1 00:00:13,680 --> 00:00:16,800 Speaker 1: Hello, and welcome to What Goes Up, a Bloomberg weekly 2 00:00:16,840 --> 00:00:21,520 Speaker 1: market podcast. I'm Sarah pontecor reporter on the Cross Asset team, 3 00:00:21,520 --> 00:00:24,200 Speaker 1: and I'm Mike Reagan, a senior editor on the Markets team. 4 00:00:24,200 --> 00:00:26,360 Speaker 1: This week on the show, you could say the market's 5 00:00:26,400 --> 00:00:29,920 Speaker 1: gone wild. Swings of three to four in the spire 6 00:00:30,040 --> 00:00:33,000 Speaker 1: have become the norm. The Fed issued its first emergency 7 00:00:33,080 --> 00:00:35,519 Speaker 1: rate cut since two thousand and eight, and ten year 8 00:00:35,560 --> 00:00:39,240 Speaker 1: treasury yields are below one. What does it all mean? 9 00:00:39,479 --> 00:00:41,960 Speaker 1: And when will it end? I don't know, Sarah? Why 10 00:00:41,960 --> 00:00:43,640 Speaker 1: are you asking me? How would I possibly know that? 11 00:00:43,680 --> 00:00:46,720 Speaker 1: I thought you have the answer to everything. Anyway, of course, 12 00:00:46,800 --> 00:00:49,559 Speaker 1: when the episode with the craziest thing we saw in 13 00:00:49,640 --> 00:00:52,159 Speaker 1: markets this week? Sorry, you know I abstained from that 14 00:00:52,200 --> 00:00:54,520 Speaker 1: competition last time. You abstained last time because you're gonna 15 00:00:54,560 --> 00:00:58,040 Speaker 1: have an extra extra great one that well, you know 16 00:00:58,400 --> 00:01:01,080 Speaker 1: since I abstained, you know what that means? Still undefeated. 17 00:01:01,400 --> 00:01:03,760 Speaker 1: I guess that's true. We'll give it to you. I'll 18 00:01:03,760 --> 00:01:05,399 Speaker 1: give it to you this time because I'm feeling nice. 19 00:01:05,400 --> 00:01:08,000 Speaker 1: But anyway, we've got some great guests that will hopefully 20 00:01:08,040 --> 00:01:11,200 Speaker 1: tell us when will it end? No pressure here, but 21 00:01:11,680 --> 00:01:13,600 Speaker 1: joining us for the first time on the show. Very 22 00:01:13,640 --> 00:01:16,920 Speaker 1: happy to have him. He is the chief macro strategist 23 00:01:17,000 --> 00:01:21,080 Speaker 1: at e I a all weather Alpha Partners not fullsnala. 24 00:01:21,200 --> 00:01:23,240 Speaker 1: How welcome to the show. Thanks for having me. Appreciate 25 00:01:23,240 --> 00:01:27,000 Speaker 1: it absolutely and also back on the show, our old friend. 26 00:01:27,520 --> 00:01:32,520 Speaker 1: He's a cross set reporter. He's a Reddit aficionado. Lukawa, 27 00:01:32,600 --> 00:01:36,760 Speaker 1: welcome to the show. I'm not just I am not. 28 00:01:37,040 --> 00:01:39,560 Speaker 1: You're more so than the rest of us. Now that 29 00:01:39,600 --> 00:01:41,639 Speaker 1: you're here, I have to I have to tell you something. Okay, 30 00:01:41,680 --> 00:01:44,040 Speaker 1: you know, you know I consider you a friend. Sara 31 00:01:44,160 --> 00:01:47,320 Speaker 1: is your friend. Even novels your friend. We gather do 32 00:01:47,440 --> 00:01:50,160 Speaker 1: here to talk about that that white belt you've been wearing. 33 00:01:51,800 --> 00:01:55,120 Speaker 1: The white belt, this is an intervention. This is an intervention. 34 00:01:55,240 --> 00:01:59,040 Speaker 1: It's always in between Memorial Day and Labor Day somewhere. 35 00:01:59,240 --> 00:02:01,760 Speaker 1: Is he wearing it now, Luke? Oh yeah. For listeners 36 00:02:01,800 --> 00:02:04,640 Speaker 1: who don't know Luke, I will describe he You actually asked, 37 00:02:04,640 --> 00:02:07,600 Speaker 1: how would you describe Luke's fashion sense? I describe it 38 00:02:07,640 --> 00:02:11,639 Speaker 1: as risk on. He's sorry, he's like a lever. He's 39 00:02:11,680 --> 00:02:14,360 Speaker 1: like a Leverty, triple LEVERTYTF of fact. You know how 40 00:02:14,440 --> 00:02:18,880 Speaker 1: Luke described it? Loud, loud, loud, loud and cheap. Was 41 00:02:18,919 --> 00:02:23,520 Speaker 1: actually the full description is it's reddy. It's a very 42 00:02:23,600 --> 00:02:26,359 Speaker 1: it's hip on Reddit. Look, you know there's appropriate time 43 00:02:26,440 --> 00:02:28,560 Speaker 1: to wear a white belt, you know, like you just 44 00:02:28,560 --> 00:02:32,600 Speaker 1: started karate lessons, maybe where it's like a special occasion 45 00:02:32,639 --> 00:02:35,480 Speaker 1: at the retirement home bingo night or something. Sara's from Florida, 46 00:02:35,600 --> 00:02:40,959 Speaker 1: she knows. I'm just jealous. Anyway, I'm Luke is very 47 00:02:40,960 --> 00:02:43,600 Speaker 1: progressive dresser. Michael Michael come in on Monday with a 48 00:02:43,600 --> 00:02:47,080 Speaker 1: white belt. I'd be happy to give Mike my belt. 49 00:02:47,080 --> 00:02:53,040 Speaker 1: He just wouldn't fit it. Cheeze Luke. All Right, you win, 50 00:02:53,160 --> 00:02:56,080 Speaker 1: you win anyway, not for Let's start with you, because 51 00:02:57,120 --> 00:02:59,800 Speaker 1: apart from Luke's white belt this, uh, it's just been 52 00:02:59,800 --> 00:03:03,640 Speaker 1: a crazy week. I was going through one of your notes, uh, 53 00:03:03,919 --> 00:03:06,200 Speaker 1: from from your hedge fund that you sent around the clients, 54 00:03:06,280 --> 00:03:10,320 Speaker 1: and I was astounded because you've tallied up the number 55 00:03:10,639 --> 00:03:13,960 Speaker 1: of tests being done in each country for the coronavirus, 56 00:03:14,040 --> 00:03:18,360 Speaker 1: and then you obviously divided it by population. Let me 57 00:03:18,600 --> 00:03:23,840 Speaker 1: read the listeners. Some numbers here, Uh, South Korea approximately 58 00:03:23,880 --> 00:03:26,000 Speaker 1: test per million people, and you give sort of a 59 00:03:26,080 --> 00:03:30,799 Speaker 1: league table here, Austria two thirty five per million goes 60 00:03:30,840 --> 00:03:34,280 Speaker 1: on and on, Finland twenty three per million, Vietnam eighteen, 61 00:03:34,520 --> 00:03:38,280 Speaker 1: all the way at the bottom. United States one test 62 00:03:38,360 --> 00:03:41,240 Speaker 1: per per million people. And later in the you say 63 00:03:41,240 --> 00:03:43,640 Speaker 1: obviously that the market is is very much gonna be 64 00:03:43,680 --> 00:03:47,240 Speaker 1: a referendum on how well uh the government here is 65 00:03:47,280 --> 