WEBVTT - After the K-Shaped Recovery 0:00:12.720 --> 0:00:16.400 Hello, and welcome to What Goes Up, a weekly markets podcast. 0:00:16.560 --> 0:00:19.080 My name is Mike Reagan. I'm a senior editor at Bloomberg. 0:00:20.040 --> 0:00:23.000 I'm Katie Greifeld. I'm a cross asset reporter at Bloomberg, 0:00:23.000 --> 0:00:25.079 and I'm filling in for Bil Donna Hi Rate and 0:00:25.239 --> 0:00:27.960 this week on the show, Well, there's a big disconnect 0:00:28.040 --> 0:00:31.240 going on right now. The job market is red hot, 0:00:31.440 --> 0:00:34.839 economic growth is strong, and the worst of the pandemic 0:00:34.880 --> 0:00:37.839 seems to be behind us. So why is one popular 0:00:37.880 --> 0:00:40.400 measure of consumer sentiment at the lowest in more than 0:00:40.440 --> 0:00:43.400 a decade. And what does it all mean for markets. 0:00:43.920 --> 0:00:46.280 We'll get into it with an expert on confidence and 0:00:46.320 --> 0:00:50.519 the role that confidence plays in decision making. But first, Katie, 0:00:50.960 --> 0:00:53.320 excited to have you back on the show. Here for 0:00:53.360 --> 0:00:55.680 all the vill Donna fans out there. She's fine, She's 0:00:55.720 --> 0:00:58.920 just vacationing in Portugal. So I'm a little jealous, I 0:00:58.960 --> 0:01:03.040 gotta say, And you know she's I was gonna say. 0:01:03.040 --> 0:01:05.920 She is so funny because two or three weeks ago 0:01:06.000 --> 0:01:08.080 she was like complaining about this trip. She was like, 0:01:08.120 --> 0:01:09.800 I don't even want to go on it. I don't 0:01:09.800 --> 0:01:11.560 know if we should. I was like, what are you 0:01:11.600 --> 0:01:14.600 talking about I picture her in Lisbon like reading all 0:01:14.600 --> 0:01:17.920 the analysts notes on her phone and missing all the sites. 0:01:18.920 --> 0:01:22.120 And she was also like, you know. I started salivating 0:01:22.120 --> 0:01:23.760 when she told me she was going to Portugal there 0:01:23.760 --> 0:01:25.200 because I thought back, I had a trip there a 0:01:25.240 --> 0:01:27.360 couple of years ago, and I must be gained ten 0:01:27.400 --> 0:01:30.160 pounds and I was I was like, filt I had 0:01:30.200 --> 0:01:34.520 theres o. The seafood is incredible. I had this incredible 0:01:34.520 --> 0:01:36.399 steak at this one place. And she's like, yeah, I 0:01:36.400 --> 0:01:39.200 don't eat fish, were meat of any kind And I 0:01:39.640 --> 0:01:42.520 was like, well, they have olives. I think maybe you 0:01:42.560 --> 0:01:45.440 could have some olives. I don't know. You know, she 0:01:45.640 --> 0:01:49.280 loves cauliflower. I rest assured that she probably found some 0:01:49.680 --> 0:01:54.120 delicious cauliflower in Portugal. We can only hope, but in 0:01:54.160 --> 0:01:55.880 any case, I look forward to the day when I 0:01:56.000 --> 0:01:59.120 left the country. Haven't been I haven't been outside the 0:01:59.120 --> 0:02:01.760 borders in a while. It we should probably get to 0:02:01.840 --> 0:02:04.160 the guest and yeah, yeah, why do you bring him in? 0:02:04.160 --> 0:02:06.440 I'm very excited about our guests too, and not only 0:02:06.480 --> 0:02:09.680 because he's a blue hen like me, a professor at 0:02:09.680 --> 0:02:11.640 the University of Delaware and Don William and marry another 0:02:11.680 --> 0:02:14.480 fine school, but also because I feel like he covers 0:02:14.840 --> 0:02:17.120 some angles that we don't get into a lot on 0:02:17.160 --> 0:02:21.400 this show, and that's sort of behavioral finance and psychology 0:02:21.400 --> 0:02:23.680 and that sort of thing. And he's I'm also excited. 0:02:23.720 --> 0:02:26.280 He's from my neck of the woods, down in Chester County, Pennsylvania, 0:02:26.280 --> 0:02:27.880 a beautiful corner of the world. So what do you 0:02:27.919 --> 0:02:30.000 bring him in here? Katie? All right, Well, if you 0:02:30.040 --> 0:02:32.840 were wondering what this man's name is, it is Peter Atwater. 