1 00:00:13,880 --> 00:00:17,120 Speaker 1: Hello, and welcome to What Goes Up, A Bloomberg Weekly 2 00:00:17,160 --> 00:00:21,360 Speaker 1: Markets podcast. I'm Sarah Plantze, reporter on the Cross Asset team, 3 00:00:21,400 --> 00:00:24,240 Speaker 1: and I'm Mike Reagan, a senior editor on the Markets team. 4 00:00:24,239 --> 00:00:26,840 Speaker 1: This week on the show, did the reflation trade come 5 00:00:26,880 --> 00:00:29,920 Speaker 1: back just a little bit too quickly? All of a sudden, 6 00:00:29,920 --> 00:00:32,479 Speaker 1: the yield curve is flattening once again, and markets are 7 00:00:32,479 --> 00:00:37,120 Speaker 1: playing defense. Some investors say they also see shades of August. 8 00:00:37,560 --> 00:00:39,640 Speaker 1: It's also that time of year, with less than six 9 00:00:39,680 --> 00:00:43,199 Speaker 1: weeks togo until firms across Wall Street are starting to 10 00:00:43,240 --> 00:00:45,680 Speaker 1: share their thoughts and ideas for the year ahead. And 11 00:00:45,800 --> 00:00:48,040 Speaker 1: of course we'll close out the episode with our tradition 12 00:00:48,200 --> 00:00:51,320 Speaker 1: the Craziest Thing I saw in Markets this week? And Sarah, 13 00:00:51,400 --> 00:00:53,599 Speaker 1: before we get to, I gotta say I'm excited as 14 00:00:53,680 --> 00:00:56,720 Speaker 1: usual on podcast A. I'm excited about about two things. 15 00:00:57,200 --> 00:00:58,840 Speaker 1: One is, we got a pretty good call to the 16 00:00:58,920 --> 00:01:01,400 Speaker 1: podcast hotline, to the What Goes Up Hotline this We'll 17 00:01:01,440 --> 00:01:03,959 Speaker 1: save that for the Craziest Thing. The other thing I'm 18 00:01:04,000 --> 00:01:06,440 Speaker 1: excited about is I don't know if you've noticed, but 19 00:01:06,600 --> 00:01:10,679 Speaker 1: my Delaware Blue Hens basketball team is undefeated six and 20 00:01:10,720 --> 00:01:13,920 Speaker 1: oh the woebegone basketball team of the University of Delaware. 21 00:01:14,000 --> 00:01:20,840 Speaker 1: I must say I hadn't noticed many people. Your Michigan 22 00:01:20,840 --> 00:01:24,039 Speaker 1: team's also undefeated at three and oh though, so we 23 00:01:24,120 --> 00:01:26,680 Speaker 1: are twice as undefeated as you. I'm just gonna throw 24 00:01:26,680 --> 00:01:28,560 Speaker 1: that out there, probably not for long. We'll see how 25 00:01:28,600 --> 00:01:31,520 Speaker 1: we do it. But to honor the occasion, we actually 26 00:01:31,560 --> 00:01:34,080 Speaker 1: have a guest from the great state of Delaware joining 27 00:01:34,160 --> 00:01:37,240 Speaker 1: us here. Unfortunately, he did not go to the University 28 00:01:37,240 --> 00:01:40,000 Speaker 1: of Delaware. He went to our conference rival, James Madison, 29 00:01:40,040 --> 00:01:42,840 Speaker 1: so we won't we won't talk basketball with him about that, 30 00:01:43,680 --> 00:01:46,200 Speaker 1: but we're happy to have him. His name is Luke Tilly. 31 00:01:46,240 --> 00:01:49,760 Speaker 1: He's the chief economist at Wilmington's Trust in Wilmington, Delaware, 32 00:01:49,760 --> 00:01:52,960 Speaker 1: and he's a former officer at the Philadelphia Federal Reserve. Luke, 33 00:01:53,000 --> 00:01:55,160 Speaker 1: welcome to the show. Thank you for having me. Okay, 34 00:01:55,200 --> 00:01:58,640 Speaker 1: also joining us our very own Bonds and f X 35 00:01:58,680 --> 00:02:03,040 Speaker 1: reporter and skilled a question I would say, Katie Greifeld, 36 00:02:03,080 --> 00:02:04,840 Speaker 1: welcome to the show. Thank you. I'm so glad you 37 00:02:04,840 --> 00:02:06,920 Speaker 1: brought that up right. How's the horse stone. His name 38 00:02:07,000 --> 00:02:09,359 Speaker 1: is Batman and he's doing great. It's good. I used 39 00:02:09,360 --> 00:02:11,760 Speaker 1: to think his name is Fatman, but I was mistaken. 40 00:02:11,840 --> 00:02:15,560 Speaker 1: It is Batman is a much better, maybe more polite, 41 00:02:15,600 --> 00:02:21,280 Speaker 1: accepting name than right. Right, I misunderstood my bed anyway, Luke, 42 00:02:21,360 --> 00:02:24,360 Speaker 1: let's start with you. I downloaded Welmington Trust has a 43 00:02:24,480 --> 00:02:28,799 Speaker 1: very interesting capital markets forecast for twenty on the website. 44 00:02:28,840 --> 00:02:31,280 Speaker 1: I uh. I advise everyone to download it's it's a 45 00:02:31,280 --> 00:02:33,880 Speaker 1: pretty good read, and I like it because it gets 46 00:02:33,880 --> 00:02:36,920 Speaker 1: into some of the sort of hot topics of the day, 47 00:02:37,000 --> 00:02:41,840 Speaker 1: not just really financial but politics, populism, that sort of thing. 48 00:02:41,880 --> 00:02:44,200 Speaker 1: I advise everyone print this out and bring it to 49 00:02:44,240 --> 00:02:46,800 Speaker 1: Thanksgiving dinner so when it comes time to talk politics, 50 00:02:46,840 --> 00:02:49,160 Speaker 1: you're you're well armed. But I just I wanted to 51 00:02:49,200 --> 00:02:52,760 Speaker 1: read a line from it that I think is really fascinating. 52 00:02:52,800 --> 00:02:54,720 Speaker 1: I think this explains a lot of what we're seeing 53 00:02:54,760 --> 00:02:57,519 Speaker 1: in the world today, whether it be Hong Kong or Chili. 54 00:02:57,919 --> 00:03:01,280 Speaker 1: We're sort of the the US political endscape and it 55 00:03:01,360 --> 00:03:04,359 Speaker 1: goes the rise, and populism isn't part of an outgrowth 56 00:03:04,880 --> 00:03:09,160 Speaker 1: of the unintended consequences of productivity, which includes more gains 57 00:03:09,160 --> 00:03:12,320 Speaker 1: for owners than workers and the secular disruption of the 58 00:03:12,400 --> 00:03:16,280 Speaker 1: labor force. For example, labor share of income remains low. 59 00:03:16,320 --> 00:03:19,240 Speaker 1: The figure dropped from fifty six point five percent at 60 00:03:19,280 --> 00:03:22,280 Speaker 1: the turn of the twentieth century to fifty point nine 61 00:03:22,320 --> 00:03:25,400 Speaker 1: percent in two thousand and fourteen, and it will continue 62 00:03:25,440 --> 00:03:29,160 Speaker 1: to drive populist sentiment. I find the stuff fascinating because 63 00:03:29,240 --> 00:03:32,280 Speaker 1: I think this is a key theme of sort of 64 00:03:32,360 --> 00:03:35,360 Speaker 1: global geopolitics. And like I said, this unrest we've seen 65 00:03:35,400 --> 00:03:38,600 Speaker 1: in Hong Kong, in CHILEI a lot of Latin America. 66 00:03:39,400 --> 00:03:42,080 Speaker 1: How does one take this and apply it to this 67 00:03:42,200 --> 00:03:45,080 Speaker 1: sort of the investment landscape. Yeah, sure, so it's a 68 00:03:45,120 --> 00:03:46,840 Speaker 1: it's quite a mouthful. I don't know if you would 69 00:03:46,840 --> 00:03:51,800 Speaker 1: try and do it Thanksgiving dinner. But of course we 70 00:03:51,800 --> 00:03:54,960 Speaker 1: were packing quite a bit of information into that paragraph. 71 00:03:55,080 --> 00:03:59,800 Speaker 1: But UH, simply put the rise of populism around the globe. 