Speaker 1: Hello, and welcome to What Goes Up, a Bloomberg weekly
Speaker 1: market podcast. I'm Sarah Pontzek, or reporter on the Cross
Speaker 1: Asset Team and on Mike Reagan, a senior editor on
Speaker 1: the Market Team and the Garfuncle two. Sarah's Paul Simon.
Speaker 1: I think it's a good one. I like it. We're
Speaker 1: gonna I'm serious, We're gonna see how long we can
Speaker 1: keep us going, prove how creative Mike Reagan really is.
Speaker 1: Updating myself a little bit with these references. I need
Speaker 1: I need some some some millennial reference for the kids
Speaker 1: out there. Come up with some some more recent ones
Speaker 1: for you next time. But anyway, Mike, this week on
Speaker 1: the show, the last time our guests joined us on
Speaker 1: the podcast, we had this lengthy conversation about how could
Speaker 1: stocks be near record when the economic outlook was so uncertain?
Speaker 1: Sound familiar, Well that was actually last summer in two
Speaker 1: thousand and nineteen, and it's just a reminder that the
Speaker 1: stock market and the economy are not one and the same.
Speaker 1: We've had this conversation many times over the last couple
Speaker 1: of weeks. But again he'll tackle the question, but in
Speaker 1: different circumstances, and as always, will close out the episode
Speaker 1: with the craziest thing I saw in markets this week.
Speaker 1: So if you saw something crazy, please do give us
Speaker 1: a call on the Bloomberg Podcast hotline at six four
Speaker 1: or six three two four three four nine. Oh, and
Speaker 1: leave us a voicemail with the craziest thing you saw
Speaker 1: in markets this weekend. Maybe we'll play your crazy thing
Speaker 1: on the air. But Sarah, let's let's introduce that guest.
Speaker 1: Very happy to have him back. His name is Shawn Snyder.
Speaker 1: He's the head of investment strategy at City Personal Wealth Management. Sean,
Speaker 1: welcome to the show, Thank you, glad you back. Great, Um,
Speaker 1: and we got some notes, some talking points of yours
Speaker 1: uh this week. And I'm I'm fascinated with this notion, Um,
Speaker 1: that all that basically matters to a lot of investors
Speaker 1: right now is the Fed's balance sheet. You point out
Speaker 1: that at least for part of the last Bowl market
Speaker 1: there was like a ninety I think it's a percent
Speaker 1: correlation between the size of the balance sheet and what
Speaker 1: the stock market did. Obviously, now the FED is expanding
Speaker 1: that balance sheet again aggressively. Is that really? Is that
Speaker 1: all that matters right now as far as the level
Speaker 1: of the stock market. I mean, I'm looking at valuations,
Speaker 1: and here we are among the highest valuations we've had
Speaker 1: on a forward basis SMP about twenty five times earnings
Speaker 1: forward earnings, NASTAC one hundred, almost thirty times forward earnings.
Speaker 1: Probably that in the at least the top decile, maybe
Speaker 1: even higher than that of this century. But yet, as
Speaker 1: you point out, when the it is in stimulation mode,
Speaker 1: um evaluations really even matter at this point. You know,
Speaker 1: you ask if the Federal Reserve stimulus is all that matters,
Speaker 1: and I think the answer is that it's not all
Speaker 1: that matters. You know, health data is now economic data.
Speaker 1: If you saw a second wave of a coronavirus, then obviously, uh,
Speaker 1: you know, just having that FED stimulus may not be
Speaker 1: enough to keep the market on its pace. So there
Speaker 1: are things that do matter outside of the FED stimulus,
Speaker 1: without a doubt. But one things that I've referenced lately
Speaker 1: is how fast and how powerful the reaction has been
Speaker 1: in terms of stimulus. During the global financial crisis, it
Speaker 1: took the Federal Reserve almost six years to increase their
Speaker 1: balance sheet by three trillion dollars. We've done that in
Speaker 1: just three months. UM, So it hasn't been exactly one
Speaker 1: trillion dollar every month. It's been a little bit less,
Speaker 1: a little bit more, but it's about one trillion dollars
Speaker 1: each month UM. So far balance sheets at about seven
Speaker 1: trillion now projected to go to maybe nine trillion in
Speaker 1: the next few months, and that made me moderate. But
Speaker 1: just the sheer speed at which they operated this time
Speaker 1: around UM I think does volumes for the speed at
Speaker 1: which the stock markets recovered. It's not the only thing
Speaker 1: that matters, but it is really important. Speed has really
Speaker 1: been unbelievable. You kind of mapped out the speed of
Speaker 1: balance sheet growth, but there's a statistic. We just had
Speaker 1: the fastest fifty day rally for the SMP fire ever.
