1 00:00:12,880 --> 00:00:16,040 Speaker 1: Hello, and welcome to What Shows Up at Bloomberg Weekly 2 00:00:16,079 --> 00:00:20,000 Speaker 1: Market Podcast. I'm Sarah Ponzec, reporter on the Cross Asset 3 00:00:20,000 --> 00:00:22,479 Speaker 1: team and on Mike Reagan, a senior editor on the 4 00:00:22,520 --> 00:00:25,080 Speaker 1: Markets team. This week on the show, it was certainly 5 00:00:25,120 --> 00:00:28,479 Speaker 1: one for the record books. As the coronavirus continued to 6 00:00:28,520 --> 00:00:31,840 Speaker 1: spread around the globe, Treasury yields plunged to all time lows, 7 00:00:31,880 --> 00:00:35,760 Speaker 1: the tenure below one point three for the first time ever, 8 00:00:36,240 --> 00:00:38,879 Speaker 1: and by one measure, stock volatility surpassed that of the 9 00:00:38,920 --> 00:00:42,720 Speaker 1: fourth quarter route in with the SMP five falling into 10 00:00:42,760 --> 00:00:47,600 Speaker 1: a ten correction, and Sarah, I supposed, should we conclude 11 00:00:47,640 --> 00:00:49,800 Speaker 1: the episode with the craziest thing I saw in markets? 12 00:00:49,800 --> 00:00:52,320 Speaker 1: Should we continue that tradition? I think we should continue 13 00:00:52,360 --> 00:00:55,440 Speaker 1: that tradition. Yeah, we have a couple of columns this week, 14 00:00:55,480 --> 00:00:58,040 Speaker 1: we have someone who waited on Twitter, so we have 15 00:00:58,080 --> 00:01:00,240 Speaker 1: a lot a lot to go around. I boy up 16 00:01:00,240 --> 00:01:04,360 Speaker 1: stain this week it is, But you know, I kind 17 00:01:04,360 --> 00:01:07,480 Speaker 1: of feel like Michael Jordan's when he retired from basketball. 18 00:01:07,480 --> 00:01:09,119 Speaker 1: He just got he was so good and it's so 19 00:01:09,120 --> 00:01:11,000 Speaker 1: good at winning. You went every week. You might have 20 00:01:11,080 --> 00:01:14,080 Speaker 1: got four week off. Give the rest of us a 21 00:01:14,160 --> 00:01:16,240 Speaker 1: chance Yeah, he went and played baseball. I might go 22 00:01:16,319 --> 00:01:20,240 Speaker 1: switch to the rational sane market. Yeah, I don't know, Okay, yeah, 23 00:01:20,240 --> 00:01:22,600 Speaker 1: because that's so exciting that and also I totally blank. 24 00:01:22,640 --> 00:01:25,080 Speaker 1: I could not find I even contacted Vil Donna. Are 25 00:01:25,120 --> 00:01:27,440 Speaker 1: are crazy in a week like this. I'm shocked that 26 00:01:27,600 --> 00:01:30,520 Speaker 1: you blanked and you couldn't find something that really Uh 27 00:01:30,680 --> 00:01:33,480 Speaker 1: says a lot about how good you're actually are at 28 00:01:33,520 --> 00:01:36,639 Speaker 1: finding crazy every Sorry it's crazy this week. Yeah. Luckily 29 00:01:36,680 --> 00:01:39,080 Speaker 1: today we have some great guests here with us to 30 00:01:39,120 --> 00:01:41,800 Speaker 1: help make sense of all of it. Yeah. Absolutely, joining 31 00:01:41,880 --> 00:01:44,440 Speaker 1: us for the first time. We're very excited to have her. 32 00:01:44,480 --> 00:01:47,920 Speaker 1: She is the chief fixed income strategist at Charles Schwab. 33 00:01:48,120 --> 00:01:50,480 Speaker 1: Cathy Shones, Welcome to the show. Thanks for having me 34 00:01:50,960 --> 00:01:54,320 Speaker 1: and coming back to the show. A real favorite of 35 00:01:54,360 --> 00:01:56,920 Speaker 1: the what Goes Up fans out there. Uh, this guy 36 00:01:56,960 --> 00:01:59,560 Speaker 1: actually has his own fan club. It's not a club, 37 00:01:59,600 --> 00:02:03,880 Speaker 1: it's one person, that's one guy, but he's very vocal. 38 00:02:03,920 --> 00:02:09,040 Speaker 1: So so Eli Panamey. If in fact, that is your 39 00:02:09,040 --> 00:02:11,799 Speaker 1: real name, and I'm pretty sure it's not your real name, Uh, 40 00:02:11,840 --> 00:02:14,680 Speaker 1: this one's for you. But this is Chris Nag, Executive 41 00:02:14,800 --> 00:02:17,760 Speaker 1: editor of Bloomberg News, he's going to tell us to 42 00:02:17,919 --> 00:02:20,840 Speaker 1: the decimal point when this stock market correction will end. 43 00:02:20,880 --> 00:02:23,480 Speaker 1: Isn't that correct? That We're going to reveal that later, 44 00:02:23,480 --> 00:02:25,800 Speaker 1: So stick around for that. But Cat, I wanted to 45 00:02:25,840 --> 00:02:28,080 Speaker 1: start with you. I know, this is the type of 46 00:02:28,120 --> 00:02:32,960 Speaker 1: week where I my heart goes out to strategists who, uh, 47 00:02:33,000 --> 00:02:35,880 Speaker 1: the ink is barely dry on your year head forecast, 48 00:02:36,120 --> 00:02:42,799 Speaker 1: and BOYD does everything change quick? Right? Yeah? I hate 49 00:02:42,840 --> 00:02:44,640 Speaker 1: to bring it up, but I want to give you 50 00:02:44,680 --> 00:02:46,960 Speaker 1: credit for one thing that was in your original forecast 51 00:02:47,040 --> 00:02:49,760 Speaker 1: that I find very interesting, and that was you were 52 00:02:49,919 --> 00:02:54,840 Speaker 1: underweight how you'll debt junk bonds basically, and uh because 53 00:02:55,880 --> 00:02:58,640 Speaker 1: do you foury in that particular as a class I 54 00:02:58,680 --> 00:03:02,760 Speaker 1: think was eye popping, uh, leading into this coronavirus episodes. 55 00:03:02,800 --> 00:03:05,520 Speaker 1: I mean razor thin spreads. Um, yes, there were some 56 00:03:05,560 --> 00:03:09,240 Speaker 1: green shoots in the economy, but it just seemed it seemed, uh, 57 00:03:09,280 --> 00:03:10,880 Speaker 1: you know, to you for it to be to be 58 00:03:10,919 --> 00:03:13,560 Speaker 1: really good, too good to be true. So I'm just wondering, 59 00:03:13,600 --> 00:03:15,040 Speaker 1: you know, if we could start with that sort of 60 00:03:15,040 --> 00:03:17,960 Speaker 1: notion that high yield. I feel like it's time to 61 00:03:18,000 --> 00:03:21,080 Speaker 1: really worry about high yield. Looking at the spreads on 62 00:03:21,120 --> 00:03:23,840 Speaker 1: the Bloomberg Barkley's Index. I think they were like three 63 00:03:24,080 --> 00:03:27,919 Speaker 1: forty basis points a week ago up to and that 64 00:03:28,040 --> 00:03:32,679 Speaker 1: sort of rapid widening of spreads is pretty alarming. How 65 00:03:32,760 --> 00:03:36,640 Speaker 1: far does it go? I mean, is this um economic 66 00:03:36,720 --> 00:03:39,160 Speaker 1: damage from this virus enough to start worrying about sort 67 00:03:39,160 --> 00:03:42,920 Speaker 1: of defaults and and massive downgrades and that sort of thing. Well, 68 00:03:42,960 --> 00:03:47,120 Speaker 1: we were worried before this happened, partly because the economy 69 00:03:47,360 --> 00:03:50,400 Speaker 1: was already showing signs of slowing down a bit, and 70 00:03:50,440 --> 00:03:52,960 Speaker 1: the spreads were so tight that there was no margin 71 00:03:53,120 --> 00:03:55,560 Speaker 1: for air. And that was the reason for our underweight 72 00:03:55,640 --> 00:03:59,880 Speaker 1: you know, why why buy those bonds and get so 73 00:04:00,040 --> 00:04:03,120 Speaker 1: little yield and take so much risk um And our 74 00:04:03,200 --> 00:04:07,160 Speaker 1: concerns really centered around a couple of industries, energy being one, 75 00:04:07,560 --> 00:04:10,320 Speaker 1: which has been in sort of a secular decline now, 76 00:04:10,840 --> 00:04:15,000 Speaker 1: and also the corporate profits were not rising. We look 77 00:04:15,040 --> 00:04:20,240 Speaker 1: at the actual corporate profits, not the ones that the 78 00:04:20,279 --> 00:04:23,640 Speaker 1: management likes to talk about, So we actually look at 79 00:04:23,680 --> 00:04:27,880 Speaker 1: the real ones, like the items left in yeah, exactly, 80 00:04:28,080 --> 00:04:31,800 Speaker 1: and those have been sort of deteriorating for quite some time, 81 00:04:32,360 --> 00:04:35,560 Speaker 1: and corporate leverage going up at the same time. And 82 00:04:35,600 --> 00:04:38,719 Speaker 1: then when you look at the asset class. You look 83 00:04:38,720 --> 00:04:41,680 Speaker 1: at the loan