0:02:32.960 --> 0:02:35.880 He is the president of Financial Insights, LLC. He's also 0:02:35.919 --> 0:02:38.680 a finest professor at William and Mary and the University 0:02:38.760 --> 0:02:41.760 of Delaware. I know I get the blue hen reference. 0:02:41.800 --> 0:02:43.359 It was a little lost on me, but here we are. 0:02:43.400 --> 0:02:45.760 But in any case, Peter, welcome to the show. It's 0:02:45.800 --> 0:02:48.079 great to have you with us. Thanks, Katie and Mike. 0:02:48.240 --> 0:02:50.720 Glad to be here. Peter. I wanted to start I 0:02:50.840 --> 0:02:53.520 just sort of if you could give us an idea 0:02:53.720 --> 0:02:57.160 of your approach. Like I said, you know, you sort 0:02:57.200 --> 0:03:00.160 of look a lot at more of the behavior real 0:03:00.240 --> 0:03:03.120 type of finance, and I think it's a really important 0:03:03.120 --> 0:03:05.840 time to talk about that, given this last few years 0:03:06.480 --> 0:03:08.880 have just spent unlike anything we've ever seen before. I 0:03:08.880 --> 0:03:12.720 think as far as um investors, psychology, and then the 0:03:12.760 --> 0:03:15.160 whole meme stock Craze walk Us. There's kind of your 0:03:15.200 --> 0:03:18.720 approach to to how you think about these things. Sure, 0:03:18.760 --> 0:03:21.160 so I I look at things in terms of confidence, 0:03:21.160 --> 0:03:24.160 And when I think of confidence, I don't mean the 0:03:24.480 --> 0:03:29.200 theater of confidence, the self confidence that so often gets discussed. 0:03:29.200 --> 0:03:32.280 I'm I'm really talking about the feelings of certainty and 0:03:32.400 --> 0:03:35.400 control that we have in our lives, because those are 0:03:35.440 --> 0:03:39.640 the real factors and the choices we make. When we're confident, 0:03:39.960 --> 0:03:42.800 we think we know what's coming, and even more so, 0:03:42.920 --> 0:03:46.320 we think that we're capable of handling whatever that is. 0:03:47.080 --> 0:03:50.560 And we don't talk about it this way, but the 0:03:50.560 --> 0:03:54.840 the opposite of confidence is vulnerability, when we feel like 0:03:55.040 --> 0:03:58.480 things are uncertain and we feel powerless, sort of like 0:03:58.560 --> 0:04:00.960 we felt and have been feeling a lot for the 0:04:01.040 --> 0:04:05.920 last two years. And so those feelings of vulnerability play 0:04:06.000 --> 0:04:09.560 into a lot of the choices that we make. And so, Peter, 0:04:10.040 --> 0:04:12.840 I mean, it's it's interesting to hear you, you know, 0:04:12.880 --> 0:04:15.880 talk so much about confidence because I mean, just recently 0:04:15.920 --> 0:04:19.440 we got consumer sentiment data that it was just terrible. 0:04:19.480 --> 0:04:21.240 I mean, if you look at the consumer. They're still 0:04:21.240 --> 0:04:23.560 spending a lot of money, but it looks like they're 0:04:23.839 --> 0:04:26.480 miserable about it. And I'm curious how you take inputs 0:04:26.520 --> 0:04:28.760 such as that, how you think about that in relation 0:04:28.800 --> 0:04:32.599 to confidence and how that feeds into markets. Yeah, so 0:04:32.640 --> 0:04:34.680 I think in a couple of ways. One, I think 0:04:34.680 --> 0:04:38.400 we need to recognize that there is no single level 0:04:38.440 --> 0:04:42.800 of confidence, particularly today, and you know, as the person 0:04:42.839 --> 0:04:45.520 who coined the term the case shaped recovery, to me, 0:04:45.640 --> 0:04:49.280 there there are two extremes to confidence. Those that are 0:04:49.360 --> 0:04:52.839 closest to the financial markets have one level that is 0:04:52.880 --> 0:04:56.840 distinct from those particularly individuals who have worked throughout the 0:04:56.839 --> 0:05:00.680 pandemic out in the real world. And so I think 0:05:00.720 --> 0:05:04.880 what you're seeing is a lot of vulnerability being expressed 0:05:04.880 --> 0:05:08.280 in the consumer sentiment numbers, and and vulnerability from any 0:05:08.360 --> 0:05:11.560 number of factors. It could be economic. It could be 0:05:12.080 --> 0:05:15.040 the fact that they're paying more at the pipe at 0:05:15.040 --> 0:05:19.839 the pump, inflation food prices. But what is also interesting 0:05:19.920 --> 0:05:22.400 is where we see in a lot of these sentiment 0:05:22.480 --> 0:05:27.400 figures the impact of political vulnerability. And so when you 0:05:27.400 --> 0:05:32.039 know after the election, you could see where Republican economic 0:05:32.160 --> 0:05:37.800 confidence fell dramatically while Democrats confidence improved. So I think 0:05:37.800 --> 0:05:40.440 we need to recognize that these measures are picking up 0:05:40.520 --> 0:05:43.640 much more than just how we feel about the economy. 