Speaker 1: I mean, pretty unbelievable when you think about that. The
Speaker 1: SMP now up roughly or so off the bottom. We
Speaker 1: actually got a question on Twitter for you, Sean um
Speaker 1: from a listener at tweet view or nine, so I
Speaker 1: wanted to ask the question for him. He said, one,
Speaker 1: when and if FED support will ever be removed? So
Speaker 1: will FED support ever actually be removed? And what is
Speaker 1: the downside if this support actually just goes on indefinitely
Speaker 1: and they can't remove it. I think the most important
Speaker 1: thing is what happens to the unemployment rate, And right
Speaker 1: now you're seeing an unemployment rate that's headed towards the
Speaker 1: highest level we've seen in decades, and one of the
Speaker 1: mandates of the Federal Reserve is to have full employment
Speaker 1: in the country. So I think the notion that they're
Speaker 1: going to back off of stimulus will start to normalize
Speaker 1: it anytime soon is probably not accurate. Even if COVID
Speaker 1: nineteen is come and gone and we're past the worst
Speaker 1: of it, which I'm not necessarily confident about um. But
Speaker 1: if you still have high levels of unemployment, I think
Speaker 1: there's still going to continue to have that policy backstop.
Speaker 1: What is the downside if they remove it? It depends
Speaker 1: on the economic environment we're in. We did see them
Speaker 1: start to remove it two thousand seventeen and two thousand
Speaker 1: and eighteen in the market climbed higher, but it was
Speaker 1: in this case it was on the back of fiscal
Speaker 1: stimulus from Congress, So it really depends on what the
Speaker 1: environment looks like. Then, if we're at the end of
Speaker 1: one and the economy is booming because it's so much
Speaker 1: pent up demand and so much stimulus, well well done. Shot.
Speaker 1: You know, whatever someone preps is a question with I've
Speaker 1: got a question for you from someone on Twitter. I mean,
Speaker 1: that's reason to get nervous right there. So I uh,
Speaker 1: I think i'd be sweating a little bit. This is
Speaker 1: a question like that. You all know where that one's
Speaker 1: gonna go. Next week? Uh, this upcoming week the FED
Speaker 1: will meet uh for the regular meeting. We did have, uh,
Speaker 1: some comments from William Dudley, the former head of the
Speaker 1: New York FED, talking about those old boogeyman words moral hazard,
Speaker 1: you know, worrying that the FED is incentivizing excessive risk
Speaker 1: taking with its latest measures. Now, obviously, I I think,
Speaker 1: as you pointed out, the FED has the mandate to
Speaker 1: keep unemployment low and to keep inflation stable and you know,
Speaker 1: relatively near that that two percent target. I wonder though,
Speaker 1: if they will at least try to try to talk
Speaker 1: the market out of this this sort of phase of exuberance,
Speaker 1: sort of the way Dudley did bringing up that moral
Speaker 1: hazard that sort of thing. Could could you see that
Speaker 1: type of scenario where you know, the FED maybe someone
Speaker 1: uses that irrational exuberant or or or or sort of
Speaker 1: warns about the risk of getting too aggressive in your
Speaker 1: investments at this time of of a cycle. Normally they
Speaker 1: try to stay away from making commentsary about the stock market.
