1 00:00:13,880 --> 00:00:17,759 Speaker 1: Hello, and welcome to What Goes Up, a weekly markets podcast. 2 00:00:17,880 --> 00:00:20,079 Speaker 1: My name is Mike Reagan. I'm a senior editor at 3 00:00:20,120 --> 00:00:23,680 Speaker 1: Bloomberg and I'm Aldanna hik Across Acid reporter with Bloomberg. 4 00:00:24,720 --> 00:00:30,680 Speaker 1: And this week on the show, well, stocks, bonds, crypto, commodities, whatever, 5 00:00:31,000 --> 00:00:34,760 Speaker 1: Just about every asset class is suffering right now. And 6 00:00:34,920 --> 00:00:38,000 Speaker 1: to add salt to the wounds, chaos and British markets 7 00:00:38,120 --> 00:00:42,040 Speaker 1: is reverberating around the world. Many strategists are cutting their 8 00:00:42,120 --> 00:00:44,519 Speaker 1: year ends targets for the SMP five hundred as the 9 00:00:44,560 --> 00:00:50,479 Speaker 1: Federal Reserve doubles down on its inflation fighting strategy. Plus 10 00:00:50,520 --> 00:00:53,040 Speaker 1: the U s midterms are coming up, which could cause 11 00:00:53,080 --> 00:00:56,200 Speaker 1: even more market turbulence. What's it all mean for the 12 00:00:56,240 --> 00:00:58,360 Speaker 1: rest of the year. We will get into it with 13 00:00:58,480 --> 00:01:03,520 Speaker 1: a veteran Wall Street strategist, but first, vil Donna, it's 14 00:01:03,560 --> 00:01:07,280 Speaker 1: exciting news. This week we have finally gotten more than 15 00:01:07,400 --> 00:01:11,720 Speaker 1: three hundred ratings on Apple podcast. And you know what 16 00:01:11,760 --> 00:01:14,920 Speaker 1: that means. That means, I believe the deal was you 17 00:01:14,959 --> 00:01:18,479 Speaker 1: now have to accept me in your professional network on LinkedIn. 18 00:01:18,720 --> 00:01:21,640 Speaker 1: That was not the deal. That was not the deal. 19 00:01:22,080 --> 00:01:26,600 Speaker 1: You are still pending approval on LinkedIn. Still on read 20 00:01:26,720 --> 00:01:30,600 Speaker 1: There you know, Emily Grafao co hosted one podcast with 21 00:01:30,600 --> 00:01:33,120 Speaker 1: Me and your Friends on LinkedIn, and then she invited 22 00:01:33,120 --> 00:01:36,040 Speaker 1: me to join her professional network on LinkedIn. And nice 23 00:01:36,120 --> 00:01:39,640 Speaker 1: of her. It's and you nothing nothing, I'm just the deal. 24 00:01:40,080 --> 00:01:42,840 Speaker 1: The deal was that I revealed my high school nickname. 25 00:01:43,240 --> 00:01:45,759 Speaker 1: I think. Okay, so you're ready to reveal your high 26 00:01:45,760 --> 00:01:48,080 Speaker 1: school nickame. Well, first I have to congratulate you, because 27 00:01:48,080 --> 00:01:49,680 Speaker 1: this is a pretty good ploy to get people to 28 00:01:49,720 --> 00:01:53,480 Speaker 1: write reviews. It was. It was a smart idea. Some 29 00:01:53,680 --> 00:01:56,960 Speaker 1: may called a gimmick. Gimick, and I'm fine with that. Actually, 30 00:01:57,000 --> 00:01:59,400 Speaker 1: if if you want to call it's fun and the 31 00:01:59,440 --> 00:02:02,080 Speaker 1: reviews are on. Remember somebody asked me if I would 32 00:02:02,120 --> 00:02:05,320 Speaker 1: marry them. Yeah, in one of the reviews I accepted. 33 00:02:05,840 --> 00:02:11,760 Speaker 1: I did. We're happily married. Now. Love is love. Love 34 00:02:11,880 --> 00:02:15,160 Speaker 1: is love. But so, okay, to reveal my high school nickname, 35 00:02:15,160 --> 00:02:17,040 Speaker 1: I think we'll just we'll have to wait until we 36 00:02:17,120 --> 00:02:20,079 Speaker 1: do craziest things in markets and then maybe I'll reveal 37 00:02:20,120 --> 00:02:24,160 Speaker 1: it there. All right, sounds good deal. Deal Okay, but 38 00:02:24,280 --> 00:02:26,720 Speaker 1: you I think you heard our guests this week laughing 39 00:02:26,720 --> 00:02:28,760 Speaker 1: in the background, and I do want to bring him 40 00:02:28,760 --> 00:02:30,320 Speaker 1: and I'm so happy to have him on the show. 41 00:02:30,520 --> 00:02:33,239 Speaker 1: Julian Emmanuel ever Core i s S chief Equity and 42 00:02:33,320 --> 00:02:35,800 Speaker 1: quantitative Strategists, and I've been trying to get him on 43 00:02:35,880 --> 00:02:38,360 Speaker 1: for so long and I'm so happy he's here. Great 44 00:02:38,400 --> 00:02:40,239 Speaker 1: to be here. You know, the problem was a little 45 00:02:40,320 --> 00:02:42,720 Speaker 1: pandemic got in the way, But here we are a 46 00:02:42,760 --> 00:02:47,440 Speaker 1: little pandemic, just a minor pandemic, a minor hiccup. But 47 00:02:47,560 --> 00:02:50,680 Speaker 1: Julian um so Mike already mentioned what's been happening in 48 00:02:50,720 --> 00:02:52,880 Speaker 1: the UK over the past couple of days. So maybe 49 00:02:53,040 --> 00:02:55,359 Speaker 1: just to start, you can tell us how important what's 50 00:02:55,400 --> 00:02:57,840 Speaker 1: going on in the UK right now is for global markets. 51 00:02:58,200 --> 00:03:01,359 Speaker 1: So I think the backdrop here is just to understand 52 00:03:01,400 --> 00:03:07,079 Speaker 1: that for investors, the storm that has been two thus far, 53 00:03:07,680 --> 00:03:13,480 Speaker 1: the you know, dominance of macro imperatives across all assets 54 00:03:13,680 --> 00:03:16,600 Speaker 1: has really been unprecedented. And it really goes back to 55 00:03:16,720 --> 00:03:21,320 Speaker 1: this idea that after twenty five years of quiescent inflation, 56 00:03:21,600 --> 00:03:24,600 Speaker 1: we had a breakout in the readings that's now been 57 00:03:24,639 --> 00:03:27,799 Speaker 1: over a year and and obviously you know, really feeding 58 00:03:27,880 --> 00:03:34,840 Speaker 1: into the FEDS imperative to get inflation under control by 59 00:03:34,920 --> 00:03:39,680 Speaker 1: going on this and you know, unprecedented degree of hiking. Uh. 60 00:03:39,760 --> 00:03:42,400 Speaker 1: You know, we we think about the current status as 61 00:03:42,720 --> 00:03:46,280 Speaker 1: something from that movie Supersize Me. You've done three seventy 62 00:03:46,320 --> 00:03:50,400 Speaker 1: five Supersized, you might do a fourth in November. But 63 00:03:50,800 --> 00:03:54,400 Speaker 1: what's happening is that this is the kind of you know, 64 00:03:54,880 --> 00:04:00,720 Speaker 1: rapid acceleration and tightening that reverberates across the globe. Obviously, 65 00:04:00,840 --> 00:04:03,440 Speaker 1: the conduit has really been the strength and the dollar 66 00:04:04,080 --> 00:04:07,800 Speaker 1: feeding into the UK. You've had a leadership change, the 67 00:04:07,880 --> 00:04:11,560 Speaker 1: Queen's passing, a new prime minister, a new government, just 68 00:04:11,800 --> 00:04:15,640 Speaker 1: total huge challenges in a market that had already been 69 00:04:15,680 --> 00:04:20,760 Speaker 1: showing strains frankly since the Brexit vote in So really, 70 00:04:21,080 --> 00:04:26,760 Speaker 1: you know, testing the outer bands of volatility across every 71 00:04:26,800 --> 00:04:30,719 Speaker 1: asset that's in the UK. You know what I find 72 00:04:30,760 --> 00:04:34,800 Speaker 1: fascinating about it, Julian, is this volatility we've seen in 73 00:04:34,839 --> 00:04:38,039 Speaker 1: the bond market globally, but especially this week. You know. 74 00:04:38,080 --> 00:04:40,479 Speaker 1: And and for listeners who are are listening to this 75 00:04:40,600 --> 00:04:43,840 Speaker 1: later we're recording here. It's Wednesday afternoon. So the big 76 00:04:43,839 --> 00:04:47,520 Speaker 1: news today was um, the Back of England came out 77 00:04:47,600 --> 00:04:50,360 Speaker 1: and said, you know, they will basically buy all of 78 00:04:50,440 --> 00:04:53,200 Speaker 1: the British bonds. They need to to to sort of 79 00:04:53,279 --> 00:04:55,839 Speaker 1: tame the bond market. So I'm looking at the ten 80 00:04:55,920 --> 00:05:00,560 Speaker 1: year guilt British guilt yield dawn fifty basis points in 81 00:05:00,600 --> 00:05:03,960 Speaker 1: a single day, uh U s yields as a result, 82 00:05:04,040 --> 00:05:07,320 Speaker 1: Canadian yields everything is down like twenty some basis points. 