WEBVTT - UBS’s China Bull 0:00:12.920 --> 0:00:16.079 Hello, and welcome to What Goes Up, a Bloomberg weekly 0:00:16.120 --> 0:00:19.560 market podcast. I'm Sarah Pontzek, a reporter on the Cross 0:00:19.600 --> 0:00:22.319 Asset team, and I'm Mike Reagan, a senior editor on 0:00:22.360 --> 0:00:24.520 the Markets Team. This week on the show, you could 0:00:24.520 --> 0:00:27.479 say it's been quite the comeback. Just weeks after the 0:00:27.480 --> 0:00:31.720 spreading coronavirus shook financial markets around the globe, US equity 0:00:31.760 --> 0:00:34.279 markets have found their way back to record highs and 0:00:34.440 --> 0:00:37.000 risks seems to be back in vogue. Would you say 0:00:37.040 --> 0:00:41.479 it's justified? Or should investors likely be wary of the rally? 0:00:42.080 --> 0:00:44.320 And if you only came here for the big reveal 0:00:44.440 --> 0:00:47.040 of the craziest things we saw in markets this week, 0:00:47.080 --> 0:00:51.000 don't worry. We will close the show with that tradition. Uh, Sarah, 0:00:51.000 --> 0:00:54.200 bad news for you again this week coming from once again. 0:00:54.240 --> 0:00:57.080 I think I got one week of aprieve, one week 0:00:57.080 --> 0:00:59.120 of you saying that you don't automatically win the title. 0:01:00.560 --> 0:01:02.600 I'm back to win in again, guarantee. I don't know, 0:01:02.640 --> 0:01:05.440 maybe our guest, maybe our guests will surprise us with 0:01:05.480 --> 0:01:07.560 some even crazier things, but that mind, it's pretty good. 0:01:07.959 --> 0:01:10.240 But joining us for the first time on the show, 0:01:10.480 --> 0:01:13.720 very happy to have them. Barry gil, head of investments 0:01:13.760 --> 0:01:16.680 at UBS Asset Management. Barry, Welcome to the show. I 0:01:16.720 --> 0:01:19.480 would be here with and also joining us from the 0:01:19.520 --> 0:01:23.839 Bloomberg Consumer team. She's a reporter and editor. Where's many 0:01:23.880 --> 0:01:27.440 hats is Bloomberg? Sally Bakewall Sally, welcome to the show. 0:01:27.560 --> 0:01:32.319 Thank you, Barry. Let's start with you. UM. I write 0:01:32.360 --> 0:01:35.240 to be sort of shocked at how resilient the stock 0:01:35.319 --> 0:01:38.800 market is given the events going on in China. I 0:01:38.800 --> 0:01:41.479 guess I'm a little surprised it snapped back as far 0:01:41.680 --> 0:01:44.760 as quickly as it has, but I think everybody is 0:01:44.800 --> 0:01:48.200 alert there. They're trying to play the map from stars. 0:01:48.400 --> 0:01:52.200 Everybody understands how long that took to play out. Says 0:01:52.200 --> 0:01:53.920 there's a little bit of jumping the gun. But as 0:01:53.920 --> 0:01:56.680 soon as people anticipated that things were going to move 0:01:56.680 --> 0:01:58.680 into the second derivative and start to flatten out in 0:01:58.800 --> 0:02:01.920 terms of new cases getting in ounced, the risk appetite 0:02:01.960 --> 0:02:06.400 is there. All the fundamentals are pretty broadly bullish, UM, 0:02:06.480 --> 0:02:09.360 and people have continued to be underinvested in this equity 0:02:09.360 --> 0:02:12.080 bull market, So in some ways it doesn't surprise me. 0:02:12.680 --> 0:02:15.880 It's been made pretty clear that sure people like to 0:02:15.960 --> 0:02:20.519 compare the current coronavirus to the likes of Stars back 0:02:20.560 --> 0:02:23.040 in late two thousand, two thous three, but the times 0:02:23.040 --> 0:02:25.760 were very different. But you alluded to the fact that 0:02:25.880 --> 0:02:29.360 Stars took a much longer time for it to really 0:02:29.440 --> 0:02:32.760 run its course through financial markets. Do you get the 0:02:32.840 --> 0:02:37.280 sense that, sure, this is behind us, we don't yet 0:02:37.360 --> 0:02:39.520 know whether or not the virus has peaked yet, or 0:02:39.520 --> 0:02:42.200 do you get the sense that, know, the probability is 0:02:42.240 --> 0:02:45.640 that volatility is going to continue. Big moves don't happen 0:02:45.639 --> 0:02:48.920 in a vacuum, and we can't completely called the all 0:02:48.960 --> 0:02:51.359 clear just yet. Look, I think there's