Speaker 1: I have seen a few comments over the last few
Speaker 1: months where they did make reference to the equity markets,
Speaker 1: which is a bit unusual. I don't think that they're
Speaker 1: going to back away or talk down stimulus in the
Speaker 1: current environment with so much uncertainty right now, Um, what
Speaker 1: does it mean for risk assets? What does it mean
Speaker 1: for valuations? I do think you could get to a
Speaker 1: point where the valuations become so stretched that they do
Speaker 1: start to warn about, uh, you know, risk assets being
Speaker 1: in a bubble, like we have heard that before. But
Speaker 1: I think we're ways away from that. Staying on the
Speaker 1: stimulus theme, but kind of shifting over to Washington and
Speaker 1: fiscal stimulus. I mean, I I know that the unemployment
Speaker 1: boost of the Cares Act is supposed to kind of
Speaker 1: fall off and expire at the end of July. There's
Speaker 1: talk of more stimulus in Washington, d C. But it
Speaker 1: makes me wonder. I mean, we look at the Nasdaq
Speaker 1: this past week putting in a record high. We know
Speaker 1: that this administration does like to look at the stock
Speaker 1: market quite often and almost use it as a barometer
Speaker 1: of success sometimes of policy. We saw it with the
Speaker 1: US China trade war in a way when all of
Speaker 1: a sudden, when the stock market would go back up,
Speaker 1: maybe they would get a little bit more aggressive with
Speaker 1: their tactics. I mean, do you do you think it's
Speaker 1: possible at all, though, that what we're seeing happen in
Speaker 1: the stock market could at least bring down the urgency
Speaker 1: of further stimulus measures to help the economy and there
Speaker 1: by the stock market. Albeit they're not in the same
Speaker 1: but still it almost makes you feel if you're only
Speaker 1: looking at the stock market, like there isn't this urgency
Speaker 1: for more help. And understand that theory, but I do
Speaker 1: want to make a couple of points that I think
Speaker 1: go against that notion. Uh this the impact of COVID
Speaker 1: nineteen has been felt very unevenly across the demographics in
Speaker 1: the United States that Fetcher Powell made reference to. At
Speaker 1: one point that of households with income under forty thousand
Speaker 1: had lost jobs. If you look at the unemployment rate
Speaker 1: divided by education, the unemployment rate for those of the
Speaker 1: bachelor's degree to higher is eight point five percent. The
Speaker 1: unemployment rate for someone with a high school degree or
Speaker 1: lower is closer to so really really big divide on
Speaker 1: how it's impacted Americans. So, even though the stock market
Speaker 1: seems to be doing well, if you're working remotely and
Speaker 1: you have that ability, which is maybe say thirty percent
Speaker 1: of the US population, you probably feel okay because it's
Speaker 1: getting sunny out and it feels like the health data
Speaker 1: has gotten better. But for a lot of people, there's
Speaker 1: a lot of uncertainty about will they be able to
Speaker 1: return to a job. And don't think we knew that
Speaker 1: answer yet. So I hope that they keep that in
Speaker 1: mind when they think about the stimulus, and I think
Speaker 1: they'll go through with more. I'm not sure what the
Speaker 1: number will be. I've heard three trillion, I've heard one trillion.
Speaker 1: But I think they'll do it again based on that premise.
Speaker 1: Show on another interesting point you've made in your notes
Speaker 1: here is uh you talk about as the economy reopens,
Speaker 1: investors are kind of rotating out of those stay at
Speaker 1: home stocks you know, your your social networks, your zoom, uh,
Speaker 1: that sort of thing, and into what you call get
Speaker 1: me out stocks, which I like that that. I like
Speaker 1: that everyone else is calling them reopening stocks, but no,
Speaker 1: they're get me out there, get me out. I think
Speaker 1: I think we can all sympathize with that feeling of
Speaker 1: get get me out of here, Sarah there in her
Speaker 1: parents house in Florida. Although you seem to have a
Speaker 1: very happy domestic life with with the folks down in Florida. Look,
Speaker 1: I'm not I'm not complaining. A lot of people have
Speaker 1: it much worse than I do right now, so I'll
Speaker 1: I'll handle any annoyances that I have to do very
Speaker 1: well right now. I think your dad probably listens to
Speaker 1: the show, so you can't. You can't criticize the home
Speaker 1: life too much. I guess right, no, not right now,
Speaker 1: just in private, not publicly over the airwaves. But anyway, Sean,
Speaker 1: you talk about you say you still think it makes
Speaker 1: sense to get in the companies that are sort of
Speaker 1: the future of of America. Look us through kind of
Speaker 1: what you mean by that, because I think that is
Speaker 1: I think that's a wise call. Sure. So, initially the
Speaker 1: concept was the core of America and the future of America.
Speaker 1: And what I meant was the core of America was
Speaker 1: like food and staples, retailing, um, you know, the basics
Speaker 1: of the world that we all need to survive. Right.
Speaker 1: We saw a huge surgeon demand for toilet paper. That's
Speaker 1: an example of something we all needed at one point.
Speaker 1: That's kind of the core the future of America. And
Speaker 1: I think it's always been this way, but it's been
Speaker 1: accelerated by COVID nineteen. UH is rise in demand for
Speaker 1: cloud computing, UM, tele medicine, UH in this case because
Speaker 1: of COVID nineteen, thermal imaging so that you can check temperatures.
Speaker 1: Those things have really done well, including in home entertainment,
Speaker 1: the more popular names that we tend to think about,
Speaker 1: they actually have positive returns year to date, whereas the
Speaker 1: get me out stocks are still quite depressed, but they're improving. UH.
