WEBVTT - Markets, The Fed, And Crypto 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 0:00:15.600 --> 0:00:18.479 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.599 at Bloomberg dot com slash podcast. All right, the Federal 0:00:22.800 --> 0:00:26.320 Reserve is raising interest rates. I think we all get that. 0:00:26.480 --> 0:00:28.000 The question now that I hear from a lot of 0:00:28.000 --> 0:00:31.280 investors is how aggressively will they be doing? Are we 0:00:31.360 --> 0:00:34.560 talking twenty five basis points at a time, fifty basis points? 0:00:34.600 --> 0:00:37.120 How much an aggregate? Let's check in with somebody who 0:00:37.280 --> 0:00:39.640 kind of does this stuff for living. David Riley, chief 0:00:39.680 --> 0:00:43.320 investment strategist for Blue Bay Asset Management. David, the US 0:00:43.400 --> 0:00:46.199 Federal Reserve is in a hiking mode. How do you 0:00:46.320 --> 0:00:50.880 envision it playing out? Hi, Paul, Well, I actually think 0:00:50.960 --> 0:00:54.800 the Fed is more likely to have a hiking cycle 0:00:55.000 --> 0:00:59.680 rather like the one that we had in and that's 0:00:59.720 --> 0:01:03.280 where the Fed, you know, it was actually very aggressive. 0:01:03.440 --> 0:01:06.400 It hiked rates by three hundred basis points in the 0:01:06.400 --> 0:01:10.360 course of um twelve months. It kind of got ahead 0:01:10.520 --> 0:01:15.440 of inflation issues. The economy did slow down, but it 0:01:15.480 --> 0:01:18.680 didn't go into recession, and so you know, the FED 0:01:18.840 --> 0:01:22.640 engineered a soft landing for the economy, retained its kind 0:01:22.640 --> 0:01:27.120 of UM anti inflation or reinforced is anti inflation credentially. 0:01:27.200 --> 0:01:30.640 So I actually think that's a more likely past now 0:01:30.720 --> 0:01:33.280 for the FED because it is behind the inflation curve 0:01:33.640 --> 0:01:37.000 than this kind of you know model that a lot 0:01:37.040 --> 0:01:38.720 of people look at, which is two thousand and four 0:01:38.800 --> 0:01:41.399 to six, where it was a very gradual, very predictable, 0:01:41.800 --> 0:01:46.000 twenty five basis point hike at each meeting. What does 0:01:46.080 --> 0:01:49.240 this mean then for positioning? Paul and I have talked 0:01:49.280 --> 0:01:51.800 a lot about duration. Are one hundred year bond is 0:01:51.840 --> 0:01:55.760 down about fifty has duration does not do well in 0:01:55.840 --> 0:01:58.080 higher rates. How are you thinking then about what this 0:01:58.160 --> 0:02:02.680 means for positioning an important folio out. Yeah, so I 0:02:03.120 --> 0:02:06.320 do think that, um, you know, we've we've got a 0:02:06.320 --> 0:02:09.360 lot now priced in. I still think the market is 0:02:09.560 --> 0:02:12.560 underpricing where the FED is actually going to go up. 0:02:12.680 --> 0:02:16.600 So in terms of positioning in our fixed income port boliers, 0:02:17.160 --> 0:02:20.440 we would still have over the medium term a UM 0:02:20.680 --> 0:02:24.519 short duration bias when it comes to US rates would 0:02:24.560 --> 0:02:27.200 still rather express that at the shorter end than at 0:02:27.200 --> 0:02:31.240 the longer end, because as you've been reporting, we're you know, 0:02:31.360 --> 0:02:35.520 seeing a pretty dramatic flattening of the treasury curve and 0:02:35.560 --> 0:02:37.919 it's and it's quite I mean we've we've also had 0:02:37.919 --> 0:02:41.840 a sort of intra day UM that tend to invers 0:02:42.160 --> 0:02:45.280 as well. So and then within credit, I think it 0:02:45.360 --> 0:02:48.160 makes sense to be thinking about kind of moving up 0:02:48.200 --> 0:02:52.600 in quality, getting access in a high inflation environment to 0:02:52.680 --> 0:02:56.240 real assets, so maybe taking some exposure through you know, 0:02:56.320 --> 0:03:01.760 securitized mortgage securities as well. All right, David, I'm going 0:03:01.800 --> 0:03:04.480 for yield. I'm ready to take some risk. I'm going 0:03:04.639 --> 0:03:06.680 looking at the high yield market, maybe even the leverage 0:03:06.720 --> 0:03:09.440 loan market. What