00:03:50,760 Speaker 1: managing this crisis. I'm not getting much confidence from that 66 00:03:50,800 --> 00:03:53,280 Speaker 1: one per million, as has the tide turned it? Although 67 00:03:53,320 --> 00:03:55,280 Speaker 1: do you think they're they're starting to get out ahead 68 00:03:55,280 --> 00:03:58,240 Speaker 1: of this? Obviously, Congress past this eight billion and change 69 00:03:58,800 --> 00:04:01,720 Speaker 1: UH bill to to put some money into the health 70 00:04:01,760 --> 00:04:05,680 Speaker 1: care system and fight this. How how concerned is the 71 00:04:05,720 --> 00:04:07,720 Speaker 1: market that this is just not gonna end up well 72 00:04:07,760 --> 00:04:11,160 Speaker 1: for the the US? Right? So? I think, um, you know, 73 00:04:11,200 --> 00:04:14,400 Speaker 1: before before this kind of shock to the markets, the 74 00:04:14,480 --> 00:04:16,479 Speaker 1: markets were kind of trying to debate whether or not 75 00:04:16,600 --> 00:04:18,760 Speaker 1: this was going to be primarily kind of like a 76 00:04:18,839 --> 00:04:22,320 Speaker 1: China story, a China, China only story. I think as 77 00:04:22,320 --> 00:04:24,200 Speaker 1: we started to see the case counts in South Korea 78 00:04:24,240 --> 00:04:26,080 Speaker 1: pick up, it became clear that, no, this is not 79 00:04:26,120 --> 00:04:29,320 Speaker 1: going to be kind of isolated to China. And now 80 00:04:29,360 --> 00:04:31,280 Speaker 1: that we've fallen as far as we have, I do 81 00:04:31,360 --> 00:04:35,200 Speaker 1: think the market now is expecting you know, a rise 82 00:04:35,200 --> 00:04:39,200 Speaker 1: in case counts as we get testing to plif rate. However, 83 00:04:39,520 --> 00:04:41,960 Speaker 1: we still are quite behind the curve. So like right now, 84 00:04:42,040 --> 00:04:44,640 Speaker 1: for example, the latest is that you know, we get 85 00:04:44,680 --> 00:04:49,200 Speaker 1: about a million and a half testing capacity going forward 86 00:04:49,279 --> 00:04:51,919 Speaker 1: over the next couple of weeks. However, because of the 87 00:04:52,000 --> 00:04:54,560 Speaker 1: lab constraints, we can only do about ten k per day, 88 00:04:54,600 --> 00:04:57,040 Speaker 1: which would take a while to scale up. So we 89 00:04:57,080 --> 00:05:00,240 Speaker 1: would expect that, like there is an inflection in case 90 00:05:00,279 --> 00:05:03,080 Speaker 1: counsel's coming, but it's probably not going to be too 91 00:05:03,120 --> 00:05:06,000 Speaker 1: quickly unless a private sector really steps up. And we're 92 00:05:06,120 --> 00:05:08,520 Speaker 1: quite quite down the line on the league tables, as 93 00:05:08,560 --> 00:05:12,039 Speaker 1: you mentioned, so we're pretty concerned that um ultimately the 94 00:05:12,080 --> 00:05:14,080 Speaker 1: markets will decide that the White House is a bit 95 00:05:14,080 --> 00:05:16,279 Speaker 1: behind the curve on this threat. I remember a couple 96 00:05:16,279 --> 00:05:18,239 Speaker 1: of weeks ago there was a lot of optimism building 97 00:05:18,320 --> 00:05:20,680 Speaker 1: up because there are reports coming out saying that the 98 00:05:20,680 --> 00:05:23,080 Speaker 1: coronavirus was speaking. Of course, a lot of this pertained 99 00:05:23,120 --> 00:05:26,040 Speaker 1: to China, but now we're seeing this international spread and 100 00:05:26,080 --> 00:05:29,080 Speaker 1: there's a lot of numbers data flying out there regarding 101 00:05:29,080 --> 00:05:32,240 Speaker 1: the coronavirus. I mean, what actually are the factors that 102 00:05:32,320 --> 00:05:35,000 Speaker 1: you guys look out to try to get a sense 103 00:05:35,040 --> 00:05:39,640 Speaker 1: of how this is actually progressing, and to inform any 104 00:05:39,760 --> 00:05:42,360 Speaker 1: investment decisions, if at all, because it seems like it's 105 00:05:42,400 --> 00:05:46,599 Speaker 1: so difficult when there's so many UH numbers and so 106 00:05:46,720 --> 00:05:49,640 Speaker 1: much data out there that kind of flies against the 107 00:05:49,640 --> 00:05:51,720 Speaker 1: phase of another one. Right, These are the type of 108 00:05:51,839 --> 00:05:55,200 Speaker 1: environments that me, as a macer junkie, I love, although 109 00:05:55,240 --> 00:05:58,599 Speaker 1: I don't like the social implications. But the idea is that, yes, 110 00:05:58,760 --> 00:06:00,960 Speaker 1: there was a case sequence show case counting clients in 111 00:06:01,000 --> 00:06:06,280 Speaker 1: China after a historic quarantine, right, Um, even if we 112 00:06:06,320 --> 00:06:09,719 Speaker 1: wanted to that wouldn't happen here. Um, And it did spread, 113 00:06:09,960 --> 00:06:13,840 Speaker 1: and there were community spread events across the world. And 114 00:06:13,880 --> 00:06:16,400 Speaker 1: so what we're looking at is we want to see 115 00:06:16,440 --> 00:06:18,880 Speaker 1: folks start to migrate from the idea of we can 116 00:06:18,920 --> 00:06:21,360 Speaker 1: contain this virus, which I think is a fantasy, and 117 00:06:21,360 --> 00:06:23,840 Speaker 1: people are coming around to toward how do we deal 118 00:06:23,839 --> 00:06:26,880 Speaker 1: with congestion and how do we deal with capacity constraints. 119 00:06:27,320 --> 00:06:31,840 Speaker 1: If you do certain social isolation procedures that prevents super 120 00:06:31,960 --> 00:06:35,320 Speaker 1: high congestions and hospitals and you know, just regular public 121 00:06:35,320 --> 00:06:38,200 Speaker 1: health and in fact public spaces in general, well that 122 00:06:38,240 --> 00:06:40,400 Speaker 1: does as slow as the virus with the capacity and 123 00:06:40,400 --> 00:06:44,080 Speaker 1: the health, health care infrastructure, and biotechnology developments can catch 124 00:06:44,200 --> 00:06:46,520 Speaker 1: up to the threat. So what we're focused on mostly 125 00:06:46,640 --> 00:06:49,880 Speaker 1: is how quickly does the United States, in response to 126 00:06:50,000 --> 00:06:54,080 Speaker 1: rising case counts, implements social isolation procedures that slows the 127 00:06:54,160 --> 00:06:57,640 Speaker 1: viruses transmission and allows the health care apparatus to catch 128 00:06:57,720 --> 00:06:59,560 Speaker 1: up to the threat. If you answer your phone, it's 129 00:06:59,600 --> 00:07:02,919 Speaker 1: one of your fund investors, uh, and they say, you know, 130 00:07:03,560 --> 00:07:05,760 Speaker 1: what are you guys doing? What's going on? You know, 131 00:07:05,880 --> 00:07:08,480 Speaker 1: is it novels? Not here right now? Please leave a message? 