part of the asset class, because most 84 00:04:41,680 --> 00:04:43,760 Speaker 1: of these issuers have not only how you bonds, they 85 00:04:43,760 --> 00:04:46,600 Speaker 1: have loans as well. And you look at the loans 86 00:04:46,600 --> 00:04:50,000 Speaker 1: and about seventy of the loans now are covenant light, 87 00:04:50,160 --> 00:04:54,720 Speaker 1: meaning there's not much protection for investors. So even before 88 00:04:54,880 --> 00:04:58,800 Speaker 1: this happened, the risk of rising defaults or problems with 89 00:04:58,880 --> 00:05:02,320 Speaker 1: refinancing if should we hit you know, a speed bump 90 00:05:02,640 --> 00:05:05,440 Speaker 1: was there. Obviously we didn't know this would be the 91 00:05:05,480 --> 00:05:08,120 Speaker 1: speed bump or where it would come from. But when 92 00:05:08,160 --> 00:05:12,280 Speaker 1: you're priced for beyond perfection, it just made sense to 93 00:05:12,320 --> 00:05:14,840 Speaker 1: us just stand back and say we don't want a 94 00:05:14,880 --> 00:05:17,360 Speaker 1: part of this until it's more attractive. So we've seen 95 00:05:17,440 --> 00:05:20,400 Speaker 1: high old spreads widening now at the widest level since August. 96 00:05:20,440 --> 00:05:22,520 Speaker 1: I believe also there have been many reports out this 97 00:05:22,560 --> 00:05:25,960 Speaker 1: week about bond offerings drying up in the United States 98 00:05:26,040 --> 00:05:30,200 Speaker 1: in Europe. Is that something we could potentially expect to 99 00:05:30,240 --> 00:05:33,680 Speaker 1: continue or to worsen, particularly if we do see this 100 00:05:33,760 --> 00:05:36,640 Speaker 1: virus spread around the globe, And it's really hard to 101 00:05:36,760 --> 00:05:39,680 Speaker 1: estimate exactly what the fallout is going to be. Yeah, absolutely, 102 00:05:39,680 --> 00:05:42,320 Speaker 1: I mean it's not unusual for high yield spreads to 103 00:05:42,320 --> 00:05:45,400 Speaker 1: to jump a couple of hundred base points pretty quickly 104 00:05:45,440 --> 00:05:49,640 Speaker 1: when things go south. Um, so currently at over they're 105 00:05:49,640 --> 00:05:51,799 Speaker 1: just back to the long term averages, right and even 106 00:05:51,880 --> 00:05:54,880 Speaker 1: like they're under value right now, So we could go 107 00:05:54,960 --> 00:05:57,720 Speaker 1: to five hundred or five fifty over. I mean this 108 00:05:57,839 --> 00:06:01,360 Speaker 1: is maybe now we made I to move from underweight 109 00:06:01,480 --> 00:06:05,040 Speaker 1: to at least neutral. We might start looking for attractive 110 00:06:05,040 --> 00:06:09,360 Speaker 1: opportunities where they exist. But with all the uncertainty about 111 00:06:09,440 --> 00:06:12,839 Speaker 1: the virus and what impact it will have, Um, it's 112 00:06:12,839 --> 00:06:15,120 Speaker 1: probably too early to jump in there with both feet 113 00:06:15,400 --> 00:06:18,320 Speaker 1: right and the on the flip side of that spread. Obviously, 114 00:06:18,360 --> 00:06:21,280 Speaker 1: the treasury yields are just as start mentioned. Uh what 115 00:06:21,400 --> 00:06:25,520 Speaker 1: are we blow? Are we blow on the tenure? I mean, 116 00:06:25,560 --> 00:06:29,880 Speaker 1: real yields are negative? Now? Um, how low can they go? 117 00:06:30,000 --> 00:06:34,479 Speaker 1: I mean we've heard people sort of uh prophesies about oh, 118 00:06:34,720 --> 00:06:37,760 Speaker 1: don't be surprised if we see negative yields in the US. 119 00:06:37,839 --> 00:06:41,400 Speaker 1: I mean, could we really uh contemplate such a it 120 00:06:41,480 --> 00:06:44,640 Speaker 1: could happen? Um in our view? You know, you you'd 121 00:06:44,680 --> 00:06:47,599 Speaker 1: probably have to have a situation where we were going 122 00:06:47,680 --> 00:06:51,200 Speaker 1: into a global recession and the FED was not keeping 123 00:06:51,279 --> 00:06:53,719 Speaker 1: up by lowering short term, they could go to zero 124 00:06:54,160 --> 00:06:57,320 Speaker 1: and maybe stay there, and in the worst case scenario, 125 00:06:57,440 --> 00:07:01,679 Speaker 1: you could see two five tenure yields go negative. That's 126 00:07:01,720 --> 00:07:06,400 Speaker 1: not a forecast, but it's not beyond comprehension, right, but 127 00:07:06,520 --> 00:07:09,000 Speaker 1: you'd still see the sort of the bill yields that 128 00:07:09,080 --> 00:07:11,840 Speaker 1: front end of the curve positive, you think. I think 129 00:07:11,960 --> 00:07:15,000 Speaker 1: the FED would really really like to not go to 130 00:07:15,120 --> 00:07:18,200 Speaker 1: negative rates because of the impact on the banking system 131 00:07:18,280 --> 00:07:22,560 Speaker 1: and just mechanically, you know, money market funds, and that 132 00:07:22,720 --> 00:07:26,080 Speaker 1: hasn't been entirely successful where it has been done. Now. 133 00:07:26,400 --> 00:07:29,480 Speaker 1: You might get some argument from European Central Bank on that, 134 00:07:29,560 --> 00:07:32,040 Speaker 1: but I think by and large are some question marks 135 00:07:32,080 --> 00:07:35,280 Speaker 1: as to whether it's really an effective strategy. Never say never. 136 00:07:35,400 --> 00:07:37,760 Speaker 1: I think they might if if we were really in 137 00:07:37,760 --> 00:07:41,840 Speaker 1: a deflationary environment. But um my bias is to say 138 00:07:41,880 --> 00:07:45,640 Speaker 1: that that's really kind of a small probability event. Stepping 139 00:07:45,680 --> 00:07:47,600 Speaker 1: back and taking a little bit of a wider view 140 00:07:47,960 --> 00:07:50,160 Speaker 1: when we're trying to figure out what the coronavirus might 141 00:07:50,200 --> 00:07:53,480 Speaker 1: actually mean for the global economy, be constantly here that 142 00:07:53,560 --> 00:07:56,800 Speaker 1: it's going to cause supply shocks. Also, it does now 143 00:07:56,880 --> 00:08:00,160 Speaker 1: appear that it will cause demand shocks as well, if 144 00:08:00,240 --> 00:08:03,320 Speaker 1: people can't get out of their houses or go to work. 145 00:08:03,720 --> 00:08:06,520 Speaker 1: I mean, in that scenario, sure many people can get 146 00:08:06,520 --> 00:08:09,080 Speaker 1: the ball market saying the ball market is screaming for 147 00:08:09,120 --> 00:08:11,760 Speaker 1: the FED to ease once again, I mean, what help 148 00:08:11,800 --> 00:08:14,920 Speaker 1: would that actually even do in this scenario. Yeah, and 149 00:08:15,080 --> 00:08:19,080 Speaker 1: I think it has pretty widely accepted that adding liquidity 150 00:08:19,080 --> 00:08:22,440 Speaker 1: in this environment probably isn't going to cure the cure 151 00:08:22,520 --> 00:08:25,360 Speaker 1: the disease, produce a vaccine, or make people go to 152 00:08:25,400 --> 00:08:29,640 Speaker 1: the movies or the grocery store. Having said that, though, um, 153 00:08:29,720 --> 00:08:32,959 Speaker 1: I think one thing it does is it's a signaling device, right. 