Speaker 1: Hello, and welcome to What Goes Up, a Bloomberg weekly
Speaker 1: market podcast. I'm Sarah pontecor reporter on the Cross Asset team,
Speaker 1: and I'm Mike Reagan, a senior editor on the Markets team.
Speaker 1: This week on the show, you could say the market's
Speaker 1: gone wild. Swings of three to four in the spire
Speaker 1: have become the norm. The Fed issued its first emergency
Speaker 1: rate cut since two thousand and eight, and ten year
Speaker 1: treasury yields are below one. What does it all mean?
Speaker 1: And when will it end? I don't know, Sarah? Why
Speaker 1: are you asking me? How would I possibly know that?
Speaker 1: I thought you have the answer to everything. Anyway, of course,
Speaker 1: when the episode with the craziest thing we saw in
Speaker 1: markets this week? Sorry, you know I abstained from that
Speaker 1: competition last time. You abstained last time because you're gonna
Speaker 1: have an extra extra great one that well, you know
Speaker 1: since I abstained, you know what that means? Still undefeated.
Speaker 1: I guess that's true. We'll give it to you. I'll
Speaker 1: give it to you this time because I'm feeling nice.
Speaker 1: But anyway, we've got some great guests that will hopefully
Speaker 1: tell us when will it end? No pressure here, but
Speaker 1: joining us for the first time on the show. Very
Speaker 1: happy to have him. He is the chief macro strategist
Speaker 1: at e I a all weather Alpha Partners not fullsnala.
Speaker 1: How welcome to the show. Thanks for having me. Appreciate
Speaker 1: it absolutely and also back on the show, our old friend.
Speaker 1: He's a cross set reporter. He's a Reddit aficionado. Lukawa,
Speaker 1: welcome to the show. I'm not just I am not.
Speaker 1: You're more so than the rest of us. Now that
Speaker 1: you're here, I have to I have to tell you something. Okay,
Speaker 1: you know, you know I consider you a friend. Sara
Speaker 1: is your friend. Even novels your friend. We gather do
Speaker 1: here to talk about that that white belt you've been wearing.
Speaker 1: The white belt, this is an intervention. This is an intervention.
Speaker 1: It's always in between Memorial Day and Labor Day somewhere.
Speaker 1: Is he wearing it now, Luke? Oh yeah. For listeners
Speaker 1: who don't know Luke, I will describe he You actually asked,
Speaker 1: how would you describe Luke's fashion sense? I describe it
Speaker 1: as risk on. He's sorry, he's like a lever. He's
Speaker 1: like a Leverty, triple LEVERTYTF of fact. You know how
Speaker 1: Luke described it? Loud, loud, loud, loud and cheap. Was
Speaker 1: actually the full description is it's reddy. It's a very
Speaker 1: it's hip on Reddit. Look, you know there's appropriate time
Speaker 1: to wear a white belt, you know, like you just
Speaker 1: started karate lessons, maybe where it's like a special occasion
Speaker 1: at the retirement home bingo night or something. Sara's from Florida,
Speaker 1: she knows. I'm just jealous. Anyway, I'm Luke is very
Speaker 1: progressive dresser. Michael Michael come in on Monday with a
Speaker 1: white belt. I'd be happy to give Mike my belt.