83 00:05:07,880 --> 00:05:10,520 Speaker 1: I mean, for one thing, these are just I think 84 00:05:11,120 --> 00:05:14,320 Speaker 1: nightmarish moves from sort of a a you know, how 85 00:05:14,360 --> 00:05:17,760 Speaker 1: do you price the risk free rate when it's jumping 86 00:05:17,800 --> 00:05:21,039 Speaker 1: around like this? But I wonder, in particular, what do 87 00:05:21,080 --> 00:05:24,600 Speaker 1: you make of how UK is kind of leading the 88 00:05:24,640 --> 00:05:26,919 Speaker 1: bond market globally? Now? Is it, you know, is it 89 00:05:27,000 --> 00:05:30,640 Speaker 1: just sort of a relative value or correlation that should 90 00:05:30,640 --> 00:05:35,200 Speaker 1: cause US yields to to revert back when UK yields do, 91 00:05:35,480 --> 00:05:37,640 Speaker 1: or is it you know, is there sort of an 92 00:05:37,640 --> 00:05:40,359 Speaker 1: assumption going on that the b o E is is 93 00:05:40,520 --> 00:05:43,120 Speaker 1: foreshadowing what's to come from other central banks, you know? 94 00:05:43,480 --> 00:05:46,080 Speaker 1: Or eventually is the FED and the ECB gonna have 95 00:05:46,160 --> 00:05:47,960 Speaker 1: to come out and say, yeah, well we'll do whatever 96 00:05:48,000 --> 00:05:50,880 Speaker 1: it takes to to keep on markets in check. What 97 00:05:50,880 --> 00:05:53,640 Speaker 1: what exactly is the relationship there? Do you think, Well, 98 00:05:54,120 --> 00:05:56,080 Speaker 1: if you go back to the end of last week, 99 00:05:56,120 --> 00:05:58,800 Speaker 1: it really all started with a point in time, call 100 00:05:58,880 --> 00:06:02,280 Speaker 1: it Friday morning, where one looked up on one screen 101 00:06:02,480 --> 00:06:07,800 Speaker 1: and every single indicator, every single asset, every single market 102 00:06:08,320 --> 00:06:13,679 Speaker 1: was completely read. Okay, you know whatever was indiscriminate selling 103 00:06:13,960 --> 00:06:16,520 Speaker 1: that to us was the start of this emotional phase 104 00:06:16,800 --> 00:06:21,880 Speaker 1: that because it was clear the policy mitch mismatch between 105 00:06:22,200 --> 00:06:25,400 Speaker 1: the new trust government and and Quartet the Chancellor of 106 00:06:25,440 --> 00:06:31,520 Speaker 1: the Exchequer UH, and where the Bank of England felt 107 00:06:31,720 --> 00:06:35,000 Speaker 1: it needs to go, need needed to go, needs to go, 108 00:06:35,080 --> 00:06:37,480 Speaker 1: and that's an open concept, which is why I keep 109 00:06:37,600 --> 00:06:41,960 Speaker 1: changing tenses. UH is is that is that it's really 110 00:06:42,720 --> 00:06:48,560 Speaker 1: caused this instability that got some feeling as if there 111 00:06:48,680 --> 00:06:51,760 Speaker 1: was this idea that the UK was about to become 112 00:06:51,800 --> 00:06:54,919 Speaker 1: an emerging market and seeing the kind of volatility in 113 00:06:54,960 --> 00:06:59,000 Speaker 1: the bond markets there that one had seen throughout time 114 00:06:59,040 --> 00:07:03,359 Speaker 1: and places like Mexico during crisis, or Brazil or you know, 115 00:07:03,440 --> 00:07:08,919 Speaker 1: going back to the Asian UH Tiger crisis, that type 116 00:07:08,920 --> 00:07:13,960 Speaker 1: of volatility, and frankly, because so much of UK debt 117 00:07:14,080 --> 00:07:18,440 Speaker 1: is denominated in sterling, that wasn't necessarily going to be 118 00:07:19,240 --> 00:07:22,280 Speaker 1: uh the way it would play out. But nevertheless, the 119 00:07:22,400 --> 00:07:27,080 Speaker 1: markets have become just very, very liquid, and people got 120 00:07:27,200 --> 00:07:32,559 Speaker 1: very very afraid of buying bonds in an environment where 121 00:07:33,000 --> 00:07:38,640 Speaker 1: there's still no concrete evidence that inflation, particularly in Europe, 122 00:07:39,400 --> 00:07:42,920 Speaker 1: is shown signs of topping, although that evidence is starting 123 00:07:42,920 --> 00:07:46,960 Speaker 1: to build quite rapidly in the US. And Julian, how 124 00:07:47,040 --> 00:07:50,200 Speaker 1: much would you say, how much of what's going on 125 00:07:50,240 --> 00:07:53,280 Speaker 1: in the UK would you ascribe to the choppiness that 126 00:07:53,320 --> 00:07:55,760 Speaker 1: we've seen in US markets or is it more the 127 00:07:55,760 --> 00:07:58,560 Speaker 1: case that what's happening with our stock market for instance 128 00:07:58,560 --> 00:08:03,040 Speaker 1: the last couple of days we can more ascribe, you know, 129 00:08:04,280 --> 00:08:07,400 Speaker 1: blame what's going on with interest rates or whatever else. Well, 130 00:08:07,680 --> 00:08:10,640 Speaker 1: it's definitely sort of what we would call across assets 131 00:08:10,640 --> 00:08:15,800 Speaker 1: psychology and the driver as it has been the entire year, 132 00:08:16,360 --> 00:08:20,640 Speaker 1: is this now positive correlation between stocks and bonds, and 133 00:08:20,720 --> 00:08:24,400 Speaker 1: so as the yields continued to ratchet higher, uh, you know, 134 00:08:24,480 --> 00:08:29,040 Speaker 1: obviously the U K's rise and yields feeding into the US, 135 00:08:29,320 --> 00:08:32,640 Speaker 1: feeding into Italy. With the political changes over the weekend 136 00:08:32,720 --> 00:08:36,800 Speaker 1: that certainly you know, put provide upside pressure two yields 137 00:08:36,840 --> 00:08:40,520 Speaker 1: there as well. It's really became a bit of a snowball, 138 00:08:41,280 --> 00:08:44,400 Speaker 1: which is why from our point of view, the Bank 139 00:08:44,440 --> 00:08:48,000 Speaker 1: of England had to act in a reasonably decisive manner. 140 00:08:49,520 --> 00:08:52,360 Speaker 1: You know, Julian, I was reading one of your most 141 00:08:52,400 --> 00:08:56,520 Speaker 1: recent notes, and UM, obviously the other big story of 142 00:08:56,559 --> 00:08:59,520 Speaker 1: the week is UH set a new law when the 143 00:08:59,559 --> 00:09:04,240 Speaker 1: U star market for this bear market spundred, closing at 144 00:09:04,240 --> 00:09:09,880 Speaker 1: the lowest since November. UM. I get the sense from 145 00:09:10,520 --> 00:09:15,959 Speaker 1: your note though, that you think the acute selling UH 146 00:09:16,000 --> 00:09:18,520 Speaker 1: maybe over and then maybe there's a bear market rally 147 00:09:18,600 --> 00:09:20,120 Speaker 1: and store for us? Is that A Is that a 148 00:09:20,120 --> 00:09:23,440 Speaker 1: fair reading of your note? We are feeling that way 149 00:09:23,960 --> 00:09:28,280 Speaker 1: basically from our point of view. These kinds of bear markets, 150 00:09:28,280 --> 00:09:30,640 Speaker 1: and if you go back to the highs in January, 151 00:09:30,679 --> 00:09:34,040 Speaker 1: they don't move in straight lines. And the last several 152 00:09:34,080 --> 00:09:38,440 Speaker 1: weeks again in response to this ratcheting higher in yields 153 00:09:38,440 --> 00:09:41,240 Speaker 1: across the globe has been pretty much of a straight 154 00:09:41,280 --> 00:09:44,720 Speaker 1: line moved down UM in stocks, which if you think 155 00:09:44,760 --> 00:09:47,800 Speaker 1: about it, September, we don't want to go back to school, 156 00:09:47,920 --> 00:09:49,679 Speaker 1: We don't want to go back to the office four 157 00:09:49,760 --> 00:09:52,600 Speaker 1: or five days a week. The psychology tends to be 158 00:09:52,640 --> 00:09:57,199 Speaker 1: poor in every September, but particularly so this year because 159 00:09:57,240 --> 00:09:59,680 Speaker 1: you have all this macro uncertainty and a FED who's 160 00:09:59,720 --> 00:10:03,360 Speaker 1: commit a it UH to hiking rates and keeping pressure 161 00:10:03,480 --> 00:10:05,760 Speaker 1: uh really on the rest of the world via the 162 00:10:05,800 --> 00:10:10,360 Speaker 1: stronger dollar through the rate hike transmission mechanism. But for us, 163 00:10:10,600 --> 00:10:16,320 Speaker 1: we started seeing signs that this kind of activity was unsustainable. 164 00:10:16,880 --> 00:10:21,480 Speaker 1: The VIX has started spiking. You've seen investor sentiment really 165 00:10:21,640 --> 00:10:24,400 Speaker 1: only as bad as has ever been near the trough 166 00:10:24,440 --> 00:10:27,520 Speaker 1: in two thousand and nine and near the bottom of 167 00:10:28,000 --> 00:10:32,240 Speaker 1: the first Gulf War bear market in And so for us, 168 00:10:32,600 --> 00:10:35,840 Speaker 1: those kinds of ideas, along with the fact that October 169 00:10:35,960 --> 00:10:41,320 Speaker 1: tends to be a turning point for stocks and the 170 00:10:41,400 --> 00:10:43,319 Speaker 1: data that as much as we don't want to think 171 00:10:43,360 --> 00:10:47,200 Speaker 1: about mid terms, the following year after mid terms tends 172 00:10:47,240 --> 00:10:51,199 Speaker 1: to be good as well. Uh, to us, just really uh, 173 00:10:51,559 --> 00:10:55,240 Speaker 1: Given the fact that we thought that the yield moves 174 00:10:55,440 --> 00:11:00,360 Speaker 1: were becoming parabolically unsustainable, we did feel and do feel 175 00:11:00,600 --> 00:11:04,960 Speaker 1: that that will transmit into higher equity prices, certainly in 176 00:11:05,000 --> 00:11:08,760 Speaker 1: the near term, perhaps even longer. And I think, Julian 177 00:11:08,800 --> 00:11:12,319 Speaker 1: you wrote recently for stocks, the bigger, the bigger they fall, 178 00:11:12,440 --> 00:11:15,040 Speaker 1: the harder they bounce, right, So is that part of 179 00:11:15,080 --> 00:11:18,200 Speaker 1: that equation here? Very much so? So? He basically, at 180 00:11:18,800 --> 00:11:22,400 Speaker 1: at the new lows, you were down almost twenty from 181 00:11:22,440 --> 00:11:24,920 Speaker 1: the highs. And what we did was we looked at 182 00:11:24,960 --> 00:11:28,840 Speaker 1: the history of prior bear markets going back fifty years 183 00:11:28,920 --> 00:11:32,439 Speaker 1: or so, and what we found was, once you started 184 00:11:32,520 --> 00:11:36,319 Speaker 1: a bear market rally, which we defined as either five 185 00:11:36,320 --> 00:11:39,640 Speaker 1: per cent or more over five trading days or more 186 00:11:40,280 --> 00:11:44,280 Speaker 1: from that kind of depressed level, the average run is 187 00:11:44,440 --> 00:11:49,720 Speaker 1: on the order of seventeen over the course of thirty 188 00:11:49,720 --> 00:11:55,199 Speaker 1: five trading days, which interestingly enough takes you in proximity 189 00:11:55,240 --> 00:11:57,960 Speaker 1: to the two hundred day moving average, which is where 190 00:11:58,000 --> 00:12:01,160 Speaker 1: the market failed in its rally and August, but more 191 00:12:01,200 --> 00:12:05,880 Speaker 1: importantly takes you in proximity to not only the November 192 00:12:05,880 --> 00:12:10,280 Speaker 1: second FED meeting, but also the November eighth election, which 193 00:12:10,760 --> 00:12:14,199 Speaker 1: you know are going to be very interesting events. Indeed 194 00:12:14,800 --> 00:12:18,000 Speaker 1: so so all the stars are aligning in one place there. 