132 00:07:09,000 --> 00:07:11,040 Speaker 1: You know what what are you telling people? You know, 133 00:07:11,080 --> 00:07:13,160 Speaker 1: what would you tell a client if they called and said, 134 00:07:13,200 --> 00:07:15,160 Speaker 1: what do you how do you guys dealing with this? Well, 135 00:07:15,200 --> 00:07:19,320 Speaker 1: if it's daring market hours then um, probably somebody else 136 00:07:19,560 --> 00:07:23,640 Speaker 1: um our business will be handla um. If but you know, 137 00:07:23,680 --> 00:07:25,320 Speaker 1: you get me on the phone outside of market hours, 138 00:07:25,360 --> 00:07:29,239 Speaker 1: first thing I say, please wash your hands. It really 139 00:07:29,360 --> 00:07:32,000 Speaker 1: it really does make a huge difference. You know, we 140 00:07:32,040 --> 00:07:34,440 Speaker 1: can we can debate whether basks are helpfulness and that, 141 00:07:34,480 --> 00:07:36,480 Speaker 1: but like you know, I'm sure you guys have seen 142 00:07:36,520 --> 00:07:40,280 Speaker 1: what happens to the bacteria and viruses when not just 143 00:07:40,440 --> 00:07:43,000 Speaker 1: virus but bacteria as well. Um, when when you wash 144 00:07:43,040 --> 00:07:45,600 Speaker 1: your hands for twenty seconds. It's a. It's a. It's amazing. 145 00:07:45,760 --> 00:07:50,320 Speaker 1: So what is the portfolio allocations when of washing your hands? Right? Right? Right? Yeah, 146 00:07:50,760 --> 00:07:53,040 Speaker 1: no kidding, I like I like that. So, you know, 147 00:07:53,120 --> 00:07:56,000 Speaker 1: we we were quite bearish around Valentine's Day, as we 148 00:07:56,040 --> 00:07:59,000 Speaker 1: wrote in our past note, UM, so we were pretty 149 00:07:59,000 --> 00:08:02,000 Speaker 1: well positioned going in to this shock. Um. Now what 150 00:08:02,080 --> 00:08:04,640 Speaker 1: we're kind of expecting is um, you know, it takes 151 00:08:04,640 --> 00:08:07,000 Speaker 1: some time for the market to digest the shock. We 152 00:08:07,080 --> 00:08:09,720 Speaker 1: probably have a relatively wide and volatile range for the 153 00:08:09,760 --> 00:08:13,000 Speaker 1: time being. And as we start to see the potential 154 00:08:13,040 --> 00:08:17,360 Speaker 1: for social isolation procedures be implemented, then it becomes, like 155 00:08:17,400 --> 00:08:20,480 Speaker 1: you said, a referendum about how behind or on the 156 00:08:20,520 --> 00:08:23,560 Speaker 1: curve is the White House and to what extent um? 157 00:08:23,640 --> 00:08:25,680 Speaker 1: You know, how long are we gonna have social isolation 158 00:08:25,720 --> 00:08:27,760 Speaker 1: procedures to the extent we get them. If we get them, 159 00:08:27,840 --> 00:08:30,320 Speaker 1: that's the biggest risk to like earning his growth and 160 00:08:30,800 --> 00:08:34,240 Speaker 1: potential for job losses. And then the question becomes eight 161 00:08:34,280 --> 00:08:36,080 Speaker 1: point three billion dollars is not going to move the needle. 162 00:08:36,160 --> 00:08:37,960 Speaker 1: We're gonna need you know, we need to add another 163 00:08:38,040 --> 00:08:40,040 Speaker 1: zero to that. If you look at like nine eleven, 164 00:08:40,120 --> 00:08:45,240 Speaker 1: Hurricane Katrin, a Hurricane Sandy, billion dollars packages. So you 165 00:08:45,280 --> 00:08:47,760 Speaker 1: know that we're we're nowhere near that level right now. 166 00:08:47,840 --> 00:08:51,280 Speaker 1: If we see the White House and Congress suddenly catch up, 167 00:08:51,720 --> 00:08:54,880 Speaker 1: perhaps you know, the lowest in based on the fact 168 00:08:54,920 --> 00:08:57,640 Speaker 1: that President Trump called it the Corona flu Wednesday night, 169 00:08:57,960 --> 00:09:01,880 Speaker 1: we do expect there's some risk for potential more downside, 170 00:09:02,000 --> 00:09:05,520 Speaker 1: potentially new lows. Once we get to the point where, um, 171 00:09:05,559 --> 00:09:07,640 Speaker 1: you know, we're starting to see kind of a little 172 00:09:07,679 --> 00:09:11,120 Speaker 1: bit of panic about the effect of potential social isolation procedures. 173 00:09:11,440 --> 00:09:13,719 Speaker 1: Then we start bargain hunting. And then I kind of 174 00:09:13,720 --> 00:09:15,720 Speaker 1: passed the baton to my partner who runs our launch 175 00:09:15,720 --> 00:09:33,800 Speaker 1: short portfolio. Gotcha, gotcha, Look, let's bring you in here. 176 00:09:33,840 --> 00:09:35,760 Speaker 1: I mean, you wear that white belt, but I consider 177 00:09:35,800 --> 00:09:38,800 Speaker 1: you a black belt in looking at volatility markets. Right 178 00:09:38,960 --> 00:09:45,080 Speaker 1: half hots segue, what what's what? What's the volt market 179 00:09:45,160 --> 00:09:46,719 Speaker 1: look like to you? I mean, unless I looked, the 180 00:09:46,840 --> 00:09:51,720 Speaker 1: VIX is kind of in that thirty range, absolutely screaming. 181 00:09:51,800 --> 00:09:55,559 Speaker 1: The volatility term structure is, you know, has signaling a 182 00:09:55,679 --> 00:09:58,760 Speaker 1: persistent degree of alarm that you know, I haven't seen 183 00:09:58,840 --> 00:10:01,280 Speaker 1: in my few years in this business. If I if 184 00:10:01,320 --> 00:10:04,280 Speaker 1: I was back in I probably would have seen something 185 00:10:04,360 --> 00:10:07,120 Speaker 1: like this in terms of the persistence in the magnitude 186 00:10:07,200 --> 00:10:10,400 Speaker 1: of how much the ball markets are saying, be very 187 00:10:10,559 --> 00:10:13,040 Speaker 1: very worried about now, but also be worried about later. 188 00:10:13,400 --> 00:10:15,280 Speaker 1: That's kind of what the read and you get when 189 00:10:15,720 --> 00:10:18,800 Speaker 1: the front ball month is so uh, the front futures 190 00:10:18,800 --> 00:10:21,719 Speaker 1: contract is so high. Uh, there's about the second is 191 00:10:21,760 --> 00:10:24,360 Speaker 1: also still so high. And one thing that's been happening 192 00:10:24,440 --> 00:10:28,200 Speaker 1: is people have been getting absolutely roasted trying to short volatility. 