Speaker 1: He just wouldn't fit it. Cheeze Luke. All Right, you win,
Speaker 1: you win anyway, not for Let's start with you, because
Speaker 1: apart from Luke's white belt this, uh, it's just been
Speaker 1: a crazy week. I was going through one of your notes, uh,
Speaker 1: from from your hedge fund that you sent around the clients,
Speaker 1: and I was astounded because you've tallied up the number
Speaker 1: of tests being done in each country for the coronavirus,
Speaker 1: and then you obviously divided it by population. Let me
Speaker 1: read the listeners. Some numbers here, Uh, South Korea approximately
Speaker 1: test per million people, and you give sort of a
Speaker 1: league table here, Austria two thirty five per million goes
Speaker 1: on and on, Finland twenty three per million, Vietnam eighteen,
Speaker 1: all the way at the bottom. United States one test
Speaker 1: per per million people. And later in the you say
Speaker 1: obviously that the market is is very much gonna be
Speaker 1: a referendum on how well uh the government here is
Speaker 1: managing this crisis. I'm not getting much confidence from that
Speaker 1: one per million, as has the tide turned it? Although
Speaker 1: do you think they're they're starting to get out ahead
Speaker 1: of this? Obviously, Congress past this eight billion and change
Speaker 1: UH bill to to put some money into the health
Speaker 1: care system and fight this. How how concerned is the
Speaker 1: market that this is just not gonna end up well
Speaker 1: for the the US? Right? So? I think, um, you know,
Speaker 1: before before this kind of shock to the markets, the
Speaker 1: markets were kind of trying to debate whether or not
Speaker 1: this was going to be primarily kind of like a
Speaker 1: China story, a China, China only story. I think as
Speaker 1: we started to see the case counts in South Korea
Speaker 1: pick up, it became clear that, no, this is not
Speaker 1: going to be kind of isolated to China. And now
Speaker 1: that we've fallen as far as we have, I do
Speaker 1: think the market now is expecting you know, a rise
Speaker 1: in case counts as we get testing to plif rate. However,
Speaker 1: we still are quite behind the curve. So like right now,
Speaker 1: for example, the latest is that you know, we get
Speaker 1: about a million and a half testing capacity going forward
Speaker 1: over the next couple of weeks. However, because of the
Speaker 1: lab constraints, we can only do about ten k per day,
Speaker 1: which would take a while to scale up. So we
Speaker 1: would expect that, like there is an inflection in case
Speaker 1: counsel's coming, but it's probably not going to be too
Speaker 1: quickly unless a private sector really steps up. And we're
Speaker 1: quite quite down the line on the league tables, as
Speaker 1: you mentioned, so we're pretty concerned that um ultimately the
Speaker 1: markets will decide that the White House is a bit
Speaker 1: behind the curve on this threat. I remember a couple
Speaker 1: of weeks ago there was a lot of optimism building
Speaker 1: up because there are reports coming out saying that the
Speaker 1: coronavirus was speaking. Of course, a lot of this pertained
Speaker 1: to China, but now we're seeing this international spread and
Speaker 1: there's a lot of numbers data flying out there regarding
Speaker 1: the coronavirus. I mean, what actually are the factors that
Speaker 1: you guys look out to try to get a sense
Speaker 1: of how this is actually progressing, and to inform any
Speaker 1: investment decisions, if at all, because it seems like it's
Speaker 1: so difficult when there's so many UH numbers and so
Speaker 1: much data out there that kind of flies against the
Speaker 1: phase of another one. Right, These are the type of
Speaker 1: environments that me, as a macer junkie, I love, although
Speaker 1: I don't like the social implications. But the idea is that, yes,
Speaker 1: there was a case sequence show case counting clients in
Speaker 1: China after a historic quarantine, right, Um, even if we
Speaker 1: wanted to that wouldn't happen here. Um, And it did spread,
Speaker 1: and there were community spread events across the world. And
Speaker 1: so what we're looking at is we want to see
Speaker 1: folks start to migrate from the idea of we can
Speaker 1: contain this virus, which I think is a fantasy, and
Speaker 1: people are coming around to toward how do we deal
Speaker 1: with congestion and how do we deal with capacity constraints.
Speaker 1: If you do certain social isolation procedures that prevents super
Speaker 1: high congestions and hospitals and you know, just regular public
Speaker 1: health and in fact public spaces in general, well that
Speaker 1: does as slow as the virus with the capacity and
Speaker 1: the health, health care infrastructure, and biotechnology developments can catch
Speaker 1: up to the threat. So what we're focused on mostly
Speaker 1: is how quickly does the United States, in response to
Speaker 1: rising case counts, implements social isolation procedures that slows the
Speaker 1: viruses transmission and allows the health care apparatus to catch
Speaker 1: up to the threat. If you answer your phone, it's
Speaker 1: one of your fund investors, uh, and they say, you know,
Speaker 1: what are you guys doing? What's going on? You know,
Speaker 1: is it novels? Not here right now? Please leave a message?
