WEBVTT - Surveillance: GameStop with Cooperman 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 0:00:09.240 --> 0:00:13.200 with Jonathan Ferrell and Lisa Brownowitz. Daily we bring you 0:00:13.320 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.840 Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot Com, 0:00:23.920 --> 0:00:30.440 and of course, on the Bloomberg terminal. Right now, Leon 0:00:30.480 --> 0:00:34.320 Cooperman joins us. He's with Omega, their family office, the chairman, 0:00:34.400 --> 0:00:36.760 the CEO. What he really is is a kid out 0:00:36.760 --> 0:00:39.640 of Hunter College who got a job at Xerox a 0:00:39.720 --> 0:00:43.680 million years ago and stumbled through Colombia into Golden Sacks 0:00:43.720 --> 0:00:47.239 where he uh found acclaim fame and fortune. He was 0:00:47.280 --> 0:00:51.960 a regular and institutional Investors Awards ceremonies for years and 0:00:52.080 --> 0:00:55.640 years and years. Mr Cooperman joins us this morning, Leon, 0:00:55.760 --> 0:00:58.480 why is this short squeeze different than the forty two 0:00:58.520 --> 0:01:02.800 others you've known since you joined Golden Sachs. Well, the 0:01:02.880 --> 0:01:06.880 market is very different because things were happening much more quickly. Uh, 0:01:06.920 --> 0:01:09.720 there's just no stabilizers. When I came to Wall Street 0:01:09.760 --> 0:01:13.800 fifty five years ago, the brokers firms traded stock fifty 0:01:13.840 --> 0:01:16.840 cents to share. The vocal rule didn't exist. They had 0:01:16.880 --> 0:01:19.679 a center to stabilize and go against the trend that 0:01:19.720 --> 0:01:23.360 doesn't exist anymore. Uh. You know the vibue used to 0:01:23.400 --> 0:01:26.080 be New York Stock Exchange. Any presented the volumes well board, 0:01:26.360 --> 0:01:30.680 the specialists don't play a role for someone unexplained reason. Uh, 0:01:30.720 --> 0:01:33.200 the SEC eliminated the uptick rule with two thousand and 0:01:33.200 --> 0:01:37.200 seven or something. Very well, okay, and I don't want 0:01:37.240 --> 0:01:39.600 to interrupt, but that's right where I wanted to go. Okay. 0:01:39.760 --> 0:01:42.600 Arthur Levitt and others full disclosure. Mr Levitt's a Bloomberg 0:01:42.640 --> 0:01:45.880 board member. Arthur Levitt others took us from quarter point 0:01:45.959 --> 0:01:50.440 responsibility down to the rush of the decimalization, and then 0:01:50.520 --> 0:01:55.520 we had the uptick rule changed. Explain why the uptick 0:01:55.640 --> 0:01:59.160 rule was so important, Well, he had, it's the village 0:01:59.160 --> 0:02:01.320 of the market. You need an uptiket just couldn't not. 0:02:01.680 --> 0:02:03.520 I think the elimination of the up to group gave 0:02:03.640 --> 0:02:07.720 rise to these high frequency you know, out instators, and 0:02:07.720 --> 0:02:10.160 they know nothing about value, they know everything about price, 0:02:10.600 --> 0:02:13.920 so they basically they exacerbate the trend. When the market's 0:02:13.960 --> 0:02:17.440 going up, they accelerate the up and moves going down 0:02:17.480 --> 0:02:20.960 the accelerated down mood and I think the SEC should 0:02:21.200 --> 0:02:24.000 be They've been very mindful of the course of trading, 0:02:24.400 --> 0:02:27.000 but they have not looked at the lowering the course 0:02:27.040 --> 0:02:29.640 of trading, what impact has had in the market. And 0:02:29.680 --> 0:02:31.440 I think that we should try to slow things down 0:02:31.440 --> 0:02:34.520 a little and reinstate the up to group. Charles Cancer 0:02:34.680 --> 0:02:36.640 of New Berger Berman was on the other day and 0:02:36.680 --> 0:02:40.800 made very clear his break is a responsible short interest. 