193 00:10:28,600 --> 00:10:31,080 Speaker 1: People think, you know, when VALL goes up, that means, 194 00:10:31,160 --> 00:10:32,599 Speaker 1: you know, it's a it's a good short. And you know, 195 00:10:32,760 --> 00:10:34,920 Speaker 1: it is true that when VALL goes up you have 196 00:10:35,040 --> 00:10:37,480 Speaker 1: more kind of profit potential, more room to move just 197 00:10:37,640 --> 00:10:40,480 Speaker 1: on VALL coming in. But the the structure of the 198 00:10:40,520 --> 00:10:44,200 Speaker 1: market recently has been such that spot vix is actually 199 00:10:44,320 --> 00:10:47,800 Speaker 1: much much much higher than the front month, and uh, 200 00:10:47,920 --> 00:10:50,679 Speaker 1: that convergence is taking place more and more with the 201 00:10:50,760 --> 00:10:53,440 Speaker 1: front month. So your actual investible way to short fall 202 00:10:53,720 --> 00:10:55,640 Speaker 1: and you know, in an easy way short of getting 203 00:10:55,640 --> 00:10:58,439 Speaker 1: the strip uh is actually converging to the upside. So 204 00:10:58,520 --> 00:11:01,360 Speaker 1: people are getting uh, pretty much absolutely killed on this. 205 00:11:01,520 --> 00:11:04,079 Speaker 1: And it's a reminder that you know, I got to 206 00:11:04,080 --> 00:11:06,520 Speaker 1: look at the curve structure, gotta look at the term structure. Oh, 207 00:11:06,559 --> 00:11:09,280 Speaker 1: when you're getting involved in this, whatsoever is that notion 208 00:11:09,400 --> 00:11:12,760 Speaker 1: that you know, the market was so blatantly short vaultil 209 00:11:12,800 --> 00:11:15,520 Speaker 1: you're heading into this, Is that sort of rebounding into 210 00:11:15,559 --> 00:11:17,640 Speaker 1: the equity market, You think that maybe making these sell 211 00:11:17,679 --> 00:11:20,280 Speaker 1: offs a little bit worse. I think somewhat. I do 212 00:11:20,480 --> 00:11:23,719 Speaker 1: think there's something to the argument that the you know, 213 00:11:23,880 --> 00:11:28,360 Speaker 1: the degree of euphoria we saw in January and early 214 00:11:28,480 --> 00:11:31,720 Speaker 1: February has you know, the necessary every reaction has an 215 00:11:31,720 --> 00:11:34,320 Speaker 1: opposite and equal reaction just means that it's a little 216 00:11:34,360 --> 00:11:36,920 Speaker 1: worse on the other side. I you know, I think 217 00:11:37,080 --> 00:11:40,200 Speaker 1: all the people that were h kind of flooding into 218 00:11:40,280 --> 00:11:43,160 Speaker 1: single stock calls, we've seen that reverse. The equity put 219 00:11:43,280 --> 00:11:47,120 Speaker 1: call actually taught actually bottomed the day of the market 220 00:11:47,200 --> 00:11:50,240 Speaker 1: topped at like point five five, so many more calls 221 00:11:50,480 --> 00:11:53,600 Speaker 1: training them puts. But it hasn't really risen to kind 222 00:11:53,640 --> 00:11:55,959 Speaker 1: of you know, alarming level, since we're still short of 223 00:11:56,040 --> 00:11:59,439 Speaker 1: like Q four team put call ratios. So you know, 224 00:11:59,760 --> 00:12:02,000 Speaker 1: that could be a sense that people are just cutting 225 00:12:02,120 --> 00:12:05,839 Speaker 1: risk rather than hedging risk. But the vall metrics in 226 00:12:06,000 --> 00:12:08,800 Speaker 1: terms of what people are looking for, it's crazy, Like 227 00:12:08,880 --> 00:12:10,840 Speaker 1: when you think about what does the thirty vix mean, 228 00:12:10,960 --> 00:12:14,240 Speaker 1: it means essentially, we're expecting a near two percent move 229 00:12:14,480 --> 00:12:17,240 Speaker 1: every day for a month and the SMP five hundred. 230 00:12:17,400 --> 00:12:20,560 Speaker 1: But that's what we're realizing. We're realizing insanely high than 231 00:12:22,000 --> 00:12:24,240 Speaker 1: So I want to get your take because what that said. 232 00:12:24,320 --> 00:12:28,479 Speaker 1: So Monday we had four percent bounds, then on Tuesday 233 00:12:29,000 --> 00:12:32,360 Speaker 1: we had this massive sell off. Then the next day 234 00:12:32,360 --> 00:12:34,839 Speaker 1: and this was after Super Tuesday, we get another four 235 00:12:34,960 --> 00:12:37,400 Speaker 1: percent balance, and we have people out there saying, oh, 236 00:12:37,440 --> 00:12:40,600 Speaker 1: it's the Biden balance because Vice President Biden did better 237 00:12:40,640 --> 00:12:43,440 Speaker 1: in Super Tuesday. Yet on Thursday we get another massive 238 00:12:43,480 --> 00:12:46,680 Speaker 1: sell off. How much can you actually look to politics 239 00:12:46,760 --> 00:12:48,840 Speaker 1: at this point in time and look at the potential 240 00:12:49,200 --> 00:12:51,640 Speaker 1: Democratic nominees to say who's going to run and actually 241 00:12:51,760 --> 00:12:55,560 Speaker 1: make a direct correlation to market moves in a market 242 00:12:55,840 --> 00:12:58,640 Speaker 1: in which it seems like we are just moving NonStop 243 00:12:58,760 --> 00:13:01,880 Speaker 1: one way or the other inmentum bets every every single day. 244 00:13:02,480 --> 00:13:05,079 Speaker 1: I don't think we ever had any leftism priced into 245 00:13:05,120 --> 00:13:08,160 Speaker 1: the market. Um. You know, it made sense um to 246 00:13:08,280 --> 00:13:11,880 Speaker 1: me at least that on Tuesday when the Fed cut 247 00:13:11,920 --> 00:13:14,920 Speaker 1: fifty BIPs, that a lot of folks, including me, would 248 00:13:14,960 --> 00:13:16,480 Speaker 1: come in and say, all right, this, you know, the 249 00:13:16,559 --> 00:13:20,640 Speaker 1: upside catalyst has been materialized and realized. You know, we 250 00:13:20,720 --> 00:13:22,719 Speaker 1: can go ahead and dump the long risk and we 251 00:13:22,760 --> 00:13:25,520 Speaker 1: can shorten this bounce, which is what happened. Then you know, 252 00:13:25,640 --> 00:13:28,199 Speaker 1: you get that rally on Wednesday on Biden, and I 253 00:13:28,320 --> 00:13:30,760 Speaker 1: think there is you know, the market practitioners tend to 254 00:13:30,840 --> 00:13:32,520 Speaker 1: be a little bit right leaning, so there is a 255 00:13:32,640 --> 00:13:36,679 Speaker 1: bit of a you know, personal kind of like you know, 256 00:13:37,040 --> 00:13:39,120 Speaker 1: just feeling like a little bit more relieved. And the 257 00:13:39,160 --> 00:13:41,760 Speaker 1: markets were quite volatile, so