154 00:08:33,040 --> 00:08:35,200 Speaker 1: It says, Okay, we're on it. It's sort of the 155 00:08:35,240 --> 00:08:38,000 Speaker 1: whatever it takes that we got out of draggy in Europe, 156 00:08:38,080 --> 00:08:41,840 Speaker 1: that we're going to provide support and liquidity. And if 157 00:08:41,880 --> 00:08:45,480 Speaker 1: financial conditions continue to tighten, which you know, the credit 158 00:08:45,559 --> 00:08:48,960 Speaker 1: spread story is part of that, they can loosen financial 159 00:08:48,960 --> 00:08:52,240 Speaker 1: conditions a bit by lowering rates and that can help 160 00:08:52,280 --> 00:08:55,120 Speaker 1: on the margin. But I think part of the hesitancy 161 00:08:55,160 --> 00:08:57,560 Speaker 1: we're hearing from FED officials is they know that there's 162 00:08:57,600 --> 00:08:59,960 Speaker 1: only limited impact they can have, and they don't want 163 00:09:00,120 --> 00:09:02,559 Speaker 1: use all their tools if this thing is going to 164 00:09:02,679 --> 00:09:06,800 Speaker 1: pass in six weeks or something. I wonder if quantitative 165 00:09:06,840 --> 00:09:09,280 Speaker 1: easing would sort of come back on the table before 166 00:09:09,480 --> 00:09:13,080 Speaker 1: even as your percent fed rate, you know, especially aimed 167 00:09:13,080 --> 00:09:14,760 Speaker 1: at the corporate market. You know, if we do see 168 00:09:14,760 --> 00:09:18,280 Speaker 1: that deterioration, I suppose that's a possibility as well. I 169 00:09:18,280 --> 00:09:22,439 Speaker 1: think they probably are discussing right now what what possible 170 00:09:22,520 --> 00:09:26,440 Speaker 1: tools they could use. UM, it's pretty obvious from public 171 00:09:26,480 --> 00:09:29,720 Speaker 1: statements that as of at least yesterday they did not 172 00:09:29,920 --> 00:09:32,920 Speaker 1: have a quorum for even a rate cut, because there's 173 00:09:33,160 --> 00:09:35,400 Speaker 1: a number of officials coming out and saying, oh, it's 174 00:09:35,440 --> 00:09:38,320 Speaker 1: too early to tell. So I think before they start 175 00:09:38,360 --> 00:09:40,960 Speaker 1: signaling any change in policy, they need to get everybody 176 00:09:41,040 --> 00:09:43,160 Speaker 1: on board as to what they want to do and 177 00:09:43,280 --> 00:09:45,839 Speaker 1: what their reasoning is going to be. Chris, come on 178 00:09:45,920 --> 00:09:48,120 Speaker 1: in here, because full disclosure, we record as a Thursday, 179 00:09:48,160 --> 00:09:49,760 Speaker 1: and as of right now, the SMPS on track for 180 00:09:49,760 --> 00:09:52,000 Speaker 1: its worst week since two and granted that we can 181 00:09:52,000 --> 00:09:54,800 Speaker 1: do thousan eight was much worse, but still that says 182 00:09:54,840 --> 00:09:58,520 Speaker 1: something about the velocity of what we've seen. Why is 183 00:09:58,559 --> 00:10:01,080 Speaker 1: it do you think that we are seeing such this 184 00:10:01,240 --> 00:10:04,800 Speaker 1: dramatic and fast downturn. A couple of things come to mind. 185 00:10:04,840 --> 00:10:07,160 Speaker 1: One is it's exactly what we're discussing right now that 186 00:10:07,200 --> 00:10:09,480 Speaker 1: it's not clear that the FED, as it has every 187 00:10:09,480 --> 00:10:11,679 Speaker 1: other time something like this has happened for the last 188 00:10:12,160 --> 00:10:14,840 Speaker 1: x amount of yours, has some has some blueprint for 189 00:10:14,840 --> 00:10:17,160 Speaker 1: for reversing anything. It really is not in the business 190 00:10:17,160 --> 00:10:22,680 Speaker 1: of curing new viruses, to put it mildly. And the 191 00:10:22,720 --> 00:10:24,280 Speaker 1: other thing I think you have to look at in 192 00:10:24,320 --> 00:10:28,480 Speaker 1: the stock market is the slope downward somewhat reflects the 193 00:10:28,480 --> 00:10:32,040 Speaker 1: slope up where we had an enormous orgy of bullishness 194 00:10:32,520 --> 00:10:36,000 Speaker 1: over the previous four or five months. You uh look 195 00:10:36,040 --> 00:10:39,680 Speaker 1: at tech stocks basically parabolic rise rises. You had a 196 00:10:39,679 --> 00:10:44,120 Speaker 1: lot of um individual investors jumping into the market. Just 197 00:10:44,200 --> 00:10:46,960 Speaker 1: comes right after all of the brokerage is cut their 198 00:10:47,320 --> 00:10:50,040 Speaker 1: cut their commission rates to zero. A lot of hedge 199 00:10:50,040 --> 00:10:53,840 Speaker 1: funds get in it. And part of any reversal like 200 00:10:53,920 --> 00:10:56,240 Speaker 1: this is going to be what it's reversing. And it's 201 00:10:56,280 --> 00:11:00,120 Speaker 1: reversing basically a steep rally, and it's coming one right 202 00:11:00,120 --> 00:11:05,280 Speaker 1: after another, and it looks becauses it to look very bad. Sorry, 203 00:11:04,679 --> 00:11:08,120 Speaker 1: I gotta I'm gonna talk with Eli after this. I'm 204 00:11:08,160 --> 00:11:10,160 Speaker 1: gonna I'm gonna wait for that to somehow up here 205 00:11:10,160 --> 00:11:13,800 Speaker 1: in one of the stories that go out, what's going 206 00:11:13,840 --> 00:11:15,720 Speaker 1: to be yours? Now? That would be a good head on, 207 00:11:16,080 --> 00:11:18,520 Speaker 1: But you know, uh, say the FED. I mean, and 208 00:11:18,640 --> 00:11:20,800 Speaker 1: you look at the futures market, FED fund futures, they're 209 00:11:20,840 --> 00:11:22,760 Speaker 1: pricing what two or three rate cuts by the end 210 00:11:22,800 --> 00:11:26,120 Speaker 1: of the year already. Um, it doesn't seem to a 211 00:11:26,120 --> 00:11:28,160 Speaker 1: matter of the stock market. I mean, would that signal 212 00:11:28,200 --> 00:11:31,400 Speaker 1: from the FED, if if whoever sup next on the 213 00:11:31,400 --> 00:11:34,480 Speaker 1: FED speaking circuits, you know, pretty much signal that rates coming. 214 00:11:34,679 --> 00:11:36,200 Speaker 1: I mean, who knows if that would work in right 215 00:11:36,280 --> 00:11:38,240 Speaker 1: on one thing, I would say we mentioned QUWI, and 216 00:11:38,320 --> 00:11:40,559 Speaker 1: in the minds of a lot of stock investors that 217 00:11:40,640 --> 00:11:43,959 Speaker 1: are not necessarily most expensive minds in the world, QUI 218 00:11:44,160 --> 00:11:46,560 Speaker 1: has been going on for the last five months that 219 00:11:46,640 --> 00:11:51,200 Speaker 1: they're can They're they're convinced that the I are just 220 00:11:53,800 --> 00:11:57,120 Speaker 1: which I get. But at a psychological level, again, we're 221 00:11:57,160 --> 00:11:59,520 Speaker 1: not talking about necessarily the brightest bulbs in the tree. 222 00:11:59,559 --> 00:12:02,000 Speaker 1: They really the idea that the FED has been doing 223 00:12:02,040 --> 00:12:05,520 Speaker 1: something to stimulate the economy through its repo actions is 224 00:12:05,600 --> 00:12:07,920 Speaker 1: pretty much lodged in. So you have a bunch of 225 00:12:07,920 --> 00:12:10,600 Speaker 1: people who are like, wait, what happened to all of 226 00:12:10,640 --> 00:12:12,720 Speaker 1: all of that stimulus we thought we were getting. So 227 00:12:13,040 --> 00:12:14,640 Speaker 1: in a way, it kind of it's kind of a 228 00:12:14,640 --> 00:12:16,600 Speaker 1: little bit of a laboratory for whether or not stimulus 229 00:12:16,640 --> 00:12:19,080 Speaker 1: would work. I think in my nursing home there there's 230 00:12:19,160 --> 00:12:22,120 Speaker 1: debate over whether the repo actions were Kui will will 231 00:12:22,160 --> 00:12:26,360 Speaker 1: be raging on forever, And I gotta say, I'm I'm 232 00:12:26,440 --> 00:12:28,520 Speaker 1: kind of one of those those dumb stock guys where 233 00:12:28,520 --> 00:12:31,839 Speaker 1: I get it. It's not the same as Kuwi, But Kathy, 234 00:12:32,320 --> 00:12:34,200 Speaker 1: they're gonna have to keep up with this, with these 235 00:12:34,200 --> 00:12:37,160 Speaker 1: repo actions longer than they expected, I think, now right, 236 00:12:37,200 --> 00:12:41,360 Speaker 1: I mean, and you know, basically what they're doing in 237 00:12:41,400 --> 00:12:44,720 Speaker 1: the repo market, you know, intentional or not, it's bringing 238 00:12:44,800 --> 00:12:48,679 Speaker 1: those money market rates, you know, lower than inflation, turning 239 00:12:48,679 --> 00:12:52,679 Speaker 1: them negative on a on a real basis. Usually what 240 00:12:52,720 --> 00:12:55,600 Speaker 1: they're doing is keeping the Fed Funds rate in the 241 00:12:55,679 --> 00:13:00,400 Speaker 1: corridor that they established, So um the is in the 242 00:13:00,440 --> 00:13:04,880 Speaker 1: balance sheet at the short end is really not stimulus 243 00:13:04,920 --> 00:13:09,839 Speaker 1: to the economy, is not quee. It's simply to manage 244 00:13:10,000 --> 00:13:13,480 Speaker 1: the Fed Funds rate in the area that they want 245 00:13:13,520 --> 00:13:17,960 Speaker 1: to keep it in. So the misinterpretation of that was 246 00:13:18,040 --> 00:13:21,560 Speaker 1: pretty widespread. The one thing I will say is when 247 00:13:21,600 --> 00:13:25,160 