Speaker 1: You know what what are you telling people? You know,
Speaker 1: what would you tell a client if they called and said,
Speaker 1: what do you how do you guys dealing with this? Well,
Speaker 1: if it's daring market hours then um, probably somebody else
Speaker 1: um our business will be handla um. If but you know,
Speaker 1: you get me on the phone outside of market hours,
Speaker 1: first thing I say, please wash your hands. It really
Speaker 1: it really does make a huge difference. You know, we
Speaker 1: can we can debate whether basks are helpfulness and that,
Speaker 1: but like you know, I'm sure you guys have seen
Speaker 1: what happens to the bacteria and viruses when not just
Speaker 1: virus but bacteria as well. Um, when when you wash
Speaker 1: your hands for twenty seconds. It's a. It's a. It's amazing.
Speaker 1: So what is the portfolio allocations when of washing your hands? Right? Right? Right? Yeah,
Speaker 1: no kidding, I like I like that. So, you know,
Speaker 1: we we were quite bearish around Valentine's Day, as we
Speaker 1: wrote in our past note, UM, so we were pretty
Speaker 1: well positioned going in to this shock. Um. Now what
Speaker 1: we're kind of expecting is um, you know, it takes
Speaker 1: some time for the market to digest the shock. We
Speaker 1: probably have a relatively wide and volatile range for the
Speaker 1: time being. And as we start to see the potential
Speaker 1: for social isolation procedures be implemented, then it becomes, like
Speaker 1: you said, a referendum about how behind or on the
Speaker 1: curve is the White House and to what extent um?
Speaker 1: You know, how long are we gonna have social isolation
Speaker 1: procedures to the extent we get them. If we get them,
Speaker 1: that's the biggest risk to like earning his growth and
Speaker 1: potential for job losses. And then the question becomes eight
Speaker 1: point three billion dollars is not going to move the needle.
Speaker 1: We're gonna need you know, we need to add another
Speaker 1: zero to that. If you look at like nine eleven,
Speaker 1: Hurricane Katrin, a Hurricane Sandy, billion dollars packages. So you
Speaker 1: know that we're we're nowhere near that level right now.
Speaker 1: If we see the White House and Congress suddenly catch up,
Speaker 1: perhaps you know, the lowest in based on the fact
Speaker 1: that President Trump called it the Corona flu Wednesday night,
Speaker 1: we do expect there's some risk for potential more downside,
Speaker 1: potentially new lows. Once we get to the point where, um,
Speaker 1: you know, we're starting to see kind of a little
Speaker 1: bit of panic about the effect of potential social isolation procedures.
Speaker 1: Then we start bargain hunting. And then I kind of
Speaker 1: passed the baton to my partner who runs our launch
Speaker 1: short portfolio. Gotcha, gotcha, Look, let's bring you in here.
Speaker 1: I mean, you wear that white belt, but I consider
Speaker 1: you a black belt in looking at volatility markets. Right
Speaker 1: half hots segue, what what's what? What's the volt market
Speaker 1: look like to you? I mean, unless I looked, the
Speaker 1: VIX is kind of in that thirty range, absolutely screaming.
Speaker 1: The volatility term structure is, you know, has signaling a
Speaker 1: persistent degree of alarm that you know, I haven't seen
Speaker 1: in my few years in this business. If I if
Speaker 1: I was back in I probably would have seen something
Speaker 1: like this in terms of the persistence in the magnitude
Speaker 1: of how much the ball markets are saying, be very
Speaker 1: very worried about now, but also be worried about later.
Speaker 1: That's kind of what the read and you get when
Speaker 1: the front ball month is so uh, the front futures
Speaker 1: contract is so high. Uh, there's about the second is
Speaker 1: also still so high. And one thing that's been happening
Speaker 1: is people have been getting absolutely roasted trying to short volatility.