0:02:41.200 --> 0:02:45.680 Leon Cooperman is one path here to restrict the size 0:02:45.919 --> 0:02:49.720 of the short interest, to not only protect investors, but 0:02:49.840 --> 0:02:52.320 just just to put a break on all that high 0:02:52.400 --> 0:02:56.200 speed market. No, I would say that we should just 0:02:56.200 --> 0:02:59.000 follow the rules that existence. I mean, if you're short 0:02:59.080 --> 0:03:01.760 something you have to secure, you're a ball, okay, if 0:03:01.800 --> 0:03:03.760 you if you if you can't have a barrow, you 0:03:03.760 --> 0:03:07.080 shouldn't be short. So the extent that somebody shouldn't one 0:03:07.120 --> 0:03:09.720 that represented the market capital company, it is because the 0:03:09.800 --> 0:03:13.359 rules have not been followed. Liam was anything to a 0:03:13.520 --> 0:03:19.680 maya from the events of several weeks ago, anything to admire, Uh, well, 0:03:19.680 --> 0:03:22.800 the system has survived. But you know, no, I would 0:03:22.800 --> 0:03:26.200 say it's not. Look, the Wall Street ethics has been 0:03:26.200 --> 0:03:29.119 in a decline for quite some time, many many years ago. 0:03:29.160 --> 0:03:32.079 I confronted the then head of the New York Stock Exchange. 0:03:32.520 --> 0:03:36.240 I asked why they allowed these algorithmic guys to co 0:03:36.400 --> 0:03:39.280 locate their computers next to New York Stocker Change, to 0:03:39.360 --> 0:03:42.520 give them a split second advance over the public. Just 0:03:42.560 --> 0:03:45.400 doesn't seem to be right. And his response was, well, 0:03:45.520 --> 0:03:48.240 we don't do it, somebody else will. Okay. The sale 0:03:48.280 --> 0:03:51.360 of order flow raises questions in terms of whether the 0:03:51.400 --> 0:03:54.800 public's orders are being abused. But I think that there 0:03:54.840 --> 0:03:56.680 there's a lot of things yet she could be doing. 0:03:57.160 --> 0:03:59.320 And the last thing we need is Elizabeth Warren or 0:03:59.320 --> 0:04:03.520 Bernie Sands or AOC getting involved setting policy. You know, 0:04:03.560 --> 0:04:07.200 the rules and the regulations exist there in place, just 0:04:07.320 --> 0:04:10.120 follow them. Well. Actually, know, Leon, a lot of people 0:04:10.160 --> 0:04:13.640 have characterized this as the wealthy versus the poor, David 0:04:13.920 --> 0:04:15.880 versus Goliath. How and healthful do you think that is? 0:04:15.960 --> 0:04:20.240 Right now? I think that's all blowning, you know, uh, 0:04:20.880 --> 0:04:24.960 this persistent attack of the wealthy. I mean, Melvin lost 0:04:25.000 --> 0:04:28.560 a lot of money. I suspect that he's a very 0:04:28.560 --> 0:04:33.120 wealthy guy, the fellow that runs Melbourne Capital, So so 0:04:34.120 --> 0:04:36.400 I don't think he's a battling against the wealthy and 0:04:36.440 --> 0:04:39.040 the poor. I think in America as a country became 0:04:39.120 --> 0:04:42.760 great because poor people want to inspire to become wealthy, 0:04:43.080 --> 0:04:47.320 not because they basically had a negative view of the wealthy. 0:04:47.440 --> 0:04:50.080 And uh, you know, how do you become wealthy in America? 0:04:50.360 --> 0:04:52.760 You become wealthy in America you should develop a practice 0:04:52.800 --> 0:04:56.000 service and somebody needs when you get richly rewarded and 0:04:56.040 --> 0:04:58.360 the people who had to have their head screwed oncorrectly 0:04:58.760 --> 0:05:02.039 then shared that success others less fortunate. Is the world 0:05:02.120 --> 0:05:04.360 better off and worse off because of Bill Gauge, Jeff 0:05:04.400 --> 0:05:08.320 Bezos and host of other people. You know, I've said 0:05:08.320 --> 0:05:10.839 on your program other programs, ken Lyn Bell, who go 0:05:10.880 --> 0:05:13.920 in the finest human beings I've ever met? Okay Well, 0:05:14.000 --> 0:05:17.960 Ken State, Bernie Marcus, Uh you know, I think he 0:05:18.040 --> 0:05:20.960 raised him something like h fifty families put up two 0:05:20.960 --> 0:05:23.600 billion dollars East they raised ten million dollars, and I 0:05:23.640 --> 0:05:26.120 don't know. The enterprise today is probably two d and 0:05:26.120 --> 0:05:30.039 seventy billion dollars. They have several thousand employees and a millionaires. 