0:05:43.640 --> 0:05:47.080 It's it's really how how vulnerable or confident we feel? 0:05:47.279 --> 0:05:50.200 More broadly, And can we just talk about how good 0:05:50.200 --> 0:05:52.400 of a call that was the case shaped recovery? Could 0:05:52.440 --> 0:05:54.480 you explain just a little bit about that? As I remember, 0:05:54.520 --> 0:05:57.360 it's that, you know, the upper tiers, the upper income 0:05:57.400 --> 0:06:00.880 thresholds of society would recover from the pandemic more quickly. 0:06:00.920 --> 0:06:04.560 Where is the lower income sectors of you know, society? 0:06:04.560 --> 0:06:06.640 They would have a harder time doing that. I bet Peter, 0:06:06.680 --> 0:06:08.520 I bet you wish you could have trademarked to that 0:06:08.560 --> 0:06:11.520 and gotten some royalties on that, because it was everywhere 0:06:11.920 --> 0:06:14.719 there for a while. Yeah, And and to be honest 0:06:14.720 --> 0:06:18.160 with you, it had nothing to do with economic factors. 0:06:18.200 --> 0:06:20.640 To me, those were going to follow. But I could 0:06:20.680 --> 0:06:25.560 immediately see in March when those who worked in the 0:06:25.600 --> 0:06:30.120 service economy quickly pivoted to working from home, and the 0:06:30.279 --> 0:06:34.640 boost and confidence that that gave people relative to the 0:06:34.720 --> 0:06:38.800 doctors and the nurses and the folks who were taking 0:06:38.800 --> 0:06:43.000 care of the supermarket that didn't have that as a choice. 0:06:43.600 --> 0:06:47.560 And so you could see this real stark bifurcation and 0:06:47.600 --> 0:06:50.720 confidence that I felt that ultimately would play through into 0:06:50.760 --> 0:06:53.520 the economy, which is sort of what's happened. Where do 0:06:53.520 --> 0:06:56.160 you suppose we are now in that recovery? I mean, 0:06:56.200 --> 0:06:58.840 have had the has the upstroke and the downstroke of 0:06:58.839 --> 0:07:01.520 that k gotten close together, they're getting further apart. Do 0:07:01.560 --> 0:07:03.480 you think, what what's sort of the status of it? 0:07:04.440 --> 0:07:08.240 So I actually took the view that the real popularity 0:07:08.279 --> 0:07:12.440 of that term marked the extreme of it um. You know, 0:07:12.480 --> 0:07:15.239 as somebody who watches narratives for a living, I've learned 0:07:15.280 --> 0:07:20.480 that that correlations break down the moment everybody's talking about them, 0:07:21.160 --> 0:07:23.920 and I felt that this was just another one. And 0:07:23.920 --> 0:07:26.280 and in many ways we're starting to see that. You're 0:07:26.320 --> 0:07:30.640 seeing those at the bottom becoming much more strident about 0:07:30.920 --> 0:07:34.760 you know, getting wage gains and pressing to unionize. You know, 0:07:35.000 --> 0:07:39.240 you're seeing a lot of activity where folks, you know, 0:07:39.360 --> 0:07:42.520 in the in the lower economics sphere, are are doing 0:07:42.560 --> 0:07:46.000 things to address the vulnerability that they're experiencing. And at 0:07:46.000 --> 0:07:49.080 the same time, you know, beginning a year ago, you 0:07:49.080 --> 0:07:54.560 could start to see sentiment decline within the financial markets themselves, 0:07:54.640 --> 0:07:57.200 and you know, so so I do think that that 0:07:57.320 --> 0:08:00.640 the two lines are beginning to to convert urge. The 0:08:01.000 --> 0:08:04.440 question in my mind is, ultimately, do those at the 0:08:04.480 --> 0:08:07.960 bottom are they lifted? You are more than those at 0:08:07.960 --> 0:08:21.600 the top begin to feel vulnerable. Let's talk a little 0:08:21.600 --> 0:08:24.000 bit more about the financial markets and drill in there. 