Speaker 1: they did quee, a couple of things happened. Long term 248 00:13:25,240 --> 00:13:29,160 Speaker 1: rates went up because it built up inflation expectation. That 249 00:13:29,200 --> 00:13:32,520 Speaker 1: didn't happen this time. And secondly, they told us they 250 00:13:32,559 --> 00:13:35,800 Speaker 1: were doing que They were it's a signaling thing, and 251 00:13:35,840 --> 00:13:38,280 Speaker 1: they were trying to get people to be you know, 252 00:13:38,440 --> 00:13:41,560 Speaker 1: bullish and and risk taking. And this time they said, 253 00:13:41,640 --> 00:13:43,800 Speaker 1: now we're just trying to keep the FED funds rate 254 00:13:43,840 --> 00:13:46,520 Speaker 1: in a range, and it's all plumbing. And the market 255 00:13:46,840 --> 00:13:49,319 Speaker 1: ran with the story that they like. But we'll say 256 00:13:49,640 --> 00:13:52,360 Speaker 1: a few emails landed in my inbox this week pointing 257 00:13:52,400 --> 00:13:54,800 Speaker 1: to the fact that, yeah, this is a horrible week 258 00:13:54,800 --> 00:13:56,680 Speaker 1: in the stock market, but if you look at the 259 00:13:56,760 --> 00:14:00,120 Speaker 1: level of the Fed's balance sheet hasn't been increasing as 260 00:14:00,160 --> 00:14:02,800 Speaker 1: quickly as possible. And now Cathy is plowing her eyes. 261 00:14:03,080 --> 00:14:05,640 Speaker 1: But you know, I'm looking at it from that sort 262 00:14:05,679 --> 00:14:09,360 Speaker 1: of lizard brain stock market guy, right. I mean, you 263 00:14:09,400 --> 00:14:13,240 Speaker 1: had you had cash interest rates money market mutual funds 264 00:14:13,240 --> 00:14:15,960 Speaker 1: at about two and a quarter above the rate of inflation. 265 00:14:16,040 --> 00:14:17,480 Speaker 1: You bring them back down, so I don't know what 266 00:14:17,520 --> 00:14:19,520 Speaker 1: they're right now, one and a half or so. I mean, 267 00:14:19,560 --> 00:14:21,840 Speaker 1: and maybe not be similar to the economy. I feel 268 00:14:21,840 --> 00:14:24,000 Speaker 1: like it is stimulative to the stock market to some degree. 269 00:14:24,040 --> 00:14:27,120 Speaker 1: You see that those balances, Uh you know, I see 270 00:14:27,160 --> 00:14:29,400 Speaker 1: I keeps a running tally of money market bounces that 271 00:14:29,440 --> 00:14:32,240 Speaker 1: had been going up and up, and it kind of plateaued. Um. 272 00:14:32,440 --> 00:14:37,520 Speaker 1: So can they still sort of unwind these repo operations 273 00:14:37,560 --> 00:14:39,720 Speaker 1: like they had planned in the spring. Oh, you know, 274 00:14:39,840 --> 00:14:42,560 Speaker 1: I think so. Um. I think they want to keep 275 00:14:42,600 --> 00:14:47,000 Speaker 1: it going through tax time. But we heard Jamie Diamond 276 00:14:47,040 --> 00:14:50,120 Speaker 1: come out and say that the his bank will now 277 00:14:50,280 --> 00:14:52,920 Speaker 1: use the discount window, which is one of the reasons 278 00:14:53,000 --> 00:14:56,440 Speaker 1: that things were, um not working properly, is because they 279 00:14:56,480 --> 00:14:59,280 Speaker 1: were reluctant to use the discount window because the stigma 280 00:14:59,320 --> 00:15:02,400 Speaker 1: attached to it after the financial crisis. So if he's 281 00:15:02,480 --> 00:15:06,200 Speaker 1: reversing that policy, there'll be less need for them to 282 00:15:06,240 --> 00:15:09,240 Speaker 1: inject liquidity. I'm thinking back to two thousand eighteen and 283 00:15:09,320 --> 00:15:12,800 Speaker 1: imagining JP Morgan staying we're gonna tap the discount window 284 00:15:12,920 --> 00:15:16,440 Speaker 1: to alleviate the stigma. Stigma, and Bear Sterns going, yeah, 285 00:15:16,560 --> 00:15:21,440 Speaker 1: us too, We're gonna do it to alleviate the stigma. Yeah, 286 00:15:21,600 --> 00:15:23,720 Speaker 1: thinking back to when Jamie Diamond said we could see 287 00:15:23,720 --> 00:15:29,240 Speaker 1: four percent on the tenure now we're talking about I 288 00:15:29,240 --> 00:15:31,080 Speaker 1: also want to get your take because if we look 289 00:15:31,080 --> 00:15:33,720 Speaker 1: at the curve, we're seeing an interesting divergence, whereas if 290 00:15:33,760 --> 00:15:36,480 Speaker 1: you look at the spread between three month tenure yields 291 00:15:36,720 --> 00:15:39,560 Speaker 1: now pretty deeply inverted once again, and in a way 292 00:15:39,560 --> 00:15:43,360 Speaker 1: we've seen a re steepening in two's tens. What what 293 00:15:43,520 --> 00:15:45,440 Speaker 1: is the message here if you can actually take away 294 00:15:45,440 --> 00:15:48,440 Speaker 1: any coherent message at this point from the curve. Yeah, 295 00:15:48,480 --> 00:15:51,000 Speaker 1: I think there is a question of what's what's actually 296 00:15:51,040 --> 00:15:53,480 Speaker 1: being signal and what's sort of a consequence of all 297 00:15:53,560 --> 00:15:57,160 Speaker 1: the various things going on. Um, the three months ten year, 298 00:15:57,240 --> 00:15:59,880 Speaker 1: I think is telling you that the market thinks the 299 00:16:00,040 --> 00:16:02,600 Speaker 1: fat is too tight, and the market expects the fad 300 00:16:02,640 --> 00:16:06,360 Speaker 1: to cut rates, and we've had an interpretation at the 301 00:16:06,400 --> 00:16:08,080 Speaker 1: long end of the curve that this is a deeply 302 00:16:08,200 --> 00:16:12,720 Speaker 1: deflationary event. Now, sometimes supply shocks are traditionally supposed to 303 00:16:12,720 --> 00:16:15,680 Speaker 1: be inflationary, but I think, um, the assumption is this, 304 00:16:15,760 --> 00:16:18,720 Speaker 1: suppose supply and demand and you're seeing crude oil prices 305 00:16:18,800 --> 00:16:21,680 Speaker 1: crash and other commodity prices go down, and the assumption 306 00:16:21,760 --> 00:16:24,240 Speaker 1: is that demand is going to shrink as well. So 307 00:16:24,320 --> 00:16:28,400 Speaker 1: it's been very deflationary and that's pulled down long term rates. 308 00:16:28,440 --> 00:16:32,560 Speaker 1: The belly of the curve, which had been actually inverted, 309 00:16:33,200 --> 00:16:35,120 Speaker 1: is just kind of lagging behind now. So I'm not 310 00:16:35,480 --> 00:16:38,240 Speaker 1: I'm not using the two stan as a great signal 311 00:16:38,320 --> 00:16:42,240 Speaker 1: from here. I wonder what weight and CPI cruise ship 312 00:16:42,280 --> 00:16:49,600 Speaker 1: pricing has in a yeah, but uh, one thing A 313 00:16:49,680 --> 00:16:53,000 Speaker 1: story I helped that on the bonds team before this 314 00:16:53,080 --> 00:16:57,840 Speaker 1: real risk off episode started, was basically about how thin 315 00:16:58,000 --> 00:16:59,840 Speaker 1: like we were talking about how thin spreads were. Ye, 316 00:17:00,040 --> 00:17:04,159 Speaker 1: not just in corporates, in in munies. Everywhere you look 317 00:17:04,160 --> 00:17:07,800 Speaker 1: you have Greek tenure yields below one percent, Italian tenure 318 00:17:07,880 --> 00:17:10,200 Speaker 1: yields below one percent, and you know, the spread to 319 00:17:10,440 --> 00:17:13,159 Speaker 1: German buns pretty much the lowest they had been in 320 00:17:13,520 --> 00:17:16,800 Speaker 1: the past decade or so. And back for America, their 321 00:17:17,080 --> 00:17:20,520 Speaker 1: weekly fund manager survey came out and I forgot. I 322 00:17:20,520 --> 00:17:23,480 Speaker 1: think it was like the second biggest risk that people 323 00:17:23,720 --> 00:17:29,119 Speaker 1: saw was quote unquote the bond bubble popping um. Obviously 324 00:17:29,560 --> 00:17:31,760 Speaker 1: we've got other risks to worry about now, but I mean, 325 00:17:32,520 --> 00:17:35,360 Speaker 1: do you believe there was a bond bubble? And if so, 326 00:17:35,520 --> 00:17:38,080 Speaker 1: I mean, how do you explain and even if you 327 00:17:38,080 --> 00:17:40,240 Speaker 1: don't think it's a bubble, how do how does one 328 00:17:40,720 --> 00:17:45,120 Speaker 1: think about why there was so much money coming into 329 