Speaker 1: People think, you know, when VALL goes up, that means,
Speaker 1: you know, it's a it's a good short. And you know,
Speaker 1: it is true that when VALL goes up you have
Speaker 1: more kind of profit potential, more room to move just
Speaker 1: on VALL coming in. But the the structure of the
Speaker 1: market recently has been such that spot vix is actually
Speaker 1: much much much higher than the front month, and uh,
Speaker 1: that convergence is taking place more and more with the
Speaker 1: front month. So your actual investible way to short fall
Speaker 1: and you know, in an easy way short of getting
Speaker 1: the strip uh is actually converging to the upside. So
Speaker 1: people are getting uh, pretty much absolutely killed on this.
Speaker 1: And it's a reminder that you know, I got to
Speaker 1: look at the curve structure, gotta look at the term structure. Oh,
Speaker 1: when you're getting involved in this, whatsoever is that notion
Speaker 1: that you know, the market was so blatantly short vaultil
Speaker 1: you're heading into this, Is that sort of rebounding into
Speaker 1: the equity market, You think that maybe making these sell
Speaker 1: offs a little bit worse. I think somewhat. I do
Speaker 1: think there's something to the argument that the you know,
Speaker 1: the degree of euphoria we saw in January and early
Speaker 1: February has you know, the necessary every reaction has an
Speaker 1: opposite and equal reaction just means that it's a little
Speaker 1: worse on the other side. I you know, I think
Speaker 1: all the people that were h kind of flooding into
Speaker 1: single stock calls, we've seen that reverse. The equity put
Speaker 1: call actually taught actually bottomed the day of the market
Speaker 1: topped at like point five five, so many more calls
Speaker 1: training them puts. But it hasn't really risen to kind
Speaker 1: of you know, alarming level, since we're still short of
Speaker 1: like Q four team put call ratios. So you know,
Speaker 1: that could be a sense that people are just cutting
Speaker 1: risk rather than hedging risk. But the vall metrics in
Speaker 1: terms of what people are looking for, it's crazy, Like
Speaker 1: when you think about what does the thirty vix mean,
Speaker 1: it means essentially, we're expecting a near two percent move
Speaker 1: every day for a month and the SMP five hundred.
Speaker 1: But that's what we're realizing. We're realizing insanely high than
Speaker 1: So I want to get your take because what that said.
Speaker 1: So Monday we had four percent bounds, then on Tuesday
Speaker 1: we had this massive sell off. Then the next day
Speaker 1: and this was after Super Tuesday, we get another four
Speaker 1: percent balance, and we have people out there saying, oh,
Speaker 1: it's the Biden balance because Vice President Biden did better
Speaker 1: in Super Tuesday. Yet on Thursday we get another massive
Speaker 1: sell off. How much can you actually look to politics
Speaker 1: at this point in time and look at the potential
Speaker 1: Democratic nominees to say who's going to run and actually
Speaker 1: make a direct correlation to market moves in a market
Speaker 1: in which it seems like we are just moving NonStop
Speaker 1: one way or the other inmentum bets every every single day.
Speaker 1: I don't think we ever had any leftism priced into
Speaker 1: the market. Um. You know, it made sense um to
Speaker 1: me at least that on Tuesday when the Fed cut
Speaker 1: fifty BIPs, that a lot of folks, including me, would
Speaker 1: come in and say, all right, this, you know, the
Speaker 1: upside catalyst has been materialized and realized. You know, we
Speaker 1: can go ahead and dump the long risk and we
Speaker 1: can shorten this bounce, which is what happened. Then you know,
Speaker 1: you get that rally on Wednesday on Biden, and I
Speaker 1: think there is you know, the market practitioners tend to
Speaker 1: be a little bit right leaning, so there is a
Speaker 1: bit of a you know, personal kind of like you know,
Speaker 1: just feeling like a little bit more relieved. And the
Speaker 1: markets were quite volatile, so you know, these type of
Speaker 1: moves are gonna happen anyway. So that also, you know,
Speaker 1: kind of made sense to me. But that's why we
Speaker 1: were looking to fade that bounce. Um, you know, and
Speaker 1: it's it's starting to work. But but speaking to your
Speaker 1: point in Luke, you know this, you know, the folks
Speaker 1: have this recency bias of you know, by the dip
Speaker 1: or like short the spikes and volatility. This is a
Speaker 1: very different shock than our typical shocks. This is not
Speaker 1: a shock that fiscal policy and monetary policy can um
Speaker 1: by themselves handle. This is a crisis of confidence. Um,
Speaker 1: that cannot be you know, stemmed by central bank liquidity.
