> 0:15:21.680 we're the jobs that have been edit have been over 0:15:21.680 --> 0:15:23.880 the last couple of months have been less than expected, 0:15:23.920 --> 0:15:26.320 and uh, you know, I presumably that gives the FED 0:15:26.400 --> 0:15:28.760 some more leeway to kind of stay on the sidelines here. 0:15:29.200 --> 0:15:32.800 The risk of wage inflation, presumably is is is not 0:15:32.840 --> 0:15:35.360 necessarily front and center. How do you view the labor market? 0:15:36.960 --> 0:15:40.240 So again, I think that it is a wait and see. 0:15:40.280 --> 0:15:43.600 We are seeing, uh, the unemployment rate in these states 0:15:43.680 --> 0:15:46.200 that are pulling out for four states last Saturday, eight 0:15:46.280 --> 0:15:51.200 states is coming Saturday total between now and in July nineteen. 0:15:51.520 --> 0:15:55.720 We are seeing activity and movement move up in these 0:15:55.760 --> 0:15:58.720 states in the as these labor pools are replenished. We're 0:15:58.760 --> 0:16:02.400 also seeing teenagers poor into the labor market at the 0:16:02.440 --> 0:16:05.400 fastest pace. Since I think you have an eight I mean, 0:16:05.440 --> 0:16:07.720 it's a magnificent number, and that's great for teams. You're 0:16:07.720 --> 0:16:10.520 gonna make a ton of money this summer making My 0:16:10.960 --> 0:16:13.280 seventeen year old was offered eighteen dollars an hour just 0:16:13.480 --> 0:16:18.200 yesterday hopefully doing nothing. Um So, because it's it's the 0:16:18.280 --> 0:16:22.640 low skilled work that needs to be fulfilled, and people 0:16:22.640 --> 0:16:24.720 aren't factoring in the fact that it's not just people 0:16:24.720 --> 0:16:26.880 going from state an average of six d and thirty 0:16:26.960 --> 0:16:29.080 to three d and thirty a week in unemployment benefits 0:16:29.080 --> 0:16:32.960 if they're on extended state. The gig workers, the contractors. 0:16:33.520 --> 0:16:35.320 If these states are pulled in the plug earlier they 0:16:35.520 --> 0:16:38.960 they run, their safety net goes away completely. And you 0:16:39.000 --> 0:16:42.320 have rental eviction moratoriums that are expiring also at the 0:16:42.440 --> 0:16:45.160 end of June. So you know, I think the FEDS 0:16:45.200 --> 0:16:47.880 wait and see on wage inflation is appropriate for a 0:16:47.880 --> 0:16:51.520 little while longer until we know what the labor pool really, 0:16:51.920 --> 0:16:54.600 what the population of the labor pool truly is here 0:16:54.680 --> 0:16:57.560 in the coming twelve weeks. I think you're underestimating the 0:16:57.640 --> 0:17:00.880 skills of your seventeen year old. I just want to 0:17:00.920 --> 0:17:03.440 quickly ask you if you can fly a plane, Oh, 0:17:03.480 --> 0:17:07.880 that's all right, airlines need pilots. Uh, then he should 0:17:07.920 --> 0:17:10.560 be getting paid more. I just want to quickly ask you, 0:17:10.560 --> 0:17:12.840 we only got about thirty seconds here, but I've been 0:17:12.840 --> 0:17:16.280 watching the reverse repo facility with wide eyes. Is it 0:17:16.480 --> 0:17:19.160 really that big of a deal or on what's happening there? 0:17:20.840 --> 0:17:22.520 So you know it would be that big of a 0:17:22.560 --> 0:17:25.119 deal had we not had yesterday dot dot dot and 0:17:25.200 --> 0:17:26.840 one data point does not make for a trend. But 0:17:26.880 --> 0:17:28.639 the fact that we came down from five four to 0:17:28.720 --> 0:17:32.000 five oh nine as the Treasury is checking account, that 0:17:32.040 --> 0:17:34.880 tells us the FED, if you will, is depleted as 0:17:34.920 --> 0:17:36.920 we as we head into the end of July when 0:17:36.920 --> 0:17:40.000 they want to get that balance down to five billion dollars. 0:17:40.400 --> 0:17:42.560 I think that as long as we see these numbers 0:17:42.600 --> 0:17:45.159 continue to come down, they might pop back up by 0:17:45.160 --> 0:17:47.600 the way going into quarter, and they always do window 0:17:47.720 --> 0:17:49.840 dressing purposes. But as long as we see that it's 0:17:49.880 --> 0:17:52.320 been coming back down, then the Fed can claim it's 0:17:52.400 --> 0:17:54.919 purely mechanical in nature. If it keeps going up, that 0:17:55.000 --> 0:17:57.399 starts to flash credit risk. All right, daniel thank you 0:17:57.440 --> 0:17:59.720 so much for joining us to really appreciate getting your 0:17:59.760 --> 0:18:02.679 thoughts on this FED day. Danielle di Martino bou the 0:18:02.720 --> 0:18:06.040 CEO and director of Intelligence at Quill Intelligence and a 0:18:06.080 --> 0:18:09.800 former advisor at the Federal Reserve of Dallas and a 0:18:09.840 --> 0:18:14.000 Bloomberg opinion contributor. Well more coming up this is Bloomberg. 0:18:17.720 --> 0:18:20.960 Well the metrics as it relates to vaccines, they remained positive. 