72 00:04:00,320 --> 00:04:02,800 Speaker 1: If you just read headlines, you might think is coming 73 00:04:02,880 --> 00:04:06,360 Speaker 1: from uh sort of random success of populist leaders or 74 00:04:06,440 --> 00:04:09,960 Speaker 1: particular movements that just happened to get more popular. But really, 75 00:04:10,120 --> 00:04:13,200 Speaker 1: at its at its core, UH is this rise in 76 00:04:13,360 --> 00:04:17,039 Speaker 1: productivity with firms, and firms have turned to robotics and 77 00:04:17,200 --> 00:04:22,680 Speaker 1: artificial intelligence, UM, all kinds of technology that increases their productivity, 78 00:04:22,800 --> 00:04:25,400 Speaker 1: and one of the UH, one of the outcomes of 79 00:04:25,440 --> 00:04:29,960 Speaker 1: that is that less of income, less of GDP is 80 00:04:30,000 --> 00:04:32,120 Speaker 1: actually going to the worker. We had a fairly steady 81 00:04:32,200 --> 00:04:34,800 Speaker 1: share of GDP going to workers if you look at 82 00:04:34,880 --> 00:04:39,200 Speaker 1: US data for about four or five decades until the 83 00:04:39,240 --> 00:04:42,000 Speaker 1: past of fifteen or twenty years when you see this 84 00:04:42,400 --> 00:04:45,760 Speaker 1: uh steady decline in the amount that's going to workers. 85 00:04:45,839 --> 00:04:48,960 Speaker 1: So in our view, on top of some of the 86 00:04:48,960 --> 00:04:50,800 Speaker 1: there admittedly there are some other things. You've got the 87 00:04:50,800 --> 00:04:52,799 Speaker 1: outsourcing of jobs, You've got some of those other things, 88 00:04:52,800 --> 00:04:56,000 Speaker 1: but both in the US and worldwide, you've got less 89 00:04:56,080 --> 00:04:58,560 Speaker 1: and less income going to workers, and that tends to 90 00:04:58,600 --> 00:05:01,920 Speaker 1: produce a pipe the sentiment. The connection makes sense. And 91 00:05:02,040 --> 00:05:03,680 Speaker 1: looking at your research, I grouped it as a three 92 00:05:03,760 --> 00:05:08,320 Speaker 1: piece you have productivity, populism, and then portfolio. But I 93 00:05:08,360 --> 00:05:10,960 Speaker 1: can imagine some people coming to you and saying, what 94 00:05:11,000 --> 00:05:12,880 Speaker 1: do you mean productivity is on the rise? You look 95 00:05:12,920 --> 00:05:15,680 Speaker 1: at some data points and it still shows that productivity 96 00:05:15,760 --> 00:05:17,880 Speaker 1: is really low. Is the problem that there's still the 97 00:05:17,920 --> 00:05:22,800 Speaker 1: conundrum of people just not potentially measuring productivity in the 98 00:05:22,920 --> 00:05:27,760 Speaker 1: right way in this new era of technology and other industries. Yes, exactly. 99 00:05:27,800 --> 00:05:29,920 Speaker 1: So this is something that we dug into quite a 100 00:05:29,960 --> 00:05:33,080 Speaker 1: bit this year, and it's uh it's twofold. Really. One 101 00:05:33,160 --> 00:05:36,359 Speaker 1: is that it's very challenging to measure productivity uh. And 102 00:05:36,360 --> 00:05:38,920 Speaker 1: then the second is that productivity tends to show up 103 00:05:38,920 --> 00:05:41,880 Speaker 1: with a pretty significant lag. So on the first point, 104 00:05:42,360 --> 00:05:45,640 Speaker 1: when the economy is changing very quickly as it is 105 00:05:45,680 --> 00:05:48,040 Speaker 1: now we term this the fourth Industrial Revolution, with the 106 00:05:48,080 --> 00:05:50,960 Speaker 1: development of all of these technologies. When the economy is 107 00:05:51,040 --> 00:05:54,920 Speaker 1: changing very quickly, it's incredibly hard for our government statisticians 108 00:05:54,960 --> 00:05:56,960 Speaker 1: down in d C to keep track of it. Uh. 109 00:05:57,000 --> 00:05:59,640 Speaker 1: In the late nineteen nineties this happened as well. There 110 00:05:59,720 --> 00:06:02,280 Speaker 1: was this same conundrum that we had right now. How 111 00:06:02,360 --> 00:06:03,840 Speaker 1: is it possible that we have all this growth and 112 00:06:03,880 --> 00:06:06,520 Speaker 1: we have low unemployment, yet we don't have inflation going up? 113 00:06:07,120 --> 00:06:09,200 Speaker 1: And the answer at that time was productivity. When you 114 00:06:09,200 --> 00:06:12,320 Speaker 1: went several years later, when they had a better handle 115 00:06:12,320 --> 00:06:14,960 Speaker 1: on what was going on, productivity was revised up about 116 00:06:14,960 --> 00:06:16,640 Speaker 1: one and a half percent for a three or four 117 00:06:16,720 --> 00:06:20,520 Speaker 1: year period. And our view is that that's exactly what's 118 00:06:20,520 --> 00:06:22,400 Speaker 1: going on right now. The government is not very good 119 00:06:22,400 --> 00:06:25,360 Speaker 1: at keeping track of just how productive Amazon is, for example, 120 00:06:25,440 --> 00:06:27,760 Speaker 1: or uber or some of these other companies. They'll get 121 00:06:27,800 --> 00:06:30,160 Speaker 1: a better handle on it later, but right now we 122 00:06:30,200 --> 00:06:33,679 Speaker 1: believe that that productivity is actually stronger than the statistics show, 123 00:06:34,080 --> 00:06:37,240 Speaker 1: and that of course is what's helping keep inflation low 124 00:06:37,320 --> 00:06:40,440 Speaker 1: right now and not not having those price pressures. Let's 125 00:06:40,480 --> 00:06:44,440 Speaker 1: get right into those Thanksgiving political discussions with with your 126 00:06:44,480 --> 00:06:50,520 Speaker 1: drunk uncles. But you have to have the ammunition to 127 00:06:51,120 --> 00:06:54,279 Speaker 1: counter those drunk uncles. I'm probably the drunk uncle in 128 00:06:54,320 --> 00:06:57,440 Speaker 1: my in my scenario, but for everyone else, for you 129 00:06:57,760 --> 00:07:02,559 Speaker 1: nephews and nieces out there. Um, and you start off this, uh, 130 00:07:02,680 --> 00:07:06,520 Speaker 1: this report, this Capital Markets Outlook, you kind of give 131 00:07:06,760 --> 00:07:10,160 Speaker 1: the sort of the risks if there's a Democrat elected 132 00:07:10,440 --> 00:07:14,680 Speaker 1: or a Republican. Very interesting one looking at if there's 133 00:07:15,080 --> 00:07:20,560 Speaker 1: a left leaning government. The wealth tax, this is a 134 00:07:20,760 --> 00:07:24,119 Speaker 1: third rail issue for a lot of people. Uh, woman 135 00:07:24,160 --> 00:07:26,320 Speaker 1: can trust. According to this report, gives it a high 136 00:07:26,360 --> 00:07:29,760 Speaker 1: chance of happening if a Democrat is elected, but a 137 00:07:29,800 --> 00:07:33,760 Speaker 1: low impact on markets. Um, the walks through what the 138 00:07:33,840 --> 00:07:36,480 Speaker 1: thinking is with that, right. So this is a obviously 139 00:07:36,520 --> 00:07:38,520 Speaker 1: a politically sensitive one and we should say that all 140 00:07:38,560 --> 00:07:41,040 Speaker 1: of our research is just really not meant to be 141 00:07:41,080 --> 00:07:42,960 Speaker 1: a judgment over whether these things are good, bad, or 142 00:07:42,960 --> 00:07:45,000 Speaker 1: and different, but just looking at what the impact would 143 00:07:45,000 --> 00:07:47,840 Speaker 1: be on markets, but clearly, clearly the wealth tax is 144 00:07:47,880 --> 00:07:51,360 Speaker 1: something that has the attention of voters on the left 145 00:07:51,440 --> 00:07:53,760 Speaker 1: right now, in supporters of the of the candidates in 146 00:07:53,840 --> 00:07:57,440 Speaker 1: the in the Democratic primaries. So