Speaker 1: And uh, it's kind of analogous to the nine eleven
Speaker 1: and so it really depends on the White House's response.
Speaker 1: And um, you know we're we're below Vietnam and our
Speaker 1: testing testing ratios. So and to me, the big, the
Speaker 1: big issue is what happens in the credit markets. Uh.
Speaker 1: You know we saw this sort of little known British
Speaker 1: air airline, uh fly By. I say, I hadn't heard
Speaker 1: of fly Have you heard of Never? I'm you know,
Speaker 1: I'm a greatound guy, so greatly alright, I would say, Um,
Speaker 1: but you know you see the credit false swaps on
Speaker 1: the cruise ship operators, Carnival and and Real Caribbean. At
Speaker 1: what point do you think the credit market really starts
Speaker 1: to freak out? I mean it kind of is a
Speaker 1: little bit of issuance was down, high yield issuance was
Speaker 1: sort of froze up for a few days there. It
Speaker 1: does this have the potential to to become a credit crisis?
Speaker 1: Do you think? I mean, they're the potential is there.
Speaker 1: I don't think it will happen because I do think
Speaker 1: the pressure from the equity markets will eventually necessit will
Speaker 1: eventually pressure a sufficient response, even if it's belated. Um,
Speaker 1: I'm not a credit guy, so I'm not going to
Speaker 1: pretend like I am. But from what I understand, it's
Speaker 1: been very difficult to trade right now. It's very a
Speaker 1: liquid There has been a bit of a diversion between
Speaker 1: equity and credit. So I wouldn't be surprised if, for example,
Speaker 1: like one of the things we're looking for for like
Speaker 1: a real bottom, um is a durable bottom. Is that? Okay?
Speaker 1: We we have some public health policies in place that
Speaker 1: are kind of freaking out folks about earning trajectories and
Speaker 1: like kind of commercial activity credit is starting to kind
Speaker 1: of you know, spreads are starting to wide and blah
Speaker 1: blah blah, and you know the hidie holes, the places
Speaker 1: where people are kind of hiding in, like you know,
Speaker 1: tech tech software or like utility staples, those are getting
Speaker 1: hit too, reflecting, you know, just risk constraints, position liquidation.
Speaker 1: That's where we're looking for a real bottom, and we don't.
Speaker 1: We don't really quite see that yet. So the fun
Speaker 1: credit divergence that's really crept up recently that I can
Speaker 1: comment on is, you know, I was just Thursday morning,
Speaker 1: I was running through the numbers and looking at you know,
Speaker 1: your weekly change in the SMP five d versus the
Speaker 1: weekly net move and investment grade credit of fault swaps.
Speaker 1: And you know, normally you think stock market up, that
Speaker 1: means you know, risk on our companies are getting more
Speaker 1: credit worthy, perceived risk of default going down. Uh. The
Speaker 1: combination of having stocks up at least you know, point
Speaker 1: eight on the week and at this point we were
Speaker 1: up you know, three point five on the SMP five
Speaker 1: hundred and I g C d X at least five
Speaker 1: basis points wider. Uh, that combination is incredibly rare. It's
Speaker 1: the last time it happened was the week ending eighteen,
Speaker 1: which was literally the day after the peak in the
Speaker 1: right before the route. So that's that's something I've been
Speaker 1: kind of giving my eye on his credit is um
Speaker 1: credit is saying that, you know, the bounce that we've
Speaker 1: gotten in stocks is should be treated as kind of
Speaker 1: you know, the way knofs outlined how he's treating it
Speaker 1: not your most encouraging analogy, but not also pointed out
Speaker 1: some places that investors have been hiding watching tech and
Speaker 1: the sort look you've been pointing out low volatility stocks
Speaker 1: because that was also an area that a lot of
Speaker 1: people went to hide last year. Uh, and you found
Speaker 1: that low volatility stocks have not really been living up
Speaker 1: to their name. Uh. What does that really tell you?