a little bit 0:02:51.360 --> 0:02:56.239 of hope going on that the containment efforts have sort 0:02:56.240 --> 0:02:59.520 of coulter aize the problem earlier than if you if 0:02:59.520 --> 0:03:01.360 you go back to Stars, and this is obviously the 0:03:01.440 --> 0:03:04.919 only event that we can sort of in our investment 0:03:04.960 --> 0:03:06.720 memory that we can go back to, So we may 0:03:06.840 --> 0:03:10.320 overplay the analogy. But then there was a cover up 0:03:10.360 --> 0:03:13.360 going on. There's been pretty much full disclosure taking place 0:03:13.400 --> 0:03:16.200 this time. The challenge I think coming out of this 0:03:16.280 --> 0:03:20.280 particular problem is that because the reaction has been as 0:03:20.320 --> 0:03:24.280 swift as it has, the likely impact on g d 0:03:24.400 --> 0:03:28.280 P is potentially even greater, um, particularly in agency seeing 0:03:28.360 --> 0:03:31.839 data points coming out to support that than people that anticipated. 0:03:31.880 --> 0:03:34.160 So there maybe a little bit of bad news associated 0:03:34.200 --> 0:03:38.800 with the reporting of that going forward. UM but uh my, 0:03:38.800 --> 0:03:41.600 my guess is that that everything happens these days and 0:03:41.640 --> 0:03:43.760 gets priced in a heck of a lot quicker than 0:03:43.800 --> 0:03:45.680 it would have done fifteen or twenty years ago. And 0:03:45.720 --> 0:03:48.840 as a result, UM, I think it's just going to 0:03:48.920 --> 0:03:52.440 play out. It's fine, So sort of a bitter medicine 0:03:52.480 --> 0:03:54.920 for excuse a really bad pun as far as the 0:03:54.960 --> 0:03:58.680 economy goes quarantining these cities basically shutting down, it seems 0:03:58.720 --> 0:04:02.800 like a huge chunk of the consumer economy. UM. And 0:04:02.840 --> 0:04:04.800 I know reading one of your recent notes, you you 0:04:04.840 --> 0:04:09.480 sounded pretty bullish about UM, China, especially the consumer in 0:04:09.600 --> 0:04:14.360 China becoming more affluent, uh more sort of a you know, 0:04:14.400 --> 0:04:19.520 a domestic focused economy rather than an export focused economy. Um. 0:04:19.680 --> 0:04:22.800 Does this just delay that sort of progress or is 0:04:22.839 --> 0:04:25.920 there any chance of any sort of permanent or semi 0:04:25.920 --> 0:04:29.479 permanent damage to consumer confidence in China? I don't think 0:04:29.600 --> 0:04:32.000 there is a recipe for that at all. I think 0:04:32.040 --> 0:04:35.200 the trends taking place in China are inexorable in nature. 0:04:35.600 --> 0:04:40.599 They're truly structural um, the growing middle class, the focus 0:04:40.680 --> 0:04:43.160 on the domestic economy, there's a lot of things going on. 0:04:43.200 --> 0:04:45.560 There's a real break that takes there's a sort of 0:04:45.560 --> 0:04:48.760 a bifurcation that's taking place in the market there. But 0:04:48.800 --> 0:04:52.320 I'm bullish both on the consumerization of the of the 0:04:52.400 --> 0:04:56.320 Chinese economy, the premium ization phenomenon that's taking place there 0:04:56.360 --> 0:05:00.560 as people get um wealthier, and then whole bunch of 0:05:00.560 --> 0:05:03.359 disruptive things that are taking place from the technology standpoint 0:05:03.440 --> 0:05:05.720 over there, and I think that those are going to 0:05:05.760 --> 0:05:08.000 play out over the next ten or twenty years, and 0:05:08.000 --> 0:05:10.760 and nothing like this will get in the way. In fact, 0:05:10.800 --> 0:05:13.960 if anything, you could argue that one of the lessons 0:05:14.000 --> 0:05:17.160 this and this is not directed directly at the consumer 0:05:17.160 --> 0:05:20.560 element element of the economy, but when you have an 0:05:20.560 --> 0:05:22.840 event like this and you have to shut down factories, 0:05:23.560 --> 0:05:26.560 and what you figure out is, we'll hang on a second. 