0:05:30.560 --> 0:05:33.599 Bernie and Kendon given back billions of dollars to society. 0:05:34.520 --> 0:05:38.679 That's the American dream. Well, how does the FED factor 0:05:38.720 --> 0:05:41.360 into the American dream, because the American dream increasingly has 0:05:41.400 --> 0:05:43.960 been people with assets have continued to see their wealth 0:05:44.000 --> 0:05:47.280 grow dramatically under the Fed's regime, versus those who don't 0:05:47.279 --> 0:05:50.760 have assets, which have missed out. Look, this goes back. 0:05:50.960 --> 0:05:53.240 We have had some you know, I'm not a big 0:05:53.240 --> 0:05:56.120 bull in the market presently. I understand exactly what's going 0:05:56.160 --> 0:06:01.000 on basically, but we've had the government for warming some 0:06:01.080 --> 0:06:04.000 type of providing some type of life support to the 0:06:04.040 --> 0:06:06.640 economy and the markets. There's two thousand and eight, two 0:06:06.680 --> 0:06:09.440 thousand eight Mr Rnanke figured out that common was going 0:06:09.480 --> 0:06:12.120 down the toilet. He had to reverse that. He said, 0:06:12.160 --> 0:06:14.240 the best way to reverse that is to create wealth. 0:06:14.480 --> 0:06:16.520 You know, the so called forate Goo effect. Five percent 0:06:16.600 --> 0:06:19.680 of wealth changes workers with the consumption. And the best 0:06:19.680 --> 0:06:21.600 way to get wealth that we get the stock market up. 0:06:21.760 --> 0:06:24.520 The trouble with it is of stocks how much wanting 0:06:24.560 --> 0:06:26.839 to set the people? Uh, not that they did the 0:06:26.880 --> 0:06:29.440 wrong thing. They did the right thing, okay, and then 0:06:29.480 --> 0:06:33.119 they spent the next ten years taking away the wealth 0:06:33.200 --> 0:06:35.560 that was created from the wealthy by creating an environment 0:06:35.560 --> 0:06:38.520 where there's no returnment savings. So if you were letter 0:06:38.640 --> 0:06:40.560 proved in life in two thousand and eight, and you 0:06:40.560 --> 0:06:42.680 didn't get caught in a big way and you had savings. 0:06:43.120 --> 0:06:48.120 If you tax adjust and inflation adjust, you returned savings negative. Okay, 0:06:48.279 --> 0:06:50.159 And now they want to get another bite of the apple. 0:06:50.600 --> 0:06:53.640 We are following. It's very clear what's going on in 0:06:54.120 --> 0:06:58.360 the country right now. Unemployment pre COVID was like five 0:06:58.440 --> 0:07:01.120 point seven million people on the poor in that balloon 0:07:01.279 --> 0:07:04.279 over twenty three million. That's now down to about a 0:07:04.320 --> 0:07:08.120 bit over ten million. And they're conducting monetary and fiscal policy, 0:07:08.680 --> 0:07:10.920 not saying it wrong, but there's a pricey page for 0:07:10.920 --> 0:07:14.160 this long term. They're conducting policy with the idea of 0:07:14.200 --> 0:07:17.880 getting the unemployment back to where it was pre COVID. Okay, 0:07:18.040 --> 0:07:20.720 and everything they're doing so just look at the world. 0:07:21.040 --> 0:07:25.720 We've injected one trillion dollars more in stimulus in the 0:07:25.800 --> 0:07:29.120 way of transfer payments. Is the economy incoming has been lost? 0:07:29.360 --> 0:07:32.680 Plus we're talking about another trillion nine Okay. We took 0:07:32.680 --> 0:07:34.600 two and fourty five years from this country to go 0:07:34.640 --> 0:07:37.600 from zero national debt to twenty one or two trillion. 