0:08:24.000 --> 0:08:26.280 Because you sent us a ton of notes. They were 0:08:26.360 --> 0:08:29.400 extremely helpful, so thank you for that. And you send 0:08:29.400 --> 0:08:31.239 in one of your emails that you know you see 0:08:31.560 --> 0:08:35.520 a lady or the tiger potential to markets, and I 0:08:35.559 --> 0:08:38.360 would love to hear exactly what you mean by that. 0:08:39.400 --> 0:08:42.800 But the setup is this. We we've had a year 0:08:43.880 --> 0:08:48.640 in which the most abstract, wild and crazy stocks have 0:08:48.800 --> 0:08:54.199 really suffered, and at the same time we have sentiment, 0:08:54.320 --> 0:08:58.559 consumer sentiment that's really lousy. Consumer sentiment is so bad 0:08:58.640 --> 0:09:00.800 that you go back to October two thousand and eleven 0:09:00.840 --> 0:09:03.280 and and what do you see While you saw occupy 0:09:03.360 --> 0:09:07.839 wal Street, you saw riots in London. Um. So, so 0:09:07.920 --> 0:09:12.480 we know that when sentiment is this low, we behave 0:09:12.559 --> 0:09:16.440 badly as as people, and not surprising, you're seeing things 0:09:16.440 --> 0:09:19.280 like the trucker's strike up in Canada. So so we 0:09:19.360 --> 0:09:24.040 express our shared vulnerability in a in an active social way, 0:09:24.600 --> 0:09:27.320 and so part of me says, well, if this is 0:09:27.400 --> 0:09:30.559 like two thousand and eleven, this is a low, this 0:09:30.640 --> 0:09:33.800 is a meaningful load that we should bounce from. And 0:09:33.880 --> 0:09:37.599 that's the lady scenario that the powder puff, as I 0:09:37.679 --> 0:09:41.000 call it, where where you start people start to feel better, 0:09:41.320 --> 0:09:46.120 Inflation comes down, the bond market eases, equities rise, um, 0:09:46.280 --> 0:09:49.920 you could see popularity of Joe Biden begin to improve. 0:09:50.040 --> 0:09:52.600 Because presidents are only as good as we feel. So 0:09:52.679 --> 0:09:55.200 there are a lot of things that in this moment, 0:09:55.679 --> 0:09:58.160 I feel like they have the makings of a of 0:09:58.200 --> 0:10:03.160 a major sentiment up. That's challenged a little bit in 0:10:03.280 --> 0:10:07.199 terms of equity valuations. That valuations are nothing like they 0:10:07.200 --> 0:10:10.720 did in two thousand eleven, but but okay, I'll live 0:10:10.760 --> 0:10:15.880 with that. The downside is the more troubling one to me, 0:10:16.440 --> 0:10:20.200 which is to say, if this isn't a low and 0:10:20.280 --> 0:10:25.240 sentiment really deteriorates, well, then you're getting into Lehman Brothers 0:10:25.280 --> 0:10:32.080 like moments where trust broad trust issues become a disconcerting 0:10:32.120 --> 0:10:34.640 factor to people. And so I think we need to 0:10:34.720 --> 0:10:40.079 be cognizant of those two potential scenarios, not wishing for trouble, 0:10:40.679 --> 0:10:44.000 but I know that as somebody who's focuses on confidence. 0:10:44.400 --> 0:10:48.880 If confidence really drops further, we're gonna become much more 0:10:48.880 --> 0:10:53.400 aggressive about addressing the vulnerability we feel. And Katie, this 0:10:53.440 --> 0:10:56.400 isn't a political statement, but Joe Biden another Blue Hen, 0:10:56.520 --> 0:10:59.480 I don't know, if you know that a lot of 0:10:59.520 --> 0:11:02.280 us out there, well, it seems like a tough time 0:11:02.280 --> 0:11:05.600 for Blue Hens. Then I don't know, like administration is 0:11:05.840 --> 0:11:09.560 really worried about inflation. I mean kind of to that point. 0:11:09.640 --> 0:11:13.760 I mean to think about what could bring confidence lower. 0:11:14.200 --> 0:11:16.080 I mean, would it be inflation or what else do 0:11:16.080 --> 0:11:20.120 you have in mind? So it could be inflation. I 0:11:20.160 --> 0:11:25.000 tend to think that things like gas prices become a 0:11:25.080 --> 0:11:29.360 really important test to to consumer sentiment at this point, 0:11:29.360 --> 0:11:31.720 the same thing with food prices, the things that you 0:11:31.720 --> 0:11:35.800 you can't control the quantity that you buy. So I 0:11:36.040 --> 0:11:39.400 I I do think that some of the the the 0:11:39.440 --> 0:11:43.200 basics could be factors. But you know, don't forget we 0:11:43.280 --> 0:11:46.520 have in the backdrop to your political risk in Europe. 