0:05:26.640 --> 0:05:28.320 We now have people in these factories, We've now just 0:05:28.360 --> 0:05:31.599 shut down the productive capacity of a region because of 0:05:31.640 --> 0:05:33.520 this event. How do we actually figure out how to 0:05:33.520 --> 0:05:36.120 automate from here? So in some ways it's going to 0:05:36.160 --> 0:05:39.599 accelerate some trends that are already in place. One stat 0:05:39.600 --> 0:05:42.960 I saw that was amazing to me Bloomberg Economics. Uh, 0:05:43.440 --> 0:05:46.359 Tom Orlick, the the head of Bloomberg Economics, kind of 0:05:46.400 --> 0:05:51.160 lowered his forecast for first quarter GDP growth UM untill 0:05:51.160 --> 0:05:54.279 about four and a half percent. Was six percent at 0:05:54.279 --> 0:05:57.520 the end of last year, so slow by uh, you know, 0:05:57.960 --> 0:06:00.760 China's standards. But it's amazing to me that there could 0:06:00.760 --> 0:06:02.760 be any growth at all in this economy in this 0:06:02.839 --> 0:06:06.520 quarter given what we're seeing on TV and yet twice 0:06:06.560 --> 0:06:08.839 the pace of the US growth. Still, it's just remarkable. 0:06:09.360 --> 0:06:11.960 It's just a dis engine of growth, regardless of the 0:06:11.960 --> 0:06:13.720 fact that it's slowing. Well, this goes back to the 0:06:13.760 --> 0:06:15.960 earlier point that I was making. I think we likely 0:06:16.080 --> 0:06:21.159 underestimate the severity of the impact in this quarter. So 0:06:21.400 --> 0:06:23.640 we've had the snap back in the market, then you're 0:06:23.640 --> 0:06:26.160 going to report on the real data. It's probably a 0:06:26.200 --> 0:06:30.480 little bit more. It's probably potentially significantly more pronounced um 0:06:30.520 --> 0:06:32.400 in the first quarter as a result of this, But 0:06:32.440 --> 0:06:35.600 then the snap back will be equally hard when things stabilize. Right, 0:06:35.600 --> 0:06:37.839 we haven't yet gotten the economic data that shows the 0:06:37.920 --> 0:06:40.760 period that encompasses the virus, and as we start to 0:06:40.760 --> 0:06:43.360 get that through February, we will start to see it 0:06:43.600 --> 0:06:47.719 say there's a possibility that it comes through worse than expected, 0:06:48.279 --> 0:06:52.000 we see another bout of volatility shake markets really around 0:06:52.000 --> 0:06:56.560 the globe because you are bullish on China. Uh, would 0:06:56.600 --> 0:06:59.080 you say that's an opportunity for you to look for 0:06:59.120 --> 0:07:03.800 opportunity and where would that actually be in that event? Absolutely, 0:07:03.839 --> 0:07:06.920 it's very likely that when that reporting takes place of 0:07:07.040 --> 0:07:10.840 past data, it's actually coinciding with real time data in 0:07:10.960 --> 0:07:14.200 terms of new cases, etcetera getting announced, and the market 0:07:14.360 --> 0:07:16.720 is a forward looking mechanism, and it will spend a 0:07:16.720 --> 0:07:19.440 lot more time focused on that second derivative kicking in 0:07:19.560 --> 0:07:21.440 rather than the reporting of the bad data. In fact, 0:07:21.800 --> 0:07:25.040 once you get over the data um it really gives 0:07:25.080 --> 0:07:26.880 the all clear to the market because we can't really 0:07:26.880 --> 0:07:30.720 see any other major hiccups that could affect it from there, 0:07:30.760 --> 0:07:33.360 at least over the next few months. You know, Sally, 0:07:33.440 --> 0:07:38.040 when it comes to us consumer companies that are your focus, 0:07:38.080 --> 0:07:40.760 it's hard to even think of a company that is 0:07:40.760 --> 0:07:43.800 not somehow exposed to China, either as a supplier or 0:07:43.960 --> 0:07:46.480 as a customer. Uh. And I know you've you've just 0:07:46.520 --> 0:07:49.880 been typing your fingers this week with trying to cover 0:07:49.880 --> 0:07:51.480 it all. But what are some of the highlights of 0:07:51.520 --> 0:07:54.200 what the consumer companies are saying about the virus? Yeah, 0:07:54.200 --> 0:07:57.920 I have no fingers less um. Well, I think it's 0:07:57.920 --> 0:08:02.680 been a really interesting week because US companies have now 0:08:02.800 --> 0:08:06.400 had a bit of time to digest and see how 0:08:06.400 --> 0:08:08.600 it's going to play out, and that corresponded with a 0:08:08.720 --> 0:08:12.360 busy week for earnings where they have