you know, these type of 258 00:13:41,800 --> 00:13:44,800 Speaker 1: moves are gonna happen anyway. So that also, you know, 259 00:13:44,960 --> 00:13:47,439 Speaker 1: kind of made sense to me. But that's why we 260 00:13:47,559 --> 00:13:50,800 Speaker 1: were looking to fade that bounce. Um, you know, and 261 00:13:51,600 --> 00:13:53,520 Speaker 1: it's it's starting to work. But but speaking to your 262 00:13:53,600 --> 00:13:56,360 Speaker 1: point in Luke, you know this, you know, the folks 263 00:13:56,640 --> 00:13:59,400 Speaker 1: have this recency bias of you know, by the dip 264 00:13:59,640 --> 00:14:01,839 Speaker 1: or like short the spikes and volatility. This is a 265 00:14:02,000 --> 00:14:04,640 Speaker 1: very different shock than our typical shocks. This is not 266 00:14:04,720 --> 00:14:09,160 Speaker 1: a shock that fiscal policy and monetary policy can um 267 00:14:09,280 --> 00:14:13,240 Speaker 1: by themselves handle. This is a crisis of confidence. Um, 268 00:14:13,360 --> 00:14:16,880 Speaker 1: that cannot be you know, stemmed by central bank liquidity. 269 00:14:17,360 --> 00:14:20,080 Speaker 1: And uh, it's kind of analogous to the nine eleven 270 00:14:20,400 --> 00:14:23,000 Speaker 1: and so it really depends on the White House's response. 271 00:14:23,120 --> 00:14:26,080 Speaker 1: And um, you know we're we're below Vietnam and our 272 00:14:26,120 --> 00:14:29,440 Speaker 1: testing testing ratios. So and to me, the big, the 273 00:14:29,640 --> 00:14:33,560 Speaker 1: big issue is what happens in the credit markets. Uh. 274 00:14:33,680 --> 00:14:36,640 Speaker 1: You know we saw this sort of little known British 275 00:14:36,720 --> 00:14:39,880 Speaker 1: air airline, uh fly By. I say, I hadn't heard 276 00:14:39,880 --> 00:14:42,960 Speaker 1: of fly Have you heard of Never? I'm you know, 277 00:14:43,000 --> 00:14:47,760 Speaker 1: I'm a greatound guy, so greatly alright, I would say, Um, 278 00:14:48,120 --> 00:14:51,560 Speaker 1: but you know you see the credit false swaps on 279 00:14:51,840 --> 00:14:56,440 Speaker 1: the cruise ship operators, Carnival and and Real Caribbean. At 280 00:14:56,520 --> 00:14:58,560 Speaker 1: what point do you think the credit market really starts 281 00:14:58,600 --> 00:14:59,920 Speaker 1: to freak out? I mean it kind of is a 282 00:15:00,040 --> 00:15:02,560 Speaker 1: little bit of issuance was down, high yield issuance was 283 00:15:02,960 --> 00:15:05,240 Speaker 1: sort of froze up for a few days there. It 284 00:15:05,360 --> 00:15:07,960 Speaker 1: does this have the potential to to become a credit crisis? 285 00:15:08,000 --> 00:15:10,760 Speaker 1: Do you think? I mean, they're the potential is there. 286 00:15:11,080 --> 00:15:13,520 Speaker 1: I don't think it will happen because I do think 287 00:15:13,680 --> 00:15:16,960 Speaker 1: the pressure from the equity markets will eventually necessit will 288 00:15:17,040 --> 00:15:21,160 Speaker 1: eventually pressure a sufficient response, even if it's belated. Um, 289 00:15:21,680 --> 00:15:23,200 Speaker 1: I'm not a credit guy, so I'm not going to 290 00:15:23,240 --> 00:15:25,920 Speaker 1: pretend like I am. But from what I understand, it's 291 00:15:25,960 --> 00:15:28,080 Speaker 1: been very difficult to trade right now. It's very a 292 00:15:28,160 --> 00:15:30,400 Speaker 1: liquid There has been a bit of a diversion between 293 00:15:30,400 --> 00:15:33,320 Speaker 1: equity and credit. So I wouldn't be surprised if, for example, 294 00:15:33,520 --> 00:15:35,040 Speaker 1: like one of the things we're looking for for like 295 00:15:35,120 --> 00:15:38,800 Speaker 1: a real bottom, um is a durable bottom. Is that? Okay? 296 00:15:38,920 --> 00:15:42,920 Speaker 1: We we have some public health policies in place that 297 00:15:43,000 --> 00:15:45,960 Speaker 1: are kind of freaking out folks about earning trajectories and 298 00:15:46,080 --> 00:15:49,000 Speaker 1: like kind of commercial activity credit is starting to kind 299 00:15:49,040 --> 00:15:50,680 Speaker 1: of you know, spreads are starting to wide and blah 300 00:15:50,680 --> 00:15:54,080 Speaker 1: blah blah, and you know the hidie holes, the places 301 00:15:54,080 --> 00:15:56,280 Speaker 1: where people are kind of hiding in, like you know, 302 00:15:56,480 --> 00:16:00,720 Speaker 1: tech tech software or like utility staples, those are getting 303 00:16:00,760 --> 00:16:04,080 Speaker 1: hit too, reflecting, you know, just risk constraints, position liquidation. 304 00:16:04,680 --> 00:16:07,480 Speaker 1: That's where we're looking for a real bottom, and we don't. 305 00:16:07,480 --> 00:16:10,240 Speaker 1: We don't really quite see that yet. So the fun 306 00:16:10,440 --> 00:16:13,360 Speaker 1: credit divergence that's really crept up recently that I can 307 00:16:13,480 --> 00:16:16,640 Speaker 1: comment on is, you know, I was just Thursday morning, 308 00:16:16,680 --> 00:16:19,120 Speaker 1: I was running through the numbers and looking at you know, 309 00:16:19,200 --> 00:16:21,960 Speaker 1: your weekly change in the SMP five d versus the 310 00:16:22,560 --> 00:16:26,240 Speaker 1: weekly net move and investment grade credit of fault swaps. 311 00:16:26,640 --> 00:16:28,520 Speaker 1: And you know, normally you think stock market up, that 312 00:16:28,680 --> 00:16:31,880 Speaker 1: means you know, risk on our companies are getting more 313 00:16:31,920 --> 00:16:35,240 Speaker 1: credit worthy, perceived risk of default going down. Uh. The 314 00:16:35,640 --> 00:16:39,360 Speaker 1: combination of having stocks up at least you know, point 315 00:16:39,440 --> 00:16:41,360 Speaker 1: eight on the week and at this point we were 316 00:16:41,440 --> 00:16:43,560 Speaker 1: up you know, three point five on the SMP five 317 00:16:43,640 --> 00:16:46,520 Speaker 1: hundred and I g C d X at least five 318 00:16:46,560 --> 00:16:50,480 Speaker 1: basis points wider. Uh, that combination is incredibly rare. It's 319 00:16:50,840 --> 00:16:55,400 Speaker 1: the last time it happened was the week ending eighteen, 320 00:16:55,480 --> 00:16:59,160 Speaker 1: which was literally the day after the peak in the 321 00:17:00,200 --> 00:17:02,760 Speaker 1: right before the route. So that's that's something I've been 322 00:17:02,800 --> 00:17:05,360 