a wealth tax would 147 00:07:57,440 --> 00:08:00,880 Speaker 1: be incredibly challenging if it were implemented in terms of 148 00:08:00,920 --> 00:08:03,560 Speaker 1: the execution of it and keeping track of wealth. We 149 00:08:03,600 --> 00:08:05,760 Speaker 1: actually think it's more likely that will end up getting 150 00:08:05,800 --> 00:08:09,240 Speaker 1: higher taxes in some other form, either the reversal of 151 00:08:09,280 --> 00:08:13,920 Speaker 1: the taxes that were implemented in those tax cuts, or 152 00:08:14,200 --> 00:08:16,760 Speaker 1: perhaps increases in taxes somewhere else. You know that that's 153 00:08:16,760 --> 00:08:18,880 Speaker 1: on the personal side, that's also on the corporate side. 154 00:08:19,080 --> 00:08:21,760 Speaker 1: But clearly there's some support for the wealth tax right now, 155 00:08:21,760 --> 00:08:23,520 Speaker 1: but there's a lot of sort of devil in the 156 00:08:23,520 --> 00:08:26,640 Speaker 1: details on how you would go about implementing that. Right, 157 00:08:26,640 --> 00:08:28,960 Speaker 1: It would be very tough to appraise someone's wealth on 158 00:08:28,960 --> 00:08:31,120 Speaker 1: a hear to your basis if you yeah, and then 159 00:08:31,160 --> 00:08:32,840 Speaker 1: you get the dynamic effects they try to get their 160 00:08:32,880 --> 00:08:36,400 Speaker 1: wealth out. Several several of the proposals want to penalize that. 161 00:08:36,480 --> 00:08:39,360 Speaker 1: It would be incredibly messy, But it's clearly going to 162 00:08:39,440 --> 00:08:42,199 Speaker 1: be a topic of discussion throughout. People digging holes in 163 00:08:42,240 --> 00:08:45,000 Speaker 1: their backyard with filling it with golden and bitcoin. I 164 00:08:45,000 --> 00:08:48,199 Speaker 1: guess that's what you do with bitcoin, Katie, right, is 165 00:08:48,200 --> 00:08:50,880 Speaker 1: that that's what I hear? Yeah? Right. There was a 166 00:08:50,920 --> 00:08:55,719 Speaker 1: really interesting story this week actually about high wealth individuals 167 00:08:55,800 --> 00:09:01,040 Speaker 1: all of a sudden very interested in very normal type storage. Yeah, 168 00:09:01,080 --> 00:09:03,400 Speaker 1: safety deposit box because who knows, who knows what's going 169 00:09:03,480 --> 00:09:06,600 Speaker 1: to happen with rates lately. Um With that said though, 170 00:09:06,640 --> 00:09:09,840 Speaker 1: and bringing it kind of into Katie's world of f 171 00:09:09,840 --> 00:09:12,240 Speaker 1: FX and rates, Luke, I first want to ask you 172 00:09:12,280 --> 00:09:15,199 Speaker 1: because also in the notes that were sent over to us, uh, 173 00:09:15,240 --> 00:09:17,679 Speaker 1: they said that the way you guys see it, tightening 174 00:09:17,720 --> 00:09:20,160 Speaker 1: of monetary policy is a ways off, which I think 175 00:09:20,160 --> 00:09:23,600 Speaker 1: the Fed has made very clear despite global central banks 176 00:09:23,600 --> 00:09:27,440 Speaker 1: taking a breather from incremental monetary easing. I want to 177 00:09:27,480 --> 00:09:29,680 Speaker 1: get your take though, because a few people this week 178 00:09:29,720 --> 00:09:32,120 Speaker 1: have said to me that now what it looks like 179 00:09:32,160 --> 00:09:34,680 Speaker 1: the market is doing with yields moving lower once again 180 00:09:34,760 --> 00:09:38,400 Speaker 1: to vnsives inequities, coming back to the fore, that maybe 181 00:09:38,400 --> 00:09:41,040 Speaker 1: the market is actually pricing in the idea that the 182 00:09:41,080 --> 00:09:43,920 Speaker 1: FED will have to cut again, and we're still stuck 183 00:09:43,920 --> 00:09:47,040 Speaker 1: in this virtuous circle where the market prices in a 184 00:09:47,120 --> 00:09:49,240 Speaker 1: cut and then the FED fields as though they have 185 00:09:49,400 --> 00:09:52,000 Speaker 1: to cut. Do you think it's possible we do get 186 00:09:52,000 --> 00:09:54,600 Speaker 1: back to this that scenario, say within the next year. 187 00:09:55,120 --> 00:09:56,920 Speaker 1: We do think it's possible, but we don't think it's 188 00:09:57,000 --> 00:10:01,679 Speaker 1: the highest chance outcome if will. So a lot of 189 00:10:01,679 --> 00:10:04,880 Speaker 1: what the FED was doing was basically fixing the yield curve. 190 00:10:05,000 --> 00:10:07,440 Speaker 1: If you will, uh listeners out there, you can't see 191 00:10:07,440 --> 00:10:11,040 Speaker 1: me putting the air quotes around the word fixing, but um, 192 00:10:11,040 --> 00:10:12,839 Speaker 1: but that's essentially what they were doing. So Jerome pal 193 00:10:12,920 --> 00:10:15,760 Speaker 1: never used this term, but essentially when the old curve inverts, 194 00:10:15,760 --> 00:10:18,839 Speaker 1: they get pretty nervous about that. Um. And even though 195 00:10:18,840 --> 00:10:20,520 Speaker 1: they don't as as I said, they don't use that 196 00:10:20,600 --> 00:10:22,200 Speaker 1: as well, we need to do that. That was clearly 197 00:10:22,200 --> 00:10:23,679 Speaker 1: part of it. The the old curve back to where 198 00:10:23,720 --> 00:10:25,440 Speaker 1: it is right now, as you said, flattening a little 199 00:10:25,440 --> 00:10:27,760 Speaker 1: bit more this week. But the FED has gotten themselves 200 00:10:27,760 --> 00:10:29,560 Speaker 1: in a spot where as they said, they want to 201 00:10:29,559 --> 00:10:31,720 Speaker 1: wait and see how long it takes and what the 202 00:10:31,760 --> 00:10:34,840 Speaker 1: impacts of their rate cuts are. Clearly it is having 203 00:10:35,000 --> 00:10:37,920 Speaker 1: having an impact so far, but really we don't think 204 00:10:37,960 --> 00:10:39,800 Speaker 1: that they would end up cutting more rates unless the 205 00:10:39,840 --> 00:10:43,440 Speaker 1: economy took a material turned downwards. What could cause that 206 00:10:43,480 --> 00:10:45,840 Speaker 1: to happen that are it's not our view that the 207 00:10:45,880 --> 00:10:48,280 Speaker 1: economy is going to take a material turned downwards unless 208 00:10:48,320 --> 00:10:51,080 Speaker 1: we get more tariffs. If you get more tariffs on 209 00:10:51,280 --> 00:10:54,439 Speaker 1: between US and China, more brinksmanship there, we think that 210 00:10:54,440 --> 00:10:56,240 Speaker 1: that would end up leading them down that way. But 211 00:10:56,280 --> 00:10:58,480 Speaker 1: that's that's not our view right now. On the other 212 00:10:58,520 --> 00:11:02,439 Speaker 1: side of whether they would be raising interest rates, uh, 213 00:11:02,480 --> 00:11:04,800 Speaker 1: they don't have a history of reversing themselves in changing 214 00:11:04,840 --> 00:11:09,680 Speaker 1: directions very quickly. UM. That would be obviously problematic to markets, 215 00:11:09,679 --> 00:11:12,280 Speaker 1: which are maybe looking for for more cuts. And you're 216 00:11:12,280 --> 00:11:14,400 Speaker 1: there's really not enough time over the next six to 217 00:11:14,480 --> 00:11:17,120 Speaker 1: nine months for inflation to do a U turn and 218 00:11:17,160 --> 00:11:20,400 Speaker 1: really move material upwards for them to want to be 219 00:11:20,480 --> 00:11:23,480 Speaker 1: hiking rates, and so then you know, if you can't 220 00:11:23,480 --> 00:11:25,880 Speaker 1: have material inflation within the next six to nine months, 221 00:11:25,880 --> 00:11:27,439 Speaker 1: you get out the twelve months and then you're right 222 00:11:27,480 --> 00:11:29,360 Speaker 1: before the election. They're not going to really want to 223 00:11:29,720 --> 00:11:32,720 Speaker 1: uh cause problems just before that. So we think it's uh, 224 00:11:32,760 --> 00:11:35,000 Speaker 1: we think it's pretty flat from from here unless you 225 00:11:35,040 --> 00:11:38,600 Speaker 1: get that material downturn and that reversal in the year 226 00:11:38,640 --> 00:11:42,079 Speaker 1: field curve is a lot more their open market operations 227 00:11:42,120 --> 00:11:45,560 Speaker 1: to sort of fix the whole repo mess adding liquidity. 