Speaker 1: And there's several data points that I can walk through
Speaker 1: if you'd like, that point towards Americans actually getting out
Speaker 1: of their house. UH. There's several things that t s
Speaker 1: A is reported for seven consecutive weeks. The number of
Speaker 1: flyers are picking up, still quite depressed, but you know,
Speaker 1: we saw a large airline announced today that they're actually
Speaker 1: adding flights according to routing requests for directions. More people
Speaker 1: are driving, and if you look at open table data,
Speaker 1: and more people are dining. UH, not just in the US,
Speaker 1: but also in Germany and other countries, and they're reduced capacities,
Speaker 1: but in many cases are actually hitting those reduced capacities.
Speaker 1: Do you think that what you see in that data,
Speaker 1: this like high frequency data that shows people getting out
Speaker 1: and about finally leaving their homes, does it show enough
Speaker 1: pent up demand almost to justify this run that we've
Speaker 1: seen in the markets. I mean, something that was really
Speaker 1: interesting about this past week was not just that we
Speaker 1: saw continuation in the stock market rally, but it almost
Speaker 1: seemed as though we started to see the bond market
Speaker 1: giving as well. I mean, we saw a nice shoot
Speaker 1: up in bond yields almost this capitulation what you look
Speaker 1: at in the data of this reopening, does it actually
Speaker 1: justify this right now? Possibly, but we don't know yet.
Speaker 1: We don't know yet. So it's what you would call
Speaker 1: it if you're an economicy called green shoots. Right, there's
Speaker 1: signs of recovery. You know, there are going to be
Speaker 1: people that need to fly on a plane because they
Speaker 1: went and moved in with their parents in Florida and
Speaker 1: they need to get back to New York. I drove,
Speaker 1: but I would be requesting Apple maps direct. Yeah, those
Speaker 1: are the people that might be flying my that could
Speaker 1: be some of that, but I would say something that
Speaker 1: supports it more than just those things I mentioned earlier
Speaker 1: is continuing claims, which is a component of the unemployment
Speaker 1: insurance claims we see each week on Thursdays. UH, continuing
Speaker 1: claims look like they have peaked and they're starting to
Speaker 1: calm down. That means people are going back to work.
Speaker 1: And traditionally, when you see a decline in continuing claims,
Speaker 1: that tends to kind of happen around the time when
Speaker 1: the economy bottles and starts to recover. So it's not
Speaker 1: it's not just these anecdotal things about people going out
Speaker 1: of their house. It's also labor market data. So I
Speaker 1: think it's real, but it's really early sean. Obviously. The
Speaker 1: other big news in the past week or so has
Speaker 1: been this uh massive civil unrest with you know, protests
Speaker 1: and looting and riots across the country. I was a
Speaker 1: bit surprised that we didn't see a little bit of
Speaker 1: a risk off reaction to that. I mean, I guess
Speaker 1: I guess you shouldn't be. If you go back in
Speaker 1: history and look at the sixties riots and that sort
Speaker 1: of thing, it never seemed to put much of a
Speaker 1: in the market. But I'm wondering if these events are
Speaker 1: influencing your thinking at all about the economy, about markets,
Speaker 1: and specifically we're kind of all waiting for this next
Speaker 1: batch of fiscal stimulus from the government, and whether this
Speaker 1: could kind of maybe reshape what that looks like. A
Speaker 1: little bit less help for the corporation, is a little
Speaker 1: bit more help for the individuals, perhaps you know, something
Speaker 1: to to try to sort of soothe the masses here.
Speaker 1: Um is that you know, is is this working its
Speaker 1: way into your your thought process at all when you
Speaker 1: try to figure out where the market's going next? It is?
Speaker 1: It is? And and I'll get to my point in
Speaker 1: a second. I mean, I think has been a difficult
Speaker 1: year for many people, for us to be at COVID nineteen.
Speaker 1: You know, now we have the protests acrostination, and you know,
Speaker 1: I think at this time we'd all probably benefit from
Speaker 1: being kinded in one another mower form. That is, so
Speaker 1: I hope that's, you know, the way we had with things.
Speaker 1: My primary thinking about the protests, aside from you know,
Speaker 1: the stuff we all feel strongly about, is what does
Speaker 1: it mean for the coronavirus? We saw very large Memorial
Speaker 1: Day celebrations in the United States and certain regions, and
Speaker 1: now we're seeing very large protests in very emergent, major
Speaker 1: urban areas. Um, if there's gonna be a second wave,
Speaker 1: that seems like a time perfect catalyst to me. I'm
Speaker 1: not saying that's going to happen. I'm not an epidemiologist.