0:07:37.640 --> 0:07:39.880 That's going up three trillion dollars a year. That's not 0:07:39.960 --> 0:07:42.920 a sustainable situation. It's a price repeat for that, Leon, 0:07:43.360 --> 0:07:46.000 What is the consequence? Is it runaway inflation? Is it 0:07:46.200 --> 0:07:49.120 markets that are going to get overheated. I don't know 0:07:49.160 --> 0:07:51.360 the answer because the inflation and inflation. I just know 0:07:51.440 --> 0:07:54.080 it's not gonna be a good end. And I don't 0:07:54.080 --> 0:07:55.400 know what it ends, but it's not gonna be a 0:07:55.440 --> 0:07:57.360 good end to the game. It's not gonna be a 0:07:57.360 --> 0:07:59.720 good end. Just think about this way. If you speak 0:07:59.760 --> 0:08:02.040 to a hundred economists, and Mr Keane is a damn 0:08:02.080 --> 0:08:04.480 good economists of his own, you speak to a hundred 0:08:04.560 --> 0:08:08.080 columnists today Ust and what is the trend? Real growth 0:08:08.120 --> 0:08:11.920 in the economy? Trend real growth? Then we said, tis 0:08:11.960 --> 0:08:14.640 potention to grow in real terms about two percent one 0:08:14.680 --> 0:08:18.200 episcent proactivity fifty basis boys from labor force growth, that's 0:08:18.200 --> 0:08:21.080 two percent, and let pe sent for inflation, that's four 0:08:21.160 --> 0:08:25.160 percent nominal GDP growth. Okay, this year the economy is 0:08:25.200 --> 0:08:28.480 expected to grow six percent. It's growing three in real terms. 0:08:28.720 --> 0:08:31.880 It's growing a three times trend. Yet we have zero 0:08:31.920 --> 0:08:35.640 interest rates. Doesn't make any sense. It's being the policy. 0:08:35.840 --> 0:08:41.199 And I resent Mr Powell in one respect, let him okay, Leon, Look, 0:08:41.240 --> 0:08:42.800 I want Leon, I want to get back just as 0:08:42.840 --> 0:08:44.360 the running out of time. I want to get back 0:08:44.360 --> 0:08:46.560 to what we're talking about here. Michael Lewis wrote a 0:08:46.600 --> 0:08:51.320 book about the flash boys. We've got to do something 0:08:51.400 --> 0:08:54.480 to get us away from the cult of high speed trading. 0:08:54.960 --> 0:08:59.680 What is your policy prescription for Mr Gensler to get 0:08:59.760 --> 0:09:04.439 us somewhere back to where Vailue is worshiped like Price 0:09:05.640 --> 0:09:07.880 the files a letter I sent to j Clinton in 0:09:08.040 --> 0:09:13.120 December recommending reinstating the uptick rule that was slow the 0:09:13.200 --> 0:09:16.319 process down. I see no downside risk to doing that, 0:09:16.880 --> 0:09:20.000 and it can control. It would basically add some stability 0:09:20.000 --> 0:09:23.520 to the system. There's no stabilizers up or down, and 0:09:23.559 --> 0:09:25.520 that's not a good thing for the markets. Who is 0:09:25.640 --> 0:09:29.000 lobbying for those people? I mean, who is representing them 0:09:29.080 --> 0:09:33.240 against people of the high speed industry, And I'm gonna 0:09:33.280 --> 0:09:38.280 say including Mr Griffin. I honestly don't know. You know, 0:09:38.559 --> 0:09:41.360 I'm nearly an old fashioned investor. I buy stocks one 0:09:41.400 --> 0:09:44.000 at a time. I'm a value guy. I buy things. 0:09:44.040 --> 0:09:46.520 What's your single bust buy right now? Farrell's gotta make 0:09:46.520 --> 0:09:49.640 some money. What's your single best buy? Complicated? But my 0:09:49.679 --> 0:09:52.440 single best idea, which should be my largest position right 0:09:53.000 --> 0:09:57.880 is a company called Legato. Legato owns somewhere between and 0:09:57.880 --> 0:10:02.880 forty megaherts and spectrum i G spectrum which got caught 0:10:02.960 --> 0:10:05.520 up at some controversy with the Department of Friends very 0:10:05.600 --> 0:10:09.520 bously objected to their spectrum used because they said interfere 0:10:09.559 --> 0:10:13.400 with the d needs complete PLODI. The FCC did a 0:10:13.440 --> 0:10:16.600 fabulous job by the chairman Pie studied this for over 0:10:16.720 --> 0:10:20.480 five years and by a five to zero by personal vote. 0:10:20.760 --> 0:10:28.040 There you