Speaker 1: And can you walk us through what you've actually been seeing? Yes,
Speaker 1: So this has been weird, and I think it's like Uh,
Speaker 1: I think it's a combination of a high baseline volatility
Speaker 1: environment with you know, the most defining feature we've had
Speaker 1: in the market is the relentless treasury bid that you know,
Speaker 1: has brought yields to all time lows tenure below one, etcetera, etcetera.
Speaker 1: So what we've seen is that ten day realized volatility
Speaker 1: and SMP five hunder low Volatility index actually exceeds that
Speaker 1: of the you know, of the market at large. So
Speaker 1: this happens from time to time, but this doesn't happen
Speaker 1: during spikes. The only time this has happened, you know,
Speaker 1: in the past five years, Uh, during a time when
Speaker 1: you know, realize vall is anything you could consider elevated,
Speaker 1: was in September. I believe at that time we were
Speaker 1: kind of worried about lack of central bank monetary ammunition,
Speaker 1: and at that time, you know, some Trump worries seeping
Speaker 1: into the market. There was a time when investors actually
Speaker 1: thought Trump would be the worst thing ever for the market,
Speaker 1: but before they decided the exact opposite. Uh, you know,
Speaker 1: in the course of a night. So what we found
Speaker 1: there is essentially that the outsized movements in high vall
Speaker 1: it seems to be a function of and especially this
Speaker 1: was key last week when we had you know, a
Speaker 1: correlation one sell off. Basically everything getting hit the same
Speaker 1: amount looks kind of looks like your mass equity index
Speaker 1: futures selling. So what happens in bad days? Everything goes down,
Speaker 1: everything goes down together in a big way. But then
Speaker 1: on the up days, what what are people gravitating back
Speaker 1: to something with an above average dividend yield? In something
Speaker 1: in which the company is their cash flow. Utilities and uh,
Speaker 1: I believe reads reads one of them, but utilities and
Speaker 1: consumer staples you make up SMP five low vall that's
Speaker 1: over three times the SMP five hundred those cash streams.
Speaker 1: Even in an ensignment of social distancing, you're you're still
Speaker 1: pretty reliable, especially when LSOL and Clorox exact paper is
Speaker 1: in there. Yes, so it just it just strikes me
Speaker 1: as something worth monitoring because if you, I'll get out
Speaker 1: my craziest thing I've seen this this week, you have
Speaker 1: to have SMP time. To have SMP five hundred low
Speaker 1: vall beating the market on a day when the SMP
Speaker 1: five hundred is up at least four percent, that's happened
Speaker 1: now four times, going back to early nine seventy two.
Speaker 1: Happened March sixteenth two, not a great time if you remember.
Speaker 1: October eight also not a great time if you remember,
Speaker 1: and twice this week on Monday and Wednesday. Alright, nice,
Speaker 1: I appreciate the segue because I did not have a
Speaker 1: segue influence. So we do have some voicemail. We the
Speaker 1: what goes Up hotline has been overflowing with voicemails with
Speaker 1: crazy things and other observations. Apologies that we can't play
Speaker 1: them all, but we have a couple to play, so
Speaker 1: let's let's hear him. Hey, this is a message for
Speaker 1: what goes Up? Long time listener, first time caller. This
Speaker 1: is your friend and colleague, Cameron christ I'm the craziest
Speaker 1: thing I saw in markets this week was a horrible
Speaker 1: white Nauga hide tie worn by Luke Kawa just because
Speaker 1: it seems as if markets are on trajectory to go
Speaker 1: back to nineteen seventies levels, Luke, doesn't mean you have
Speaker 1: to dress like it. Thanks guys, well you this, Thank
Speaker 1: thank you Cameron for that completely unsolicited complete Yeah, it's
Speaker 1: like I said, I refused that at your column. If
Speaker 1: you don't call bust. I told him to the belt though,
Speaker 1: but I don't know what tie he's talking about. You know,
Speaker 1: I have no idea either. All of my ties are wonderful.