Speaker 1: I have no idea as a strategist. I have to
Speaker 1: say I'm not an epidemiologist because everyone says that clearly
Speaker 1: I am not. I don't know. Maybe it hates sunshine,
Speaker 1: and sunshine kills it great. But if there's any catalyst, uh,
Speaker 1: this seems like an obvious one to me. But you're
Speaker 1: not gonna know for a while. It's gonna take time
Speaker 1: for that to spread. If you look at China, they
Speaker 1: actually re entered a lockdown again and it was about
Speaker 1: a month later. So you know, maybe the market will
Speaker 1: care and maybe there will be some market impact from
Speaker 1: these protests through that form, do you get the sense
Speaker 1: at all through listening to communication maybe from from government
Speaker 1: officials and also taught medical officials that we've been hearing
Speaker 1: from that if there were to be a second wave,
Speaker 1: that we will see a lockdown reminiscent of what we
Speaker 1: have all been going through and facing over the last
Speaker 1: couple of months. I mean, I've been thinking about this.
Speaker 1: We all think, Okay, if we get a second way,
Speaker 1: there's no question that we have to shut down again.
Speaker 1: But is that true? I mean, is that what we
Speaker 1: already saw the destruction that can cost to the economy, Like,
Speaker 1: when you think about it from a strategist point of view,
Speaker 1: do you think that's something we'd have to deal with again.
Speaker 1: This question comes from Sarah's dad, who's wondering if you
Speaker 1: should build a new wing on the house or not
Speaker 1: that right? Oh, that's from my mom who keeps complaining
Speaker 1: that we need a larger house because there's too many
Speaker 1: of us and the other the other siblings are supposedly
Speaker 1: going to show up as well, so everyone needs now
Speaker 1: just build a wing. Right. So, I actually think the
Speaker 1: odds of a second shutdown nationwide at least are relatively low.
Speaker 1: And there's a few reasons I think that. One, I
Speaker 1: think that we've lost some of the political will to
Speaker 1: do so. Um, people have seen high rates of unemployment,
Speaker 1: and at some point, if you're on a balance and
Speaker 1: on each side there's the economic damage or the human damage,
Speaker 1: it starts to tilt the other way, and I think
Speaker 1: that's what we've seen. Uh. The other thing I think
Speaker 1: that's important is shutting down the system and flattening the
Speaker 1: curve is not only designed to save life, but it's
Speaker 1: designed to keep the health care system from being overwhelmed.
Speaker 1: Now we don't have a vaccine yet, we do maybe
Speaker 1: have some treatments. If those treatments are effective in getting
Speaker 1: patients out of the hospital quicker, so instead of fifteen days,
Speaker 1: they're out in eleven days. Even though that might seem minor,
Speaker 1: that reduces the burden on the health care system and
Speaker 1: maybe lowers the odds that we have to lock down
Speaker 1: and and and to me, reduces the odds of a
Speaker 1: W shaped recession. Back to that letter what what is
Speaker 1: the letter shape? Uh? You know, My thinking is that
Speaker 1: they can't we can't do the lockdowns again. The lockdowns
Speaker 1: are over, not because the virus is going away, but
Speaker 1: because it's not going away, and we simply cannot just
Speaker 1: stay locked down forever. We have to sort of, um,
Speaker 1: put the masks on and and try to get back
Speaker 1: to some semblance of life. I'm wondering if that sort
Speaker 1: of goes into your thinking about everyone's favorite letter shape
Speaker 1: of this recovery you called a a V, but a
Speaker 1: lazy V, meaning that that recovery is not quite as
Speaker 1: sharp as the decline at the beginning. UM, but it
Speaker 1: is perhaps if I'm if I'm interpreting the lazy V correctly,
Speaker 1: it is kind of a slow and steady uh grind
Speaker 1: higher and recovery without sort of another nasty dip, sort
Speaker 1: of a double dip before we're all the way back
Speaker 1: to the play as we started at right, So some
Speaker 1: people would call it a squosh. I just think lazy
Speaker 1: be kind of is an easy way to interpret for me. Ironically,
Speaker 1: I actually think, you know, you make that a hand
Speaker 1: symbol when you're at a restaurant for the check and
Speaker 1: you kind of do a little dip down and a
Speaker 1: longer thing. That's kind of what it looks like to make,