228 00:11:45,880 --> 00:11:48,719 Speaker 1: I think the balance sheets expanded by close to three 229 00:11:49,200 --> 00:11:51,800 Speaker 1: billion by now. I mean, um, is that that's just 230 00:11:52,280 --> 00:11:55,439 Speaker 1: going to continue apace as long as that there's funding 231 00:11:55,440 --> 00:11:57,240 Speaker 1: stress in the repo market, do you think? Yeah? So 232 00:11:57,280 --> 00:11:59,400 Speaker 1: this is where it gets really confusing. At Thanksgiving dinner 233 00:11:59,400 --> 00:12:02,480 Speaker 1: if you want to, if you want to talk about 234 00:12:02,520 --> 00:12:06,480 Speaker 1: FED policy and their monetary policy at the short end 235 00:12:06,480 --> 00:12:08,120 Speaker 1: of the curve, and what they're doing with rates, and 236 00:12:08,160 --> 00:12:10,959 Speaker 1: then also what they're doing with buying treasuries to expand 237 00:12:10,960 --> 00:12:14,000 Speaker 1: their balance sheet, it's it can get a little bit convoluted. Um. Clearly, 238 00:12:14,040 --> 00:12:16,360 Speaker 1: their balance sheet, as you suggested, is now expanding, it 239 00:12:16,400 --> 00:12:18,680 Speaker 1: has as it has been since the beginning of September. 240 00:12:18,679 --> 00:12:20,959 Speaker 1: But that's not really on the rate cut side. That's 241 00:12:20,960 --> 00:12:23,200 Speaker 1: providing the liquidity too markets and all those problems that 242 00:12:23,240 --> 00:12:26,680 Speaker 1: happened uh in the repo market. So this is challenging 243 00:12:26,679 --> 00:12:28,640 Speaker 1: for them to talk about. Really they have to keep 244 00:12:28,679 --> 00:12:31,120 Speaker 1: doing that in order to provide liquidity, uh. And I 245 00:12:31,160 --> 00:12:33,080 Speaker 1: think they're doing their best they can to convince people 246 00:12:33,080 --> 00:12:35,120 Speaker 1: that it's not quantity of easing and it's not them 247 00:12:35,120 --> 00:12:38,360 Speaker 1: easing policy, Katie, come in here. You had a story 248 00:12:38,440 --> 00:12:41,400 Speaker 1: that ran on Sunday called the bond Market's fate hangs 249 00:12:41,400 --> 00:12:44,599 Speaker 1: in balance before trade war crunch time, and when you 250 00:12:44,679 --> 00:12:46,960 Speaker 1: talked about the rise up that we've seen in bond 251 00:12:47,040 --> 00:12:50,880 Speaker 1: yield um and what comes next. As Luke mentioned, trade 252 00:12:50,960 --> 00:12:53,360 Speaker 1: is really a large trigger that we have to keep 253 00:12:53,360 --> 00:12:56,120 Speaker 1: an eye on. But what our investors telling you this week, 254 00:12:56,160 --> 00:12:58,480 Speaker 1: because we've seen the ten year fall roughly twenty basis 255 00:12:58,520 --> 00:13:01,120 Speaker 1: points are so or more? I mean, what's driving this 256 00:13:01,320 --> 00:13:04,840 Speaker 1: and is the path for least resistance at this point lower? 257 00:13:05,559 --> 00:13:07,160 Speaker 1: That's a great question. I mean it feels like the 258 00:13:07,200 --> 00:13:10,880 Speaker 1: answer changes every day depending on the trade headlines we're 259 00:13:10,880 --> 00:13:14,560 Speaker 1: getting as to where yields are headed next. And a 260 00:13:14,640 --> 00:13:17,040 Speaker 1: stat I love that's in that article is that if 261 00:13:17,080 --> 00:13:20,560 Speaker 1: you look at tenure treasure yields, they're extremely correlated to 262 00:13:20,600 --> 00:13:22,880 Speaker 1: the Chinese you want right now, which I think just 263 00:13:23,000 --> 00:13:27,000 Speaker 1: goes to show how much of sentiment in the bond 264 00:13:27,040 --> 00:13:30,079 Speaker 1: market relies on trade. So when I talked to investors, 265 00:13:30,080 --> 00:13:33,640 Speaker 1: I talked to strategists in the bond market specifically, it's trade. 266 00:13:33,679 --> 00:13:36,160 Speaker 1: It's all about trade, and we're really entering you know, 267 00:13:36,200 --> 00:13:42,040 Speaker 1: a crucial few weeks before December and that tariff deadline. Meanwhile, 268 00:13:42,080 --> 00:13:46,280 Speaker 1: the other market you cover, Katie EFFCS has really been 269 00:13:46,559 --> 00:13:48,440 Speaker 1: let's what's the word I'm looking for? I guess quite 270 00:13:48,480 --> 00:13:51,280 Speaker 1: quite boring this year, right, Uh, you had you had 271 00:13:51,280 --> 00:13:54,280 Speaker 1: another story out this week about the dollar being in 272 00:13:54,320 --> 00:13:57,160 Speaker 1: the tightest range for a year, the dollar index, the 273 00:13:57,160 --> 00:14:00,560 Speaker 1: the Ice Dollar index being in the tightest range for 274 00:14:00,720 --> 00:14:03,760 Speaker 1: years since nineteen seventy six. Let's pretend I didn't edit 275 00:14:03,800 --> 00:14:06,800 Speaker 1: that and you can just tell me what what the 276 00:14:06,840 --> 00:14:09,120 Speaker 1: takeaway from that street. Yeah, it's really been feast and 277 00:14:09,160 --> 00:14:11,240 Speaker 1: famly because the bond market has been going crazy, but 278 00:14:11,360 --> 00:14:14,880 Speaker 1: nothing has been happening in FX. And you mentioned the 279 00:14:14,960 --> 00:14:17,240 Speaker 1: d X Y and X that's how you can find 280 00:14:17,240 --> 00:14:19,480 Speaker 1: it on the terminal. But yeah, it's stuck in its 281 00:14:19,520 --> 00:14:24,320 Speaker 1: tightest range in about over four decades. Four decades. Yeah, 282 00:14:24,320 --> 00:14:27,400 Speaker 1: I was not close to alive, But um, that really 283 00:14:27,560 --> 00:14:29,960 Speaker 1: has to do with it's especially crazy if you were 284 00:14:30,000 --> 00:14:34,320 Speaker 1: born before and have to think about how it's almost 285 00:14:34,320 --> 00:14:39,200 Speaker 1: five decades go it's still got a four handle. But um, yeah, 286 00:14:39,240 --> 00:14:41,600 Speaker 1: so that index is mostly made up of the euro 287 00:14:41,680 --> 00:14:45,240 Speaker 1: dollar pair, which is this isn't even crazier status on 288 00:14:45,280 --> 00:14:48,560 Speaker 1: track for its narrows yearly range on record, And I 289 00:14:48,600 --> 00:14:51,320 Speaker 1: was talking to sock Jen about that, and Kit Jukes 290 00:14:51,360 --> 00:14:54,400 Speaker 1: told me that's just because the market's almost been too 291 00:14:54,400 --> 00:14:58,360 Speaker 1: accurate in pricing growth differentials in Europe in America or 292 00:14:58,440 --> 00:15:01,480 Speaker 1: price for pretty good new was in America and bad 293 00:15:01,520 --> 00:15:04,760 Speaker 1: economic news out of Europe and Germany in particular. And 294 00:15:04,760 --> 00:15:09,360 Speaker 1: that's really what we're getting right now, Luke, this very 295 00:15:09,480 --> 00:15:12,760 Speaker 1: quiet volatility in the FX market. It's terrible news to 296 00:15:12,800 --> 00:15:15,960 Speaker 1: our FFS traders listeners. I'm sure it's the worst worst 297 00:15:16,000 --> 00:15:18,560 Speaker 1: possible outcome one could ever think of. But I go, 298 00:15:18,960 --> 00:15:20,920 Speaker 1: I have to wonder for the economy as far as 299 00:15:20,960 --> 00:15:24,080 Speaker 1: looking at financial conditions. I mean that it's a tight range, 300 00:15:24,080 --> 00:15:27,120 Speaker 1: it is elevated compared to last year, But I would 301 00:15:27,160 --> 00:15:30,560 Speaker 1: think that uh sort of diminished volatility in the FX 302 00:15:30,600 --> 00:15:33,120 Speaker 1: market is kind of good for financial conditions. Am I 303 00:15:33,240 --> 00:15:35,440 Speaker 1: thinking about that right? Yeah? It hopes with financial conditions, 304 00:15:35,520 --> 00:15:38,320 Speaker 1: especially with an increasingly integrated world where've got so many 305 00:15:38,320 --> 00:15:40,600 Speaker 1: companies that are operating across borders and they basically have 306 00:15:40,680 --> 00:15:43,160 Speaker 1: to deal with these FX rates on a on a daily, 307 00:15:43,200 --> 00:15:48,120 Speaker 1: weekly and monthly basis, and those more um solid or 308 00:15:48,200 --> 00:15:51,080 Speaker 1: less volatile ffex conditions just make it easier to operate, 309 00:15:51,120 --> 00:15:53,280 Speaker 1: and they just definitely encourage more trade. When you have 310 00:15:53,680 --> 00:15:57,360 Speaker 1: all of the uncertainty that Katie mentioned coming from trade 311 00:15:57,400 --> 00:15:59,800 Speaker 1: and all of the all of the uncertainty that's coming 312 00:15:59,840 --> 00:16:02,480 Speaker 1: from that, and even some uncertainty about fiscal policy, to 313 00:16:02,560 --> 00:16:05,000 Speaker 1: have one thing that is a little bit more stable 314 00:16:05,080 --> 00:16:06,600 Speaker 1: is going to be supportive of growth. In our view, 315 00:16:07,080 --> 00:16:09,480 Speaker 1: all year long, I've heard about how a strong dollar 316 00:16:09,640 --> 00:16:13,200 Speaker 1: is a headwind to corporate profits. Uh And finally, just 317 00:16:13,280 --> 00:16:15,160 Speaker 1: a couple of months ago, people thought that, well, maybe 318 00:16:15,160 --> 00:16:17,120 Speaker 1: that was about the change we saw the dollar started 319 00:16:17,160 --> 00:16:20,560 Speaker 1: turning lower before it started picking up once again. But 320 00:16:20,640 --> 00:16:23,480 Speaker 1: in your story, Katie, you talk about how corporates might 321 00:16:23,520 --> 00:16:25,840 Speaker 1: be caught off guarded a different way. Can you walk 322 00:16:25,920 --> 00:16:28,640 Speaker 1: us through that. Yeah. So usually when people think about 323 00:16:28,720 --> 00:16:30,800 Speaker 1: f X effects, they think about, you know, how is 324 00:16:30,840 --> 00:16:35,400 Speaker 1: it eating into earnings? But what reporting this story out 325 00:16:35,440 --> 00:16:38,800 Speaker 1: showed is that corporations have become or might be at 326 00:16:38,880 --> 00:16:40,960 Speaker 1: risk of becoming a bit complacent when it comes to 327 00:16:41,000 --> 00:16:43,840 Speaker 1: just hedging the currency risk. And we spoke to a 328 00:16:43,840 --> 00:16:46,320 Speaker 1: few different firms and they said it's not you know, 329 00:16:46,440 --> 00:16:50,600 Speaker 1: they're huge multinational clients or the pension funds. It's these 330 00:16:51,000 --> 00:16:54,880 Speaker 1: smaller companies, maybe you know, fifty to seventy employees, who 331 00:16:54,880 --> 00:17:00,720 Speaker 1: have pretty bare bones treasury departments or accounting staff that are, uh, 332 00:17:00,800 --> 00:17:04,560 Speaker 1: you know, after several years where nothing has happened in X, 333 00:17:04,600 --> 00:17:08,280 Speaker 1: they're kind of stepping back their hedging activity because it's 334 00:17:08,280 --> 00:17:12,560 Speaker 1: expensive and it hasn't paid off for several years. But obviously, 335 00:17:12,720 --> 00:17:17,280 Speaker 1: you know, with record volatility at record lows um, you know, 336 00:17:17,359 --> 00:17:20,520 Speaker 1: the risk is that it shoots up really quickly. So there, 337 00:17:20,560 --> 00:17:22,760 Speaker 1: I think we have a quote in there that this puts, 338 00:17:23,119 --> 00:17:26,200 Speaker 1: you know, destroy profits at risk, you know, if you're 339 00:17:26,200 --> 00:17:31,159 Speaker 1: a small company hedging less. Look, any thoughts on what 340 00:17:31,200 --> 00:17:33,520 Speaker 1: the dollar is going to do, Yeah, we don't really 341 00:17:33,720 --> 00:17:35,600 Speaker 1: put out projections of that, but I would agree with 342 00:17:35,680 --> 00:17:40,280 Speaker 1: Katie's sentiment that basically traders and FX traders are have 343 00:17:40,400 --> 00:17:43,159 Speaker 1: been predicting the economies right because fundamentally what's going to 344 00:17:43,320 --> 00:17:46,679 Speaker 1: end up driving currency and currency movements is how are 345 00:17:46,720 --> 00:17:49,720 Speaker 1: the economies performing relative to one another and then what 346 00:17:49,800 --> 00:17:53,600 Speaker 1: are central banks doing. So, as Katie said, a lot 347 00:17:53,640 --> 00:17:55,840 Speaker 1: of what is going on right now has been predicted. 348 00:17:55,880 --> 00:17:58,800 Speaker 1: We predicted a or we the industry or whatever was 349 00:17:58,840 --> 00:18:01,120 Speaker 1: priced in, was a slowdown in US growth this year 350 00:18:01,760 --> 00:18:05,119 Speaker 1: right now, not expecting a huge re acceleration in trade 351 00:18:05,119 --> 00:18:08,600 Speaker 1: and tariffs. Uh, some sort of reasonable answer to the 352 00:18:08,880 --> 00:18:12,240 Speaker 1: whole brexit question. Uh, and that the European un the 353 00:18:12,320 --> 00:18:14,560 Speaker 1: e c B s are the European Central Bank has 354 00:18:14,600 --> 00:18:16,120 Speaker 1: got a new leader and she's not gonna make any 355 00:18:16,119 --> 00:18:18,560 Speaker 1: big changes right away. Right. So if all that's priced in, 356 00:18:18,640 --> 00:18:21,320 Speaker 1: you still get those growth trajectories, Uh, then it should 357 00:18:21,359 --> 00:18:24,200 Speaker 1: be fairly stable and we wouldn't expect any big movements 358 00:18:24,200 --> 00:18:27,800 Speaker 1: in the dollar or any other currencies. You could imagine, uh, 359 00:18:28,040 --> 00:18:30,879 Speaker 1: some sort of compilation and some sort of collection of 360 00:18:30,880 --> 00:18:34,040 Speaker 1: of surprises such as trade and tariffs going bad, a 361 00:18:34,119 --> 00:18:36,760 Speaker 1: hard brexit when it's not expected, or you know, any 362 00:18:36,760 --> 00:18:38,720 Speaker 1: of any any of those things getting up ended, and 363 00:18:38,720 --> 00:18:42,440 Speaker 1: then you would expect to see some more volatility. So um. 364 00:18:43,000 --> 00:18:45,960 Speaker 1: So it's it's inherently hard thing