195 00:12:18,000 --> 00:12:21,440 Speaker 1: But what let's talk about those mid terms a little bit, Julian, 196 00:12:21,480 --> 00:12:24,600 Speaker 1: because um, you know that is something people talk about 197 00:12:24,640 --> 00:12:27,559 Speaker 1: a lot, is that uh mid term ears can can 198 00:12:27,559 --> 00:12:30,000 Speaker 1: often be weak in the stock market. I mean, I 199 00:12:30,040 --> 00:12:32,120 Speaker 1: think I think you just have to chalk that up 200 00:12:32,120 --> 00:12:35,240 Speaker 1: to coincidence. Perhaps this year, although you know, maybe some 201 00:12:35,320 --> 00:12:38,920 Speaker 1: of the extenuating uh nos of the of the drop 202 00:12:39,080 --> 00:12:42,320 Speaker 1: was was related to that. But what type of you know, 203 00:12:42,559 --> 00:12:47,840 Speaker 1: scenario do you think is most constructive h two stocks 204 00:12:47,920 --> 00:12:51,000 Speaker 1: in this mid term. There's that sort of generalization people 205 00:12:51,080 --> 00:12:54,600 Speaker 1: like that, you know, gridlock, a divided Congress is often 206 00:12:54,640 --> 00:12:57,440 Speaker 1: supportive of stocks. Is is that the type of setup 207 00:12:57,520 --> 00:12:59,840 Speaker 1: you think that that would work best? Uh? In this 208 00:13:00,640 --> 00:13:06,320 Speaker 1: So it's particularly difficult to handicap that outcome now, especially 209 00:13:06,400 --> 00:13:09,920 Speaker 1: since A you've had as negative a year as you've 210 00:13:09,920 --> 00:13:13,160 Speaker 1: had thus far, and be because the balance of power, 211 00:13:13,280 --> 00:13:16,640 Speaker 1: despite the fact that the Democrats controlled both houses, the 212 00:13:16,679 --> 00:13:20,120 Speaker 1: balance of power is so perricarious. So what we'll do 213 00:13:20,320 --> 00:13:22,760 Speaker 1: is we'll tell you what history actually says about this, 214 00:13:23,080 --> 00:13:26,000 Speaker 1: And what history says is that there is a very 215 00:13:26,040 --> 00:13:29,920 Speaker 1: pronounced out performance over the course of a hundred years 216 00:13:29,960 --> 00:13:35,800 Speaker 1: worth of stock market returns when government is unified, you know, 217 00:13:36,280 --> 00:13:40,120 Speaker 1: one party controls both Houses of Congress and the White House. Now, 218 00:13:40,280 --> 00:13:44,480 Speaker 1: the market would, in our view have a knee jerk 219 00:13:44,520 --> 00:13:49,479 Speaker 1: reaction lower on that kind of outcome because A despite 220 00:13:49,520 --> 00:13:52,760 Speaker 1: the number of times that my team and I remind investors, 221 00:13:52,800 --> 00:13:56,680 Speaker 1: and we've been doing this constantly since of that kind 222 00:13:56,720 --> 00:14:00,640 Speaker 1: of data, people refuse to acknowledge it. Okay, Number one 223 00:14:00,840 --> 00:14:05,280 Speaker 1: and number two. The assumption is here with the presidential election, 224 00:14:05,320 --> 00:14:08,640 Speaker 1: which is obviously going to be an exceptionally contentious event. 225 00:14:08,840 --> 00:14:12,480 Speaker 1: Whoever ends up running two years later, the preference would 226 00:14:12,480 --> 00:14:16,439 Speaker 1: be more than likely for less action rather than more. 227 00:14:16,800 --> 00:14:22,000 Speaker 1: But yet the data clearly shows that unified government i e. 228 00:14:22,240 --> 00:14:26,360 Speaker 1: The potential for more action rather than less has been 229 00:14:26,400 --> 00:14:35,560 Speaker 1: better for some I think in a recent note you 230 00:14:35,640 --> 00:14:39,480 Speaker 1: also said that DCS aggravating some of the recent trends. 231 00:14:39,880 --> 00:14:41,560 Speaker 1: Is that right? So maybe you can talk a little 232 00:14:41,600 --> 00:14:43,080 Speaker 1: bit about this because I know you think a lot 233 00:14:43,120 --> 00:14:46,280 Speaker 1: about how policy is affecting the market. Yeah, there's no 234 00:14:46,360 --> 00:14:49,280 Speaker 1: question about it. Look from from from the point of 235 00:14:49,400 --> 00:14:55,760 Speaker 1: view of the political situation, I don't think that there's 236 00:14:55,840 --> 00:14:59,600 Speaker 1: any debate about the fact that the divisiveness and the 237 00:14:59,720 --> 00:15:04,560 Speaker 1: part citizenship in the country without the ability to actually 238 00:15:04,600 --> 00:15:11,120 Speaker 1: have reason discourse uh is certainly affects markets, It affects uncertainty, 239 00:15:11,200 --> 00:15:14,760 Speaker 1: it affects how people are thinking about policy. But again, 240 00:15:14,840 --> 00:15:19,000 Speaker 1: when when we think about further down the road on 241 00:15:19,160 --> 00:15:23,000 Speaker 1: Constitution Avenue, which is the home of the Federal Reserve, 242 00:15:23,360 --> 00:15:26,800 Speaker 1: there's no question about the fact that the FED, in 243 00:15:26,960 --> 00:15:31,800 Speaker 1: our view, is perhaps gone a little bit too quickly 244 00:15:32,320 --> 00:15:36,640 Speaker 1: and hasn't given the markets and the economy enough time 245 00:15:37,000 --> 00:15:41,200 Speaker 1: to digest the amount of hiking UH that has been 246 00:15:41,240 --> 00:15:44,400 Speaker 1: put into the system already, and that to us has 247 00:15:44,440 --> 00:15:47,680 Speaker 1: really been sort of where the pressure points have come? 248 00:15:47,680 --> 00:15:50,760 Speaker 1: And where are you know, our head of ever, coore 249 00:15:50,960 --> 00:15:55,880 Speaker 1: s I ed Hyman has taken his GDP forecast down 250 00:15:55,920 --> 00:15:59,320 Speaker 1: to zero. So it tells you that in a lot 251 00:15:59,360 --> 00:16:03,920 Speaker 1: of ways, the FED is thinking very closely that a 252 00:16:03,960 --> 00:16:09,480 Speaker 1: recession might be a necessary condition to get inflation under control. 253 00:16:09,840 --> 00:16:14,440 Speaker 1: Certainly not desirable, but counting and counting thing that that 254 00:16:14,560 --> 00:16:19,200 Speaker 1: kind of outcome, as was the case forty years ago 255 00:16:19,280 --> 00:16:23,760 Speaker 1: during the Valkal administration. So all of these underpinn volatility. Well, 256 00:16:23,840 --> 00:16:27,360 Speaker 1: let's talk about that November FED meeting coming up, Julian. 257 00:16:27,480 --> 00:16:30,640 Speaker 1: You know, I think it's safe to say that the 258 00:16:30,680 --> 00:16:34,680 Speaker 1: FED sort of surprised most investors by being more hawkish 259 00:16:34,720 --> 00:16:37,080 Speaker 1: at the September meeting than perhaps a lot of people 260 00:16:37,160 --> 00:16:41,320 Speaker 1: were expecting. The initial sense was that we'd get at 261 00:16:41,400 --> 00:16:45,120 Speaker 1: least seventy five basis points in November and again in December. 262 00:16:45,160 --> 00:16:48,160 Speaker 1: Some I think we're even thinking perhaps a full hundred 263 00:16:48,160 --> 00:16:52,280 Speaker 1: basis points um at at least one of the meetings, UM. 264 00:16:52,320 --> 00:16:55,080 Speaker 1: But you know, financial conditions have tightened quite a bit 265 00:16:55,160 --> 00:16:57,520 Speaker 1: since then, in part because of the UK and just 266 00:16:57,600 --> 00:17:01,520 Speaker 1: the reaction to the the hawk ish FED itself. Is 267 00:17:01,640 --> 00:17:04,080 Speaker 1: have they tightened enough for for maybe the Fed to 268 00:17:04,840 --> 00:17:08,320 Speaker 1: reconsider seventy five basis points, maybe go to fifty in 269 00:17:08,400 --> 00:17:11,640 Speaker 1: the next two meetings. So the first thing I'll say 270 00:17:11,880 --> 00:17:16,119 Speaker 1: is that the fact that you could have an outcome 271 00:17:16,680 --> 00:17:21,040 Speaker 1: more hawkish than those eight minutes at Jackson Hall was shocking. 