are some of the sectors I should 0:03:09.440 --> 0:03:13.760 be looking at right now? Yeah, I mean the sectors 0:03:13.800 --> 0:03:16.839 that have done you know, pretty well within the high 0:03:16.960 --> 0:03:21.080 yield and leverage loan space, UM, as you would expect, 0:03:21.160 --> 0:03:26.640 has been UM energy, UM. I think the other areas 0:03:26.680 --> 0:03:29.200 where I would go would be and we have been going, 0:03:29.320 --> 0:03:36.200 is some of the more defensive sectors, so UM, consumer staples, healthcare. UM. 0:03:36.240 --> 0:03:38.760 There's not so much tech, but you know, what you 0:03:38.840 --> 0:03:41.960 want to get I think is exposure to sectors or 0:03:42.320 --> 0:03:47.280 those names which can absorb those higher input prices, those 0:03:47.360 --> 0:03:50.440 higher input input costs that are coming from you know, 0:03:50.520 --> 0:03:54.400 higher gasoline, higher ore prices, and energy prices more more 0:03:54.440 --> 0:03:58.440 generally have the you know, the pricing power to absorb that, 0:03:59.440 --> 0:04:02.000 where I would the void would be things like sort 0:04:02.040 --> 0:04:06.160 of some of the industrials, you know, auto park suppliers 0:04:06.360 --> 0:04:08.800 margins are pretty low. They're going to get I think 0:04:08.880 --> 0:04:13.320 quite um squeezed in terms of those margins. And more recently, 0:04:13.320 --> 0:04:16.359 I've actually been shifting from loans back into high yield 0:04:17.160 --> 0:04:19.520 bombs because you know, we've had a lot of repricing 0:04:19.600 --> 0:04:22.159 or higher rate risk is now in in in high 0:04:22.240 --> 0:04:26.520 your bomb prices. Well, in terms of leverage loans, we're 0:04:26.520 --> 0:04:29.520 going to see significant increase in the cost of that 0:04:29.600 --> 0:04:32.480 funding for a lot of uh for a lot of companies. 0:04:32.520 --> 0:04:36.080 So a bit more bias towards more defensive sectors, higher 0:04:36.120 --> 0:04:40.520 margin um and also to you know, starting to shift 0:04:40.520 --> 0:04:43.800 from from loans into high yield I am curious when 0:04:43.800 --> 0:04:47.000 you think about credit, how much of that is a 0:04:47.080 --> 0:04:52.440 sort of a fundamental strong economy call versus shorter modified 0:04:52.480 --> 0:04:59.320 duration than investment grade and it's just a shorter duration call. Yeah, 0:04:59.160 --> 0:05:03.360 as a the fair point, um. I mean, I do 0:05:03.520 --> 0:05:05.480 think when you look at it's interesting when you look 0:05:05.480 --> 0:05:09.200 at the credit market more more broadly, um, including in 0:05:09.200 --> 0:05:11.280 particularly within the high yield market. I mean, we're just 0:05:11.400 --> 0:05:16.239 not seeing of sort of really meaningful signs signs of 0:05:16.240 --> 0:05:19.880 of of of cracks. And I do think that, you know, 0:05:20.000 --> 0:05:24.159 the liquidity position of companies, including within the high yield market, 0:05:24.360 --> 0:05:27.320 is actually still very strong. I mean they've built up huge, 0:05:27.600 --> 0:05:31.720 you know, pretty big cash balances. Leverage is actually now 0:05:32.040 --> 0:05:37.120 the lower it was just prior to the pandemic. So 0:05:37.200 --> 0:05:40.719 I think, you know, default rates, the fundamental kind of 0:05:40.760 --> 0:05:44.960 credit risk is actually looking still um, pretty good. So 0:05:45.360 --> 0:05:49.359 I still think it makes sense, as you've suggested, to 0:05:49.440 --> 0:05:52.400 have a bias towards higher yielding because you've got that 0:05:52.640 --> 0:05:55.840 kind of spread cushion against higher rates and it's a 0:05:55.880 --> 0:06:01.120 shorter duration asset. So, David, you know, like the rest 0:06:01.120 --> 0:06:03.480 of the world, we're watching what's happening in the Ukraine, 0:06:03.520 --> 0:06:06.120 and but for Americans there's a little bit of yeah, 0:06:06.160 --> 0:06:08.680 but it's over there, But over there is in the 0:06:08.720 --> 0:06:11.640 backyard of Europe. How is the European credit markets reacted 0:06:12.040 --> 0:06:14.360 to the geopolitical issues taking place to the war taking 0:06:14.360 --> 0:06:18.000 place in Ukraine. Yeah, I mean it's been interesting because 0:06:18.200 --> 0:06:21.200 I mean, it's certainly the case that European credit has 0:06:21.920 --> 0:06:27.800 um since Russia's invasion of Ukraine underperformed u US credit. 