to predict. But basically 365 00:18:45,960 --> 00:18:48,280 Speaker 1: we're just putting our judgments around those risks of those 366 00:18:48,320 --> 00:18:50,400 Speaker 1: things happening at all times. Right. I think when you're 367 00:18:50,400 --> 00:18:52,879 Speaker 1: in a low volatility phase, the hardest thing to do 368 00:18:52,920 --> 00:18:54,680 Speaker 1: is try to predict what's going to snap it out 369 00:18:54,680 --> 00:18:56,399 Speaker 1: if everyone wants to do it, but it's it's it's 370 00:18:56,440 --> 00:18:59,760 Speaker 1: almost impossible, right, And and one thing is usually certain 371 00:18:59,840 --> 00:19:02,120 Speaker 1: is that has been this low volatility for this long. 372 00:19:02,119 --> 00:19:04,639 Speaker 1: It's probably not gonna be same the next year. Right, 373 00:19:05,000 --> 00:19:21,800 Speaker 1: Something's gonna happen. I wanted to get back to that 374 00:19:22,760 --> 00:19:26,879 Speaker 1: look of from Wilmington's trust UM and especially talk about 375 00:19:27,040 --> 00:19:31,920 Speaker 1: UM sort of the policies that have potentially bipartisan support. 376 00:19:32,440 --> 00:19:33,720 Speaker 1: And I like the way you guys do this. You 377 00:19:33,720 --> 00:19:36,240 Speaker 1: give these bubbles that say if it has a high 378 00:19:36,359 --> 00:19:39,240 Speaker 1: chance or a low chance, and it's in big print, 379 00:19:39,240 --> 00:19:41,080 Speaker 1: I can read it even without my reading glasses on. 380 00:19:41,160 --> 00:19:44,199 Speaker 1: So I appreciate, appreciate that from US UH, from US 381 00:19:44,440 --> 00:19:50,400 Speaker 1: on the older end here antitrust UH medium chance, medium impact, UH, 382 00:19:50,680 --> 00:19:54,720 Speaker 1: Drug price reform medium chance, medium impact. So we'll skip those. 383 00:19:55,440 --> 00:19:59,520 Speaker 1: China trade obviously another Thanksgiving topic that's bound to come up. 384 00:20:00,480 --> 00:20:03,160 Speaker 1: You guys give it a high chance and a high 385 00:20:03,320 --> 00:20:07,840 Speaker 1: high impact, which obviously I think I agree with, especially 386 00:20:08,240 --> 00:20:11,000 Speaker 1: given that this is a bipartisan issue now. So I wonder, 387 00:20:11,560 --> 00:20:13,960 Speaker 1: you know, so many people are trying to game theory out, 388 00:20:14,560 --> 00:20:19,320 Speaker 1: you know, the Trump and President She negotiations, and who's 389 00:20:19,320 --> 00:20:21,520 Speaker 1: got the upper hand, who's who's got the weaker hand, 390 00:20:22,119 --> 00:20:25,560 Speaker 1: and what it means for when we'll actually see a deal, 391 00:20:25,680 --> 00:20:28,200 Speaker 1: even a phase one deal. But what as you guys 392 00:20:28,240 --> 00:20:31,520 Speaker 1: put out here, is that you know, a tougher stance 393 00:20:31,560 --> 00:20:34,000 Speaker 1: on trying to trade is a bipartisan issue. I mean, 394 00:20:34,200 --> 00:20:40,359 Speaker 1: is it conceivable believable that, um, sort of the A 395 00:20:40,359 --> 00:20:42,240 Speaker 1: lot of the thinking is that, well, China will just 396 00:20:42,280 --> 00:20:44,640 Speaker 1: wait out President Trump. They they think there's a decent 397 00:20:44,720 --> 00:20:48,119 Speaker 1: chance you won't get reelected. They can stall and just 398 00:20:48,200 --> 00:20:51,600 Speaker 1: wait for the next president to negotiate with. Is that 399 00:20:51,640 --> 00:20:53,240 Speaker 1: a Is that a bad way of thinking about it? 400 00:20:53,280 --> 00:20:55,680 Speaker 1: Do you think there's so many, so many different ways 401 00:20:55,720 --> 00:20:57,080 Speaker 1: to think about it? And as you said, trying to 402 00:20:57,119 --> 00:21:00,159 Speaker 1: game theory it out, it has entirely too many nodes. Um. 403 00:21:00,240 --> 00:21:02,800 Speaker 1: But but I think you hit on it, and it's 404 00:21:03,000 --> 00:21:05,359 Speaker 1: that it's such a bipartisan issue. I mean, just this 405 00:21:05,400 --> 00:21:09,399 Speaker 1: week you had the Senate unanimously approved this bill that 406 00:21:09,440 --> 00:21:11,880 Speaker 1: has to do with Hong Kong and retaining their independence. 407 00:21:12,480 --> 00:21:15,840 Speaker 1: Elizabeth Warren and Ted Cruz were both co sponsors, not 408 00:21:15,920 --> 00:21:18,240 Speaker 1: just voters, but co sponsors of this bill. When do 409 00:21:18,280 --> 00:21:21,399 Speaker 1: you get often do you see that in the House voted. 410 00:21:21,400 --> 00:21:24,879 Speaker 1: I think it was four seventeen to one to approve this. 411 00:21:24,960 --> 00:21:27,640 Speaker 1: So if you needed a clearer signal of it being 412 00:21:27,840 --> 00:21:29,840 Speaker 1: um a bipartisan issue, I guess you need four in 413 00:21:29,840 --> 00:21:32,840 Speaker 1: an eighteen to zero. But but it's clearly a bypart 414 00:21:32,880 --> 00:21:34,800 Speaker 1: is an issue, which means that it's not going away. 415 00:21:35,400 --> 00:21:37,320 Speaker 1: I don't know how that the Chinese will try to 416 00:21:37,359 --> 00:21:40,280 Speaker 1: play it out, but where we've gotten ourselves as we've 417 00:21:40,359 --> 00:21:44,399 Speaker 1: implemented these tariffs, We've got deadlines coming up, and it 418 00:21:44,520 --> 00:21:46,320 Speaker 1: be sort of hard to back away from, and hard 419 00:21:46,320 --> 00:21:49,520 Speaker 1: to back away from entirely because there are so many 420 00:21:49,600 --> 00:21:53,560 Speaker 1: human rights issues. Both parties have been upset about China 421 00:21:53,600 --> 00:21:56,000 Speaker 1: in the way that they subsidize their state owned enterprises 422 00:21:56,000 --> 00:21:58,240 Speaker 1: and the way that they steal intellectual property for so 423 00:21:58,280 --> 00:22:00,720 Speaker 1: long that we view this, as said as a high 424 00:22:00,800 --> 00:22:03,720 Speaker 1: chance of something happening, whether it's a series of deals 425 00:22:04,720 --> 00:22:07,240 Speaker 1: or even if somebody else comes in, a new president 426 00:22:07,320 --> 00:22:09,800 Speaker 1: gets elected, then there's clearly going to be some more 427 00:22:10,000 --> 00:22:13,040 Speaker 1: action taken after that. So so bottom line it for us, 428 00:22:13,119 --> 00:22:16,040 Speaker 1: what kind of portfolio would you want to be in 429 00:22:16,119 --> 00:22:19,119 Speaker 1: heading in the what sort of acid allocation would you 430 00:22:19,119 --> 00:22:22,200 Speaker 1: be looking at? All? Right, So just recently after earlier 431 00:22:22,240 --> 00:22:23,919 Speaker 1: this year when the trade talks broke down, we had 432 00:22:23,960 --> 00:22:26,840 Speaker 1: gone to basically neutral against O our benchmarks and equities 433 00:22:26,840 --> 00:22:29,280 Speaker 1: and on the fixed income side. Uh, just last month 434 00:22:29,320 --> 00:22:31,800 Speaker 1: we went back overweight to equities because we've actually gotten 435 00:22:31,800 --> 00:22:36,080 Speaker 1: pretty optimistic. Um, we're not sure what a phase one 436 00:22:36,200 --> 00:22:38,640 Speaker 1: deal is gonna look like, whether that pulls back any 437 00:22:38,680 --> 00:22:41,520 Speaker 1: tariffs or anything like that, but we're fairly confident that 438 00:22:41,600 --> 00:22:44,520 Speaker 1: we're not going to see more tariffs coming on. Basically, 439 00:22:44,560 --> 00:22:48,000 Speaker 1: both economies are in such bad shape right now, especially 440 00:22:48,000 --> 00:22:51,119 Speaker 1: relative to May, that we decided to move back into equities, 441 00:22:51,320 --> 00:22:53,640 Speaker 1: and we think that it's a it's a good time 442 00:22:53,680 --> 00:22:55,600 Speaker 1: to get to be taking on a little bit more 443 00:22:55,680 --> 00:22:57,480 Speaker 1: risk and taking on a little bit more of that beta. 444 00:22:58,520 --> 00:22:59,800 Speaker 1: All right, so now we know what you guys are 445 00:22:59,800 --> 00:23:02,719 Speaker 1: looking for heading into next year. But I think that 446 00:23:02,840 --> 00:23:06,400 Speaker 1: brings us to the craziest thing all of us ever 447 00:23:06,480 --> 00:23:08,800 Speaker 1: saw this week. That's right, let's start with the call 448 00:23:08,880 --> 00:23:11,720 Speaker 1: to the hotline. I found this pretty interesting. So his 449 00:23:11,800 --> 00:23:14,200 Speaker 1: name is John. He's a financial advisor out of the 450 00:23:14,280 --> 00:23:17,720 Speaker 1: Dallas Fort Worth, Texas area, and he told us that 451 00:23:17,760 --> 00:23:19,760 Speaker 1: this is not just the craziest thing. He ever saw 452 00:23:19,960 --> 00:23:22,760 Speaker 1: this week, Mike, but it's actually maybe the craziest thing 453 00:23:22,840 --> 00:23:25,960 Speaker 1: he ever saw over the past decade to fifteen years. 454 00:23:26,320 --> 00:23:30,119 Speaker 1: He's referring to a mutual fund. It's ticker p r 455 00:23:30,480 --> 00:23:33,640 Speaker 1: w c X. It's the t row Price Capital Appreciation Fund, 456 00:23:34,000 --> 00:23:36,359 Speaker 1: and he points out just its performance, how it's been 457 00:23:36,400 --> 00:23:38,600 Speaker 1: doing so well over the past couple of years. Take 458 00:23:38,600 --> 00:23:44,040 Speaker 1: a listen, This thing is absurd. It's outperformed it's category 459 00:23:44,600 --> 00:23:47,880 Speaker 1: over the last five, ten, fifteen years. It's the number 460 00:23:47,960 --> 00:23:51,200 Speaker 1: one performing fund. And it's category. This is an aside 461 00:23:51,359 --> 00:23:58,320 Speaker 1: cation fund, so it's US has anywhere from sixty bonds 462 00:23:58,520 --> 00:24:01,960 Speaker 1: and regardless of that, still over that fifteen years time 463 00:24:02,000 --> 00:24:06,240 Speaker 1: frame is outperforming the SMP while taking significantly less less risk. 464 00:24:07,520 --> 00:24:09,480 Speaker 1: It's pretty good. And I'm gonna assume John is who 465 00:24:09,480 --> 00:24:12,000 Speaker 1: he says he is, not a trow Price salesman on 466 00:24:12,040 --> 00:24:14,080 Speaker 1: the phone there. We don't have a last name, John, 467 00:24:14,240 --> 00:24:17,320 Speaker 1: So that's on you. I believe I did fact check 468 00:24:17,400 --> 00:24:19,520 Speaker 1: him on the numbers of the fund is out performing 469 00:24:19,560 --> 00:24:21,919 Speaker 1: over the last fifteen years and twenty years, but over 470 00:24:21,960 --> 00:24:24,080 Speaker 1: the last five years it's actually lagging the SMP by 471 00:24:24,119 --> 00:24:25,960 Speaker 1: just a tad all right, Well, maybe we'll have to 472 00:24:26,000 --> 00:24:27,800 Speaker 1: try to get the manager of that on here to 473 00:24:28,119 --> 00:24:31,679 Speaker 1: talk about it. H that's pretty good, all right, Katie. 474 00:24:31,680 --> 00:24:33,200 Speaker 1: Do you have a crazy thing you saw on markets 475 00:24:33,200 --> 00:24:35,240 Speaker 1: this week? I'm gonna try my best. I love this 476 00:24:35,240 --> 00:24:37,280 Speaker 1: story because I don't understand it. But it's about the 477 00:24:37,320 --> 00:24:42,000 Speaker 1: grain market and apparently we're seeing this weird trade. It's 478 00:24:42,000 --> 00:24:44,960 Speaker 1: called the over Chicago trade, where corn is being sent 479 00:24:45,320 --> 00:24:48,080 Speaker 1: from the west to the east and usually it just 480 00:24:48,160 --> 00:24:51,120 Speaker 1: goes to the south. And my best understanding of why 481 00:24:51,320 --> 00:24:54,960 Speaker 1: that's happening is because corn farmers in the East have 482 00:24:55,080 --> 00:24:58,439 Speaker 1: been hoarding their corn supplies because there's been just this 483 00:24:58,560 --> 00:25:02,359 Speaker 1: supply day, lou and they're they're hoarding it to wait 484 00:25:02,480 --> 00:25:05,800 Speaker 1: on better prices, which I think would just exacerbate the problem. 485 00:25:05,840 --> 00:25:07,639 Speaker 1: But I don't know. It's a crazy story. It's on 486 00:25:07,680 --> 00:25:10,080 Speaker 1: the terminal. I encourage you to read it because I 487 00:25:10,080 --> 00:25:12,040 Speaker 1: probably did a terrible job. I like it. No, I 488 00:25:12,080 --> 00:25:14,840 Speaker 1: like it. That's a good Thanksgiving themes story as well. Wow, 489 00:25:14,960 --> 00:25:16,720 Speaker 1: I want to pretend that that's what I was thinking 490 00:25:16,720 --> 00:25:19,800 Speaker 1: of the core market. Sarah, how about you? Can you 491 00:25:20,280 --> 00:25:24,320 Speaker 1: can you top the crazy Chicago corn trade of whatever 492 00:25:24,359 --> 00:25:28,520 Speaker 1: that was? Like? I have one that is pretty crazy, 493 00:25:28,520 --> 00:25:29,960 Speaker 1: and there are a couple of stories that came out 494 00:25:30,000 --> 00:25:33,520 Speaker 1: about it this week. So pg n E the power 495 00:25:33,560 --> 00:25:37,000 Speaker 1: company that has been under a lot of pressure after 496 00:25:37,200 --> 00:25:41,080 Speaker 1: they did start some of those horrible, horrible wildfires out 497 00:25:41,080 --> 00:25:45,359 Speaker 1: in California. They're filed for bankruptcy. Shares are down since 498 00:25:45,359 --> 00:25:49,399 Speaker 1: mid Well, what's happening is because they have to compensate 499 00:25:49,440 --> 00:25:52,200 Speaker 1: people out in California who say that their property was damage. 500 00:25:52,440 --> 00:25:54,520 Speaker 1: They're going through all these claims and all of a sudden, 501 00:25:54,840 --> 00:25:59,159 Speaker 1: this one claim popped up with someone claiming that the 502 00:25:59,240 --> 00:26:03,719 Speaker 1: fire destroyed a five hundred pound emerald with two hundred 503 00:26:04,000 --> 00:26:07,280 Speaker 1: and eighty million dollars that they're having in their house. 504 00:26:07,520 --> 00:26:10,600 Speaker 1: So of course p g n E is a little 505 00:26:10,600 --> 00:26:13,600 Speaker 1: bit suspect about this, so they're trying to find out 506 00:26:13,920 --> 00:26:17,680 Speaker 1: more information. But Bloomberg's very own opinion Columnst. Matt Levin 507 00:26:17,720 --> 00:26:19,800 Speaker 1: looked a little bit more into this, and it turns 508 00:26:19,800 --> 00:26:23,800 Speaker 1: out that this emerald has likely been written about before. 