272 00:17:21,200 --> 00:17:23,520 Speaker 1: I think it was shocking to the markets. It's certainly 273 00:17:23,560 --> 00:17:27,080 Speaker 1: shocked us, UM. But what we think is the FED 274 00:17:27,359 --> 00:17:32,080 Speaker 1: is really potentially in its zeal to not commit the 275 00:17:32,160 --> 00:17:36,240 Speaker 1: mistakes of the mid nineties seventies. I e. Chairman of 276 00:17:36,240 --> 00:17:41,199 Speaker 1: the FED, Arthur Burns cut rates in the middle of 277 00:17:41,280 --> 00:17:47,199 Speaker 1: the inflation firestorm because there was an oncoming recession. Ultimately 278 00:17:47,240 --> 00:17:50,480 Speaker 1: he was able to, uh, you know, cause the recession 279 00:17:50,560 --> 00:17:55,800 Speaker 1: to dissipate, but the outcome was inflation remaining higher for 280 00:17:56,000 --> 00:17:59,600 Speaker 1: much longer. The FED might actually be making a different 281 00:17:59,680 --> 00:18:04,840 Speaker 1: kind of mistake in a similar type of way. By overtightening, 282 00:18:05,240 --> 00:18:08,160 Speaker 1: you really get to the point where you may have 283 00:18:08,280 --> 00:18:11,200 Speaker 1: to cut rates despite the fact that the FED has 284 00:18:11,240 --> 00:18:14,160 Speaker 1: been adamant about not wanting to do that, and and 285 00:18:14,200 --> 00:18:16,919 Speaker 1: from our point of view, you know, what do you 286 00:18:17,040 --> 00:18:21,800 Speaker 1: do if you've got a GDP quarter or quarters. We've 287 00:18:21,840 --> 00:18:24,240 Speaker 1: already had two negative quarters, even though this is not 288 00:18:24,320 --> 00:18:27,000 Speaker 1: a recession in two. But what if you had a 289 00:18:27,080 --> 00:18:31,680 Speaker 1: negative three quarter and it was clear that there might 290 00:18:31,800 --> 00:18:34,720 Speaker 1: be a need to cut rates at the same time 291 00:18:35,240 --> 00:18:38,960 Speaker 1: inflation stays call it above three, which is number not 292 00:18:39,080 --> 00:18:43,480 Speaker 1: tolerable to the FED. That's a conundrum that really really 293 00:18:43,520 --> 00:18:48,560 Speaker 1: could have serious reverberations. And that's part of our view 294 00:18:48,920 --> 00:18:52,600 Speaker 1: that the FED might be better served instead of being 295 00:18:52,680 --> 00:18:57,000 Speaker 1: dogmatic about doing seventy five in November, being more open 296 00:18:57,080 --> 00:19:01,159 Speaker 1: minded about what it may remain not do. And I 297 00:19:01,160 --> 00:19:04,320 Speaker 1: think it's entirely possible over the next number of days 298 00:19:04,480 --> 00:19:08,760 Speaker 1: that we see some commentary from other FED governors that 299 00:19:08,880 --> 00:19:13,720 Speaker 1: perhaps the door is open to a little bit of flexibility. Julian, 300 00:19:13,800 --> 00:19:16,399 Speaker 1: you're very prolific with your note writing, which makes my 301 00:19:16,480 --> 00:19:18,600 Speaker 1: job so much easier. And I read all of your notes, 302 00:19:18,920 --> 00:19:21,480 Speaker 1: but this is why I have to have been referencing 303 00:19:21,480 --> 00:19:23,160 Speaker 1: a lot of them so much so. One of them said, 304 00:19:23,320 --> 00:19:27,200 Speaker 1: the FED space case is a recession in three. So 305 00:19:27,359 --> 00:19:30,840 Speaker 1: do you think that stocks already have prices something like 306 00:19:30,880 --> 00:19:35,280 Speaker 1: that in so we'll clarify that just that was dramatic intent. 307 00:19:35,400 --> 00:19:37,359 Speaker 1: So the FEDS base case, if you look at the 308 00:19:37,440 --> 00:19:40,920 Speaker 1: at the summary of economic projections, is one percent growth 309 00:19:41,520 --> 00:19:47,320 Speaker 1: or thereabouts in three However, it's projection of the unemployment 310 00:19:47,400 --> 00:19:50,840 Speaker 1: rate at four point four percent, up from the trough 311 00:19:51,160 --> 00:19:54,480 Speaker 1: this July at three point five pc, really is an 312 00:19:54,480 --> 00:20:01,000 Speaker 1: implicit call. It nod to the probability of recession being 313 00:20:01,040 --> 00:20:03,399 Speaker 1: close to a hundred percent, because you've never had that 314 00:20:03,480 --> 00:20:07,960 Speaker 1: kind of rise in unemployment without recession happening really almost 315 00:20:08,280 --> 00:20:12,840 Speaker 1: subsequently in in very uh neyar time. And so for us, 316 00:20:14,040 --> 00:20:17,920 Speaker 1: when we think about how stocks are priced, a deep 317 00:20:17,960 --> 00:20:21,479 Speaker 1: recession is absolutely not priced in right now because if 318 00:20:21,480 --> 00:20:23,480 Speaker 1: you look at a hundred years of stock market history, 319 00:20:23,720 --> 00:20:27,000 Speaker 1: the average recession bear market ends up being down on 320 00:20:27,040 --> 00:20:29,440 Speaker 1: the order of forty one and a half percent. We're 321 00:20:29,440 --> 00:20:33,080 Speaker 1: only down around twenty at the trough. But we still 322 00:20:33,160 --> 00:20:37,520 Speaker 1: think there's enough uncertainty and enough potential, particularly if you 323 00:20:37,600 --> 00:20:42,080 Speaker 1: had other geopolitical positive developments, uh you know, lessening of 324 00:20:42,080 --> 00:20:46,200 Speaker 1: the tensions in Russia, or or perhaps you know something 325 00:20:46,240 --> 00:20:50,040 Speaker 1: positive recurring in China. All all outliers right now. But 326 00:20:50,160 --> 00:20:53,239 Speaker 1: this entire year has been a series of outliers, So 327 00:20:53,280 --> 00:20:56,800 Speaker 1: we don't want to fully you know, eliminate the upside 328 00:20:56,840 --> 00:21:02,160 Speaker 1: tail risk along with recognizing the degree of the downside. 329 00:21:02,200 --> 00:21:05,159 Speaker 1: Tell that's what I was gonna ask you. How realistic 330 00:21:05,359 --> 00:21:10,000 Speaker 1: is it to think of um, uh, some improving rhetoric 331 00:21:10,280 --> 00:21:12,359 Speaker 1: out of Moscow? I mean that. The other big story 332 00:21:12,359 --> 00:21:16,120 Speaker 1: obviously this week was that nord Stream pipeline uh, mysteriously 333 00:21:16,240 --> 00:21:19,520 Speaker 1: malfunctioning and springing a leak in the middle of the ocean. Obviously, 334 00:21:19,520 --> 00:21:22,480 Speaker 1: there's a lot of speculation that perhaps it was it 335 00:21:22,480 --> 00:21:25,800 Speaker 1: was sabotaged by Russia. That's that has been confirmed, but 336 00:21:26,280 --> 00:21:28,440 Speaker 1: I think, um, a lot of people are just assuming 337 00:21:28,480 --> 00:21:30,680 Speaker 1: that's that to be the case. Russia sort of sending 338 00:21:30,720 --> 00:21:35,000 Speaker 1: a signal how bad could this winter get for Europe? Um? 339 00:21:35,119 --> 00:21:39,000 Speaker 1: And has the market really priced in that worst case scenario? Uh? 340 00:21:39,720 --> 00:21:43,040 Speaker 1: So far we're um, could could there be a further 341 00:21:43,320 --> 00:21:48,240 Speaker 1: negative shock that really Royal's markets uh, due to the 342 00:21:48,240 --> 00:21:52,920 Speaker 1: the Russia Europe tension? So if you've got a terrible winter, 343 00:21:53,840 --> 00:21:58,320 Speaker 1: I cannot imagine that that's price in you know, rivers 344 00:21:58,520 --> 00:22:02,199 Speaker 1: icing over and so on and so forth. Um, But 345 00:22:02,320 --> 00:22:06,840 Speaker 1: if you actually look at natural gas futures traded in Europe, 346 00:22:07,200 --> 00:22:10,119 Speaker 1: they peaked earlier in the spring. Yes, they've remained at 347 00:22:10,160 --> 00:22:13,360 Speaker 1: this very elevated level that clearly is going to put 348 00:22:13,400 --> 00:22:16,479 Speaker 1: an enormous amount of pressure on the European and the 349 00:22:16,600 --> 00:22:22,120 Speaker 1: UK consumer. But on the other hand, it really hasn't. 350 00:22:23,080 --> 00:22:26,840 Speaker 1: What's happening is the market is adjusting to a base 351 00:22:26,920 --> 00:22:32,040 Speaker 1: case where Russian supply will be next to nothing for 352 00:22:32,080 --> 00:22:34,560 Speaker 1: the foreseeable future. And I think if you go back 353 00:22:34,600 --> 00:22:38,720 Speaker 1: several weeks ago, part of of what calmed markets for 354 00:22:38,840 --> 00:22:43,720 Speaker 1: at least a while was this idea that storage was 355 00:22:43,840 --> 00:22:48,639 Speaker 1: proceeding on pace or even ahead of the normal seasonal build. 356 00:22:49,320 --> 00:22:53,439 Speaker 1: So from that perspective, you know, combine that with getting 357 00:22:53,480 --> 00:22:58,040 Speaker 1: new supplies from the US and and elsewhere. Could you 358 00:22:58,119 --> 00:23:03,560 Speaker 1: bandid it? You could? Do? You need the weather to cooperate. Absolutely, 359 00:23:05,000 --> 00:23:08,720 Speaker 1: This is part of the idea that maybe potentially we 360 00:23:08,760 --> 00:23:11,560 Speaker 1: could have some upside for stocks, right, the idea that 361 00:23:11,880 --> 00:23:15,120 Speaker 1: we could see some positive developments maybe out of DC 362 00:23:15,400 --> 00:23:18,120 Speaker 1: or Moscow or London. I think is what you said recently? 