Speaker 1: which is, you know, kind of ironic. In the current environment,
Speaker 1: I think that a lot of the forecasts are probably
Speaker 1: you know, I see more and more economists sort of
Speaker 1: focusing in on that's the shape, what it looks like,
Speaker 1: and I don't disagree. I think you will see a
Speaker 1: rebound in some areas quicker uh and if you have
Speaker 1: manufacturing or automation, or you have simplely the social distance
Speaker 1: that enables you to reopen, they're gonna do. So there's
Speaker 1: gonna be pent up demand. Uh. If you're in industries
Speaker 1: like restaurants, it's less clear. Again, pretty positive news on
Speaker 1: people going back to restaurants, but if you do see
Speaker 1: a second way if then it could be very difficult
Speaker 1: slog for them. So I think it's gonna be a
Speaker 1: long recovery in some sectors. You know, if we think
Speaker 1: in New York City, I believe about a hundred and
Speaker 1: eighty thousand of two hundred and seventy four thousand food
Speaker 1: and beverage workers lost their jobs. About are they all
Speaker 1: going to have a job to go back to because
Speaker 1: they reopened outdoor dining? I doubt it. Uh, And those
Speaker 1: people are going to be misplaced and it's going to
Speaker 1: take time to find a new role for them. It
Speaker 1: really is striking and their questions that none of us
Speaker 1: know the answers too yet. But Sean, I have to
Speaker 1: give it to you for the creative descriptions the lazy
Speaker 1: V get me out stocks. I mean, we hear similar,
Speaker 1: similar descriptions often, but those are two new ones. So
Speaker 1: it's it's refreshing to hear I was sitting at home,
Speaker 1: locked into quarantine when I was just randomly thinking up
Speaker 1: weird terms. You really need to come up with an
Speaker 1: acronym to make it in this business, No Sewan, you know,
Speaker 1: fanger or bricks or something. Do you get working on that?
Speaker 1: They will sean how important is the energy market UM
Speaker 1: in terms of what this recovery looks like, what the
Speaker 1: stock market sort of reacts to UM and and walk
Speaker 1: us through you're thinking on sort of the the geo
Speaker 1: politics between OPEC and the US and and the sort
Speaker 1: of global politics of energy production. Well, we have OPEC
Speaker 1: meeting coming up. UH. There is Saudi Arabia, of course,
Speaker 1: and then there's Russia, and they seem to have very
Speaker 1: different opinions on what they want to do. They implemented
Speaker 1: pretty deep production cuts that were supposed to last through
Speaker 1: Midsummer about temper cent of global capacity or output. UH.
Speaker 1: Saudi Radio wants to keep those cuts in place longer
Speaker 1: UH and Russia wants to return to more regular production levels.
Speaker 1: So it's definitely gonna be a little bit of a
Speaker 1: battle between the two of them. We've seen that before.
Speaker 1: UM not that long ago, several months ago where oil
Speaker 1: prices crashed because the two can come to agreement. So
Speaker 1: I think is gonna be volatility in that arena or commodity.
Speaker 1: That said, I do think it is helpful that people
Speaker 1: are driving more. Uh. If you look at China, for example,
Speaker 1: the number of auto sales actually rebounded pretty strongly after
Speaker 1: UM they dealt with the lockdown of COVID nineteen because
Speaker 1: people didn't want to take public transit. I suspect. I
Speaker 1: suspect you'll see the same thing here in the United States. UM.
Speaker 1: If you look at the Apple Maps routing requests for
Speaker 1: I mentioned driving directions earlier, but they also have public
Speaker 1: transit requests and walking and public transit is flatlined. Hasn't
Speaker 1: changed at all. People do not want to return to
Speaker 1: public transit. And that's not just true in the United States.
Speaker 1: That's also you can look at the data in China, UM,
Speaker 1: other Asia countries that have maybe dealt a little bit.
Speaker 1: I don't know if I shouldn't say necessarily better, but differently, Uh,
Speaker 1: same thing. So I think there will be higher demand,
Speaker 1: least from the driving side. It's it's fascinating the metrics
Speaker 1: that suddenly become important like Apple Apple map requests. You
Speaker 1: know it's It is absolutely fascinating and one one of
Speaker 1: the side effects of this virus will be we will
Speaker 1: now rely on high frequency data to determine when recoveries.