0:06:27.920 --> 0:06:31.120 It's sold off initially much harder, and then it's come 0:06:31.160 --> 0:06:35.840 back um or tightened less quickly. And I think that 0:06:35.880 --> 0:06:39.400 makes sense because you know, I mean, I think the 0:06:39.440 --> 0:06:42.599 economic and the year political risks are much greater for 0:06:42.760 --> 0:06:45.520 Europe than they are for the United States in terms 0:06:45.560 --> 0:06:50.920 of the Russia Russia Ukraine crisis. And you know, gas 0:06:51.000 --> 0:06:53.800 prices is a huge issue for for for Europe. Even 0:06:53.839 --> 0:06:57.760 though we've seen you know, some um the recent decline 0:06:57.920 --> 0:07:01.719 or or drop in European natural prices, they're still you know, 0:07:01.800 --> 0:07:04.600 five six times where they were a year ago. And 0:07:04.800 --> 0:07:06.720 you know, talking to some of our analysts have been taught, 0:07:06.720 --> 0:07:09.720 you know, analyzing companies and talking some of those European companies, 0:07:10.080 --> 0:07:13.280 they're feeling some companies are starting to fill this neece 0:07:13.360 --> 0:07:16.920 from this increase in emper prices. And we've just seen 0:07:17.520 --> 0:07:21.559 German inflation at levels we've not seen since the early 0:07:21.640 --> 0:07:25.080 mid nine seventies, and that's painful to consumers, but it's 0:07:25.080 --> 0:07:28.360 painful for businesses as well. Ye. Good stuff. Hey, David, 0:07:28.360 --> 0:07:30.400 thanks so much for joining us. David Riley, chief investment 0:07:30.440 --> 0:07:38.320 strategist for Bloombley Asset Management. We got Michael McKee, Bloomberg 0:07:38.320 --> 0:07:41.360 Economics Editor. Here's here in a Bloomberg Interactive Broker studio. 0:07:41.400 --> 0:07:45.880 After chatting with Richmond FED President Thomas Barkin, again he 0:07:45.920 --> 0:07:51.720 seems like a reasonable business base. FED president came across 0:07:51.760 --> 0:07:53.720 pretty reasonable to me. But Rachel going up and they're 0:07:53.720 --> 0:07:55.880 gonna do what it takes. Rachel going up, They're gonna 0:07:55.920 --> 0:07:59.280 do what it takes. Uh, He's a little less convinced. 0:07:59.320 --> 0:08:01.880 I think that grates have to go as high as 0:08:01.960 --> 0:08:06.119 some people are suggesting, and he's open to a fifty 0:08:06.160 --> 0:08:09.720 basis point move, but not saying it's definitely has to happen. 0:08:09.720 --> 0:08:11.640 He's not a voter this year, but in terms of 0:08:11.680 --> 0:08:15.240 his opinion, because I think he maybe gets a view 0:08:15.320 --> 0:08:18.000 from the district, from the CEOs in his district that 0:08:18.960 --> 0:08:21.760 as you heard, things maybe slowing down a little bit, 0:08:21.840 --> 0:08:25.240 not a whole lot, but these things tend to gain 0:08:25.360 --> 0:08:27.840 momentum as you go along. You had a really good 0:08:27.920 --> 0:08:33.120 question about sort of the wage spiral and maybe that 0:08:33.240 --> 0:08:37.240 self fulfilling prophecy of if inflations higher costs arising, you 0:08:37.280 --> 0:08:39.640 need higher wages to keep up with that, and then 0:08:39.960 --> 0:08:42.920 companies have the ability to raise costs again because they 0:08:42.960 --> 0:08:45.679 know that workers are getting paid more. Is that a 0:08:45.760 --> 0:08:49.280 legitimate concern. Well, it's been the fence concerned all along. 