0:18:21.000 --> 0:18:26.000 Here in the US. The reopening is continues to accelerate. 0:18:26.040 --> 0:18:28.600 We saw the state of California fully reopened new York 0:18:28.680 --> 0:18:32.120 yesterday fully reopened, joining a number of other states. So 0:18:32.400 --> 0:18:34.919 the question is how do you play that in the 0:18:35.119 --> 0:18:38.919 stock market. Scott Rent, Senior global market strategist for the 0:18:38.920 --> 0:18:42.200 Wells Fargo Investment Institute Joints is Scott, thanks so much 0:18:42.240 --> 0:18:44.440 for joining us here. You know, love to get your 0:18:44.440 --> 0:18:48.160 thoughts on kind of your positioning in the equity markets. Here. 0:18:48.240 --> 0:18:51.680 We've you know, had this rotation trade into uh let's 0:18:51.720 --> 0:18:54.399 call it, some cyclical names, some smaller cap names, some 0:18:54.520 --> 0:18:57.480 names that might benefit from, you know, a reopening economy. 0:18:57.480 --> 0:19:00.560 They performed so well and perhaps even out warmed, you know, 0:19:00.600 --> 0:19:02.840 some of the tried and true growth stocks, the Amazon's 0:19:02.880 --> 0:19:05.280 Apples of the world, that have been such good performers 0:19:05.280 --> 0:19:08.520 really since the financial crisis of twelve years ago. How 0:19:08.560 --> 0:19:11.960 do you kind of think about, you know, your portfolio 0:19:12.000 --> 0:19:15.440 construction talking to your clients, Well, Paul, I think you 0:19:15.520 --> 0:19:17.880 have to you have to say to yourself, is this 0:19:18.000 --> 0:19:20.439 recovery in the early stages, which we think it is. 0:19:21.040 --> 0:19:22.960 Do we think it's going to be a global recovery? 0:19:23.119 --> 0:19:27.120 We do, um, So we've been leaning toward these more 0:19:27.280 --> 0:19:33.080 cyclical areas, these more cyclical sectors like you know, financials, industrials, materials. 0:19:33.320 --> 0:19:35.960 As a matter of fact, just about a month ago 0:19:36.119 --> 0:19:40.920 or so, we downgraded UH tech, we downgraded consumer discretionary, 0:19:41.000 --> 0:19:43.639 and we had been overweight those two sectors for a 0:19:43.760 --> 0:19:46.920 long long time. So we want, you know, growth is 0:19:46.960 --> 0:19:50.119 going to have to participate here if the market is 0:19:50.160 --> 0:19:51.840 going to do what we think it's going to do 0:19:51.920 --> 0:19:54.960 over the next six months or eighteen months. So we 0:19:55.000 --> 0:19:58.320 have a full allocation to tech, which is about of 0:19:58.359 --> 0:20:01.679 the market cavity s P. Five hundred, But we have 0:20:01.800 --> 0:20:07.359 been been basically leaning towards those sectors energies included in 0:20:07.400 --> 0:20:12.320 that communication services, UM materials that we think are going 0:20:12.400 --> 0:20:14.800 to to participate. So that's what we've been talking to 0:20:14.840 --> 0:20:17.879 our clients about. Is that in the US, Scott or 0:20:17.960 --> 0:20:22.199 is that are you talking about globally because we've run 0:20:22.280 --> 0:20:24.720 up there, Yeah, right, you know when we have and 0:20:24.760 --> 0:20:26.880 we've we've stuck with them, and I think we're going 0:20:26.960 --> 0:20:29.160 to and we're gonna have some back and forth here, 0:20:29.280 --> 0:20:32.439 especially whether it's around a FED meeting or are we 0:20:32.480 --> 0:20:34.200 going to have a lot of inflation or not, which 0:20:34.240 --> 0:20:37.280 is is obviously a quick key question. But you know, 0:20:37.320 --> 0:20:41.119 we like emerging markets as well as an asset class. 0:20:41.119 --> 0:20:44.480 And if you look at China, South Korea, Taiwan, you 0:20:44.520 --> 0:20:46.919 know they're going to make up whatever e M index 0:20:47.000 --> 0:20:49.760 you're looking at. They're making up the bulk of the 0:20:49.840 --> 0:20:52.640 market cap. And you know, if those if those countries 0:20:52.680 --> 0:20:55.320 are doing well, which we think they are, dollars a 0:20:55.320 --> 0:20:58.760 little lower, commodity prices are up, we think emerging markets 0:20:58.800 --> 0:21:01.480 is a good place to be. Scott, what do you 0:21:01.520 --> 0:21:07.199 expect to hear from FED Chairman Pal today? Well, I 0:21:07.240 --> 0:21:11.080 think it's going to be largely status quo. And what 0:21:11.080 --> 0:21:14.600 what I believe that means is that acknowledging that you know, 0:21:14.760 --> 0:21:17.720 growth has really come back quickly, that we're seeing some 0:21:17.840 --> 0:21:21.480 higher inflation, that the FED believes it's transitory, and we 0:21:21.560 --> 0:21:26.800 certainly believe that inflation is going to decelerate in um. 0:21:27.200 --> 0:21:29.200 I think it's key. You know, the market is going 0:21:29.240 --> 0:21:34.000