had to talk 0:08:12.400 --> 0:08:14.840 about the impact because they can't really get away with 0:08:15.000 --> 0:08:18.720 not um. Enough time has passed for them to need 0:08:18.760 --> 0:08:20.880 to be able to show they can do that. And 0:08:20.920 --> 0:08:24.080 so we have had companies like Capri which is the 0:08:24.120 --> 0:08:30.160 owner of Jimmy Chiu Vasachi Um Tapestry which owns Coach 0:08:30.200 --> 0:08:33.480 and Kate Spade and State lawder is another one, and 0:08:33.720 --> 0:08:36.800 they have started to say how it is going to 0:08:36.840 --> 0:08:39.440 impact their sales and profit this year. A few of 0:08:39.440 --> 0:08:43.600 them have reduced their guidance for revenue their profit profit 0:08:43.679 --> 0:08:46.959 forecast for this year um and that for a lot 0:08:47.000 --> 0:08:52.079 of them. Actually, their China business isn't huge, but they 0:08:52.160 --> 0:08:56.480 have invested significantly into the country because, as you mentioned, 0:08:56.520 --> 0:08:59.600 you know, it's got this rising middle class and they 0:08:59.600 --> 0:09:02.880 want to make sure they can capture that opportunity, and 0:09:02.960 --> 0:09:06.600 so that I think is why it's a big, big 0:09:06.640 --> 0:09:11.640 deal for these companies and why they are expressly seeing 0:09:11.880 --> 0:09:14.160 a dent. When companies have come out and given a 0:09:14.200 --> 0:09:17.120 forecast for the future, have they been relatively open ended? 0:09:17.200 --> 0:09:20.320 I think of Apple, for example, when they reported earnings, 0:09:20.320 --> 0:09:23.439 they just gave a wider range than expected because it's 0:09:23.559 --> 0:09:26.080 very difficult to actually estimate at this point in time 0:09:26.120 --> 0:09:29.000 what the true fallout was going to be. I know 0:09:29.120 --> 0:09:31.960 Starbucks has made clear how many stores are closed, and 0:09:32.080 --> 0:09:35.880 Nike said they will feel a material impact from the coronavirus. 0:09:35.920 --> 0:09:38.000 But do we actually have a sense yet of what 0:09:38.040 --> 0:09:41.520 the numerical impact could be to a couple or many 0:09:41.559 --> 0:09:44.080 of these companies, bottoms, lines, and what that might mean 0:09:44.200 --> 0:09:49.320 across the board. Yes, some have given specific amounts of 0:09:49.600 --> 0:09:55.000 profit impact. Others like Starbucks you mentioned, have said we 0:09:55.080 --> 0:09:57.480 are not going to we don't know the impact and 0:09:57.480 --> 0:10:00.000 we can't assess it, so we're not going to incorporate 0:10:00.160 --> 0:10:03.840 in our guidance. So have our guidance as as it 0:10:03.880 --> 0:10:06.920 should have been and as it was, and that obviously 0:10:06.960 --> 0:10:10.959 makes it difficult for investors, and perhaps it's why we 0:10:10.960 --> 0:10:13.480 we saw with the companies that I mentioned earlier, you know, 0:10:13.600 --> 0:10:16.720 capri Esday Lawder, Tapestry, they all saw their shares lift 0:10:17.440 --> 0:10:20.280 because they had otherwise good news or relatively decent good 0:10:20.600 --> 0:10:24.920 decent news um but this great unknown and this threat 0:10:25.160 --> 0:10:27.480 which they tried to address. I mean they all mentioned 0:10:27.520 --> 0:10:30.079 that there might be an impact that didn't seem to 0:10:30.480 --> 0:10:34.400 really hit the share price at all. That was almost 0:10:34.400 --> 0:10:36.560 one of my craziest things I saw this week story 0:10:36.679 --> 0:10:41.080 story work. But you basically said this company, that company 0:10:41.080 --> 0:10:43.120 in this company all came out and said this is 0:10:43.160 --> 0:10:45.280 going to have a material impact on earnings, and their 0:10:45.320 --> 0:10:48.839 stocks all rallied after they were honest, truthful. So I 0:10:48.920 --> 0:10:51.800 can almost imagine, you know, when the first quarter numbers 0:10:51.840 --> 0:10:55.080 come out, you could imagine some sort of earning Zex 0:10:55.160 --> 0:10:59.280 coronavirus impact being reported. I mean, is it going to 0:10:59.360 --> 0:11:01.240 be as simple as that, Barry? I mean, is the 0:11:01.280 --> 0:11:06.120 market going to accept that take, you know, basically ignore 0:11:06.240 --> 0:11:08.640 some bad numbers for a quarter, whether it be the 0:11:08.679 --> 0:11:12.040 economic data and earnings or could it caused a little 0:11:12.080 --> 0:11:15.080 bit of jitters. The market is pretty good at separating 0:11:15.120 --> 0:11:18.240 what's an exceptional event from what's a structural change the dynamic. 