0:08:49.360 --> 0:08:52.600 They don't want people to start thinking that inflation is 0:08:52.640 --> 0:08:55.120 embedded and going to stay that way, because then they 0:08:55.280 --> 0:08:59.560 keep asking for more money. Tom was suggesting that we 0:08:59.679 --> 0:09:02.800 might be seeing the early signs of that slowing down 0:09:02.840 --> 0:09:08.760 because companies did raise prices and now people are they 0:09:08.840 --> 0:09:10.960 had to raise their wages to keep up with it 0:09:11.000 --> 0:09:13.040 and to get people back into the labor force. But 0:09:13.400 --> 0:09:16.400 people may at this point have gotten the rays they need, 0:09:17.200 --> 0:09:20.760 and if gasoline prices in particular come down soon, they 0:09:20.760 --> 0:09:23.959 may not need to continue that. But it is their 0:09:24.000 --> 0:09:27.320 biggest fear. I just had my year in review. I 0:09:27.320 --> 0:09:31.160 did not experience any wage spiraling anywhere. I mean, maybe 0:09:31.240 --> 0:09:34.040 inching is maybe the better thing. And you're gonna be 0:09:34.080 --> 0:09:38.040 complaining when you fill up that pancakes, right, all right? 0:09:38.080 --> 0:09:42.080 So this federal reserve um is there still an argument 0:09:42.120 --> 0:09:45.080 to me that they're behind the curve um. I'm not 0:09:45.080 --> 0:09:47.240 even sure what that means, but it's certainly something people 0:09:47.320 --> 0:09:49.480 toss out there. But it feels like my federal reserve 0:09:49.520 --> 0:09:52.920 is moving here while they are moving. They've moved once, 0:09:53.040 --> 0:09:54.800 and it looks like they're going to speed it up. 0:09:56.040 --> 0:09:59.520 Behind the curve is a sort of matter of where 0:09:59.559 --> 0:10:03.680 you sit and what your view is. Uh. People on 0:10:03.720 --> 0:10:06.040 trading desks are always going to look for a reason 0:10:06.200 --> 0:10:10.079 that they didn't lose money. Uh, something else made them 0:10:10.080 --> 0:10:12.920 lose money. Uh. So you know, some people are gonna 0:10:12.920 --> 0:10:16.360 say they're behind the curve, some not. The FED is 0:10:16.640 --> 0:10:19.600 trying to figure things out in a world that's different 0:10:19.640 --> 0:10:23.040 because of the pandemic from the past. So that's that's 0:10:23.080 --> 0:10:25.360 one of the troubles that they have. And now it's 0:10:25.360 --> 0:10:27.400 gonna be interesting to watch. As I asked Tom, you know, 0:10:27.480 --> 0:10:29.440 how do you how do you know you've done enough 0:10:29.559 --> 0:10:32.480 or done too much? When policy works with a lag 0:10:32.679 --> 0:10:36.400 and we're in a situation like we are now, speaking 0:10:36.440 --> 0:10:40.200 of curves, I've been breeding a lot of notes recently that, 0:10:40.400 --> 0:10:42.960 of course, sometimes we really look at the three month tenure, 0:10:43.040 --> 0:10:45.480 but if the FED is still behind the curve, the 0:10:45.600 --> 0:10:48.040 two year tenure is maybe doing a better job. I've 0:10:48.040 --> 0:10:51.560 given us more of a realistic view. Is the FED 0:10:51.640 --> 0:10:54.360 looking at yeld curves? What do you make of those comments? Now? 0:10:54.400 --> 0:10:56.120 I think the people who are looking at yield curves, 0:10:56.160 --> 0:10:58.560 or the people in the media, when the yield curve 0:10:58.600 --> 0:11:04.040 gets close to inversions, looking it's you got very excited 0:11:04.160 --> 0:11:08.960 and all twenty three seconds it was inverted you you 0:11:09.000 --> 0:11:14.880 were just ecstatic. Um, the FED, is the yield curve 0:11:15.000 --> 0:11:18.199 tells you that at some point do you think that 0:11:18.240 --> 0:11:20.360 the economy is going to slow down? The problem is 0:11:20.400 --> 0:11:22.839 there's no timing on It could be eighteen months, two 0:11:23.000 --> 0:11:25.720 years ahead of time, and is it really connected to 0:11:25.760 --> 0:11:28.520 the yield curve or is it something else that comes along. 0:11:29.160 --> 0:11:32.080 The FED looks at the three months eighteen months forwards 0:11:32.200 --> 0:11:34.320 because that tells you sort of where they are now 0:11:35.120 --> 0:11:37.760 and where the market expects them to be in a 0:11:37.840 --> 0:11:40.520 year and a half, which is a little bit more 0:11:41.000 --> 0:11:43.720 sensible in terms of what you're trying to figure out. 0:11:44.360 --> 0:11:46.800 But it makes a nice conversation piece and a question 0:11:46.840 --> 0:11:49.600 to ask people. All Right, Michael McKee, thank you so 0:11:49.640 --> 0:11:51.880 much for joining us here in our interactive broker studio, 0:11:52.400 --> 0:11:55.200 giving us a summary of your discussion just moments ago 0:11:55.240 --> 0:11:59.000 with Richmond FED President Thomas Barkin. Uh, he's uh Richmond 0:11:59.120 --> 0:12:02.280 the home of the University of Richmond Spiders, my alma mater. 