363 00:23:18,200 --> 00:23:21,080 Speaker 1: Is that right? Yeah? Absolutely, And and if you look 364 00:23:21,119 --> 00:23:25,399 Speaker 1: at what's happened this week. Thus far, the b of 365 00:23:25,760 --> 00:23:32,200 Speaker 1: boes intervention and switching really on a dime from quantitative 366 00:23:32,240 --> 00:23:38,480 Speaker 1: tightening quantitative using once more buying bonds is the first 367 00:23:38,560 --> 00:23:43,800 Speaker 1: positive policy development, certainly in terms of stabilizing markets, and 368 00:23:43,840 --> 00:23:46,880 Speaker 1: again going back to that relationship that has been a 369 00:23:46,880 --> 00:23:51,440 Speaker 1: near unity correlation between stocks and bonds recently, you could 370 00:23:51,480 --> 00:23:55,840 Speaker 1: also get a positive policy development out of Tokyo in 371 00:23:55,880 --> 00:24:01,320 Speaker 1: the coming days. The Japanese intervened in dollar again a 372 00:24:01,400 --> 00:24:04,080 Speaker 1: week ago or so, we would say that if they 373 00:24:04,119 --> 00:24:08,640 Speaker 1: were thinking about trying to achieve maximum efficacy, they might 374 00:24:08,760 --> 00:24:11,760 Speaker 1: look at the fact that the market has endorsed the 375 00:24:11,800 --> 00:24:16,520 Speaker 1: Bank of England's policy response and perhaps maybe would endorse 376 00:24:16,800 --> 00:24:21,280 Speaker 1: to a greater extent a further intervention by Japan. So 377 00:24:21,400 --> 00:24:24,119 Speaker 1: that's something that could happen. But again it's one of 378 00:24:24,160 --> 00:24:27,920 Speaker 1: these things where you don't want to plan for a 379 00:24:28,000 --> 00:24:32,520 Speaker 1: base case being positive policy developments, but when the psychology 380 00:24:32,680 --> 00:24:36,200 Speaker 1: turns as we think it could over the next few days, 381 00:24:36,400 --> 00:24:39,400 Speaker 1: it's something that could make the moves and markets all 382 00:24:39,480 --> 00:24:43,600 Speaker 1: the more exaggerated. Yeah, that's even before we get into 383 00:24:43,680 --> 00:24:48,040 Speaker 1: China and the coming Communist Party Congress, which uh could 384 00:24:48,119 --> 00:24:52,840 Speaker 1: could bring some surprises I guess if they decided to reopen, uh, 385 00:24:53,200 --> 00:24:55,840 Speaker 1: who knows what that will do to markets. But Julian, 386 00:24:55,960 --> 00:24:57,919 Speaker 1: I know it's great to talk to you because I 387 00:24:57,960 --> 00:25:01,240 Speaker 1: know you've got an eye on every asset class uh 388 00:25:01,280 --> 00:25:04,679 Speaker 1: and sort of all the different catalysts in the market. 389 00:25:04,760 --> 00:25:07,360 Speaker 1: And I know you you uh always keep at least 390 00:25:07,359 --> 00:25:10,399 Speaker 1: one eye on the options market. And there's really been 391 00:25:10,440 --> 00:25:13,439 Speaker 1: a narrative that's evolved over the last few years that 392 00:25:13,560 --> 00:25:16,480 Speaker 1: options are become sort of the tail that wags the 393 00:25:16,520 --> 00:25:19,199 Speaker 1: dog in the US stock market, that you know, gamma 394 00:25:19,280 --> 00:25:23,080 Speaker 1: hedging and other delta hedging and other Greek letters that 395 00:25:23,119 --> 00:25:25,840 Speaker 1: I don't I'll be honest, I don't really understand completely 396 00:25:27,320 --> 00:25:33,280 Speaker 1: that that you know, all that hedging and expiration activity 397 00:25:33,480 --> 00:25:36,400 Speaker 1: really tends to push and pull the stock market, uh 398 00:25:36,440 --> 00:25:39,879 Speaker 1: in a way that suggests the fundamentals aren't really always 399 00:25:39,920 --> 00:25:43,120 Speaker 1: in charge, that the the the options market has sort 400 00:25:43,119 --> 00:25:46,400 Speaker 1: of taken the driver's seat in the market at least 401 00:25:46,600 --> 00:25:51,040 Speaker 1: certain times a month near expiration. Is that truth to that? 402 00:25:51,200 --> 00:25:54,440 Speaker 1: And how would you suggest to us non Greek alphabet 403 00:25:54,560 --> 00:25:58,439 Speaker 1: experts how to sort of look at the options market 404 00:25:58,720 --> 00:26:02,879 Speaker 1: and its influence on the equity market. UM with a 405 00:26:02,880 --> 00:26:07,160 Speaker 1: reasonable sort of sober minded view of of what its influences. 406 00:26:07,680 --> 00:26:13,719 Speaker 1: So the options market has been this evolving thing, a living, 407 00:26:13,920 --> 00:26:18,720 Speaker 1: breathing organism basically since the pandemic began. Uh you had, 408 00:26:18,880 --> 00:26:22,280 Speaker 1: you know, extraordinary call option volumes in the summer of 409 00:26:23,440 --> 00:26:26,680 Speaker 1: as as you know, the stocks to stay at home 410 00:26:26,720 --> 00:26:31,399 Speaker 1: stocks basically screamed higher driven by options activity. Then you 411 00:26:31,480 --> 00:26:36,439 Speaker 1: had obviously the meme stocks in spring of being pushed 412 00:26:36,440 --> 00:26:39,919 Speaker 1: by options activity. And now it's fascinating, and this is 413 00:26:39,960 --> 00:26:43,880 Speaker 1: something we never really expected that would happen, is that 414 00:26:44,160 --> 00:26:47,800 Speaker 1: there is still a speculative element in the markets, despite 415 00:26:47,800 --> 00:26:50,240 Speaker 1: the fact that we've had as poor year as we've had, 416 00:26:50,640 --> 00:26:55,399 Speaker 1: that instead of buying stocks is actually buying call options 417 00:26:55,680 --> 00:26:59,720 Speaker 1: and parking its cash and treasuries. So in essence, what 418 00:26:59,800 --> 00:27:03,439 Speaker 1: you're doing is you're getting the risk free rate on 419 00:27:03,520 --> 00:27:06,639 Speaker 1: a portion of your holdings, and yet you're actually getting 420 00:27:06,720 --> 00:27:10,280 Speaker 1: the same exposure that you would be getting through holding 421 00:27:10,320 --> 00:27:14,040 Speaker 1: stocks via holding options. So there's a leverage component there 422 00:27:14,080 --> 00:27:17,199 Speaker 1: as well. And what it does is it exacerbates the 423 00:27:17,280 --> 00:27:20,479 Speaker 1: moves in both sides, and we've certainly seen that in 424 00:27:20,560 --> 00:27:24,680 Speaker 1: recent weeks. But interestingly enough, if you're someone who's thinking 425 00:27:24,720 --> 00:27:28,840 Speaker 1: about hedging with options, and we don't think that's for everyone. 426 00:27:29,320 --> 00:27:35,080 Speaker 1: It actually makes hedging both upside and downside more appealing 427 00:27:35,440 --> 00:27:38,600 Speaker 1: depending on the kinds of things that you're looking to hedge. 428 00:27:39,040 --> 00:27:42,359 Speaker 1: For example, in the energy sector, Uh, there has been 429 00:27:42,400 --> 00:27:47,800 Speaker 1: an outright fear of recession. At the same time there's 430 00:27:47,840 --> 00:27:52,640 Speaker 1: been an outright fear that a favorable resolution to Russia 431 00:27:52,840 --> 00:27:56,520 Speaker 1: would depress oil prices. So really what you're having is 432 00:27:56,560 --> 00:28:02,159 Speaker 1: that is that all in there's complete discounting of you know, 433 00:28:02,240 --> 00:28:06,679 Speaker 1: conditions where multiples are half that versus the rest of 434 00:28:06,720 --> 00:28:10,000 Speaker 1: the index. And for options people, you're seeing that in 435 00:28:10,160 --> 00:28:13,240 Speaker 1: fear of puts being much more expensive. But to us, 436 00:28:13,600 --> 00:28:17,000 Speaker 1: that's an opportunity. So what I think the messages is 437 00:28:17,040 --> 00:28:22,240 Speaker 1: that you can find these relationships, um and and because 438 00:28:22,800 --> 00:28:25,639 Speaker 1: we now have the end of free money and we 439 00:28:25,720 --> 00:28:28,920 Speaker 1: have you know, quote unquote real yields. I joke with 440 00:28:28,960 --> 00:28:31,199 Speaker 1: my sons that maybe they're going to have interest on 441 00:28:31,240 --> 00:28:35,160 Speaker 1: their checking account one of these days, weeks or months. Uh, 442 00:28:35,320 --> 00:28:39,719 Speaker 1: that these relationships are much more interesting to express and 443 00:28:39,760 --> 00:28:57,640 Speaker 1: to also analyze where the market may go. So you 444 00:28:57,720 --> 00:29:00,720 Speaker 1: told me that your answer to what goes up these 445 00:29:00,800 --> 00:29:02,959 Speaker 1: days is that we're seeing a bullmarket in cash, and 446 00:29:03,040 --> 00:29:05,840 Speaker 1: everybody's beinging up cash the last couple of days to me, 447 00:29:05,920 --> 00:29:09,720 Speaker 1: and you know how parking your your money in cash 448 00:29:09,840 --> 00:29:12,360 Speaker 1: or you know, short data treasuries or whatever. So what 449 00:29:12,520 --> 00:29:14,720 Speaker 1: is it that that is making cash so appealing right now? 450 00:29:14,800 --> 00:29:18,200 Speaker 1: So obviously the Fed is is behind all of this, 451 00:29:18,320 --> 00:29:22,280 Speaker 1: no question about it, the rapidity with which the hiking 452 00:29:22,520 --> 00:29:26,000 Speaker 1: has occurred, but it's also this idea. And if you 453 00:29:26,040 --> 00:29:29,560 Speaker 1: go back to the spring um, when we first started 454 00:29:29,600 --> 00:29:33,600 Speaker 1: suggesting that investors overweight cash as stock started to weaken, 455 00:29:34,080 --> 00:29:37,520 Speaker 1: we got pushed back because, well, how could you possibly 456 00:29:37,960 --> 00:29:41,960 Speaker 1: lock in a minus five rate of return when inflation 457 00:29:42,080 --> 00:29:46,240 Speaker 1: was trading at eight percent? And our answer to that was, well, 458 00:29:46,320 --> 00:29:50,200 Speaker 1: the thing about cash is in a portfolio context, it 459 00:29:50,360 --> 00:29:53,080 Speaker 1: helps you manage and it helps you buy when you 460 00:29:53,120 --> 00:29:56,400 Speaker 1: should be buying, not sell when you should be buying. 461 00:29:56,760 --> 00:29:59,480 Speaker 1: And that's what we've seen from time to time, particularly 462 00:29:59,520 --> 00:30:03,600 Speaker 1: at the Juli low, and for us, it really becomes 463 00:30:03,600 --> 00:30:07,400 Speaker 1: this whole idea that you know, the whole concept of 464 00:30:07,400 --> 00:30:11,520 Speaker 1: Tina there is no alternative. Two stocks is a thing 465 00:30:11,600 --> 00:30:14,200 Speaker 1: of the past, and we don't think it's coming back 466 00:30:14,400 --> 00:30:18,560 Speaker 1: anytime soon. Supporting the bullmarket in cash and now I 467 00:30:18,600 --> 00:30:27,680 Speaker 1: think Mike, the new acronym is Tara. There's a reasonable alternative. Yeahs, yeah, 468 00:30:27,720 --> 00:30:30,200 Speaker 1: that was Julian. The only way to make a name 469 00:30:30,240 --> 00:30:32,680 Speaker 1: for yourself in this industry anymore is a good acronym. 