0:11:18.640 --> 0:11:22.080 I'll tell you, if there's a re acceleration in cases 0:11:22.360 --> 0:11:25.440 or something like that, then and this looks starts to 0:11:25.480 --> 0:11:27.960 look like a Q two phenomenon, then people will start 0:11:27.960 --> 0:11:30.600 to think about it very, very differently. But I think 0:11:30.640 --> 0:11:33.439 for the moment, given the the risk appetite in the market, 0:11:33.440 --> 0:11:35.480 people are going to just look right through it. You 0:11:35.520 --> 0:11:38.760 mentioned earlier on that the fundamentals are moving to the upside, 0:11:38.760 --> 0:11:41.160 And something that's really stood out to me through this 0:11:41.200 --> 0:11:43.199 earning season is the fact that if you look at 0:11:44.360 --> 0:11:47.520 forecast ADPs, it's pretty much hung in there at eight 0:11:47.559 --> 0:11:50.080 and a half percent. We haven't really seen the deterioration 0:11:50.160 --> 0:11:52.920 that you typically see when you enter a new year. 0:11:53.240 --> 0:11:56.400 So can you give us a sense, Sure, maybe profits 0:11:56.520 --> 0:11:59.600 are hanging in there even amid all these worries considering 0:11:59.600 --> 0:12:03.880 the corona of virus. But what is it um that 0:12:03.920 --> 0:12:05.880 does cause you to be so bullish as it relates 0:12:05.920 --> 0:12:09.680 to fundamentals across the board? Oh? Look, I mean, we 0:12:09.760 --> 0:12:13.760 discounted a lot of stuff in in snapped back from 0:12:13.760 --> 0:12:16.440 a very low level really at the end of twenty eighteen. 0:12:17.240 --> 0:12:19.160 But a lot of the things that people were really 0:12:19.160 --> 0:12:23.480 worried about in twenty eighteen, you know, kind of come, 0:12:23.600 --> 0:12:25.960 they've kind of passed, right, And if if anything, I 0:12:25.960 --> 0:12:30.800 would say, sitting here looking at things like the recession 0:12:30.880 --> 0:12:33.920 risk that people were fearful of, it's a lower probability 0:12:33.960 --> 0:12:38.840 in twenty now than it was maybe in You've had 0:12:38.920 --> 0:12:43.200 the loosening of financial policy by the Fed and really 0:12:43.240 --> 0:12:45.920 across the board for central banks, So that takes time 0:12:45.960 --> 0:12:50.480 to flow into um into the broad economy as well. 0:12:50.480 --> 0:12:53.000 Called it a six to nine month lag, so that's 0:12:53.040 --> 0:12:56.000 feeding into as well. And then think about all the 0:12:56.040 --> 0:12:58.760 things that we're going on in the manufacturing economy associated 0:12:58.840 --> 0:13:03.439 with trade UH last year and and for parts of eighteen, 0:13:04.120 --> 0:13:07.360 and we've had at least a Step one resolution, which 0:13:07.440 --> 0:13:11.520 gives companies the ability to plan a little bit further. 0:13:11.679 --> 0:13:16.520 So all of the manufacturing markers were really started bottoming 0:13:16.520 --> 0:13:19.240 out and starting to tip tap up. For me, the 0:13:19.280 --> 0:13:22.240 big shock has has been the impact. I mean, we 0:13:22.280 --> 0:13:24.760 really thought that we were gonna have an acceleration in growth, 0:13:24.800 --> 0:13:28.959 and the coronavirus, amongst other things, has has primarily the 0:13:29.160 --> 0:13:34.280 virus has really um held everything back. And so the 0:13:34.320 --> 0:13:36.400 move in the tenure has been dramatic. The initial move 0:13:36.400 --> 0:13:39.439 in the equity markets has been dramatic, but those underlying 0:13:39.480 --> 0:13:42.880 cyclical dynamics will play out over the course of the year, 0:13:42.920 --> 0:13:44.600 and as long as this is a one off event, 0:13:45.080 --> 0:13:47.880 they should be the dominant the dominant factor for the 0:13:47.920 --> 0:13:51.880 subsequent three quarters. And that's why, UM, I don't think 0:13:51.880 --> 0:13:53.520 you see a lot of move in the earnings estimates 0:13:53.559 --> 0:13:56.480 at the moment, because you can kind of once people 0:13:56.960 --> 0:13:59.079 ring fence that there are so many other variables going on, 0:13:59.400 --> 0:14:02.760 and people were easily conservative. Um, you should be okay 0:14:02.880 --> 0:14:20.160 hitting those numbers by the end of the year. You know, 0:14:20.280 --> 0:14:23.880 you mentioned the tenure yield UM and obviously you did 0:14:23.920 --> 0:14:27.000 a great job of explaining why the equity market might 0:14:27.560 --> 0:14:30.400 be able to look past this. Some of the other 0:14:30.440 --> 0:14:33.360 markets still seem a little cautious oil obviously, I mean, 0:14:33.400 --> 0:14:36.600 they have to contend with just the obvious supplying demand 0:14:36.640 --> 0:14:39.800 issues going on because of this. But that tenure yield 0:14:39.840 --> 0:14:42.160 is still sort of closer to the lower end of 0:14:42.160 --> 0:14:45.200 the range we've seen, I mean, is something like, uh, 0:14:45.520 --> 0:14:49.080 you know, closer to two towards the end of the year. 0:14:49.920 --> 0:14:53.680 UM started rolling over even before the coronavirus got about 0:14:53.840 --> 0:14:57.480 one and a half. It's now about one. Is that 0:14:57.560 --> 0:15:00.480 just the nature of the bond market to to be 0:15:00.480 --> 0:15:03.040 a little bit more pessimistic about the future, or is 0:15:03.120 --> 0:15:07.040 that a cause a concern for for an equity outlook. Look, 0:15:07.080 --> 0:15:09.400 this is a question that I sort of grapple with 0:15:09.880 --> 0:15:14.280 on an ongoing basis, because all of the things cyclically 0:15:15.360 --> 0:15:20.240 seem to be pointing towards more labor bargaining power, tighter 0:15:20.320 --> 0:15:25.200 labor capacity, slightly more optimism. All of these things are 0:15:25.240 --> 0:15:30.720 a recipe for increased inflation across the broad economy. The 0:15:30.720 --> 0:15:34.880 Phillips curves not dead, not dead, that's the term kinked, 0:15:34.960 --> 0:15:38.200 not dead. Um. And I do think that's that that 0:15:38.280 --> 0:15:40.000 is one of those things is that you don't see 0:15:40.040 --> 0:15:42.480 any change for a long time, and then you see 0:15:42.480 --> 0:15:45.160 a lot of change very very quickly. Um. But I 0:15:45.200 --> 0:15:48.120 think there's this structural bias. The low rate or the 0:15:48.160 --> 0:15:51.040 lower for longer phenomenon has been with us for so 0:15:51.120 --> 0:15:55.120 long that every time you get a hiccup like we've 0:15:55.160 --> 0:15:59.000 just had, it sucks people back into that story. And 0:16:00.080 --> 0:16:04.040 there are very I mean, there's a powerful secular argument 0:16:04.360 --> 0:16:08.280 around low rates, which would be in simple terms, forget 0:16:08.320 --> 0:16:10.880 about the low growth story. But in simple terms, the 0:16:10.920 --> 0:16:14.720 internet disintermediate or really the Internet being a deflator on 0:16:14.760 --> 0:16:19.240 the services economy, which is obviously sev GDP. But that's 0:16:19.240 --> 0:16:23.520 a really, really long term phenomenon um. In the medium term, 0:16:23.600 --> 0:16:26.480 these major cyclical factors that I've talked about really should 0:16:26.480 --> 0:16:29.640 be the things that that that play out. But there 0:16:29.720 --> 0:16:32.120 is momentum to that legacy story, and I think it's 0:16:32.120 --> 0:16:34.400 going to take some real optimism and a real broad 0:16:34.440 --> 0:16:36.560 cyclical uplift to sort of break the back of that. 0:16:36.640 --> 0:16:40.520 But frankly, I'm stunned at where the tenure is at 0:16:40.520 --> 0:16:43.720 this point. All Right, I think it's that time, Sarah, 0:16:43.840 --> 0:16:46.480 It is that time, all right. I know you've got 0:16:46.520 --> 0:16:50.320 a crazy thing from a listener of the show. Why 0:16:50.320 --> 0:16:52.600 don't you start with that? We did so. We actually 0:16:52.640 --> 0:16:55.720 had a terminal client reach