Speaker 1: You must have meant to say belt, and he just
Speaker 1: went on and went and said, but I'm just jealously
Speaker 1: because I had six older brothers, I was the youngest,
Speaker 1: and the bullying all went downhill. So I I kind
Speaker 1: of look at you, was that little brother. I never
Speaker 1: had the outlet for the bullying. I hope that's okay.
Speaker 1: It's like I was wondering where this is going. I
Speaker 1: was expecting it to end up in some complimentary that. Yeah. Yeah,
Speaker 1: And also you owe me money. That's just how it works. Yes, Sarah,
Speaker 1: do you have a crazy thing you saw in them?
Speaker 1: Mor I do have a crazy thing, and it'll go
Speaker 1: back to the idea of a demand for consumer staples.
Speaker 1: I was looking around just for some different price dislocations
Speaker 1: that are caused by the coronavirus and people maybe going
Speaker 1: a little bit crazy and emergency shopping. And I went
Speaker 1: on Amazon and was looking at Purell bottles because you
Speaker 1: can't really find Purell any anywhere anymore. And uh, I
Speaker 1: found a two pack of one Leader Purell bottles for
Speaker 1: three hundred and fifty dollars. It's it's crazy, I mean truly,
Speaker 1: the creer. Okay, I think you won. You might have
Speaker 1: just scored your first on that you haven't gone yet.
Speaker 1: And I also have one to the other side too,
Speaker 1: let's hear it. Uh, there's a pretty good story on
Speaker 1: the terminal that was laying out how flights have all
Speaker 1: of a sudden becoming pretty cheap because a lot of
Speaker 1: people don't want to be flying anymore. So you can
Speaker 1: get around trip flight from New York to Miami now
Speaker 1: for fifty one dollar. So I think I'm going to
Speaker 1: have to go, Oh really, we can have the problem
Speaker 1: with that fifty flights, then you gotta buy a two
Speaker 1: bottle purealitis the hedge. Yeah, all right, I'll were joint
Speaker 1: joint winners for this one. If you both had that
Speaker 1: one but I do have a backup. You know, I've
Speaker 1: been just staring at the screens all day, so unfortunately
Speaker 1: I haven't been able to check price line too frequently,
Speaker 1: so I guess you beat me on that one. But
Speaker 1: I think it's pretty wild. Um, And this is more
Speaker 1: earnest than been funny that we're price now for BIS
Speaker 1: for the end of the year and FED funds. What
Speaker 1: that means to me is that it's very difficult now
Speaker 1: for bonds to short circuit any more stock weakness. And
Speaker 1: combine that with the quote unquote Corona flu that President
Speaker 1: Trump had referred to, UM, pretty pretty crazy that we're
Speaker 1: at this point right now. Um, you know people still
Speaker 1: I think, you know, they're defending that three thousand level,
Speaker 1: and you know, we're kind of we're kind of out
Speaker 1: of firepower. I would say one thing along these lines, though,
Speaker 1: I think I think Chair Powell made the right move
Speaker 1: to move swiftly and forcefully because he just got the
Speaker 1: FED out of the way and now the pressures on
Speaker 1: the White House and Congress instead of the next two
Speaker 1: weeks being this long political debate about is the FED
Speaker 1: doing enough? And Um, so I think he made the
Speaker 1: right move. But because of that we're at a point
Speaker 1: now where you know, the market, the markets unless they're
Speaker 1: going to price a negative rates, it's up to that's
Speaker 1: up to the White House. Now what I'm curious, so
Speaker 1: the market's prices in a realistic sense, where say the
Speaker 1: ten year could go this year? I mean, well, what
Speaker 1: would you guys say, I mean, I mean the you know,
Speaker 1: I guess you can't right now wash your hands. My
Speaker 1: crazy thing is is similar in that in the treasury
Speaker 1: futures market, you can now buy call options on an
Speaker 1: off the run bond. I think it's like a mature
Speaker 1: ten year bond that implied negative yields, So you can
Speaker 1: now buy a call for for negative years. Yeah, and
Speaker 1: you're seeing you're seeing volume in those in those contracts,
Speaker 1: especially the euro dollar ones, a lot of flows there.