470 00:30:32,720 --> 00:30:35,400 Speaker 1: You gotta you gotta work on a good acronym. I 471 00:30:35,400 --> 00:30:38,960 Speaker 1: don't know, maybe this this podcast needs a good acronym. Yeah, 472 00:30:38,960 --> 00:30:41,600 Speaker 1: we can try to think of Tara. Well. You know, 473 00:30:41,680 --> 00:30:46,680 Speaker 1: it's it's interesting that the conversation around really yields Julian, 474 00:30:46,680 --> 00:30:48,800 Speaker 1: because I think it's sort of depends on how you 475 00:30:48,840 --> 00:30:51,200 Speaker 1: define real yields, right. You know, if an inflation that 476 00:30:51,320 --> 00:30:53,960 Speaker 1: eight or nine percent and treasuries are at three and 477 00:30:54,000 --> 00:30:56,240 Speaker 1: a half for are you okay? That's deeply negative. But 478 00:30:56,600 --> 00:30:59,479 Speaker 1: you know, looking out at the break even inflation rates, 479 00:31:00,120 --> 00:31:03,920 Speaker 1: you know, basically the difference between yields a nominal treasuries 480 00:31:04,160 --> 00:31:07,960 Speaker 1: and inflation protected treasuries. You know that break even rates 481 00:31:08,480 --> 00:31:12,520 Speaker 1: like to two point three two point three over ten 482 00:31:12,600 --> 00:31:17,280 Speaker 1: years um, which signals that the bottom market's best guests 483 00:31:17,520 --> 00:31:21,880 Speaker 1: is inflation will average roum two point three five over 484 00:31:21,920 --> 00:31:25,400 Speaker 1: the next ten years? Are they? Are they right? Are 485 00:31:25,400 --> 00:31:27,160 Speaker 1: the break evens right? Do you think, or is that 486 00:31:27,280 --> 00:31:31,400 Speaker 1: just a miss priced another miss price market right now. 487 00:31:31,800 --> 00:31:34,920 Speaker 1: So again we tend from point to point not to 488 00:31:35,040 --> 00:31:39,120 Speaker 1: argue with the concept that market pricing is right because 489 00:31:39,160 --> 00:31:42,640 Speaker 1: it's where you can transact at any moment. Look looking 490 00:31:42,680 --> 00:31:45,640 Speaker 1: out over the longer term. If you think about eds 491 00:31:45,680 --> 00:31:49,560 Speaker 1: Hyman's forecast for inflation next year, it's three percent, clearly 492 00:31:49,640 --> 00:31:54,800 Speaker 1: far north of that two three to forty number. Are 493 00:31:54,840 --> 00:32:00,480 Speaker 1: we eventually going to get back closer to two? Absolutely are? 494 00:32:00,720 --> 00:32:04,120 Speaker 1: And frankly that's part of our concern with the Fed, 495 00:32:04,560 --> 00:32:08,600 Speaker 1: perhaps not stepping back to assess the effect of the 496 00:32:08,640 --> 00:32:12,520 Speaker 1: tightening that we've seen, but point blank, what it does 497 00:32:12,640 --> 00:32:17,600 Speaker 1: reinforce is this whole idea that if we believed as 498 00:32:17,640 --> 00:32:22,680 Speaker 1: investors that this was the nineteen seventies ingrain, you know, 499 00:32:23,120 --> 00:32:28,640 Speaker 1: inflation expectations in high single digits, potentially low double digits 500 00:32:28,880 --> 00:32:31,920 Speaker 1: for weeks and months and years on end. This is 501 00:32:31,960 --> 00:32:34,760 Speaker 1: not the nine seventies. As a child, we were on 502 00:32:35,000 --> 00:32:38,840 Speaker 1: a four hour gas line waiting for my mother to 503 00:32:38,960 --> 00:32:43,200 Speaker 1: fill the car up. That's not what this is. I 504 00:32:43,240 --> 00:32:46,720 Speaker 1: think you called when when you were talking about stocks 505 00:32:46,720 --> 00:32:49,240 Speaker 1: and bonds in a recent note both being negative this year, 506 00:32:49,240 --> 00:32:51,880 Speaker 1: you called it breathtaking, I think was the word. Can 507 00:32:51,920 --> 00:32:54,360 Speaker 1: you talk about how unusual that is? I wrote about 508 00:32:54,440 --> 00:32:57,320 Speaker 1: a risk parity e t F that has seen a 509 00:32:57,360 --> 00:33:00,600 Speaker 1: record draw down. I think it's done something like thirty 510 00:33:00,640 --> 00:33:04,400 Speaker 1: two from the highs it reached last remember, So how 511 00:33:04,440 --> 00:33:07,160 Speaker 1: unusual is it for both stocks and months to be 512 00:33:07,880 --> 00:33:10,560 Speaker 1: down as much as we've seen this year. So we've 513 00:33:10,560 --> 00:33:14,480 Speaker 1: been showing a scattered plot of of the stock bond 514 00:33:14,640 --> 00:33:20,040 Speaker 1: return quadrants going back to nineteen seventy seven and two 515 00:33:20,360 --> 00:33:24,440 Speaker 1: is a lower left outlier on the orders of magnitude 516 00:33:24,760 --> 00:33:28,560 Speaker 1: such that you've only actually ever seen one other year 517 00:33:28,880 --> 00:33:32,520 Speaker 1: where the returns on the combined stock bond portfolio we're 518 00:33:32,600 --> 00:33:37,560 Speaker 1: both negative and only marginally so, and that was uh 519 00:33:37,640 --> 00:33:41,080 Speaker 1: the year that people were trying at the beginning of 520 00:33:41,120 --> 00:33:45,320 Speaker 1: the hiking cycle to equate to Obviously you've seen volatility 521 00:33:45,400 --> 00:33:48,760 Speaker 1: of a much higher order there um. But what it 522 00:33:48,840 --> 00:33:53,040 Speaker 1: really does is is when you have this kind of correlation, 523 00:33:53,600 --> 00:33:58,960 Speaker 1: it calls into question risk parity one thirty thirty strategies 524 00:33:59,200 --> 00:34:04,240 Speaker 1: and frankly, the employment of leverage across any investing strategy, 525 00:34:04,680 --> 00:34:10,280 Speaker 1: as well as a rethink of what valuations makes sense. 526 00:34:10,360 --> 00:34:13,759 Speaker 1: Because there's a very good argument to be made that 527 00:34:14,200 --> 00:34:18,200 Speaker 1: the valuation paradigm of the last decade or so, which 528 00:34:18,280 --> 00:34:22,320 Speaker 1: is closer to eight, nine twenty times, is no longer 529 00:34:22,400 --> 00:34:27,600 Speaker 1: the correct way to assess what stocks are worth. Yeah, so, Joya, 530 00:34:27,719 --> 00:34:29,680 Speaker 1: let's uh so break it down for me. If I 531 00:34:29,719 --> 00:34:32,960 Speaker 1: were to send you my brokerage account password and said, Julian, 532 00:34:33,040 --> 00:34:34,600 Speaker 1: just set me up for the rest of the year, 533 00:34:34,640 --> 00:34:39,879 Speaker 1: here can do. Yeah, right, What's what's it gonna look 534 00:34:39,920 --> 00:34:42,319 Speaker 1: like when you're done with it? Oh my goodness, the 535 00:34:42,360 --> 00:34:47,359 Speaker 1: foreheads dripping from that kind But I don't worry. There's 536 00:34:47,400 --> 00:34:51,759 Speaker 1: not a lot to lose in there. So so, so 537 00:34:53,000 --> 00:34:57,680 Speaker 1: what we think is that, particularly when you look out 538 00:34:57,800 --> 00:35:03,080 Speaker 1: towards your end and you think about this heightened probability 539 00:35:03,120 --> 00:35:07,239 Speaker 1: of recession, the thing that's most attractive to us is 540 00:35:07,280 --> 00:35:10,000 Speaker 1: probably the thing that, given the last week, is the 541 00:35:10,040 --> 00:35:16,320 Speaker 1: most difficult to buy, and that's longer term bonds. Uh. Again, 542 00:35:17,360 --> 00:35:21,440 Speaker 1: whether it's thinking about inflation break evens, thinking about a 543 00:35:21,480 --> 00:35:28,239 Speaker 1: heightened probability of recession, thinking about the the importation of 544 00:35:28,280 --> 00:35:33,040 Speaker 1: tighter financial conditions from around the globe to us, it 545 00:35:33,160 --> 00:35:37,160 Speaker 1: really makes sense, uh to go back to at least 546 00:35:38,320 --> 00:35:40,600 Speaker 1: what what has happened over the last couple of years 547 00:35:40,960 --> 00:35:45,400 Speaker 1: is the typical sixty forty bond portfolio has gravitated to 548 00:35:45,600 --> 00:35:49,359 Speaker 1: sixty thirty five or seventy thirty because we've all been 549 00:35:49,440 --> 00:35:53,680 Speaker 1: sold on this idea that owning government bonds was a 550 00:35:53,800 --> 00:35:57,960 Speaker 1: negative expected return outcome, and it's been true in large 551 00:35:58,000 --> 00:36:01,440 Speaker 1: part for the last two years. We haven't been positive 552 00:36:02,040 --> 00:36:06,239 Speaker 1: on bonds since we think that's where you want to 553 00:36:06,280 --> 00:36:08,879 Speaker 1: dip your toe in first again if you want to 554 00:36:08,920 --> 00:36:13,880 Speaker 1: get your equity exposure, which clearly as a function of 555 00:36:13,920 --> 00:36:16,839 Speaker 1: the portfolio breakdown, if you have any cash at all, 556 00:36:17,160 --> 00:36:20,280 Speaker 1: by default your cash levels have been rising, you probably 557 00:36:20,280 --> 00:36:23,560 Speaker 1: do want to put a little bit more um inequities. 