00:17:45,119 --> 00:17:48,400 Speaker 1: the bond market when the stock market was also doing well. 330 00:17:48,760 --> 00:17:50,760 Speaker 1: I mean, it just is it as simple as they're 331 00:17:50,760 --> 00:17:53,400 Speaker 1: just being this savings glued around the world, this sort 332 00:17:53,400 --> 00:17:56,880 Speaker 1: of record long economic expansion and just too much investor 333 00:17:56,920 --> 00:18:00,439 Speaker 1: capital looking for places ago. I think that that's the 334 00:18:00,480 --> 00:18:03,479 Speaker 1: main thing that's going on. I mean, I've been asked 335 00:18:03,520 --> 00:18:09,680 Speaker 1: about the bond bubble literally since and and someday all 336 00:18:09,720 --> 00:18:13,600 Speaker 1: those people predicting it will be right, yeah exactly if 337 00:18:13,600 --> 00:18:19,080 Speaker 1: they're still alive, Yes, exactly. But you have the secular trends, right, 338 00:18:19,359 --> 00:18:23,840 Speaker 1: the aging demographics around the world, and um, the savings 339 00:18:23,840 --> 00:18:29,080 Speaker 1: glut and decline in inflation inflation expectations, So that's that's 340 00:18:29,080 --> 00:18:32,000 Speaker 1: a bit. You have an overhang of debt, which actually 341 00:18:32,040 --> 00:18:35,399 Speaker 1: depresses economic activity to some extent, and then you have 342 00:18:35,480 --> 00:18:39,399 Speaker 1: this tremendous demand for yield, I mean just incredible um 343 00:18:39,440 --> 00:18:43,320 Speaker 1: demand for yield from pension funds, insurance companies, you know, 344 00:18:43,400 --> 00:18:47,679 Speaker 1: you name it, individual investors, and it's almost like you 345 00:18:47,800 --> 00:18:51,040 Speaker 1: get so low that people have to buy more just 346 00:18:51,160 --> 00:18:54,840 Speaker 1: to get the income that they need. And so UM, 347 00:18:54,880 --> 00:18:57,960 Speaker 1: I think that those are the main drivers. And the 348 00:18:58,000 --> 00:19:01,080 Speaker 1: expectation that the central banks will not be able to 349 00:19:01,160 --> 00:19:04,040 Speaker 1: raise rates anytime soon. Well that I do want to 350 00:19:04,040 --> 00:19:05,720 Speaker 1: bring it back to the stock market because in a 351 00:19:05,720 --> 00:19:08,000 Speaker 1: way there is a bright side to the sell off, 352 00:19:08,080 --> 00:19:13,400 Speaker 1: and that being maybe the normalization of valuations. So now 353 00:19:13,440 --> 00:19:16,879 Speaker 1: the SMP trading around it's average over the last five years. 354 00:19:16,880 --> 00:19:19,040 Speaker 1: But isn't there a sense that we're going to have 355 00:19:19,119 --> 00:19:21,479 Speaker 1: to see the e and earnings estimates come into I mean, 356 00:19:21,480 --> 00:19:23,919 Speaker 1: we've already heard from a good amount of companies, but 357 00:19:23,960 --> 00:19:26,320 Speaker 1: shouldn't that list only grow? Yeah, you're talking about the 358 00:19:26,359 --> 00:19:31,080 Speaker 1: valuation versus forward estimates. Estimates, Um, they do look much. 359 00:19:31,440 --> 00:19:34,879 Speaker 1: We're talking Thursday. On Thursday, which was the scene of 360 00:19:34,960 --> 00:19:38,280 Speaker 1: one of the more harrowing selloffs of the last ten years. 361 00:19:38,320 --> 00:19:41,480 Speaker 1: This morning and they got down to sub seventeen, which 362 00:19:41,560 --> 00:19:46,000 Speaker 1: you're right, is about average. Certainly, you lose the easy 363 00:19:46,080 --> 00:19:49,679 Speaker 1: criticism the markets over valued when that's true. But exactly 364 00:19:50,080 --> 00:19:52,600 Speaker 1: those earnings estimates have to come true, and the whole 365 00:19:52,640 --> 00:19:55,359 Speaker 1: point of the sell off is that they probably won't 366 00:19:55,440 --> 00:19:57,520 Speaker 1: as a result of devirus into the degree that they won't, 367 00:19:57,760 --> 00:20:00,560 Speaker 1: that's what everyone's in the stock market who thinking about 368 00:20:00,560 --> 00:20:02,520 Speaker 1: such things as trying to figure out like what is 369 00:20:03,200 --> 00:20:07,439 Speaker 1: snarrowing supply chains and dimming consumer markets? What does that 370 00:20:07,520 --> 00:20:11,880 Speaker 1: do to that estimate? If the estimate falls at all, 371 00:20:12,200 --> 00:20:15,679 Speaker 1: then things start to look expensive again. Yeah, it's to be. 372 00:20:15,840 --> 00:20:18,080 Speaker 1: And I hate to make the two thousand and eight comparison, 373 00:20:18,119 --> 00:20:19,800 Speaker 1: even though I guess we are in the worst week 374 00:20:19,840 --> 00:20:23,040 Speaker 1: since two thousand April. To me that the kind of 375 00:20:23,040 --> 00:20:26,960 Speaker 1: eerie similarity is not just people cutting forecasts. Uh, not 376 00:20:27,160 --> 00:20:30,920 Speaker 1: companies cutting forecast, but literally just were withdrawing them and saying, 377 00:20:31,040 --> 00:20:34,240 Speaker 1: not getting another number, we can't replace this. Um. It's 378 00:20:34,280 --> 00:20:36,680 Speaker 1: almost like I forget which bank it was that came 379 00:20:36,680 --> 00:20:38,679 Speaker 1: out in two thousand and seven and said we just 380 00:20:38,720 --> 00:20:41,880 Speaker 1: simply can't price these mortgage bonds. Um. So is that 381 00:20:42,040 --> 00:20:46,639 Speaker 1: sort of information vacuum? Uh? Kind of the biggest worry 382 00:20:46,720 --> 00:20:49,160 Speaker 1: right now? I think it is. I mean, earnings estimate. 383 00:20:49,280 --> 00:20:51,560 Speaker 1: Estimating earnings even the best of times is a pretty 384 00:20:52,280 --> 00:20:56,080 Speaker 1: feudal endeavor. The Bloomberg column This a few years ago 385 00:20:56,119 --> 00:20:58,240 Speaker 1: pointed out that by far the best indicator of what 386 00:20:58,280 --> 00:21:01,120 Speaker 1: earnings will be next year, better than animal views, strategist views, 387 00:21:01,160 --> 00:21:03,960 Speaker 1: what companies say is what they are this year, it 388 00:21:04,000 --> 00:21:06,600 Speaker 1: comes much closer to being an accurate estimate of what 389 00:21:06,640 --> 00:21:09,480 Speaker 1: they are in subsequent years. I think the two thousand 390 00:21:09,480 --> 00:21:12,720 Speaker 1: and eight comparison, while a little bit extreme, is the 391 00:21:12,800 --> 00:21:16,199 Speaker 1: right one, because what happened in two thousand seven is 392 00:21:16,200 --> 00:21:19,240 Speaker 1: it It never really looked like valuations got out of control, 393 00:21:19,240 --> 00:21:23,000 Speaker 1: because no one really looks at valuations the year after 394 00:21:23,160 --> 00:21:26,600 Speaker 1: the earnings the earnings. UH stocks fell a ton in 395 00:21:26,640 --> 00:21:28,840 Speaker 1: two thousand and they never there never looked like any 396 00:21:28,920 --> 00:21:30,479 Speaker 1: kind of valuation. But but if you look at two 397 00:21:30,480 --> 00:21:33,960 Speaker 1: thousand seven prices versus two thousand eight earnings, which ends 398 00:21:34,040 --> 00:21:37,440 Speaker 1: up being the key comparison, stocks are priced like eighty times. 