Speaker 1: But but just just the kind of offset uh Mr
Speaker 1: Mr Cameron crisis uh Anti Luke commentary. Um, because Lucas Canadian,
Speaker 1: I would like to say that Canadian bonds have some yields.
Speaker 1: So that's that's so even you know, we we were
Speaker 1: riding long rates both in the in the in the
Speaker 1: in your all our belly contract midcurve contracts as well
Speaker 1: as the long end for a while. UM, that's less
Speaker 1: interesting to us. And now because again we're priced to
Speaker 1: I basically go to zero by the end of the year. UM,
Speaker 1: so we're much more focused on the downside and equities now.
Speaker 1: But there's still some um, some room for the Bank
Speaker 1: of Canada to catch I don't know if it's catch
Speaker 1: up or down to the FED in those guys down
Speaker 1: in terms of it's gonna be taking that Greyhound up
Speaker 1: to Toronto to get some clips and funds. I do
Speaker 1: also have to say that I believe Luke wasn't the
Speaker 1: only one who took some heat this week on the
Speaker 1: Bloomberg Podcast hot Line. I'm pretty sure Mike took some
Speaker 1: heat as well. All Right, this is Paul Meyer from
Speaker 1: Northern California, and I'm talking about what goes up. And
Speaker 1: I'm disappointed that recently we haven't gotten any obscure classic
Speaker 1: rock references, not since I think James can funk for
Speaker 1: you nine. So come on, Mike, give us something. Come on, Mike,
Speaker 1: give us something. That one hurts that that I feel
Speaker 1: that one because as we all know, classic obscure classic
Speaker 1: rock rock references are an integral part of financial journalism.
Speaker 1: I feel like I've been I've been letting the readers
Speaker 1: and listeners down, and you might ask yourself, how did
Speaker 1: I get you? This is my beautiful two percent treasury.
Speaker 1: Kid's got a future. All right, I'll give you one
Speaker 1: classic rock reference. You know, everyone's talking about what song
Speaker 1: they they sing when they wash their hands. People saying birthday.
Speaker 1: I'm singing the wreco of the Edmund Fitzgerald. That's how
Speaker 1: long I'm watching where I'm not taking any chances, all right,
Speaker 1: So there you go, no chances taken. And as a reminder,
Speaker 1: you can give us a call at our Bloomberg Podcast hotline,
Speaker 1: leave us a message and we might play it on
Speaker 1: the show. And that number is six or six three
Speaker 1: to four three for nine zero. And with that said,
Speaker 1: novel Luke, thanks so much for joining the show this week.
Speaker 1: Many thanks, thank you. What goes up. We'll be back
Speaker 1: next week. Until then, you can find us on the
Speaker 1: Bluemberg terminal, website and app or wherever you get your podcasts.
Speaker 1: We love it if you took the time to rate
Speaker 1: interview the show on Apple podcast. Some more listeners can
Speaker 1: find us and you can find us on Twitter, follow
Speaker 1: me at at Sarah Pontzack. Mike is a ryg anonymous,
Speaker 1: lu Kawa is at l j Kwa and no ful
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Speaker 1: Toper Foreheads. The head of Bloomberg podcast is Francesca Levie.
Speaker 1: Thanks for listening, See you next time.