Speaker 1: kind of giving my eye on his credit is um 323 00:17:05,720 --> 00:17:09,200 Speaker 1: credit is saying that, you know, the bounce that we've 324 00:17:09,280 --> 00:17:12,359 Speaker 1: gotten in stocks is should be treated as kind of 325 00:17:12,600 --> 00:17:15,280 Speaker 1: you know, the way knofs outlined how he's treating it 326 00:17:15,600 --> 00:17:18,840 Speaker 1: not your most encouraging analogy, but not also pointed out 327 00:17:18,880 --> 00:17:21,240 Speaker 1: some places that investors have been hiding watching tech and 328 00:17:21,280 --> 00:17:24,359 Speaker 1: the sort look you've been pointing out low volatility stocks 329 00:17:24,359 --> 00:17:25,879 Speaker 1: because that was also an area that a lot of 330 00:17:25,920 --> 00:17:28,600 Speaker 1: people went to hide last year. Uh, and you found 331 00:17:28,680 --> 00:17:31,719 Speaker 1: that low volatility stocks have not really been living up 332 00:17:31,800 --> 00:17:34,080 Speaker 1: to their name. Uh. What does that really tell you? 333 00:17:34,160 --> 00:17:36,439 Speaker 1: And can you walk us through what you've actually been seeing? Yes, 334 00:17:36,520 --> 00:17:38,840 Speaker 1: So this has been weird, and I think it's like Uh, 335 00:17:39,280 --> 00:17:43,000 Speaker 1: I think it's a combination of a high baseline volatility 336 00:17:43,119 --> 00:17:46,239 Speaker 1: environment with you know, the most defining feature we've had 337 00:17:46,280 --> 00:17:50,320 Speaker 1: in the market is the relentless treasury bid that you know, 338 00:17:50,640 --> 00:17:54,320 Speaker 1: has brought yields to all time lows tenure below one, etcetera, etcetera. 339 00:17:54,720 --> 00:17:57,359 Speaker 1: So what we've seen is that ten day realized volatility 340 00:17:57,480 --> 00:18:01,240 Speaker 1: and SMP five hunder low Volatility index actually exceeds that 341 00:18:01,520 --> 00:18:03,680 Speaker 1: of the you know, of the market at large. So 342 00:18:03,800 --> 00:18:06,440 Speaker 1: this happens from time to time, but this doesn't happen 343 00:18:06,600 --> 00:18:09,119 Speaker 1: during spikes. The only time this has happened, you know, 344 00:18:09,160 --> 00:18:11,960 Speaker 1: in the past five years, Uh, during a time when 345 00:18:12,080 --> 00:18:14,840 Speaker 1: you know, realize vall is anything you could consider elevated, 346 00:18:15,160 --> 00:18:17,639 Speaker 1: was in September. I believe at that time we were 347 00:18:17,720 --> 00:18:21,600 Speaker 1: kind of worried about lack of central bank monetary ammunition, 348 00:18:21,680 --> 00:18:24,320 Speaker 1: and at that time, you know, some Trump worries seeping 349 00:18:24,320 --> 00:18:26,480 Speaker 1: into the market. There was a time when investors actually 350 00:18:26,520 --> 00:18:28,480 Speaker 1: thought Trump would be the worst thing ever for the market, 351 00:18:28,520 --> 00:18:30,920 Speaker 1: but before they decided the exact opposite. Uh, you know, 352 00:18:31,040 --> 00:18:33,080 Speaker 1: in the course of a night. So what we found 353 00:18:33,119 --> 00:18:37,000 Speaker 1: there is essentially that the outsized movements in high vall 354 00:18:37,160 --> 00:18:39,480 Speaker 1: it seems to be a function of and especially this 355 00:18:39,680 --> 00:18:42,320 Speaker 1: was key last week when we had you know, a 356 00:18:42,400 --> 00:18:46,160 Speaker 1: correlation one sell off. Basically everything getting hit the same 357 00:18:46,200 --> 00:18:49,880 Speaker 1: amount looks kind of looks like your mass equity index 358 00:18:50,240 --> 00:18:53,760 Speaker 1: futures selling. So what happens in bad days? Everything goes down, 359 00:18:53,920 --> 00:18:56,720 Speaker 1: everything goes down together in a big way. But then 360 00:18:56,840 --> 00:18:59,800 Speaker 1: on the up days, what what are people gravitating back 361 00:18:59,840 --> 00:19:02,879 Speaker 1: to something with an above average dividend yield? In something 362 00:19:03,440 --> 00:19:06,719 Speaker 1: in which the company is their cash flow. Utilities and uh, 363 00:19:06,840 --> 00:19:10,680 Speaker 1: I believe reads reads one of them, but utilities and 364 00:19:10,720 --> 00:19:14,640 Speaker 1: consumer staples you make up SMP five low vall that's 365 00:19:14,680 --> 00:19:17,280 Speaker 1: over three times the SMP five hundred those cash streams. 366 00:19:17,359 --> 00:19:20,160 Speaker 1: Even in an ensignment of social distancing, you're you're still 367 00:19:20,280 --> 00:19:25,320 Speaker 1: pretty reliable, especially when LSOL and Clorox exact paper is 368 00:19:25,400 --> 00:19:27,560 Speaker 1: in there. Yes, so it just it just strikes me 369 00:19:27,680 --> 00:19:31,320 Speaker 1: as something worth monitoring because if you, I'll get out 370 00:19:31,440 --> 00:19:34,320 Speaker 1: my craziest thing I've seen this this week, you have 371 00:19:34,680 --> 00:19:37,760 Speaker 1: to have SMP time. To have SMP five hundred low 372 00:19:37,920 --> 00:19:40,800 Speaker 1: vall beating the market on a day when the SMP 373 00:19:40,960 --> 00:19:44,160 Speaker 1: five hundred is up at least four percent, that's happened 374 00:19:44,160 --> 00:19:47,280 Speaker 1: now four times, going back to early nine seventy two. 375 00:19:47,640 --> 00:19:51,199 Speaker 1: Happened March sixteenth two, not a great time if you remember. 