399 00:21:37,640 --> 00:21:40,399 Speaker 1: That's why more or s you had so often the 400 00:21:40,400 --> 00:21:54,520 Speaker 1: stock market. I'm not saying that's happening. I do wonder though, 401 00:21:55,080 --> 00:21:58,800 Speaker 1: sure we were due for a correction. The smps now 402 00:21:59,200 --> 00:22:02,160 Speaker 1: down more than ten percent. But at one point does 403 00:22:02,240 --> 00:22:05,280 Speaker 1: this actually start to affect confidence? And just get the 404 00:22:05,320 --> 00:22:07,480 Speaker 1: sense that if we do start to see this virus 405 00:22:07,560 --> 00:22:11,120 Speaker 1: spreading around the country and people are being a little 406 00:22:11,160 --> 00:22:14,560 Speaker 1: bit freaked out on that side, I mean, confidence seems 407 00:22:14,600 --> 00:22:17,320 Speaker 1: that it's more easily affected if you start to see 408 00:22:17,320 --> 00:22:19,600 Speaker 1: it coming through to the stock market too, because people 409 00:22:19,600 --> 00:22:23,880 Speaker 1: are already being affected themselves on a physical level. Yeah, 410 00:22:23,920 --> 00:22:27,199 Speaker 1: and I think that's one one way that this potentially 411 00:22:27,200 --> 00:22:30,440 Speaker 1: turns into a recession. Right. But people stay home, are 412 00:22:30,480 --> 00:22:34,320 Speaker 1: they're fearful of traveling, um or going about even their 413 00:22:34,400 --> 00:22:37,639 Speaker 1: daily business, and they cut back. Then you start to 414 00:22:37,680 --> 00:22:40,560 Speaker 1: get well, if you're not doing much business or layoffs 415 00:22:40,600 --> 00:22:44,080 Speaker 1: because there's no no demand, demand starts to shrink. You 416 00:22:44,160 --> 00:22:47,240 Speaker 1: lay people off, then their income shrinks, and that's how 417 00:22:47,280 --> 00:22:51,800 Speaker 1: it rolls into a recession. And that's the concern that um, 418 00:22:52,040 --> 00:22:54,840 Speaker 1: I think the FED would have and and the administration 419 00:22:54,840 --> 00:22:57,719 Speaker 1: would have right now, is you this this economy has 420 00:22:57,720 --> 00:23:00,760 Speaker 1: been driven by consumer spending. That's really what's held up. 421 00:23:00,880 --> 00:23:04,960 Speaker 1: Investment has been kind of sluggish, and uh, foreign demand 422 00:23:04,960 --> 00:23:07,640 Speaker 1: has been kind of sluggish. So we really need consumers 423 00:23:07,680 --> 00:23:10,680 Speaker 1: to keep spending to chuggle along at two percent or so. 424 00:23:11,160 --> 00:23:15,359 Speaker 1: And if this affects that, U, then the risk of 425 00:23:15,440 --> 00:23:17,879 Speaker 1: recession starts to really rise, right you know? And I 426 00:23:17,920 --> 00:23:20,439 Speaker 1: know whenever the monthly jobs numbers come out, I always 427 00:23:20,440 --> 00:23:23,000 Speaker 1: look to say, well, what was really leading the growth? 428 00:23:23,320 --> 00:23:27,960 Speaker 1: A lot of sort of restaurant jobs, retail health services. 429 00:23:28,280 --> 00:23:29,760 Speaker 1: I mean, I guess they're not gonna get it. They're 430 00:23:29,760 --> 00:23:33,200 Speaker 1: not going to get laid off. They may not want 431 00:23:33,200 --> 00:23:35,720 Speaker 1: to do the job anymore. True, good point, But those 432 00:23:35,760 --> 00:23:38,800 Speaker 1: retail restaurant jobs seem very vulnerable. They're the type of 433 00:23:39,080 --> 00:23:42,040 Speaker 1: jobs that get cut very quick when the tables are empty, 434 00:23:42,080 --> 00:23:44,119 Speaker 1: when the malls are empty. Um, I mean, could we 435 00:23:44,160 --> 00:23:46,760 Speaker 1: see these jobless claims? They surprised a little bit on 436 00:23:46,800 --> 00:23:50,040 Speaker 1: the upside this week? I think, Yeah, we have President's 437 00:23:50,119 --> 00:23:52,520 Speaker 1: Day in there, so it gets a little of the seasonality. 438 00:23:52,680 --> 00:23:55,280 Speaker 1: Might be a problem with actually assessing it, but if 439 00:23:55,280 --> 00:23:57,880 Speaker 1: we yeah, I mean we're watching jobless claims really carefully 440 00:23:57,880 --> 00:23:59,800 Speaker 1: because that will be a leading indicator, right is that 441 00:23:59,800 --> 00:24:01,359 Speaker 1: I'm I was gonna ask, is that the key stat 442 00:24:01,359 --> 00:24:03,520 Speaker 1: to watch? Yeah? And we've already seen in the Jolts 443 00:24:03,600 --> 00:24:07,680 Speaker 1: report new job openings rolling over, which means it's maybe 444 00:24:07,680 --> 00:24:10,159 Speaker 1: not as robust for the new job market as it 445 00:24:10,200 --> 00:24:12,359 Speaker 1: has been. And then if you start to see some 446 00:24:12,440 --> 00:24:15,680 Speaker 1: layoffs come through, then that's going to be concerning. There's 447 00:24:15,680 --> 00:24:19,119 Speaker 1: another secondary feedback loop that someone's got to mention, which 448 00:24:19,400 --> 00:24:24,119 Speaker 1: is that certain candidates political prospects. I think we can 449 00:24:24,119 --> 00:24:27,119 Speaker 1: say if we say, are potentially affected by the stock market, 450 00:24:27,440 --> 00:24:30,600 Speaker 1: the one that the market seems to like, the candidate 451 00:24:30,680 --> 00:24:35,160 Speaker 1: that the incumbent UH could could suffer if the market, 452 00:24:35,160 --> 00:24:37,040 Speaker 1: if we get a bear market, if you have to 453 00:24:37,040 --> 00:24:39,520 Speaker 1: face that fact, and that could in and of itself 454 00:24:39,600 --> 00:24:42,119 Speaker 1: make things worse. And the guy who's been talking about 455 00:24:42,520 --> 00:24:47,320 Speaker 1: universal healthcare his whole career. Is not that I'm expressing 456 00:24:47,320 --> 00:24:50,080 Speaker 1: any kind of political opinion. My fan club will point 457 00:24:50,119 --> 00:24:53,320 Speaker 1: out that I grew up in eastern Massachusetts, so assume 458 00:24:53,359 --> 00:24:57,680 Speaker 1: what you will. But the stock market, it's pretty safe 459 00:24:57,720 --> 00:25:00,800 Speaker 1: to say, likes the sitting guy, and to the extent 460 00:25:00,920 --> 00:25:04,560 Speaker 1: his prospects are besmirched by what's going on. And with that, 461 00:25:04,680 --> 00:25:07,280 Speaker 1: I will, of course say that Michael Bloomberg, who was 462 00:25:07,359 --> 00:25:11,400 Speaker 1: running for president, is the founder of Bloomberg LP, which 463 00:25:11,440 --> 00:25:14,800 Speaker 1: is the owner of Bloomberg News. And with that, I'll say, 464 00:25:14,880 --> 00:25:17,240 Speaker 1: that's all the politics we're gonna have. Fair enough, fair enough. 465 00:25:17,359 --> 00:25:18,919 Speaker 1: I think it's time for the crazy thing. Even if 466 00:25:18,960 --> 00:25:21,600 Speaker 1: you're gonna abstain, Mike, it's time for the craziest thing. 467 00:25:22,200 --> 00:25:25,520 Speaker 1: I am, I'm I am. You know it's like Jordan's retiring, right, Chris, 468 00:25:25,600 --> 00:25:27,520 Speaker 1: you get it. Chris gets it very much. So yeah, 469 00:25:27,560 --> 00:25:35,800 Speaker 1: I don't know. But oh, come on, let's my age 470 00:25:35,800 --> 00:25:38,440 Speaker 1: shaming you. Yeah you are. I'll stop that. I'll stop that. 471 00:25:39,040 --> 00:25:41,720 Speaker 1: Let's go to the hotline, Sarah, tell people about the hotline. 472 00:25:41,920 --> 00:25:44,159 Speaker 1: So remember you can always give us a call at 473 00:25:44,160 --> 00:25:46,720 Speaker 1: our very own Bloomberg Podcast hotline. That number is six 474 00:25:46,840 --> 00:25:50,439 Speaker 1: or six three two four three four nine zero. And 475 00:25:50,520 --> 00:25:52,439 Speaker 1: as you'll hear in a second, if you leave us 476 00:25:52,440 --> 00:25:55,200 Speaker 1: a message about the craziest things that you guys have heard, 477 00:25:55,240 --> 00:25:57,200 Speaker 1: or if you have any questions for us, feel free 478 00:25:57,200 --> 00:25:58,960 Speaker 1: to leave a message and we may even play it 479 00:25:58,960 --> 00:26:00,720 Speaker 1: on the show, just like this one. Now, Sarah, I 480 00:26:00,800 --> 00:26:03,000 Speaker 1: know some people listen to podcasts at like one and 481 00:26:03,000 --> 00:26:04,720 Speaker 1: a half speed or two speed. Can you get the 482 00:26:04,800 --> 00:26:07,560 Speaker 1: number again really slow, so so they can get six 483 00:26:07,960 --> 00:26:15,760 Speaker 1: four six three two four three four nine zero. I can't. 484 00:26:15,760 --> 00:26:18,920 Speaker 1: I can't do this. I would listen to podcasts slowed 485 00:26:18,920 --> 00:26:20,760 Speaker 1: down so everyone sounds drunk. I think that would be 486 00:26:21,920 --> 00:26:26,480 Speaker 1: that would make this one make more sense. Well, let's 487 00:26:26,480 --> 00:26:29,280 Speaker 1: go to the voicemails. I know we've got two of 488 00:26:29,440 --> 00:26:33,160 Speaker 1: our well established listeners. They've called us before. We're very 489 00:26:33,160 --> 00:26:35,720 Speaker 1: happy to hear them again. Uh, let's let's hear what 490 00:26:35,760 --> 00:26:38,320 Speaker 1: they have to say. Okay, this is where what goes up. 491 00:26:38,520 --> 00:26:42,160 Speaker 1: This is Twiggy Sunday, your favorite Twitter character. So here 492 00:26:42,160 --> 00:26:46,560 Speaker 1: we go. So the dolls going down a thousand and 493 00:26:46,640 --> 00:26:48,680 Speaker 1: the vix is going nuts. So I turn in the 494 00:26:48,680 --> 00:26:52,040 Speaker 1: Bloomberg surveillance and who else do I hear? Our own 495 00:26:52,960 --> 00:27:00,520 Speaker 1: Mike Reagan are undisputed craziest thing winner of all time defeated? 