558 00:36:23,880 --> 00:36:28,000 Speaker 1: And then let's see how policy and earnings play out. 559 00:36:28,040 --> 00:36:31,040 Speaker 1: Because we have had earnings downgrades, were likely to have 560 00:36:31,160 --> 00:36:34,839 Speaker 1: them again, but the market knows this, so it may 561 00:36:34,880 --> 00:36:38,800 Speaker 1: be come with something that doesn't look like the potential 562 00:36:39,160 --> 00:36:42,520 Speaker 1: for a deep earnings recession, perhaps just a shallow one. 563 00:36:43,360 --> 00:36:46,680 Speaker 1: And Julian, just to wrap things up, I think you 564 00:36:46,680 --> 00:36:49,840 Speaker 1: you recently downgraded your ear and price target for the 565 00:36:50,000 --> 00:36:53,080 Speaker 1: SMP five hundred, So how do we square that with 566 00:36:53,719 --> 00:36:55,680 Speaker 1: you know, what we were talking about earlier about the 567 00:36:55,719 --> 00:36:59,400 Speaker 1: potential for a rally posts the mid terms. Well, what's 568 00:36:59,440 --> 00:37:04,480 Speaker 1: amazing is in again in this market, Uh, things evolve 569 00:37:05,280 --> 00:37:10,000 Speaker 1: literally by the minute or the hour, not by the day, week, 570 00:37:10,080 --> 00:37:12,920 Speaker 1: or month, as is typical in you know, really the 571 00:37:12,960 --> 00:37:15,759 Speaker 1: bull market of the last ten years or so. So 572 00:37:16,120 --> 00:37:20,120 Speaker 1: when we took our price target down to thirty seventy 573 00:37:20,200 --> 00:37:23,319 Speaker 1: five a week and a half ago or so, we 574 00:37:23,320 --> 00:37:29,000 Speaker 1: were probably viewed as still being you know, quite bearish, uh, 575 00:37:29,040 --> 00:37:31,840 Speaker 1: in in that context, and then all of a sudden, 576 00:37:32,000 --> 00:37:35,200 Speaker 1: here we are the markets trading and breaking through the 577 00:37:35,239 --> 00:37:38,279 Speaker 1: loads of thirty six thirty six, and we're looking like 578 00:37:38,320 --> 00:37:40,279 Speaker 1: some of the biggest bulls on wall streets. So what 579 00:37:40,320 --> 00:37:43,600 Speaker 1: we're really trying to do is, you know, strike the 580 00:37:43,600 --> 00:37:47,799 Speaker 1: trade off between what we felt are these oversold conditions 581 00:37:47,840 --> 00:37:51,520 Speaker 1: that have the potential for a rebound with the positive 582 00:37:51,560 --> 00:37:55,759 Speaker 1: fourth quarter seasonality. Um. And and again when you think 583 00:37:55,760 --> 00:37:59,799 Speaker 1: about next year, Uh, it's one thing to get your 584 00:38:00,000 --> 00:38:03,719 Speaker 1: said allocation to where you're comfortable, but it's another to 585 00:38:03,840 --> 00:38:07,719 Speaker 1: make assumptions at this point about how the market is 586 00:38:07,760 --> 00:38:11,600 Speaker 1: going to behave next year with high conviction because the 587 00:38:11,719 --> 00:38:15,440 Speaker 1: range of outcomes is so large. Great stuff that is 588 00:38:15,760 --> 00:38:20,719 Speaker 1: Julian Emmanuel. He is the chief equity and quantitative strategist 589 00:38:20,840 --> 00:38:24,919 Speaker 1: at ever Core. I s I, Uh, Julian always such 590 00:38:24,920 --> 00:38:28,160 Speaker 1: a pleasure to hear your thoughts and catch up with 591 00:38:28,200 --> 00:38:32,800 Speaker 1: how you're looking at things in the market. Uh, no secret, 592 00:38:32,800 --> 00:38:34,920 Speaker 1: I think Fildana. Julian is one of my favorites of 593 00:38:34,960 --> 00:38:37,600 Speaker 1: the strategists, and they're always and he always picks up 594 00:38:37,600 --> 00:38:40,040 Speaker 1: the phone, which is nice. He always gets back to 595 00:38:40,800 --> 00:38:44,080 Speaker 1: nice guy, a brilliant guy. But Julian, we can't let 596 00:38:44,080 --> 00:38:49,000 Speaker 1: you go without hearing your craziest thing you've seen in markets. 597 00:38:49,440 --> 00:38:52,840 Speaker 1: But let's start with. First off, we gotta reveal Aldonna's 598 00:38:52,920 --> 00:38:55,640 Speaker 1: high school nickname because we did get those three ratings 599 00:38:55,680 --> 00:38:59,359 Speaker 1: on Apple podcast. So a drum roll. If I had 600 00:38:59,360 --> 00:39:02,360 Speaker 1: a drama would roll it. I guess maybe maybe Stacy, 601 00:39:02,400 --> 00:39:07,280 Speaker 1: a producer, can add Yeah, that would be good. First, 602 00:39:07,360 --> 00:39:17,680 Speaker 1: st my friends called me Bill, so I'm sorry. However, 603 00:39:18,719 --> 00:39:21,280 Speaker 1: I have a feeling you're going to twist that into 604 00:39:21,480 --> 00:39:29,000 Speaker 1: Bill n or evil evil evil, All right, let's go 605 00:39:29,080 --> 00:39:31,880 Speaker 1: with that. So let's go with those two because the 606 00:39:31,920 --> 00:39:34,799 Speaker 1: other one is a little bit more boring. Evil. That's 607 00:39:34,800 --> 00:39:37,480 Speaker 1: a I'm going with that one. That is that is 608 00:39:37,560 --> 00:39:43,799 Speaker 1: that suits you. It does a little sadly, and of 609 00:39:43,840 --> 00:39:47,880 Speaker 1: course your nickname with the website that transcribes the podcast 610 00:39:47,960 --> 00:39:53,759 Speaker 1: by listening pill Dodi and Madonna. Sometimes I think they 611 00:39:53,800 --> 00:39:56,480 Speaker 1: called you Madonna hijack. So we have yeah, we have 612 00:39:56,520 --> 00:39:59,759 Speaker 1: a transcription service for the podcast. So we looked through 613 00:39:59,760 --> 00:40:02,360 Speaker 1: the ranscript and every time I say my name, it 614 00:40:02,440 --> 00:40:06,799 Speaker 1: transcribes it as phil Doto, which is hilarious. I have 615 00:40:06,920 --> 00:40:08,759 Speaker 1: some I have some friends who make fun of me 616 00:40:08,840 --> 00:40:11,960 Speaker 1: for that now, and another one is Madonna hijack, which 617 00:40:12,040 --> 00:40:14,600 Speaker 1: is also very good. There have been some really good ones. 618 00:40:15,040 --> 00:40:16,759 Speaker 1: How about you, Julian? Did you have a nickname in 619 00:40:16,840 --> 00:40:19,359 Speaker 1: high school? Well? I did. But the first thing I'd 620 00:40:19,360 --> 00:40:21,200 Speaker 1: have to say is, based on what you just said, 621 00:40:21,520 --> 00:40:24,080 Speaker 1: I have to think that there is a slice of 622 00:40:24,120 --> 00:40:29,480 Speaker 1: the voice recognition software world that's probably overpriced still at 623 00:40:29,560 --> 00:40:34,480 Speaker 1: this point. Always a trade, He's always got a trade, 624 00:40:35,040 --> 00:40:39,520 Speaker 1: Always a trade, always a trade. Mine was jewels, Okay, 625 00:40:39,680 --> 00:40:43,240 Speaker 1: very simple jewels, and uh, I think in an environment 626 00:40:43,320 --> 00:40:46,560 Speaker 1: like this, uh, you know, jewels have probably been as 627 00:40:46,600 --> 00:40:50,080 Speaker 1: good an investment as stocks and bonds or art, so 628 00:40:50,520 --> 00:40:55,359 Speaker 1: certainly part of portfolio diversification. That's good. Bringing it back. Yeah, 629 00:40:55,480 --> 00:40:57,960 Speaker 1: bringing it always brings it back to the to the markets. 630 00:40:57,960 --> 00:41:00,959 Speaker 1: I love it. That's good stuff. All right. Well, well, Dona, 631 00:41:01,360 --> 00:41:04,799 Speaker 1: I mean evil, What is your craziest thing for the week. 632 00:41:05,560 --> 00:41:08,080 Speaker 1: So I was originally going to go with something that 633 00:41:08,160 --> 00:41:10,800 Speaker 1: happened in the UK or one of these other wild moves, 634 00:41:10,920 --> 00:41:14,759 Speaker 1: but I'm just going to go with something somewhat happy, 635 00:41:14,800 --> 00:41:16,960 Speaker 1: which is that McDonald's is coming out with a happy 636 00:41:17,040 --> 00:41:20,279 Speaker 1: meal for adults, and I think I think it's aimed 637 00:41:20,320 --> 00:41:24,120 Speaker 1: at millennials, so my generation and you get you know, 638 00:41:24,520 --> 00:41:27,319 Speaker 1: I think the option is one of four figurines when 639 00:41:27,320 --> 00:41:31,040 Speaker 1: you buy your big Mac or you're chicken McNuggets. So 640 00:41:31,120 --> 00:41:33,680 Speaker 1: what are the what are the millennial figurines? Then? Is 641 00:41:33,719 --> 00:41:36,840 Speaker 1: it it's like, oh, I forget it's Taylor Swift, bobblehead 642 00:41:36,920 --> 00:41:40,160 Speaker 1: or something. I wish for that I would go to McDonald's. 643 00:41:40,200 --> 00:41:44,359 Speaker 1: But no, I think it's like regular McDonald's figurines. Uh huh, 644 00:41:44,400 --> 00:41:46,400 Speaker 1: that's pretty good. Yeah, I don't know. I don't know 645 00:41:46,440 --> 00:41:48,800 Speaker 1: how successful that will be. I don't get the idle 646 00:41:48,960 --> 00:41:52,000 Speaker 1: picture millennials eating a lot of McDonald's. To be honest, 647 00:41:52,040 --> 00:41:54,279 Speaker 1: you guys seem too healthy for that. Is that is 648 00:41:54,320 --> 00:41:57,239 Speaker 1: that fair? We love cauliflower. Yeah, all you eat is 649 00:41:57,280 --> 00:42:02,759 Speaker 1: cauliflower exclusively. All right, that's pretty good one, Julian. How 650 00:42:02,800 --> 00:42:04,840 Speaker 1: about you, what's the craziest thing you've seen in markets 651 00:42:04,840 --> 00:42:07,279 Speaker 1: these days? Well? I first got to pay tribute to 652 00:42:07,360 --> 00:42:12,360 Speaker 1: the concept that I lived through college on special big Max. 653 00:42:12,719 --> 00:42:19,080 Speaker 1: So so yeah, exactly exactly. I paid thirteen