376 00:19:51,320 --> 00:19:54,639 Speaker 1: October eight also not a great time if you remember, 377 00:19:54,920 --> 00:19:57,600 Speaker 1: and twice this week on Monday and Wednesday. Alright, nice, 378 00:19:57,680 --> 00:19:59,480 Speaker 1: I appreciate the segue because I did not have a 379 00:19:59,520 --> 00:20:02,000 Speaker 1: segue influence. So we do have some voicemail. We the 380 00:20:02,560 --> 00:20:06,159 Speaker 1: what goes Up hotline has been overflowing with voicemails with 381 00:20:06,320 --> 00:20:09,720 Speaker 1: crazy things and other observations. Apologies that we can't play 382 00:20:09,800 --> 00:20:11,280 Speaker 1: them all, but we have a couple to play, so 383 00:20:11,720 --> 00:20:14,960 Speaker 1: let's let's hear him. Hey, this is a message for 384 00:20:15,359 --> 00:20:18,960 Speaker 1: what goes Up? Long time listener, first time caller. This 385 00:20:19,240 --> 00:20:22,280 Speaker 1: is your friend and colleague, Cameron christ I'm the craziest 386 00:20:22,359 --> 00:20:26,280 Speaker 1: thing I saw in markets this week was a horrible 387 00:20:26,440 --> 00:20:32,479 Speaker 1: white Nauga hide tie worn by Luke Kawa just because 388 00:20:32,880 --> 00:20:35,520 Speaker 1: it seems as if markets are on trajectory to go 389 00:20:35,600 --> 00:20:39,040 Speaker 1: back to nineteen seventies levels, Luke, doesn't mean you have 390 00:20:39,280 --> 00:20:45,120 Speaker 1: to dress like it. Thanks guys, well you this, Thank 391 00:20:45,760 --> 00:20:50,040 Speaker 1: thank you Cameron for that completely unsolicited complete Yeah, it's 392 00:20:50,119 --> 00:20:52,240 Speaker 1: like I said, I refused that at your column. If 393 00:20:52,280 --> 00:20:56,399 Speaker 1: you don't call bust. I told him to the belt though, 394 00:20:56,480 --> 00:20:58,000 Speaker 1: but I don't know what tie he's talking about. You know, 395 00:20:58,280 --> 00:21:01,000 Speaker 1: I have no idea either. All of my ties are wonderful. 396 00:21:01,040 --> 00:21:03,040 Speaker 1: You must have meant to say belt, and he just 397 00:21:03,160 --> 00:21:06,040 Speaker 1: went on and went and said, but I'm just jealously 398 00:21:06,040 --> 00:21:09,399 Speaker 1: because I had six older brothers, I was the youngest, 399 00:21:09,520 --> 00:21:12,080 Speaker 1: and the bullying all went downhill. So I I kind 400 00:21:12,080 --> 00:21:13,639 Speaker 1: of look at you, was that little brother. I never 401 00:21:13,760 --> 00:21:16,480 Speaker 1: had the outlet for the bullying. I hope that's okay. 402 00:21:16,960 --> 00:21:20,480 Speaker 1: It's like I was wondering where this is going. I 403 00:21:20,600 --> 00:21:24,560 Speaker 1: was expecting it to end up in some complimentary that. Yeah. Yeah, 404 00:21:24,680 --> 00:21:27,920 Speaker 1: And also you owe me money. That's just how it works. Yes, Sarah, 405 00:21:27,920 --> 00:21:29,439 Speaker 1: do you have a crazy thing you saw in them? 406 00:21:29,440 --> 00:21:31,240 Speaker 1: Mor I do have a crazy thing, and it'll go 407 00:21:31,359 --> 00:21:34,639 Speaker 1: back to the idea of a demand for consumer staples. 408 00:21:34,720 --> 00:21:38,040 Speaker 1: I was looking around just for some different price dislocations 409 00:21:38,080 --> 00:21:42,760 Speaker 1: that are caused by the coronavirus and people maybe going 410 00:21:42,840 --> 00:21:45,399 Speaker 1: a little bit crazy and emergency shopping. And I went 411 00:21:45,480 --> 00:21:47,840 Speaker 1: on Amazon and was looking at Purell bottles because you 412 00:21:47,880 --> 00:21:51,840 Speaker 1: can't really find Purell any anywhere anymore. And uh, I 413 00:21:52,000 --> 00:21:56,879 Speaker 1: found a two pack of one Leader Purell bottles for 414 00:21:57,600 --> 00:22:02,760 Speaker 1: three hundred and fifty dollars. It's it's crazy, I mean truly, 415 00:22:02,840 --> 00:22:05,000 Speaker 1: the creer. Okay, I think you won. You might have 416 00:22:05,040 --> 00:22:08,440 Speaker 1: just scored your first on that you haven't gone yet. 417 00:22:08,560 --> 00:22:10,160 Speaker 1: And I also have one to the other side too, 418 00:22:10,359 --> 00:22:12,280 Speaker 1: let's hear it. Uh, there's a pretty good story on 419 00:22:12,520 --> 00:22:15,080 Speaker 1: the terminal that was laying out how flights have all 420 00:22:15,080 --> 00:22:17,520 Speaker 1: of a sudden becoming pretty cheap because a lot of 421 00:22:17,560 --> 00:22:19,919 Speaker 1: people don't want to be flying anymore. So you can 422 00:22:20,000 --> 00:22:23,399 Speaker 1: get around trip flight from New York to Miami now 423 00:22:23,600 --> 00:22:25,639 Speaker 1: for fifty one dollar. So I think I'm going to 424 00:22:25,800 --> 00:22:33,240 Speaker 1: have to go, Oh really, we can have the problem 425 00:22:33,280 --> 00:22:35,280 Speaker 1: with that fifty flights, then you gotta buy a two 426 00:22:35,920 --> 00:22:42,960 Speaker 1: bottle purealitis the hedge. Yeah, all right, I'll were joint 427 00:22:43,119 --> 00:22:44,960 Speaker 1: joint winners for this one. If you both had that 428 00:22:45,000 --> 00:22:48,360 Speaker 1: one but I do have a backup. You know, I've 429 00:22:48,400 --> 00:22:50,960 Speaker 1: been just staring at the screens all day, so unfortunately 430 00:22:50,960 --> 00:22:52,880 Speaker 1: I haven't been able to check price line too frequently, 431 00:22:53,080 --> 00:22:54,920 Speaker 1: so I guess you beat me on that one. But 432 00:22:56,240 --> 00:22:59,320 Speaker 1: I think it's pretty wild. Um, And this is more 433 00:22:59,400 --> 00:23:03,840 Speaker 1: earnest than been funny that we're price now for BIS 434 00:23:04,000 --> 00:23:06,639 Speaker 1: for the end of the year and FED funds. What 435 00:23:06,720 --> 00:23:09,399 Speaker 1: that means to me is that it's very difficult now 436 00:23:09,520 --> 00:23:14,040 Speaker 1: for bonds to short circuit any more stock weakness. And 437 00:23:14,840 --> 00:23:17,880 Speaker 1: combine that with the quote unquote Corona flu that President 438 00:23:17,920 --> 00:23:21,919 Speaker 1: Trump had referred to, UM, pretty pretty crazy that we're 439 00:23:21,960 --> 00:23:25,000 Speaker 1: at this point right now. Um, you know people still 440 00:23:25,280 --> 00:23:27,680 Speaker 1: I think, you know, they're defending that three thousand level, 441 00:23:28,320 --> 00:23:31,160 Speaker 1: and you know, we're kind of we're kind of out 442 00:23:31,200 --> 00:23:33,920 Speaker 1: of firepower. I would say one thing along these lines, though, 443 00:23:34,560 --> 00:23:37,080 Speaker 1: I think I think Chair Powell made the right move 444 00:23:37,560 --> 00:23:40,600 Speaker 1: to move swiftly and forcefully because he just got the 445 00:23:40,640 --> 00:23:42,800 Speaker 1: FED out of the way and now the pressures on 446 00:23:42,800 --> 00:23:44,760 Speaker 1: the White House and Congress instead of the next two 447 00:23:44,760 --> 00:23:48,760 Speaker 1: weeks being this long political debate about is the FED 448 00:23:48,840 --> 00:23:51,960 Speaker 1: doing enough? And Um, so I think he made the 449 00:23:52,080 --> 00:23:54,080 Speaker 1: right move. But because of that we're at a point 450 00:23:54,160 --> 00:23:57,160 Speaker 1: now where you know, the market, the markets unless