0:11:47.040 --> 0:11:51.880 I tend to look less at the specific triggers then 0:11:52.080 --> 0:11:55.280 our vulnerability to them, how we're how we would be 0:11:55.360 --> 0:11:58.400 likely to react. I mean put it this way. You know, 0:11:58.480 --> 0:12:03.079 if you had said to the crowd that Tom Hanks 0:12:03.080 --> 0:12:07.240 getting COVID would create a collapse and sentiment. We we'd 0:12:07.240 --> 0:12:11.800 all laugh. But that just happened to be the tipping 0:12:11.880 --> 0:12:17.320 point that coalesced the vulnerability that we were feeling. And 0:12:17.320 --> 0:12:19.360 so I think that's that's the kind of risk that 0:12:19.400 --> 0:12:22.560 we face here today. But to me, Peter, it sounds 0:12:22.600 --> 0:12:25.200 like your base case is more sort of the lady 0:12:25.280 --> 0:12:27.760 of in the analogy, that that we have kind of 0:12:27.760 --> 0:12:30.360 reached the bottom in in sentiment and it's bound to 0:12:30.400 --> 0:12:32.920 perk up, and that you know, a deterioration is more 0:12:33.000 --> 0:12:35.560 of a maybe not quite a te risk, but but 0:12:35.600 --> 0:12:38.320 not quite the base cases that that sound right well, 0:12:38.559 --> 0:12:42.920 I think broadly speaking, as I said, I think consumer 0:12:43.000 --> 0:12:46.120 sentiment is a low, but I think it's also important 0:12:46.160 --> 0:12:50.920 like to recognize how bifurcated that is, and so you 0:12:50.960 --> 0:12:54.840 could see those at the bottom begin to feel much 0:12:54.880 --> 0:12:59.160 better at the expense of those at the top. It 0:12:59.280 --> 0:13:02.560 would be reflect did in higher overall consumer sentiment just 0:13:02.640 --> 0:13:07.920 based on the numbers and how how extraordinarily concentrated wealth 0:13:08.040 --> 0:13:11.960 is today, but you could see where confidence would rise 0:13:13.280 --> 0:13:16.079 and in a situation where the markets are not happy 0:13:16.120 --> 0:13:19.000 about that because it means that the pendulum has swung 0:13:19.120 --> 0:13:25.360 from owners of capital two employees. And in this conversation, 0:13:25.400 --> 0:13:29.000 I'm curious where you see the fixed income markets factoring in, 0:13:29.040 --> 0:13:30.439 because if I look at the yield on a ten 0:13:30.520 --> 0:13:33.079 year treasury right now, I mean, give or take, it's 0:13:33.120 --> 0:13:35.960 around two per cent, which we haven't seen in a while. 0:13:36.160 --> 0:13:40.160 You haven't really seen that overall haven bid for treasuries 0:13:40.200 --> 0:13:42.360 that you know, one might expect to see listening to 0:13:42.440 --> 0:13:45.640 this conversation. Yeah, and I think that's what's so weird 0:13:45.720 --> 0:13:49.440 about the past year. Um. You know, one of the 0:13:49.480 --> 0:13:53.480 things that I noticed was at the same time, you 0:13:53.559 --> 0:13:59.400 had meme stocks soaring, but we had negative yielding sovereign 0:13:59.440 --> 0:14:02.560 debts it and so you would say that's not a 0:14:02.600 --> 0:14:05.959 combination that I think goes hand in hand. You know. 0:14:06.679 --> 0:14:09.119 Now those are those who would say, well, free money 0:14:09.360 --> 0:14:12.839 pumping the market, you know, But but let's get away 0:14:12.840 --> 0:14:17.079 from those issues. I think that the broader question is, 0:14:17.600 --> 0:14:21.840 you know, what does it mean if we've seen bond 0:14:21.920 --> 0:14:27.480 prices and stock prices peak simultaneously and and there I 0:14:27.520 --> 0:14:32.160 think that the nineteen seventies are an interesting parallel because 0:14:32.280 --> 0:14:35.600 you saw the end of a low interest rate environment 0:14:36.040 --> 0:14:40.440 simultaneous to a peaking in the in the equity market 0:14:40.880 --> 0:14:45.800 and the consequences