out. He goes by the 0:16:55.800 --> 0:16:59.200 name of David Back. He's a credit analyst in Virginia 0:16:59.600 --> 0:17:02.440 UM and what he said was it's rare to see 0:17:02.440 --> 0:17:05.320 a firm reorganized under Chapter eleven and re emerge in 0:17:05.320 --> 0:17:09.480 a completely different line of business. Children's clothing retailer Jim 0:17:09.480 --> 0:17:13.639 Boree announced plans to exit bankruptcy protection and begin anew 0:17:13.960 --> 0:17:17.600 as anyone have a guess, I'm gonna say, a blockchain 0:17:17.920 --> 0:17:23.040 biotechnology company focused on coronavirus vaccines. It's a very good guess, 0:17:23.080 --> 0:17:28.240 but unfortunately wrong. No, you're very wrong. Um. But as 0:17:28.400 --> 0:17:33.399 an artwork authentication service. Uh so of course, yeah, of course, 0:17:33.440 --> 0:17:37.080 why not? Why not? Right, there's a natural connection between 0:17:37.119 --> 0:17:41.520 children's clothing and artwork authentication. But it was a really 0:17:42.040 --> 0:17:47.160 good example, uh and just very interesting. Uh, trying to 0:17:47.400 --> 0:17:51.160 give you insight into how companies try to reorganize themselves 0:17:51.200 --> 0:17:55.399 to stay relevant, stay alive. That's pretty good. I encourage 0:17:55.440 --> 0:17:58.919 that kind of to reach out to us again, to rethink. 0:17:59.200 --> 0:18:04.119 Now I still want Yeah, we'll see about that. So 0:18:04.640 --> 0:18:06.640 did they tell us? I know, I told you about 0:18:06.640 --> 0:18:08.560 our our gimmick here the craziest thing. What do you 0:18:08.560 --> 0:18:11.119 have for UM? I wondered if you would mind if 0:18:11.200 --> 0:18:17.639 I substituted the word crazy with beautiful, cra beautiful, all 0:18:17.680 --> 0:18:22.520 crazy beautiful. So we had Peloton announcing its second quarter 0:18:22.600 --> 0:18:27.480 results this week UM and guidance for its next quarter 0:18:27.600 --> 0:18:31.680 missed estimates and the chares slid. But some analysts, who 0:18:31.720 --> 0:18:37.320 I think must all own Pelotons, got really quite poetic 0:18:37.560 --> 0:18:43.439 with their notes, and one of them wrote that the 0:18:43.520 --> 0:18:46.800 company was climbing the hills of worry with a steady 0:18:46.920 --> 0:18:53.000 cadence in reference to its stationary bicycles. And then another 0:18:53.760 --> 0:18:56.760 who wrote that upside in the second quarter was in 0:18:56.880 --> 0:18:59.280 part at the expense of the third quarter is faster 0:18:59.520 --> 0:19:03.439 ordered to delivery time shifted units forward. However, the endless 0:19:03.480 --> 0:19:10.680 said not to sweat the ship. Yeah, too much time. 0:19:11.160 --> 0:19:14.320 I think they they're just fishing to get the headline 0:19:14.320 --> 0:19:16.000 one of our in one of our headlines. They just 0:19:16.040 --> 0:19:23.080 got it. That's right, right. Was there any impact from 0:19:23.119 --> 0:19:27.080 that very controversial commercial for Peloton on on sales. I 0:19:27.080 --> 0:19:31.159 think the main impact was on my productivity and the 0:19:31.200 --> 0:19:34.080 productivity of my colleagues. Were discussed it at length. The 0:19:34.119 --> 0:19:37.000 amount of memes are gifts that I saw over the 0:19:37.040 --> 0:19:41.200 past week. Examt for Peloton did report earnings um with 0:19:41.280 --> 0:19:44.119 the woman from the commercials all publicity is good for 0:19:44.200 --> 0:19:46.840 That's very true, especially for that woman. She got all 0:19:46.840 --> 0:19:49.560 sorts of yes, she did for that so and probably 0:19:49.600 --> 0:19:51.840 got a free bike out of it. I imagine, all right, 0:19:52.240 --> 0:19:54.359 very pretty stiff competition, and we haven't even gotten the 0:19:54.400 --> 0:19:56.400 mind yet. I can't I can't go down the beautiful 0:19:58.240 --> 0:20:00.560 I guess, like I mean it's kind of the uh uh, 0:20:01.119 --> 0:20:04.000 the elevent in the room the I've been One of 0:20:04.040 --> 0:20:06.160 the arguments that I've been using when I've been thinking 0:20:06.160 --> 0:20:08.960 about the equity markets in particular, is