0:12:05.400 --> 0:12:08.400 Right now, let's check in with Michael Hans Hans ce 0:12:08.520 --> 0:12:11.640 IO of Clarfelt Citizens Private Wealth. Michael, thanks so much 0:12:11.679 --> 0:12:13.880 for joining us here. You know, we look at these 0:12:13.880 --> 0:12:16.160 markets and kind of you know, not much going on today, 0:12:16.200 --> 0:12:19.880 but we've certainly had volatility so far in the year. 0:12:21.440 --> 0:12:22.840 Where do we go from here? What are you telling 0:12:22.880 --> 0:12:28.400 your clients? Good morning? Thanks for having me. Volatility is 0:12:28.480 --> 0:12:31.880 likely going to persist for you know, the better part 0:12:31.920 --> 0:12:34.640 of this year, and I don't think it's a surprise 0:12:34.679 --> 0:12:37.599 to anyone. I think there's a fair amount of overall 0:12:37.760 --> 0:12:42.000 economic uncertainty and then you throw a geo political event 0:12:42.160 --> 0:12:45.839 into the mix that exacerbates, you know, the challenges that 0:12:45.920 --> 0:12:49.440 the FED has, and no surprise that we're seeing markets, 0:12:49.760 --> 0:12:53.240 you know, influx. What what we're expressing at this point 0:12:53.240 --> 0:12:56.040 in time as it relates our portfolios is you know, 0:12:56.240 --> 0:13:00.199 very little in the way of meaningful changes. Uh, as 0:13:00.200 --> 0:13:03.840 a reactionary function to to what's been going on. However, 0:13:03.880 --> 0:13:06.240 we are we are thinking about the outlook you know, 0:13:06.440 --> 0:13:09.199 given given where things are moving, but you know, the 0:13:09.520 --> 0:13:14.200 forefront UH conversations are let's not react to aggressively to 0:13:14.240 --> 0:13:17.240 the geopolitical aspect and let's keep our attention onto the 0:13:17.280 --> 0:13:19.679 path of the economy. Do you have to react though, 0:13:19.720 --> 0:13:24.200 to some of the inflationary pressures underway? So I think 0:13:24.440 --> 0:13:29.200 the elements around inflationary pressures in our minds have been 0:13:29.280 --> 0:13:34.079 in in UH position over time, right, And so to 0:13:34.200 --> 0:13:37.400 be underweight duration and fixed income has has been important. 0:13:37.440 --> 0:13:40.080 And you know, like the key seem that we've outlined 0:13:40.120 --> 0:13:42.400 over the course of the last year or so, because 0:13:42.600 --> 0:13:46.840 again it's difficult to to position in an environment where 0:13:46.840 --> 0:13:50.000 your compensation was just very limited. That dynamic is changing 0:13:50.040 --> 0:13:51.839 now and we do not feel we're in a position 0:13:51.880 --> 0:13:54.080 yet when we want to play offense and and yet 0:13:54.160 --> 0:13:57.359 long duration yet. But I think that's a meaningful positioning 0:13:57.360 --> 0:13:59.720 that we've had going into this, and I think that's 0:13:59.720 --> 0:14:02.600 that's been a clear benefit. I think over time, the 0:14:02.640 --> 0:14:06.600 interesting dynamic is that duration will become more interesting as 0:14:06.640 --> 0:14:09.680 everybody is most negative and pessimistic on the space, and 0:14:09.679 --> 0:14:12.080 that's that's actually been increasing. So the outlook for fixed 0:14:12.120 --> 0:14:15.360 income is becoming more constructive while this recent roundy off 0:14:15.480 --> 0:14:18.160 off of the lows and the equity market again, I 0:14:18.200 --> 0:14:20.240 think it just dictates that there's going to be a 0:14:20.280 --> 0:14:23.280 little bit less potential upside the balance of this year 0:14:23.280 --> 0:14:27.440 as we work through market market fluctuation. Okay, Michael, I've 0:14:27.640 --> 0:14:32.200 I've heard and read the recession word more and more 0:14:32.240 --> 0:14:34.080 over the last two to three weeks. Is that something 0:14:34.080 --> 0:14:38.600 that's in your outlook not not for this year? And 0:14:38.880 --> 0:14:42.120 I think think it's it's really interesting prior to guests outlining, 0:14:42.280 --> 0:14:45.680 and I think you know, Mike mckith mentioned that it's 0:14:45.760 --> 0:14:48.200 the media that's heavily focused on the yield curve. I 0:14:48.240 --> 0:14:51.040 think the old curve is is not necessarily the indicator. 