Speaker 1: O car. We're not gonna wait for GDP. Third quarter
Speaker 1: GDP is in September. It seems a million miles away. Yeah,
Speaker 1: this new world we're living in, well in a lot
Speaker 1: of this data actually wasn't available before the crisis. This
Speaker 1: healthcare crisis actually made a lot of these private companies
Speaker 1: open up their private data that probably wouldn't have happened
Speaker 1: without COVID nineteen. So, Michael, we were listening to Sean
Speaker 1: speak about the oil market. I had this transition queued up,
Speaker 1: so let me know how, let me know how I
Speaker 1: do here. So we have higher higher demand, likely we
Speaker 1: still have a potential for for muted supply going forward.
Speaker 1: So it's very unlikely that the oil market's gonna get
Speaker 1: anywhere near as crazy as it was in recent history.
Speaker 1: Not bet. I'll give you a be on that transition.
Speaker 1: I'll take. I'll take. Are you know I'm a harsh
Speaker 1: trader though, so I know, I know, honestly, I don't
Speaker 1: even know if I would have given me a beat. Well,
Speaker 1: in that case, you started off, what's the craziest thing
Speaker 1: you saw this week? Something that I found not just
Speaker 1: crazy but interesting this week? Uh comes to the I
Speaker 1: p O market, Uh, when it comes to stock. So,
Speaker 1: Warner Music Group went public on Wednesday with an I
Speaker 1: p O price of about twenty five dollars to share.
Speaker 1: Twenty five dollars to share, that was the I p
Speaker 1: O price. Well, in this market, it surged on the
Speaker 1: first day two over thirty dollars to share. And sure
Speaker 1: this could represent opinions of investors on on what's going
Speaker 1: on in the music industry. But I think it's very
Speaker 1: telling and also just a little bit crazy that seeing
Speaker 1: everything going on the world, what we just saw with
Speaker 1: such a steep and tremendous market collapse, that the I
Speaker 1: p O market, at least when it comes to Warner
Speaker 1: Music Group is thriving. That's pretty surprising given the you know,
Speaker 1: everyone has sort of left the music business for dead there.
Speaker 1: But I guess your Spotify and you're streaming, it's starting
Speaker 1: starting to add up. That's pretty good. I like that one.
Speaker 1: Sean had to give me An a minus on that one. Okay, okay,
Speaker 1: that's better than the transition. Bringing that g p A up.
Speaker 1: That's what we want here, Sean. How about you? Have
Speaker 1: you seen anything crazy in markets this week? Oh, there's
Speaker 1: a lot of crazy stuff going on. But I think
Speaker 1: one of the data points I recently saw, which is
Speaker 1: something I would have never thought about, was box office
Speaker 1: receipts for movies. Uh at below they hit just five
Speaker 1: thousand dollars in sales for box office receipts in the lockdown.
Speaker 1: It is now proudly back up to about three. So
Speaker 1: the five thousand was was drive ins, which I don't
Speaker 1: even know existed anymore, but they're apparently they're in hot
Speaker 1: demand now, big demand. Oh so like some rich guy
Speaker 1: got a movie for his own private home theater or
Speaker 1: something like that. Right, so maybe Kim Young Muton is
Speaker 1: making up for all. I'm pretty sure that in Queens
Speaker 1: they they hosted a drive in, So maybe maybe that, oh,
Speaker 1: drive ins five thousand dollars, I'm pretty sure. Here in Florida,
Speaker 1: I'm not doing anything. I haven't left the house in
Speaker 1: a while, but um mute movie theaters are opening up
Speaker 1: pretty soon. Pretty crazy. I mean, it's as someone who
Speaker 1: lives in New York City or near New York City,
Speaker 1: it's hard to imagine go into a movie theater. But
Speaker 1: I guess not true for other parts of the country. Yeah,
Speaker 1: those are both pretty good. Um Now, I'll give you
Speaker 1: the winning craziest thing of the week. I'm just I'm
Speaker 1: just kidding. I'm not gonna I'm not gonna word myself
Speaker 1: to the win anymore. I'll allow you toward me the
Speaker 1: win after this, Uh sir, But were when you deserve it,
Speaker 1: we get it. This is actually something that happened in
Speaker 1: the nineteen eighties. But it's the craziest thing I read
Speaker 1: at least this week, so it's still counts. I'll allow it.
Speaker 1: But great, great Matt Levine Money Stuff newsletter on Thursday,
Speaker 1: and it's all about the this price fixing scandal in
Speaker 1: the chicken industry, and he goes into detail about how
Speaker 1: chicken prices are set. It's it's really kind of fascinating
Speaker 1: that there is there are like chicken price indexes, right,
Speaker 1: and then a supplier and a buyer will make a
Speaker 1: deal for say the index plus ten cents a pound
Speaker 1: or something like that, and he makes a comparison to library.