509 00:26:23,800 --> 00:26:27,159 Speaker 1: It actually has a name. The name is Blessa I 510 00:26:27,200 --> 00:26:29,680 Speaker 1: believe that's how you pronounce it, and it also was 511 00:26:29,840 --> 00:26:34,880 Speaker 1: maybe cursed. So the way that yeah, clearly yes, um 512 00:26:34,920 --> 00:26:37,359 Speaker 1: so the way Matt Levine finishes his column and he says, 513 00:26:37,680 --> 00:26:40,119 Speaker 1: I'm going to stop the emerald speculation at this point, 514 00:26:40,160 --> 00:26:42,640 Speaker 1: but I just wanted to flag for you the possibility 515 00:26:42,720 --> 00:26:44,480 Speaker 1: that P. G N E might have caused a fire 516 00:26:44,600 --> 00:26:48,480 Speaker 1: that destroyed a cursed emerald. Um so pretty crazy stuff. 517 00:26:48,520 --> 00:26:51,040 Speaker 1: Does that end up being a good good? That's what 518 00:26:51,240 --> 00:26:53,320 Speaker 1: I'm not sure now? That is this is the curse 519 00:26:53,359 --> 00:26:55,439 Speaker 1: over now, I'm not sure. I thought you were going 520 00:26:55,480 --> 00:26:57,200 Speaker 1: to tell me that the emerald's name was fat Man 521 00:26:59,320 --> 00:27:05,840 Speaker 1: bad it is five hundred pounds. But furthermore, emeralds are flammable, 522 00:27:06,080 --> 00:27:08,119 Speaker 1: like that's what That's what I thought. I thought to 523 00:27:08,240 --> 00:27:11,920 Speaker 1: emeralds burn right. Apparently apparently, at least if you can, 524 00:27:12,560 --> 00:27:16,040 Speaker 1: you know, convince your insurance adjusters looke. Have they told 525 00:27:16,040 --> 00:27:18,280 Speaker 1: you about our our gimmick here? I heard a little 526 00:27:18,280 --> 00:27:20,359 Speaker 1: bit about it, so I did my best. But if 527 00:27:20,359 --> 00:27:22,240 Speaker 1: you're asking for the craziest thing in markets, you bring 528 00:27:22,240 --> 00:27:24,920 Speaker 1: in a macro economist, you're gonna get something about about 529 00:27:24,920 --> 00:27:26,960 Speaker 1: the economy. And that's actually I'm just gonna put some 530 00:27:27,000 --> 00:27:29,520 Speaker 1: context around something that we've already discussed, and it's about 531 00:27:29,520 --> 00:27:32,000 Speaker 1: the FED and about the balance sheet. Because you were right, 532 00:27:32,080 --> 00:27:34,560 Speaker 1: might you already mentioned that they had started to add 533 00:27:34,600 --> 00:27:37,080 Speaker 1: to their balance sheet again, and that started. The low 534 00:27:37,160 --> 00:27:38,840 Speaker 1: point was the week of August twenty six, and when 535 00:27:38,880 --> 00:27:42,240 Speaker 1: the FED released their balance sheet data this week, turns 536 00:27:42,240 --> 00:27:44,399 Speaker 1: out they have grown in total their balance sheet by 537 00:27:44,400 --> 00:27:48,199 Speaker 1: two and eighty seven billion over twelve weeks. And just 538 00:27:48,280 --> 00:27:51,080 Speaker 1: to put that in context, over twelve weeks, just that 539 00:27:51,400 --> 00:27:53,639 Speaker 1: three month period, the two hundred and eighty seven billion 540 00:27:53,760 --> 00:27:56,159 Speaker 1: is greater than the annual g d P of a 541 00:27:56,280 --> 00:27:58,840 Speaker 1: hundred and forty five of the hundred and ninety five 542 00:27:58,880 --> 00:28:04,000 Speaker 1: countries on this planet. That's crazy. It's pretty crazy. That's good, 543 00:28:04,320 --> 00:28:06,600 Speaker 1: very good, very good. I appreciate the headline, but it's 544 00:28:06,640 --> 00:28:09,160 Speaker 1: well done, well done. All right, I'll close with mine here. 545 00:28:09,240 --> 00:28:12,840 Speaker 1: This is um a stock a company called art Go 546 00:28:13,600 --> 00:28:16,919 Speaker 1: in Hong Kong. It's a company that produces marble, and 547 00:28:16,960 --> 00:28:19,320 Speaker 1: I think they were trying to expand in the real 548 00:28:19,440 --> 00:28:22,960 Speaker 1: estate and whatever. None of that's important. What's important is 549 00:28:22,960 --> 00:28:27,120 Speaker 1: this stock was up thirty eight hundred percent years a date, 550 00:28:27,840 --> 00:28:32,479 Speaker 1: thirty percent. The stock was up a penny stock mainly 551 00:28:32,520 --> 00:28:35,200 Speaker 1: because M s c I said that they would start 552 00:28:35,200 --> 00:28:39,360 Speaker 1: including it in their indexes. Uh So, obviously people trying 553 00:28:39,360 --> 00:28:42,600 Speaker 1: to front run that that passive money that will will 554 00:28:42,680 --> 00:28:45,680 Speaker 1: chase it. Later that m s C. I said, you 555 00:28:45,680 --> 00:28:48,480 Speaker 1: know what, never mind, we're not going included in our indexes. 556 00:28:48,520 --> 00:28:53,959 Speaker 1: We've gotten some complaints from you know, investors, uh uh quote. 557 00:28:54,040 --> 00:28:57,480 Speaker 1: Their quote is further analysis and feedback from market participants 558 00:28:57,520 --> 00:29:06,600 Speaker 1: on investability. In one the stock dropped percent wiped out 559 00:29:06,640 --> 00:29:10,320 Speaker 1: five points seven billion dollars of market value with the 560 00:29:10,440 --> 00:29:13,080 Speaker 1: one day percent drop. And that's the craziest thing I 561 00:29:13,080 --> 00:29:15,800 Speaker 1: saw on markets. I think all four pretty crazy this week. 562 00:29:16,040 --> 00:29:19,440 Speaker 1: That's off, Yeah, that's off. And before we go, John 563 00:29:19,560 --> 00:29:21,760 Speaker 1: from Dallas Fort Worth, Texas, I do want to let 564 00:29:21,800 --> 00:29:24,200 Speaker 1: you know that Mike and I did hear your idea 565 00:29:24,280 --> 00:29:27,800 Speaker 1: to explore indexed bond e t s even further and 566 00:29:27,800 --> 00:29:30,760 Speaker 1: talk about the potential liquidity. So we'll absolutely talk about it. 567 00:29:30,800 --> 00:29:33,080 Speaker 1: And anyone else who is interested in giving us a call, 568 00:29:33,400 --> 00:29:35,840 Speaker 1: leaving us a tip, or giving us an idea for 569 00:29:36,000 --> 00:29:38,920 Speaker 1: the craziest things you ever heard or saw in markets 570 00:29:39,000 --> 00:29:41,000 Speaker 1: this week, give us a call. That number is six 571 00:29:41,120 --> 00:29:45,640 Speaker 1: four six three to four three four nine zero. But 572 00:29:45,720 --> 00:29:48,480 Speaker 1: with that, Luke Tilly, Katie Griffelt, thanks so much for 573 00:29:48,480 --> 00:29:50,800 Speaker 1: coming on the show. This week. Thank you very much 574 00:29:50,800 --> 00:30:00,080 Speaker 1: for having me. Thank you What Goes Out? Will you 575 00:30:00,160 --> 00:30:02,720 Speaker 1: back next week. Until then, you can find us on 576 00:30:02,720 --> 00:30:05,840 Speaker 1: the Bloomberg Terminal, website and app, or wherever you get 577 00:30:05,880 --> 00:30:08,360 Speaker 1: your podcasts. We'd love it if you took the time 578 00:30:08,400 --> 00:30:11,200 Speaker 1: to rate interview the show on Apple Podcasts so more 579 00:30:11,280 --> 00:30:14,120 Speaker 1: listeners can find us. And you can find us on Twitter. 580 00:30:14,400 --> 00:30:18,520 Speaker 1: Follow me at at Sarah Pontech, Mike is at reg Anonymous, 581 00:30:18,760 --> 00:30:21,880 Speaker 1: and Katie Greifeld is at k Breifeld. You can also 582 00:30:21,920 --> 00:30:26,280 Speaker 1: follow Bloomberg Podcasts at podcasts. What Goes Up is produced 583 00:30:26,280 --> 00:30:29,880 Speaker 1: by Tofur Foreheads. The head of Bloomberg podcast is Francesca Levie. 584 00:30:30,160 --> 00:30:31,840 Speaker 1: Thanks for listening, See you next time.