0:14:51.080 --> 0:14:53.040 It's more of a symptom of what is going on 0:14:53.560 --> 0:14:56.240 and that and from the timing perspective, you know, the 0:14:56.320 --> 0:15:00.080 data is very clear that it's a difficult mat and 0:15:00.160 --> 0:15:03.840 isn't utilized to make significant adjustments, right, It's more of 0:15:03.880 --> 0:15:07.680 a coincidence factor of what's going on. Our clients are 0:15:07.720 --> 0:15:10.000 also focused on that, and that's certainly something that comes up, 0:15:10.040 --> 0:15:12.560 but it's not the first time. So the education around 0:15:12.960 --> 0:15:15.760 this is something that gives us. Can you know, the 0:15:15.920 --> 0:15:17.800 rate race of flax, right. You you look at a 0:15:17.880 --> 0:15:20.800 variety of other metrics, but I think we keep on 0:15:20.920 --> 0:15:23.680 coming back to the fact that we have re established 0:15:23.760 --> 0:15:27.920 trend economic growth. Uh. There there are good stabilizing factors 0:15:27.960 --> 0:15:33.880 in play this year, specifically balance sheet extation that's coming up. 0:15:33.920 --> 0:15:37.920 More exflation is absolutely coming, but I think that's also 0:15:38.760 --> 0:15:42.160 I think we're looking at historical time frames and again 0:15:42.200 --> 0:15:45.280 these are the types of words that come into play, 0:15:45.360 --> 0:15:47.880 but in the environment we're in, we're actually looking at 0:15:47.880 --> 0:15:50.480 above trend economic growth this year. The first quarter is 0:15:50.520 --> 0:15:52.360 going to likely come in a little bit softer, but 0:15:52.400 --> 0:15:54.760 if we have above trend growth for the balance of 0:15:54.800 --> 0:15:58.360 this year, you know, it does it does beget the 0:15:58.520 --> 0:16:02.240 need to have again, can newed equity exposure in a portfolio. 0:16:02.360 --> 0:16:04.640 The one the things that I think is really important 0:16:04.680 --> 0:16:06.800 that you don't I don't think we hear enough in 0:16:06.800 --> 0:16:10.680 in the media is that investing is not a binary game, right, 0:16:10.720 --> 0:16:13.560 and that that all too often and is what we 0:16:13.600 --> 0:16:18.720 really emphasize with our clients. We really thoughtfully construct portfolios 0:16:18.760 --> 0:16:21.360 that are highly diversified. And I think what's really important 0:16:21.360 --> 0:16:23.360 now with the context of the last couple of years 0:16:23.360 --> 0:16:26.680 and this entire cycle you know, and even coming into 0:16:26.720 --> 0:16:28.760 this year before we had market downturns and when markets 0:16:28.760 --> 0:16:31.320 were at all time clients are our major points to 0:16:31.440 --> 0:16:35.360 clients was resetting a level of expectation that we don't 0:16:35.400 --> 0:16:38.320 anticipate the race of return to continue in the manner 0:16:38.320 --> 0:16:41.440 of which they did last year. Was that bailed out 0:16:41.520 --> 0:16:45.640 by a well above historical norm equity market, and that 0:16:45.760 --> 0:16:48.680 mass some of the challenges within fixed income. Our outlook 0:16:48.720 --> 0:16:53.840 today has actually improved in a meaningful manner given where 0:16:53.880 --> 0:16:56.160 interest rates are interesting. All right, hey, Michael, thank you 0:16:56.240 --> 0:16:58.200 so much for joining us. Really appreciate getting your thoughts there. 0:16:58.240 --> 0:17:02.000 Michael hans see i oh of Harfeld Citizens Private Wealth Management. 