Speaker 1: You know, it's it's basically the same thing. Because you
Speaker 1: ask a chicken supplier what their prices, you know they're
Speaker 1: they're probably gonna give you a pretty generous high price.
Speaker 1: Not generous, but you know, obviously there's there's skepticism towards
Speaker 1: these indexes. That's not a crazy part. He goes on
Speaker 1: a tangent and talks about Ray Dalio, the founder of
Speaker 1: Bridgewater UM, one of the obviously one of the biggest
Speaker 1: hedge funds in the world, one of the most famous
Speaker 1: investors in the world. And here's where it gets crazy, Sarah,
Speaker 1: I kind of heard of this before, but I never
Speaker 1: really understood all the details. Do you understand the role
Speaker 1: Ray Dahio played in the Chicken McNugget? I have no idea.
Speaker 1: Have you heard about this so apparently about this san
Speaker 1: So it's it's fascinating. So, you know, Daio started off
Speaker 1: as a basically commodities focused I think he traded credit
Speaker 1: and stuff like that too, but he was very deep
Speaker 1: in the commodities and UM. He became well known for
Speaker 1: his observations, his daily observations research report. Obviously Bridgewater still
Speaker 1: very well known for that UM and one of his
Speaker 1: customers in the eighties was McDonald's. Now McDonald's decided they
Speaker 1: wanted to come out with the chicken McNugget, but they
Speaker 1: were worried that they'd be buying chicken in such large
Speaker 1: scale that they would single handedly raise the price of chickens.
Speaker 1: Right and there was right low. Uh yeah, I guess
Speaker 1: so you know, the FED would off the step step
Speaker 1: in and I don't know, hatch chicken eggs or something.
Speaker 1: But so the problem was there was no chicken futures
Speaker 1: contract that they could hedge with. So Dahlio figured out, basically, well,
Speaker 1: the price of a chicken is basically uh derived from
Speaker 1: the price of the corn and the soy meal that
Speaker 1: the swy being food that you feed it. So he
Speaker 1: came up with a futures contract that was basically based
Speaker 1: on the price of corn and soy meal, which allowed
Speaker 1: McDonald's to hedge their chicken costs by buying that this
Speaker 1: the synthetic derivative of soy and uh and um corn meal.
Speaker 1: And that was what apparently UH allowed McDonald's the confidence
Speaker 1: to go and start selling the chicken McNugget because they
Speaker 1: were worried again about driving those chicken prices up and
Speaker 1: having to either then immediately raised prices or just eat
Speaker 1: it on the margin. Um. So bottom line, I know
Speaker 1: I'll to tell my kids this at dinner time because
Speaker 1: they're big fans of the McNugget. That they can thank
Speaker 1: at least in part, Ray Dalio for the chicken McNugget.
Speaker 1: That is pretty unbelievable. Mike. I'll give it to you
Speaker 1: because it was a story from the eighties. Tamps it
Speaker 1: down a little bit, but it's good enough that I'll
Speaker 1: give you the w Chicken price fixing. I was like, okay, anyway,
Speaker 1: well yeah, that's so. That's that's a whole secretary. And
Speaker 1: it's interesting. I check out Matt Levine's column from this Thursday,
Speaker 1: June fourth, and it it talks all about the chicken
Speaker 1: price fixing scandals. Basically anti trust. You know, different suppliers.
Speaker 1: We're going back and forth and saying, hey, let's set
Speaker 1: the price here and see what you can do. Um,
Speaker 1: but fascinating column by Matt. From a chicken pricing to
Speaker 1: I p o S Two box office tickets. We we
Speaker 1: have quite the roundup this week. Sean Snyder, we really
Speaker 1: appreciate you coming on the show. I hope to see
Speaker 1: you guys in person, saying hopefully thanks Sean, What Goes Up.
Speaker 1: We'll be back next week. Until then, you can find
Speaker 1: us on the Bloomberg Terminal, website and app, or wherever
Speaker 1: you get your podcasts. We'd love it if you took
Speaker 1: the time to rate, interview the show on Apple Podcasts
Speaker 1: so more listeners can find us. And you can find
Speaker 1: us on Twitter, follow me at at Sarah Pontzack, Mike
Speaker 1: is at Reaganonymous, and you can also follow Bloomberg Podcasts
Speaker 1: at podcasts. What Goes Up is produced by Jordan's Gospore
Speaker 1: and the head of Bloomberg podcast is Francesca Leivie. Thanks
Speaker 1: for listening, See you next time. Wh