496 00:27:01,119 --> 00:27:04,560 Speaker 1: And was he talking about none other than Bernie Sanders 497 00:27:04,600 --> 00:27:08,360 Speaker 1: and some guy on a name Bony save the day 498 00:27:08,359 --> 00:27:12,840 Speaker 1: in hockey? Hey, that's crazy. I love it. Cheers to Mike. 499 00:27:13,200 --> 00:27:18,320 Speaker 1: Love you guys. Tweaking out. I've got to say we 500 00:27:18,440 --> 00:27:21,119 Speaker 1: always appreciate when you do call in and you let 501 00:27:21,200 --> 00:27:22,880 Speaker 1: us know what the craziest things are that you've seen 502 00:27:22,880 --> 00:27:26,480 Speaker 1: in markets. But come on, and I think the quote 503 00:27:26,480 --> 00:27:30,560 Speaker 1: was undisputed undefeated champions. Yeah right, Michael Jordan, the Michael Jordan, 504 00:27:30,800 --> 00:27:33,080 Speaker 1: the Michael Jordans, the crazy things, Chiggy, Can you call 505 00:27:33,400 --> 00:27:36,960 Speaker 1: and say that next time? But the story he's talked 506 00:27:36,960 --> 00:27:39,119 Speaker 1: about that was the craziest thing that's ever happened in hockey. 507 00:27:39,160 --> 00:27:42,119 Speaker 1: Didn't see that? The guy everyone knows the story. I 508 00:27:42,160 --> 00:27:44,879 Speaker 1: won't even bother but miracle. And all I'd say is 509 00:27:44,920 --> 00:27:47,560 Speaker 1: I'd like to be I feel like zamboni drivers everywhere 510 00:27:47,560 --> 00:27:49,639 Speaker 1: are gonna be getting calls from sports agents trying to 511 00:27:49,800 --> 00:27:55,880 Speaker 1: trying to negotiate that one day. All right, let's hear 512 00:27:55,880 --> 00:27:58,399 Speaker 1: the other voicemail. Well, my name is Morgan Hill. I'm 513 00:27:58,400 --> 00:28:02,720 Speaker 1: an investment associate and Laardo, Florida. Obviously, the folatility is 514 00:28:02,760 --> 00:28:05,920 Speaker 1: a recent has been a little crazy. But uh, when 515 00:28:05,920 --> 00:28:09,040 Speaker 1: we woke up this morning, we saw that Walt Disney's 516 00:28:09,640 --> 00:28:14,160 Speaker 1: UH CEO, Robert Tiger, stepped down UH and shares drop two. 517 00:28:14,680 --> 00:28:17,600 Speaker 1: But what was ironic about that is there was no 518 00:28:17,640 --> 00:28:21,199 Speaker 1: announcement of him actually leaving the company until the end 519 00:28:21,200 --> 00:28:23,160 Speaker 1: of one and he's going to be on the creative 520 00:28:23,200 --> 00:28:26,879 Speaker 1: aspects out of the business. So with that UM and 521 00:28:27,080 --> 00:28:31,359 Speaker 1: the new CEO UH stepping in from the head of 522 00:28:31,400 --> 00:28:34,280 Speaker 1: the parks, I think was a little crazy. So I 523 00:28:34,280 --> 00:28:37,160 Speaker 1: hope you guys have a great week. It was very 524 00:28:37,160 --> 00:28:39,400 Speaker 1: sudden news and big news. But I have to say 525 00:28:39,400 --> 00:28:41,680 Speaker 1: that my first immediate thought was can you only be 526 00:28:41,760 --> 00:28:46,000 Speaker 1: CEO of Disney if your name is Bob? My thought was, 527 00:28:46,040 --> 00:28:48,160 Speaker 1: you know that zamboni driver who got to play goalie. 528 00:28:48,240 --> 00:28:51,600 Speaker 1: I would make a great Disney movie. So free tip 529 00:28:51,600 --> 00:28:53,360 Speaker 1: for Bob Boger if you want to turn that stock around, 530 00:28:53,400 --> 00:28:56,400 Speaker 1: there's there's your next movie. Yeah, there you go. Chris 531 00:28:56,520 --> 00:28:58,960 Speaker 1: n Do you have a crazy thing? My crazy things 532 00:28:58,960 --> 00:29:02,920 Speaker 1: are just the a really preposterous number of ridiculous little 533 00:29:02,920 --> 00:29:05,800 Speaker 1: stocks that went crazy this week. There were somebody making 534 00:29:06,160 --> 00:29:09,000 Speaker 1: protective gog. I guess it's not not that these things 535 00:29:09,040 --> 00:29:13,320 Speaker 1: should go nuts, but has Matt suit maker was up 536 00:29:13,400 --> 00:29:16,560 Speaker 1: eight someone else And then there was this there's this 537 00:29:16,760 --> 00:29:22,880 Speaker 1: uh biotech called Vier Farm Vier Pharmaceuticals or biologicals. It's 538 00:29:22,880 --> 00:29:26,480 Speaker 1: backed by Gates and soft Bank. That this morning, you 539 00:29:26,480 --> 00:29:28,600 Speaker 1: would think, if you've got the big backers like that, 540 00:29:28,640 --> 00:29:32,000 Speaker 1: you weren't just some ludicrous shooting bottle rocket type thing. 541 00:29:32,320 --> 00:29:36,120 Speaker 1: It doubled over about three minutes about it dirty this morning. 542 00:29:36,680 --> 00:29:39,680 Speaker 1: That yeah, there's volatility of every variety on the market 543 00:29:39,760 --> 00:29:41,640 Speaker 1: right now. You know, I would call that an orgy 544 00:29:41,680 --> 00:29:46,000 Speaker 1: of bullishness. And yeah, and I recommend listeners can now 545 00:29:46,080 --> 00:29:50,760 Speaker 1: go wash their ears out with soap and water after that. Katy, 546 00:29:51,280 --> 00:29:53,520 Speaker 1: you don't look to me like you specialize in crazy 547 00:29:53,640 --> 00:29:56,719 Speaker 1: market observations. You look more of the sane and uh 548 00:29:57,160 --> 00:30:02,720 Speaker 1: well reasoned. Well, actually, one thing my team does. First 549 00:30:02,720 --> 00:30:04,560 Speaker 1: of all, I started my career as a commodity trader, 550 00:30:04,680 --> 00:30:08,840 Speaker 1: so I've seen a whole lot of crazy uh and 551 00:30:08,920 --> 00:30:12,280 Speaker 1: I can't really talk about most of it, but can 552 00:30:12,280 --> 00:30:16,680 Speaker 1: you do the hand signals? Yeah, you are like Chicago 553 00:30:16,720 --> 00:30:19,080 Speaker 1: Board of Trade today. I was told that if I 554 00:30:19,120 --> 00:30:21,320 Speaker 1: ever needed a surface to air missile, I should go 555 00:30:21,360 --> 00:30:24,800 Speaker 1: to the floor. But yeah, there were a lot of 556 00:30:24,840 --> 00:30:30,960 Speaker 1: things you could find that off exchange trading was very interesting. 557 00:30:31,560 --> 00:30:33,720 Speaker 1: But one thing my team does actually is every year 558 00:30:33,760 --> 00:30:36,280 Speaker 1: we have a bond Issue of the Year award for 559 00:30:36,560 --> 00:30:41,000 Speaker 1: like this goofy ist craziest thing. Now it's stio early 560 00:30:41,040 --> 00:30:43,000 Speaker 1: in the year yet to know and there's not much 561 00:30:43,000 --> 00:30:46,360 Speaker 1: issueance going on, but we we've had some good ones 562 00:30:46,440 --> 00:30:48,840 Speaker 1: over the years, so we do like crazy market stuff. 563 00:30:49,120 --> 00:30:51,440 Speaker 1: But I would say the craziest comment I got this 564 00:30:51,520 --> 00:30:55,120 Speaker 1: week was from somebody as I was talking about, well, 565 00:30:55,160 --> 00:30:58,760 Speaker 1: this is why you have treasuries in your asset allocation 566 00:30:58,880 --> 00:31:01,600 Speaker 1: because when times like this, um, it's the best head 567 00:31:01,680 --> 00:31:05,640 Speaker 1: you get against the stock market decline. And um he 568 00:31:05,720 --> 00:31:08,800 Speaker 1: got sort of via mitten he said treasuries are so 569 00:31:08,920 --> 00:31:12,280 Speaker 1: dangerous if interest rates go up, you know you're gonna 570 00:31:12,320 --> 00:31:15,720 Speaker 1: get killed. And I like, there's a mentality out there 571 00:31:15,960 --> 00:31:20,200 Speaker 1: that's worried about a US treasury but not about the 572 00:31:20,240 --> 00:31:24,440 Speaker 1: stock market. You know. I was just like, Okay, the 573 00:31:24,480 --> 00:31:27,040 Speaker 1: worst thing is going to happen is you're going to 574 00:31:27,160 --> 00:31:30,880 Speaker 1: hold it to majurity and get a low yield that 575 00:31:31,120 --> 00:31:33,880 Speaker 1: and get your money back. Like why is this in 576 00:31:33,960 --> 00:31:37,400 Speaker 1: a day like this? Why is this so dangerous to 577 00:31:37,440 --> 00:31:39,760 Speaker 1: get so afraid? Like who cares if the SMP drops? 