0:17:02.000 --> 0:17:04.080 They're based in Terrytown, New York. And Michael's got a 0:17:04.080 --> 0:17:08.119 green dot next to his name, which is good to seek. 0:17:12.320 --> 0:17:14.840 Looking at the bitcoin here, we can't do that because 0:17:14.880 --> 0:17:17.959 Tom Keen is not here. Bitcoins off just about one 0:17:18.000 --> 0:17:20.800 percent here, still above forty seven thousand. Feels like it's 0:17:20.800 --> 0:17:23.719 been in this fairly tight trading range. Maybe that's just me, 0:17:23.880 --> 0:17:25.720 but you know, we see the moves one or two 0:17:25.720 --> 0:17:27.840 percent every day, but it's still kind of in this range. Uh, 0:17:27.960 --> 0:17:30.520 let's bring on Katie Gridfeld. She's a cross as reporter 0:17:30.560 --> 0:17:33.120 and Bloomberg Quick Take co anchor. She joins us here 0:17:33.160 --> 0:17:35.879 in a Bloomberg and her actor broker studio Crypto. What 0:17:35.880 --> 0:17:38.040 are you looking at take, Katie, Well, like you said, Paul, 0:17:38.080 --> 0:17:40.960 the price action we did see actually a break above 0:17:41.000 --> 0:17:44.200 that range, a little bit. It got above forty dollars 0:17:44.200 --> 0:17:46.800 a coin. It looks like it's staying there. Hasn't pushed 0:17:46.920 --> 0:17:49.680 much higher beyond that. And I think it was last 0:17:49.680 --> 0:17:52.240 week that we were having this debate with Matt Miller 0:17:52.280 --> 0:17:54.679 about whether it's a good or a bad thing, that 0:17:54.720 --> 0:17:58.800 you've really seen the volatility of bitcoin drop off. And 0:17:58.800 --> 0:18:00.760 I have some new numbers to share. This comes from 0:18:00.760 --> 0:18:03.359 Mike Reagan. He wrote a great column yesterday that if 0:18:03.400 --> 0:18:06.280 you look at the ratio of bitcoins realized volatility to 0:18:06.520 --> 0:18:09.840 t l T, it's that long bond long treasury et F, 0:18:10.000 --> 0:18:13.760 it'small into less than one point five five versus seven 0:18:13.920 --> 0:18:17.159 just six weeks ago. So you've really seen bitcoin volatility 0:18:17.720 --> 0:18:20.159 really drop off a cliff. Even though it did manage 0:18:20.200 --> 0:18:21.679 to get a little bit out of that range, it 0:18:21.680 --> 0:18:31.080 hasn't gone Why the retail investors, Okay, that's probably yeah, no, 0:18:31.240 --> 0:18:35.119 but you have seen some enthusiasm come out of the space. 0:18:35.200 --> 0:18:37.360 The fact that you saw that big draw down from 0:18:37.920 --> 0:18:42.240 basically November until February, I think that washed out a 0:18:42.359 --> 0:18:44.600 lot of positions. That's what I've been hearing. It really 0:18:44.640 --> 0:18:47.560 flushed out a lot of those retail players who haven't 0:18:47.640 --> 0:18:49.920 really come back into the market. You do hear about 0:18:50.000 --> 0:18:53.040 some big buys. I mean, micro Strategy was out yesterday 0:18:53.080 --> 0:18:55.760 with an announcement that um they would lever up to 0:18:55.840 --> 0:18:59.360 borrow more bitcoin, but maybe those retail participants aren't there 0:18:59.440 --> 0:19:01.800 like they were maybe six months ago. I'm curious the 0:19:01.840 --> 0:19:04.520 focus has been a lot on Bitcoin. I was watching Ethereum, 0:19:04.560 --> 0:19:07.119 which hasn't quite you know, sort of recouped a lot 0:19:07.160 --> 0:19:09.240 of the losses the way we saw with Bitcoin regaining 0:19:09.320 --> 0:19:13.680 some of the the year to date losses, Ethereum has to, 0:19:13.840 --> 0:19:15.440 but you just don't quite hear about it. The way 0:19:15.480 --> 0:19:18.399 we have about Bitcoin. Ethereum is funny. I mean crypto 0:19:18.440 --> 0:19:20.920 in general is funny. Where a bitcoin, it's supposed to 0:19:20.960 --> 0:19:24.159 be this magnificent store of value, really acts like a 0:19:24.320 --> 0:19:26.919 leverage tech stock. And then Ethereum, there is a lot 0:19:27.000 --> 0:19:30.840 of excitement around the Ethereum blockchain, but Ether the token 0:19:31.280 --> 0:19:34.160 more than anything, it acts like a leverage bet on Bitcoin. 0:19:34.320 --> 0:19:38.120 So it's interesting that in this rebound that we've seen 0:19:38.160 --> 0:19:41.200 in the crypto space, it's really been Bitcoin lead, not Ethereum. 