that we've never 0:20:09.080 --> 0:20:14.520 had a real period of speculation and optimism UM in 0:20:14.600 --> 0:20:17.600 the market. There's been isolated pockets of it right where things, 0:20:17.600 --> 0:20:20.640 and certainly twenty seventeen was a period of a lot 0:20:20.640 --> 0:20:24.760 of multiple expansion. But I would say the dynamic in 0:20:25.080 --> 0:20:29.360 Tesla's stock in the last few days UM for a 0:20:29.480 --> 0:20:35.280 very large cap company is one of the strangest things 0:20:35.359 --> 0:20:38.879 that I've seen, and it's certainly for somebody who's sort 0:20:38.920 --> 0:20:42.240 of been structurally bullish, and I'm very very much the 0:20:42.320 --> 0:20:44.560 cycle I've been wanted to buy that we want to 0:20:44.600 --> 0:20:47.040 buy the dips, and you want to stay invested until 0:20:47.200 --> 0:20:50.199 you see the same levels of commitment and optimism that 0:20:50.280 --> 0:20:53.280 you see typically the end of other cycles. When you 0:20:53.320 --> 0:20:55.880 see events like that, you either ask is their market 0:20:55.880 --> 0:20:59.119 structure issue going on, or is there some sort of 0:20:59.200 --> 0:21:02.600 level of speculation that I haven't picked up broadly, And 0:21:02.640 --> 0:21:05.360 so you you watched situations like that to figure out 0:21:05.400 --> 0:21:07.159 if they're sort of signal in the noise, and I 0:21:07.200 --> 0:21:09.440 can't parse it at the moment, but it was certainly odd. 0:21:09.440 --> 0:21:11.439 I agree that that was bizarre. It's the type of 0:21:11.440 --> 0:21:13.080 thing you see in like a penny stock where it 0:21:13.119 --> 0:21:15.879 only takes a few thousand bucks to move. Unbelievable. I mean, 0:21:15.920 --> 0:21:20.040 I heard comparison thrown out there a few times this week, 0:21:20.080 --> 0:21:22.560 but I think anytime you see a stock jumped that much, 0:21:22.680 --> 0:21:25.720 especially the likes of Tesla, which was an extremely heavily 0:21:26.200 --> 0:21:32.040 shorted company, very polarizing, it definitely captured everyone. Let me 0:21:32.119 --> 0:21:35.520 be very clear, this is nothing like yeah, but the 0:21:35.840 --> 0:21:39.520 fact that this is what at least spurred comparisons. Um, 0:21:39.600 --> 0:21:43.119 but yeah, very still different, right right, All right, Well 0:21:43.160 --> 0:21:45.760 I've got I've got two crazy things, a bonus one. 0:21:46.359 --> 0:21:48.800 I'm allowed to bonus crazy thing, right, do I get 0:21:48.840 --> 0:21:52.520 to Oh, you go first. I'm just because I'm tacking 0:21:52.560 --> 0:21:57.000 on to Barry as well. So sure, Tesla shares did surge, 0:21:57.400 --> 0:22:00.720 but Luke Kawa, our colleague, point it out and looked 0:22:00.720 --> 0:22:03.880 into the options market, and if you had bought calls 0:22:03.960 --> 0:22:09.120 on Tesla that paid out at one thousand dollars, then 0:22:09.560 --> 0:22:14.120 your investment would have risen nine thousand, eight hundred percent 0:22:15.359 --> 0:22:18.520 through that would be good, which would be good. Um. 0:22:18.640 --> 0:22:22.960 I I saw a couple reddits um about Tesla with 0:22:23.000 --> 0:22:26.960 people posting how much they had made by buying call 0:22:27.000 --> 0:22:31.159 options on Tesla. Uh, call it luck, call it whatever 0:22:31.200 --> 0:22:34.600 you want to um, but some serious money was made. 0:22:34.640 --> 0:22:38.240 I wonder if they on the way down after or 0:22:38.600 --> 0:22:40.679 if they lost it all because they were they were 0:22:40.720 --> 0:22:43.080 too stubborn. Well that's pretty good, all right. Well let 0:22:43.119 --> 0:22:46.320 me give you one my bonus crazy thing. It's that guy, 0:22:46.680 --> 0:22:50.600 the junk bond trader at City Group in London. Guy 0:22:50.680 --> 0:22:54.160 makes a million pounds a year. Uh. They called him 0:22:54.200 --> 0:22:58.960 stealing snacks from the from the cafeteria, so they suspended 0:22:59.240 --> 0:23:02.840 a million dollars year, a million pounds a year junk 0:23:02.880 --> 0:23:04.840 bond trader for stealing snacks. So that was pretty good. 0:23:04.840 --> 0:23:07.479