in Zurich 654 00:42:19,120 --> 00:42:22,799 Speaker 1: a couple of years ago, so you know, Uh, inflation 655 00:42:23,080 --> 00:42:27,400 Speaker 1: and uh, you know, the risk free arbitrage amongst currencies 656 00:42:27,400 --> 00:42:31,040 Speaker 1: and countries just not there. So I have to pay 657 00:42:31,080 --> 00:42:33,600 Speaker 1: tribute to the UK, and I have to pay tribute 658 00:42:34,239 --> 00:42:39,640 Speaker 1: to a legendary president, uh, Ronald Reagan. In our view, Uh, 659 00:42:39,680 --> 00:42:43,840 Speaker 1: the fact that um that Liz Trust and quasi quarteg 660 00:42:44,200 --> 00:42:50,240 Speaker 1: uh didn't fully appreciate the fact that their policy announcements 661 00:42:50,480 --> 00:42:54,040 Speaker 1: tax cuts, subsidies for energy and so on would be 662 00:42:54,280 --> 00:42:57,200 Speaker 1: as destabilizing in the near term as it has been 663 00:42:57,239 --> 00:43:01,080 Speaker 1: to markets. Doesn't recognize the fact that they probably would 664 00:43:01,120 --> 00:43:05,480 Speaker 1: have been better off announcing their policy in cowboy boots 665 00:43:05,520 --> 00:43:09,920 Speaker 1: and chaps, the same way President Ronald Reagan did in 666 00:43:09,960 --> 00:43:13,160 Speaker 1: the early nineteen eighties on top of his horse when 667 00:43:13,239 --> 00:43:17,480 Speaker 1: he announced his version of Reaganomics. That shot directly against 668 00:43:18,000 --> 00:43:21,839 Speaker 1: the vulcar fed the same way that the UK is 669 00:43:21,920 --> 00:43:25,600 Speaker 1: trying to shoot against the Bank of England. Um and frankly, 670 00:43:25,719 --> 00:43:30,080 Speaker 1: for us, that kind of display of revelry and and 671 00:43:30,160 --> 00:43:33,799 Speaker 1: find sartorial splendor might have been able to sell the 672 00:43:33,880 --> 00:43:37,080 Speaker 1: markets a bit better, but alas we've needed the Bank 673 00:43:37,120 --> 00:43:39,560 Speaker 1: of England to step in and hopefully it will have 674 00:43:39,640 --> 00:43:43,440 Speaker 1: a happy ending. I'd love to see her rotting horse 675 00:43:43,560 --> 00:43:46,360 Speaker 1: with chaps and a cowboy hat down Downing Street. That 676 00:43:46,360 --> 00:43:47,960 Speaker 1: would go I think that would go over some funny 677 00:43:50,560 --> 00:43:54,680 Speaker 1: all right, good stuff, good stuff. I have to think 678 00:43:54,719 --> 00:43:58,120 Speaker 1: about Liz Trust and cowboy boots and uh and and 679 00:43:58,200 --> 00:44:01,919 Speaker 1: a hat can own it the way Reagan did though, 680 00:44:02,000 --> 00:44:06,000 Speaker 1: that's uh that was his signature. Look all right, I'll 681 00:44:06,000 --> 00:44:09,520 Speaker 1: give you mine. This is courtesy of Bloomberg our own 682 00:44:09,760 --> 00:44:15,759 Speaker 1: Mark Alwood. He wrote about the investment market for handbags. 683 00:44:16,200 --> 00:44:19,560 Speaker 1: But how many handbags do you want? Just one? Just one? 684 00:44:19,800 --> 00:44:24,920 Speaker 1: I have? Okay too? Maybe three? No, I'm just kidding, 685 00:44:25,640 --> 00:44:29,160 Speaker 1: I'm totally kidding. Literally, what's the most you've ever paid 686 00:44:29,200 --> 00:44:32,880 Speaker 1: for a handbag? I think honestly it was like so 687 00:44:33,120 --> 00:44:36,000 Speaker 1: not not part of the whatever article you read that 688 00:44:36,080 --> 00:44:38,840 Speaker 1: still sounds like a lot to me. For Oh no, 689 00:44:38,960 --> 00:44:41,800 Speaker 1: they can be like ten. Why now, this story is 690 00:44:41,840 --> 00:44:45,080 Speaker 1: all about some of the most ridiculous ones. There's the 691 00:44:45,160 --> 00:44:47,719 Speaker 1: birken bag. I guess yeh, that's like ten tho or more. 692 00:44:48,200 --> 00:44:51,480 Speaker 1: That is like the yeah, the most expensive a so 693 00:44:51,719 --> 00:44:57,360 Speaker 1: black birken in crocodile crocodile skits. I guess it's actually 694 00:44:57,360 --> 00:45:00,360 Speaker 1: made out of a crocodile hide. Fetched two hundred and 695 00:45:00,560 --> 00:45:05,320 Speaker 1: eight thousand dollars three years ago. But here's the here's 696 00:45:05,880 --> 00:45:08,719 Speaker 1: where we get to play. The prices precise, Julie, I 697 00:45:08,719 --> 00:45:11,799 Speaker 1: regret to inform you you're now a contestant on a 698 00:45:11,800 --> 00:45:15,000 Speaker 1: little game show we have here called the prices precise. 699 00:45:15,760 --> 00:45:18,440 Speaker 1: The prices right because I'm afraid of Bob Barker, but 700 00:45:18,520 --> 00:45:24,360 Speaker 1: the prices precise because this story discusses credit Swiss actually 701 00:45:24,520 --> 00:45:31,240 Speaker 1: did a analysis of Chanel handbags and what they did 702 00:45:31,520 --> 00:45:35,600 Speaker 1: over the trailing twelve months ended in June. Now I 703 00:45:35,719 --> 00:45:39,520 Speaker 1: think back into June. Okay, it was a awful period 704 00:45:39,560 --> 00:45:42,640 Speaker 1: for market sentiment. Bonds were falling, stocks were in a 705 00:45:42,640 --> 00:45:46,719 Speaker 1: bear market. Everything was doing awful. Uh, what do you 706 00:45:46,760 --> 00:45:53,600 Speaker 1: think Credit Swiss study of Chanel handbags said that those 707 00:45:53,640 --> 00:45:56,800 Speaker 1: handbags did what was their return over the previous twelve 708 00:45:56,840 --> 00:46:02,360 Speaker 1: months as of June sense percentage terms? Think of it 709 00:46:02,400 --> 00:46:09,880 Speaker 1: as a a Chanel handbag index. I think up one, really, 710 00:46:11,640 --> 00:46:14,440 Speaker 1: even though I mean socks were in a bear market market, 711 00:46:14,440 --> 00:46:16,680 Speaker 1: otherwise we wouldn't be talking about that. You think Chanelle 712 00:46:16,719 --> 00:46:19,400 Speaker 1: was the ultimate safe haven? Up on, Julian, what what 713 00:46:19,440 --> 00:46:24,759 Speaker 1: do you think Chanel handbags trailing twelve month return was 714 00:46:25,160 --> 00:46:28,719 Speaker 1: as of June? Well, you can't have an equity strategist 715 00:46:28,960 --> 00:46:32,040 Speaker 1: in a bear market giving numbers like that, But I 716 00:46:32,080 --> 00:46:35,240 Speaker 1: would say it's probably somewhere on the order of twenty 717 00:46:35,320 --> 00:46:38,800 Speaker 1: five or thirty, because again, this was the year where 718 00:46:38,800 --> 00:46:43,440 Speaker 1: we were all coming out of our homes and re engaging, 719 00:46:43,520 --> 00:46:46,040 Speaker 1: and boy, if you don't look good when you're seeing 720 00:46:46,040 --> 00:46:49,120 Speaker 1: people you haven't seen in two years, you don't have 721 00:46:49,160 --> 00:46:52,200 Speaker 1: a second chance to make a new first impression. So 722 00:46:52,239 --> 00:46:57,880 Speaker 1: you're saying you set up This is why Julian is 723 00:46:57,960 --> 00:47:02,200 Speaker 1: the chief strategist ever queer, I s I hit it 724 00:47:02,280 --> 00:47:04,359 Speaker 1: right on the head there, Julian, It's amazing. Twenty four 725 00:47:04,400 --> 00:47:09,400 Speaker 1: point five previous year, I was shooting for the stars. 726 00:47:09,960 --> 00:47:13,800 Speaker 1: Who knew the ultimate safe haven was a purse basically 727 00:47:13,840 --> 00:47:16,799 Speaker 1: a purse. I won't have to buy one. I'll get 728 00:47:17,480 --> 00:47:19,040 Speaker 1: I'll get you one next time I go to Europe. 729 00:47:19,360 --> 00:47:24,239 Speaker 1: I don't know, right instead of instead of ham, No, 730 00:47:24,400 --> 00:47:26,359 Speaker 1: you fill it with ham if you if you get 731 00:47:26,400 --> 00:47:32,360 Speaker 1: me a luxury handbag and fill it with Iberico ham, 732 00:47:31,320 --> 00:47:36,520 Speaker 1: that that it's a deal. Uh. Anyway, I'm impressed, Julie, 733 00:47:36,560 --> 00:47:38,120 Speaker 1: and you nailed it on the head. I think maybe 734 00:47:38,120 --> 00:47:40,400 Speaker 1: he uh, maybe he saw that report. What do you 735 00:47:40,400 --> 00:47:44,080 Speaker 1: think filled out it? He's shaking his head. No, he's 736 00:47:44,120 --> 00:47:53,319 Speaker 1: just that good and Bloomberg, he is just that good. 737 00:47:53,600 --> 00:47:56,160 Speaker 1: H Joan. Thank you so much for your time. We 738 00:47:56,200 --> 00:47:58,360 Speaker 1: always appreciate it, and I hope we can get you 739 00:47:58,360 --> 00:48:10,040 Speaker 1: back again. Thank you think, Julian, what goes up? We'll 740 00:48:10,040 --> 00:48:11,880 Speaker 1: be back next week. And so then you can find 741 00:48:11,960 --> 00:48:15,040 Speaker 1: us on the Bloomberg Terminal website and app or wherever 742 00:48:15,120 --> 00:48:17,680 Speaker 1: you get your podcasts. We love it if you took 743 00:48:17,680 --> 00:48:20,600 Speaker 1: the time to rate and review the show on Apple Podcasts, 744 00:48:20,719 --> 00:48:23,160 Speaker 1: so more listeners can find us. And you can find 745 00:48:23,200 --> 00:48:26,719 Speaker 1: us on Twitter, follow me at reag Anonymous, Bill Donna 746 00:48:26,800 --> 00:48:30,520 Speaker 1: hierarch Is at Bildanna Hirach. You can also follow Bloomberg 747 00:48:30,560 --> 00:48:35,239 Speaker 1: Podcasts at Podcasts, What Goes Up is produced by Stacy Wan. 748 00:48:35,680 --> 00:48:37,239 Speaker 1: Thanks for listening, to see you next time.