0:19:41.440 --> 0:19:44.200 I'm gonna be interested to see if those correlations ever 0:19:44.400 --> 0:19:47.080 break apart at some point, because you do have some 0:19:47.280 --> 0:19:51.080 different fundamentals on those blockchains, but the tokens just trade 0:19:51.119 --> 0:19:55.760 in tandem. You hear that fundamental? I said it, Where 0:19:55.800 --> 0:19:58.000 are we now that there was a hack right on 0:19:58.119 --> 0:20:00.480 one of these crypto things on out now? I know 0:20:00.520 --> 0:20:02.879 it's a real classroom. We started about talking about hacks. 0:20:03.119 --> 0:20:05.320 What happened there? There are more and more hacks, so 0:20:05.400 --> 0:20:08.479 this is really interesting. Involves what's known as a bridge, 0:20:08.480 --> 0:20:12.200 which basically likes to move tokens from one block chain 0:20:12.320 --> 0:20:15.200 to another. So thank you know, it's pretty hard to 0:20:15.280 --> 0:20:19.240 move money from Venmo to PayPal. This is basically a 0:20:19.320 --> 0:20:21.720 bridge that kind of connects the different blockchains so you 0:20:21.720 --> 0:20:24.440 can move money around. But you're seeing more and more 0:20:24.520 --> 0:20:28.320 hacks of these bridges. You saw one in February with wormhole. 0:20:28.600 --> 0:20:31.760 You saw another one. Uh, news of this break yesterday. 0:20:31.800 --> 0:20:34.840 It's actually took six days for them to uncover this hack, 0:20:34.920 --> 0:20:36.880 and let me just explain what it was. So there's 0:20:36.960 --> 0:20:40.200 this play to earn game called Axie Infinity, and what 0:20:40.320 --> 0:20:42.960 we learned yesterday was that hackers sold about six hundred 0:20:43.000 --> 0:20:46.920 million dollars worth of tokens from the blockchain network connected 0:20:47.440 --> 0:20:51.320 to that game, specifically from the bridge that connects it. 0:20:51.400 --> 0:20:54.399 And again it took six days for them to uncover this, 0:20:54.480 --> 0:20:56.359 So that's a lot of money. So hold on. So 0:20:56.520 --> 0:21:00.200 you could argue that the thesis of ethery um or 0:21:00.359 --> 0:21:03.240 bitcoin or the blockchain is still intact, because that is 0:21:03.280 --> 0:21:06.760 supposed to be sort of right, this decentralized, unhackable if 0:21:06.800 --> 0:21:08.959 you will in quote. So the fact that they can 0:21:09.000 --> 0:21:12.080 say it was the bridge and not like the underlined blockchain, 0:21:13.000 --> 0:21:17.000 does that thesis then still hold up? Yes, I would 0:21:17.000 --> 0:21:20.240 say that that most people, most of the criticisms I've 0:21:20.240 --> 0:21:22.200 seen this is mostly focused on the fact that you 0:21:22.320 --> 0:21:25.080 have these bridges, and the problem with these bridges is 0:21:25.160 --> 0:21:27.840 that the computer code that makes the mark it it 0:21:28.040 --> 0:21:32.159 isn't audited. So basically, these hackers are finding ways to 0:21:32.359 --> 0:21:35.320 exploit that computer code in the way it's written. So 0:21:35.560 --> 0:21:37.560 you could form an argument that is it really a 0:21:37.640 --> 0:21:40.480 hack if we're just following the code. I think a 0:21:40.520 --> 0:21:42.560 lot of people would say that, yes, you are hacking it, 0:21:42.680 --> 0:21:45.200 but again it's in the code. They're finding these exploits 0:21:45.240 --> 0:21:48.560 that let them basically siphen these coins out of the bridges. 0:21:49.119 --> 0:21:51.040 All Right, we have a Federal Reserve here that is 0:21:51.880 --> 0:21:55.640 raising interest rates and pretty significantly. Do we have any 0:21:55.720 --> 0:22:00.240 idea how crypto broadly defined ken and will or could 0:22:00.280 --> 0:22:03.159 perform in this type of environment. It's a great question 0:22:03.240 --> 0:22:06.680 because the last time the Fed really was raising rates 0:22:06.720 --> 0:22:09.720 in that's when the last cycle ended. I mean, bitcoin 0:22:09.840 --> 0:22:12.560 was less than five thousand dollars of coins. It wasn't 0:22:12.720 --> 0:22:15.600 in the mainstream like it is now. So I think 0:22:15.640 --> 0:22:17.600 this is the biggest test that we're coming up a 0:22:17.680 --> 0:22:21.840 real full blown rate hiking cycle. I mean, if bitcoin 0:22:21.960 --> 0:22:24.439 continues to have the same properties that it does now 0:22:24.520 --> 0:22:27.399