they're 451 00:23:57,160 --> 00:24:00,160 Speaker 1: going to price a negative rates, it's up to that's 452 00:24:00,240 --> 00:24:02,920 Speaker 1: up to the White House. Now what I'm curious, so 453 00:24:03,200 --> 00:24:07,720 Speaker 1: the market's prices in a realistic sense, where say the 454 00:24:07,800 --> 00:24:09,840 Speaker 1: ten year could go this year? I mean, well, what 455 00:24:09,960 --> 00:24:14,800 Speaker 1: would you guys say, I mean, I mean the you know, 456 00:24:15,119 --> 00:24:21,560 Speaker 1: I guess you can't right now wash your hands. My 457 00:24:21,680 --> 00:24:24,120 Speaker 1: crazy thing is is similar in that in the treasury 458 00:24:24,200 --> 00:24:28,159 Speaker 1: futures market, you can now buy call options on an 459 00:24:28,680 --> 00:24:31,000 Speaker 1: off the run bond. I think it's like a mature 460 00:24:32,119 --> 00:24:35,560 Speaker 1: ten year bond that implied negative yields, So you can 461 00:24:35,640 --> 00:24:38,200 Speaker 1: now buy a call for for negative years. Yeah, and 462 00:24:38,240 --> 00:24:40,480 Speaker 1: you're seeing you're seeing volume in those in those contracts, 463 00:24:40,680 --> 00:24:43,560 Speaker 1: especially the euro dollar ones, a lot of flows there. 464 00:24:43,720 --> 00:24:47,040 Speaker 1: But but just just the kind of offset uh Mr 465 00:24:47,320 --> 00:24:54,680 Speaker 1: Mr Cameron crisis uh Anti Luke commentary. Um, because Lucas Canadian, 466 00:24:54,720 --> 00:24:58,119 Speaker 1: I would like to say that Canadian bonds have some yields. 467 00:24:58,119 --> 00:25:01,439 Speaker 1: So that's that's so even you know, we we were 468 00:25:01,520 --> 00:25:03,840 Speaker 1: riding long rates both in the in the in the 469 00:25:04,000 --> 00:25:06,800 Speaker 1: in your all our belly contract midcurve contracts as well 470 00:25:06,840 --> 00:25:09,480 Speaker 1: as the long end for a while. UM, that's less 471 00:25:09,520 --> 00:25:12,639 Speaker 1: interesting to us. And now because again we're priced to 472 00:25:12,840 --> 00:25:15,320 Speaker 1: I basically go to zero by the end of the year. UM, 473 00:25:15,520 --> 00:25:17,920 Speaker 1: so we're much more focused on the downside and equities now. 474 00:25:18,359 --> 00:25:22,320 Speaker 1: But there's still some um, some room for the Bank 475 00:25:22,359 --> 00:25:25,080 Speaker 1: of Canada to catch I don't know if it's catch 476 00:25:25,160 --> 00:25:28,120 Speaker 1: up or down to the FED in those guys down 477 00:25:28,760 --> 00:25:31,600 Speaker 1: in terms of it's gonna be taking that Greyhound up 478 00:25:31,600 --> 00:25:35,440 Speaker 1: to Toronto to get some clips and funds. I do 479 00:25:35,600 --> 00:25:38,159 Speaker 1: also have to say that I believe Luke wasn't the 480 00:25:38,240 --> 00:25:39,960 Speaker 1: only one who took some heat this week on the 481 00:25:40,040 --> 00:25:43,520 Speaker 1: Bloomberg Podcast hot Line. I'm pretty sure Mike took some 482 00:25:43,640 --> 00:25:47,240 Speaker 1: heat as well. All Right, this is Paul Meyer from 483 00:25:47,520 --> 00:25:51,480 Speaker 1: Northern California, and I'm talking about what goes up. And 484 00:25:51,600 --> 00:25:56,399 Speaker 1: I'm disappointed that recently we haven't gotten any obscure classic 485 00:25:56,560 --> 00:26:00,399 Speaker 1: rock references, not since I think James can funk for 486 00:26:00,520 --> 00:26:04,640 Speaker 1: you nine. So come on, Mike, give us something. Come on, Mike, 487 00:26:04,680 --> 00:26:07,680 Speaker 1: give us something. That one hurts that that I feel 488 00:26:07,720 --> 00:26:10,959 Speaker 1: that one because as we all know, classic obscure classic 489 00:26:11,080 --> 00:26:14,280 Speaker 1: rock rock references are an integral part of financial journalism. 490 00:26:14,320 --> 00:26:17,000 Speaker 1: I feel like I've been I've been letting the readers 491 00:26:17,000 --> 00:26:19,840 Speaker 1: and listeners down, and you might ask yourself, how did 492 00:26:19,880 --> 00:26:24,000 Speaker 1: I get you? This is my beautiful two percent treasury. 493 00:26:24,760 --> 00:26:27,000 Speaker 1: Kid's got a future. All right, I'll give you one 494 00:26:27,040 --> 00:26:29,520 Speaker 1: classic rock reference. You know, everyone's talking about what song 495 00:26:29,880 --> 00:26:34,479 Speaker 1: they they sing when they wash their hands. People saying birthday. 496 00:26:34,720 --> 00:26:37,639 Speaker 1: I'm singing the wreco of the Edmund Fitzgerald. That's how 497 00:26:37,720 --> 00:26:40,239 Speaker 1: long I'm watching where I'm not taking any chances, all right, 498 00:26:40,720 --> 00:26:43,320 Speaker 1: So there you go, no chances taken. And as a reminder, 499 00:26:43,640 --> 00:26:45,720 Speaker 1: you can give us a call at our Bloomberg Podcast hotline, 500 00:26:45,800 --> 00:26:47,760 Speaker 1: leave us a message and we might play it on 501 00:26:47,880 --> 00:26:50,400 Speaker 1: the show. And that number is six or six three 502 00:26:50,520 --> 00:26:54,720 Speaker 1: to four three for nine zero. And with that said, 503 00:26:54,840 --> 00:26:57,640 Speaker 1: novel Luke, thanks so much for joining the show this week. 504 00:26:57,760 --> 00:27:08,160 Speaker 1: Many thanks, thank you. What goes up. We'll be back 505 00:27:08,320 --> 00:27:10,359 Speaker 1: next week. Until then, you can find us on the 506 00:27:10,400 --> 00:27:14,240 Speaker 1: Bluemberg terminal, website and app or wherever you get your podcasts. 507 00:27:14,640 --> 00:27:16,320 Speaker 1: We love it if you took the time to rate 508 00:27:16,359 --> 00:27:19,320 Speaker 1: interview the show on Apple podcast. Some more listeners can 509 00:27:19,400 --> 00:27:22,080 Speaker 1: find us and you can find us on Twitter, follow 510 00:27:22,160 --> 00:27:25,560 Speaker 1: me at at Sarah Pontzack. Mike is a ryg anonymous, 511 00:27:26,160 --> 00:27:29,560 Speaker 1: lu Kawa is at l j Kwa and no ful 512 00:27:29,600 --> 00:27:32,560 Speaker 1: Sinala is at no ful Sinala. You can also follow 513 00:27:32,600 --> 00:27:36,800 Speaker 1: Bloomberg podcasts at podcasts. What Goes Up is produced by 514 00:27:36,880 --> 00:27:39,840 Speaker 1: Toper Foreheads. The head of Bloomberg podcast is Francesca Levie. 515 00:27:40,080 --> 00:27:41,840 Speaker 1: Thanks for listening, See you next time.