of rising bond yields and and rising 0:14:46.080 --> 0:14:49.800 stock yields or stock prices or falling stock prices. One 0:14:49.800 --> 0:14:52.040 of the things that we also saw in that environment, 0:14:52.800 --> 0:14:58.760 we're concerns about systemic stability, trust in the system, you know, 0:14:58.760 --> 0:15:02.280 whether it's watergate, so were the changing the dramatic changing 0:15:02.280 --> 0:15:04.720 of the guard at the FED. You know that the 0:15:04.880 --> 0:15:09.080 question will be how to investors interpret what this rise 0:15:09.120 --> 0:15:13.240 in rates signifies. Right now, it's pretty clear we're associating 0:15:13.320 --> 0:15:16.600 with inflation, but it becomes a very different story if 0:15:16.640 --> 0:15:20.960 the signal means something different to the crowd. I'm glad 0:15:21.000 --> 0:15:23.320 you brought up meme stocks, Peter. I know you've you've 0:15:23.360 --> 0:15:26.280 thought about them a lot. That whole phenomenon we saw, 0:15:26.360 --> 0:15:29.160 and I think it's especially interesting from your perspective as 0:15:29.200 --> 0:15:32.040 a university professor. You know, I I just pictured all 0:15:32.080 --> 0:15:34.440 your students coming up to you like you know, shot 0:15:34.560 --> 0:15:38.480 by game stop or Shebau or what it seems to 0:15:38.520 --> 0:15:42.560 me almost like nothing we've ever seen before, that that mania. 0:15:43.480 --> 0:15:45.120 What was it like as a professor? I mean, is 0:15:45.120 --> 0:15:47.200 it was everyone trading on Robin Hood in the middle 0:15:47.200 --> 0:15:49.440 of class, and what's kind of the climate there now? 0:15:49.560 --> 0:15:51.760 Is it all worn off as the fever broke. It 0:15:51.800 --> 0:15:54.080 seems like it has based on the prices. But yeah, 0:15:54.080 --> 0:15:57.160 they were trading in class and they were trading, you know, 0:15:57.200 --> 0:16:01.000 initially the stocks, and they were moving into options. You know, 0:16:01.040 --> 0:16:04.240 my my head just about exploded when students came up 0:16:04.240 --> 0:16:06.480 to me and said, professor, I'm not making enough in 0:16:06.520 --> 0:16:10.720 call options. What do you think about futures? And it's like, okay, 0:16:10.760 --> 0:16:15.440 I think we're It's it's pretty clear that everybody is in. 0:16:15.520 --> 0:16:17.920 Who's who's going to get in? And they were They 0:16:17.920 --> 0:16:22.720 were unconvincible that they were wrong, which is another behavioral 0:16:22.760 --> 0:16:26.160 trait that I that I always look for, is the 0:16:26.160 --> 0:16:30.720 inability to consider the other side. No sentiment is clearly changed, 0:16:31.320 --> 0:16:34.040 you know. I think there is still a sub segment 0:16:34.320 --> 0:16:38.640 of the population that is fixated on the movement in 0:16:38.720 --> 0:16:42.760 cryptocurrencies and n f t s, But the mania stage 0:16:42.840 --> 0:16:47.040 is gone. And I think the moment Elon Musk get 0:16:47.120 --> 0:16:50.040 walked onto the stage of Saturday Night Live, we sort 0:16:50.040 --> 0:16:54.400 of saw the simultaneous peaking and culture and finance that 0:16:54.400 --> 0:16:58.320 that marked the top. That was definitely the top of 0:16:58.440 --> 0:17:01.000 so many things in our society, so many things that 0:17:01.040 --> 0:17:04.320 we don't even know yet. But I'm curious to hear 0:17:04.320 --> 0:17:07.040 a little bit more about your perspective as a professor, 0:17:07.080 --> 0:17:09.520 because something I wonder about, and I've talked about a 0:17:09.520 --> 0:17:12.840 little bit with various people, is that, you know, on 0:17:12.600 --> 0:17:16.240 the on the the tail end of this roller coaster 0:17:16.880 --> 0:17:19.359 of me Mania, coming down from those highs, you know, 0:17:19.400 --> 0:17:21.879 a lot of people probably lost a lot of money, 0:17:21.880 --> 0:17:24.720 probably a lot of people who were completely new to 0:17:24.800 --> 0:17:27.760 markets and new to investing. And I mean the hope 0:17:27.840 --> 0:17:30.719 is that, you know, perhaps I mean the optimistic view 0:17:30.800 --> 0:17:33.320 is that perhaps they got involved in investing in trading 0:17:33.680 --> 0:17:38.280 with me Mania, and they graduated onto maybe some more 0:17:38.720 --> 0:17:41.640 types of wealth building. You know, maybe hopefully they bought 0:17:41.720 --> 0:17:44.280 some index funds and put some cash there. But then 0:17:44.400 --> 0:17:46.719 the more pessimistic view was, you know, perhaps a lot 0:17:46.760 --> 0:17:49.320 of these people were burned and they've become a little 0:17:49.320 --> 0:17:53.280 bit disenchanted with the stock market, with investing. I would 0:17:53.280 --> 0:17:55.720 love to hear your perspective on that, especially someone who 0:17:55.800 --> 0:17:57.480 you know, probably talks to a lot of people who 0:17:57.800 --> 0:18:02.240 did get involved during one. Yeah, I think that the 0:18:02.680 --> 0:18:05.280 novice and naive are always the last of the party, 0:18:05.280 --> 0:18:07.320 and it's a it's a trend that I it's a 0:18:07.320 --> 0:18:10.600 pattern I look for, um just in terms of broad 0:18:10.600 --> 0:18:15.400 measures of sentiment. I worry about the migration that we've seen, 0:18:15.520 --> 0:18:19.600 particularly among young people, is out of the stock market 0:18:20.200 --> 0:18:26.200 and into online gambling. That the gamification that we saw 0:18:26.400 --> 0:18:32.040 taking place in in online stock trading platforms has moved 0:18:32.359 --> 0:18:35.960 to an environment that's even more familiar to young people, 0:18:36.440 --> 0:18:40.119 more resonant with young people. And you know, you just 0:18:40.320 --> 0:18:44.640 cannot talk to population of young people, particularly young men, 0:18:45.200 --> 0:18:48.399 without quickly getting swept up into what are you what 0:18:48.480 --> 0:18:51.440 are you betting on? You know this week? In whatever 0:18:51.520 --> 0:18:56.880 the gamer event is. Yeah, that's interesting. There is such 0:18:56.920 --> 0:19:00.040 an overlap, it seems like, you know, between the the 0:19:00.200 --> 0:19:03.320 risk taking in in the meme stocks and gambling. It's 0:19:03.640 --> 0:19:07.160 it's you can see people flipping between the same apps 0:19:07.200 --> 0:19:09.439 and every day. I would imagine and think back, I 0:19:09.480 --> 0:19:12.280 mean to the start of it and the whole the 0:19:12.320 --> 0:19:14.480 whole reason that we were given for why we saw 0:19:14.600 --> 0:19:17.000 such a flood into robin Hood and other apps is 0:19:17.040 --> 0:19:19.960 because there weren't any live sports that people are looking 0:19:19.960 --> 0:19:24.000 for an outlet. That's true. Yeah, I mean we we've 0:19:24.000 --> 0:19:27.439 sort of merged Wall Street, Las Vegas, the metaverse, and 0:19:27.560 --> 0:19:33.879 social media into this phenomenon of betting on everything, and 0:19:33.880 --> 0:19:37.159 and some of that I think you can attribute to 0:19:37.920 --> 0:19:42.119 sort of the pandemic nihilism that that we've seen elsewhere. 0:19:42.680 --> 0:19:46.760 But but it's to me, it's a really troubling intersection 0:19:47.440 --> 0:19:52.200 because of it what it all of the iconic figures 0:19:52.200 --> 0:19:54.639 that have now been swept up into it, from sports 0:19:54.680 --> 0:19:58.800 figures to Hollywood figures to political figures. We we've monetized 0:19:58.840 --> 0:20:03.000 celebrity is such an extreme that there's there's a lot 0:20:03.040 --> 0:20:06.320 more riding on this than just you know, housing prices. 