578 00:31:40,360 --> 00:31:42,560 Speaker 1: I don't want to hold the treasury bond. I still 579 00:31:42,560 --> 00:31:45,280 Speaker 1: have upside, I guess, I don't know. It's the weirdest 580 00:31:45,440 --> 00:31:48,720 Speaker 1: it's it's it's it's sort of a visceral reaction. You 581 00:31:48,760 --> 00:31:52,440 Speaker 1: say treasuries with any maturity and people get freaked out 582 00:31:53,000 --> 00:31:57,880 Speaker 1: just because of the yield right after thirty six years 583 00:31:57,920 --> 00:32:01,600 Speaker 1: of them falling. If if you've been watching the SMP 584 00:32:01,720 --> 00:32:03,840 Speaker 1: go up twenty I feel like, because I recently had 585 00:32:03,880 --> 00:32:06,360 Speaker 1: to allocate my I ra A and I have to 586 00:32:06,400 --> 00:32:09,840 Speaker 1: say that I kind of I said that to the Fidelity, 587 00:32:09,880 --> 00:32:12,560 Speaker 1: But you know why I said it's because you know 588 00:32:12,680 --> 00:32:15,760 Speaker 1: I sat there for for the last ten years watching 589 00:32:16,440 --> 00:32:18,520 Speaker 1: the SMP route every year and I'm like, where the 590 00:32:18,560 --> 00:32:20,480 Speaker 1: hell am I going to get that new treasury? And 591 00:32:20,600 --> 00:32:22,320 Speaker 1: you know what I should have done, it turns out 592 00:32:22,480 --> 00:32:26,080 Speaker 1: is put every cent of it into a treasury. Year 593 00:32:26,120 --> 00:32:29,080 Speaker 1: to day, long term treasuries are up eight percent hindsight 594 00:32:29,200 --> 00:32:31,960 Speaker 1: is everything? All right? Well, you teesus, we're gonna have 595 00:32:31,960 --> 00:32:33,920 Speaker 1: to get you back for the craziest bond offering of 596 00:32:34,200 --> 00:32:36,000 Speaker 1: the year. But that one's that a worded in the year. 597 00:32:36,240 --> 00:32:41,040 Speaker 1: We usually do it in November. November, okay, Sarah, will 598 00:32:41,120 --> 00:32:43,840 Speaker 1: marker calendar. My calendar is on a napkin that I 599 00:32:43,920 --> 00:32:46,880 Speaker 1: left somewhere in the mark my calendar like a months out. 600 00:32:47,680 --> 00:32:49,720 Speaker 1: All right, Sarah, A lot of pressure on you to 601 00:32:49,800 --> 00:32:54,360 Speaker 1: deliver this week the craziest thing you saw. I I'm 602 00:32:54,400 --> 00:32:57,360 Speaker 1: just going to give my Colleagueluke Callo shout out because 603 00:32:57,400 --> 00:32:59,840 Speaker 1: he did have the Business Week cover this week and 604 00:32:59,840 --> 00:33:02,240 Speaker 1: it a great story and it is also just crazy. 605 00:33:02,400 --> 00:33:05,240 Speaker 1: So the headline of it is read, it's profane greedy 606 00:33:05,240 --> 00:33:07,880 Speaker 1: traders are shaking up the stock market. And essentially what 607 00:33:07,960 --> 00:33:12,280 Speaker 1: this is a story about is about those on Reddit. 608 00:33:12,600 --> 00:33:16,000 Speaker 1: It's Wall Street bets who essentially go on and they 609 00:33:16,160 --> 00:33:18,760 Speaker 1: all it seems like they all come together behind a 610 00:33:18,800 --> 00:33:21,200 Speaker 1: single name. They all think that they can buy calls 611 00:33:21,240 --> 00:33:23,320 Speaker 1: that will make the dealers and buy underlying shares, and 612 00:33:23,360 --> 00:33:27,680 Speaker 1: it pushes prices way up and up, and names like Virgin, Galactic, Tesla, 613 00:33:27,880 --> 00:33:30,680 Speaker 1: Plug Power, Lumber Liquidators, all these stocks that have been 614 00:33:30,680 --> 00:33:35,120 Speaker 1: going absolutely crazy have all been discussed on Wall Street bets, 615 00:33:35,240 --> 00:33:40,240 Speaker 1: and it really is just it's unbelievable. It's it's pretty. 616 00:33:40,280 --> 00:33:42,840 Speaker 1: It's a crazy story. I will say, you know, that 617 00:33:42,960 --> 00:33:45,800 Speaker 1: almost was not the cover story and told the editor 618 00:33:45,880 --> 00:33:48,040 Speaker 1: came to me as he does in a panic often 619 00:33:48,200 --> 00:33:50,360 Speaker 1: because he was afraid he might have to hold that 620 00:33:50,400 --> 00:33:53,760 Speaker 1: story for a week, and asked me to write a 621 00:33:53,800 --> 00:33:56,160 Speaker 1: cover You're in a nice story of my story. That 622 00:33:56,200 --> 00:33:59,760 Speaker 1: was a fine story of Chris was. Chris made so 623 00:33:59,840 --> 00:34:02,120 Speaker 1: much fun of that story. I did not he did, 624 00:34:02,240 --> 00:34:04,600 Speaker 1: Oh okay, he did the dead cat that you don't 625 00:34:04,600 --> 00:34:07,520 Speaker 1: I think, right? That was unnecessary as a cat mother. 626 00:34:08,680 --> 00:34:10,600 Speaker 1: I think people understand, Well, you need to, you need 627 00:34:10,640 --> 00:34:12,600 Speaker 1: to understand, you need to explain it now. I had to. Well, 628 00:34:12,640 --> 00:34:16,319 Speaker 1: I was about Robert Schiller's new book Narrative Economics, and 629 00:34:16,320 --> 00:34:19,440 Speaker 1: then Narrative in the Markets, and uh uh, you know, 630 00:34:19,560 --> 00:34:21,840 Speaker 1: I use some of the metaphors like Wall of Glory 631 00:34:22,760 --> 00:34:26,160 Speaker 1: and the dead cat bounce, and Chris thought, I explained, 632 00:34:26,560 --> 00:34:28,000 Speaker 1: I don't have any problem with people say I do 633 00:34:28,040 --> 00:34:29,600 Speaker 1: have a problem with people saying that cat bounce. But 634 00:34:29,800 --> 00:34:32,440 Speaker 1: I didn't feel like we needed like a three paragraph 635 00:34:32,520 --> 00:34:36,920 Speaker 1: exsis physics of a cat. Cats stopped off the building 636 00:34:37,800 --> 00:34:41,040 Speaker 1: the tree, wasn't it? And then you come on and 637 00:34:41,400 --> 00:34:47,040 Speaker 1: lay were God God with the the numbers that the 638 00:34:47,080 --> 00:34:50,360 Speaker 1: subscriptions are just going to go away into this podcast 639 00:34:51,040 --> 00:34:57,640 Speaker 1: before who will rewind and listen to you talk about that? 640 00:34:58,120 --> 00:35:00,359 Speaker 1: All right, well, I think we need to end it here, 641 00:35:00,880 --> 00:35:04,200 Speaker 1: Mike and Chris um. But with that said, Kathy Jones 642 00:35:04,280 --> 00:35:06,120 Speaker 1: Chris Nig, thank you both so much for joining the 643 00:35:06,120 --> 00:35:11,759 Speaker 1: show today. Thank you, what goes up. We'll be back 644 00:35:11,880 --> 00:35:14,160 Speaker 1: next week. Until then, you can find us on the 645 00:35:14,200 --> 00:35:18,239 Speaker 1: Bloomberg Terminal website and app or wherever you get your podcasts. 646 00:35:18,600 --> 00:35:20,439 Speaker 1: We'd love it if you took the time to rate 647 00:35:20,440 --> 00:35:23,279 Speaker 1: interview the show on Apple Podcast so more listeners can 648 00:35:23,320 --> 00:35:26,120 Speaker 1: find us. And you can find us on Twitter. Follow 649 00:35:26,160 --> 00:35:29,640 Speaker 1: me at at Sarah pon Sack, Mike is at re Anonymous, 650 00:35:29,960 --> 00:35:33,279 Speaker 1: Kathy Jones is at Kathy Jones and Chris nag Is 651 00:35:33,320 --> 00:35:37,200 Speaker 1: at Chris nag One. You can also follow Bloomberg Podcasts 652 00:35:37,360 --> 00:35:41,400 Speaker 1: at podcasts. What Goes Up is produced by Tofur Foreheads. 653 00:35:41,440 --> 00:35:44,720 Speaker 1: The head of Bloomberg podcast is Francesca Levie. Thanks for listening, 654 00:35:44,800 --> 00:35:45,560 Speaker 1: See you next time.