0:20:06.920 --> 0:20:09.000 We're in two thousand and five. This is this is 0:20:09.040 --> 0:20:13.879 a big cultural phenomenon that transcends the markets and cuts 0:20:13.880 --> 0:20:17.160 across all of American in many ways. I don't think 0:20:17.160 --> 0:20:20.080 we yet understand, you know, Piterre, One thing I wanted 0:20:20.080 --> 0:20:21.840 to unpack a little bit you You had a great 0:20:21.840 --> 0:20:24.840 point in your email to us before the show about 0:20:25.040 --> 0:20:27.080 how you're watching gold and I just want to read 0:20:27.080 --> 0:20:28.399 a little bit of your email because I thought it 0:20:28.400 --> 0:20:30.320 was a good line. He said. Even with the recent 0:20:30.440 --> 0:20:33.000 rallying commodities, if you have found a reason to buy 0:20:33.040 --> 0:20:36.600 precious metals. It's the buick in a sea of e vs. 0:20:36.880 --> 0:20:39.399 Which I took my hat. That's a good line, But 0:20:39.440 --> 0:20:41.880 I wonder what's going on there. I mean, obviously crypto 0:20:42.040 --> 0:20:46.400 has been pitched as sort of digital gold. Um, it's 0:20:46.400 --> 0:20:50.600 debatable whether it plays the same sort of role as 0:20:50.680 --> 0:20:53.040 gold would in a portfolio, but I do think a 0:20:53.119 --> 0:20:55.280 lot of people are subscribing to that idea. Is that 0:20:55.680 --> 0:20:57.280 is that part of what's going on with gold, do 0:20:57.320 --> 0:20:59.840 you think? Or is it? Is it something else? Yeah, 0:21:00.040 --> 0:21:02.159 And just to be clear to listeners, I am not 0:21:02.240 --> 0:21:04.800 a goldbug. I am not a you know, I'm a 0:21:04.840 --> 0:21:09.840 pretty agnostic observer of things. And and what's been so 0:21:10.200 --> 0:21:13.760 startling to me is that you look at the commodity space, 0:21:14.320 --> 0:21:17.159 and you know, from from lumber to oil to iron 0:21:17.240 --> 0:21:21.680 arts and you you name it, those commodity prices have exploded. 0:21:21.760 --> 0:21:25.639 So this is this is a a product, an investment 0:21:25.640 --> 0:21:29.760 that has been left out of every every mania we've 0:21:29.800 --> 0:21:35.120 seen in the last three or four years. And and 0:21:35.160 --> 0:21:40.240 we can attribute it to its old. It's stodgy, it's 0:21:40.280 --> 0:21:47.240 the antithesis of cool. And until it reacts, people don't 0:21:47.240 --> 0:21:49.520 know what to make of it. And and It's been 0:21:49.560 --> 0:21:52.600 a fascinating thing to watch because we've had this enormous 0:21:52.680 --> 0:21:56.359 multi year coil in gold. You know, I don't know 0:21:56.400 --> 0:21:59.000 if it will resolve up or down, but what I've 0:21:59.400 --> 0:22:03.520 learned avior release coils are like an enormous tug of 0:22:03.560 --> 0:22:09.639 war where energy is expanded in vast amounts between the 0:22:09.680 --> 0:22:12.840 bulls and the bears until one side finally let slots. 0:22:13.560 --> 0:22:15.840 And so, as I said, I don't know which direction 0:22:15.880 --> 0:22:18.800 it's going to be, but gold is going to give 0:22:18.920 --> 0:22:21.840 us some science as to what is happening. As far 0:22:21.880 --> 0:22:39.359 as sentiment, Peter, I wanted to quickly also go back to, 0:22:39.680 --> 0:22:41.320 you know, a point you made that this could be 0:22:41.400 --> 0:22:44.439 like the nineteen seventies and we might see, you know, 0:22:44.840 --> 0:22:48.000 stock and bond prices peak at the same time. And 0:22:48.040 --> 0:22:50.199 I have to admit I wasn't close to alive in 0:22:50.200 --> 0:22:52.840 the nineteen seventies, so I'd love to hear you know, 0:22:52.920 --> 0:22:56.720 where was the hiding place? Then what was the haven asset? Then? 0:22:57.520 --> 0:23:03.280 So the haven asset was gold, behaving asset were real assets, 0:23:03.960 --> 0:23:08.120 and I think that's real assets. I think of as 0:23:08.160 --> 0:23:12.680 a as a counter point to all of the abstraction 0:23:13.359 --> 0:23:18.520 that we have. So eagerly embraced in this cycle. And 0:23:18.520 --> 0:23:22.600 and that abstraction is in many ways a mirror of 0:23:22.680 --> 0:23:25.879 the kinds of abstractions we saw in the in the 0:23:26.000 --> 0:23:30.040 nineteen sixties. You know, we've got space again, We've got 0:23:30.359 --> 0:23:33.360 you know, in this case, it's social media, not television, 0:23:33.480 --> 0:23:37.439 and and you know, the internet, not you know, telephone. 0:23:38.000 --> 0:23:43.640 But there's a clear series of behavioral parallels leading up 0:23:43.680 --> 0:23:48.280 to what's happening now that we saw in the nineteen sixties. 0:23:48.320 --> 0:23:51.600 And and you know, again not surprising to see the 0:23:51.680 --> 0:23:56.159