go to tell you Leon, thank you. We've 0:10:28.040 --> 0:10:29.640 got to leave it there. Leon cooperm in there and 0:10:29.720 --> 0:10:31.679 make a family office Chairman and see Leon get to 0:10:31.679 --> 0:10:40.080 catch up. Got to see you again. Thank you. It 0:10:40.120 --> 0:10:42.920 would be nice John to speak to someone truly expert 0:10:42.960 --> 0:10:46.959 in the span of commodities. Young Gartman ages ago. John 0:10:47.000 --> 0:10:50.360 Farrell actually was in the pits enjoying losing money. Well, 0:10:50.400 --> 0:10:52.520 let's talk to Dennis now, not about losing money, maybe 0:10:52.520 --> 0:10:55.080 even making it. Dennis Gartman, Chairman of the University of 0:10:55.080 --> 0:10:58.040 Akrons and Downment Committee. Dennis grit to catch up with you, sir. 0:10:58.280 --> 0:11:00.880 You've heard the same conversation we've heard. Let's contribute to 0:11:00.920 --> 0:11:03.920 it and common it's he super psychile. Your thoughts now, Dennis, 0:11:04.640 --> 0:11:06.840 I think There's something going on that is very, very 0:11:06.840 --> 0:11:08.959 serious in the commodity markets. Take a look at almost 0:11:09.000 --> 0:11:10.800 any commodity that you want to look at. Look at tin, 0:11:11.320 --> 0:11:14.559 it's up dramatically. Look at copper, it's up dramatically. Look 0:11:14.600 --> 0:11:18.679 at cotton, it's up dramatically. Look at wheat, corn, soybeans 0:11:18.720 --> 0:11:21.440 up dramatically. Look at livestock prices up dramatically. Look at 0:11:21.480 --> 0:11:24.400 the cost of shipping goods up dramatically. There's something more 0:11:24.480 --> 0:11:27.000 going on than just a mere bounce from the lows. 0:11:27.040 --> 0:11:29.800 I think that the bear market that had existed for 0:11:29.880 --> 0:11:32.160 a more than a decade has ended. I think a 0:11:32.200 --> 0:11:34.240 bowl market that will probably last for a long period 0:11:34.280 --> 0:11:37.080 of time has begun. The monetary authorities around the world 0:11:37.080 --> 0:11:40.520 are sponsoring this is to become extremely expansionary. This is 0:11:40.559 --> 0:11:43.600 starting and it's not going to go away anytime soon. Dennis, 0:11:43.640 --> 0:11:46.920 I gotta rip up the script. You are absolutely definitive 0:11:47.080 --> 0:11:50.120 in the way that you stop losing money in commodities, 0:11:50.120 --> 0:11:52.120 which is a habit. It's sort of like game stop. 0:11:52.440 --> 0:11:56.520 To be honest, what is your best practice for our 0:11:56.559 --> 0:12:01.760 listeners and viewers to not lose money investing in commodities. 0:12:01.800 --> 0:12:05.679 What's the single best guardment tip. Add to winning trades 0:12:05.720 --> 0:12:08.959 and avoid doing and avoid adding to losing trades. Whatever 0:12:09.000 --> 0:12:10.920 you do. An old rule of mine, and it's a 0:12:11.000 --> 0:12:12.920 very good rule. Do more of that which is working 0:12:12.920 --> 0:12:15.120 and less of that which is not. If something is 0:12:15.160 --> 0:12:16.760 going from the lower left to the upper right and 0:12:16.800 --> 0:12:19.520 it's been working for you, add to it. If something's 0:12:19.559 --> 0:12:21.720 been going from the lower left to the upper right 0:12:21.720 --> 0:12:24.200 and you're short of it, stop doing that. So that's 0:12:24.240 --> 0:12:27.480 the simplest methodology. It's the best methodology. It's good in life, 0:12:27.480 --> 0:12:29.280 and it's good in trading. Do more of that which 0:12:29.320 --> 0:12:32.200 is working and less of that which is not. Evidently 0:12:32.600 --> 0:12:34.920 over leverage, it was about to say, evidently triple every 0:12:34.920 --> 0:12:38.000 cash is working really well for a Tom Keene. There 0:12:38.040 --> 0:12:40.760 raises a question though, this idea of the goods inflation, 0:12:40.840 --> 0:12:43.320 this idea of commodity is gaining at a time when 0:12:43.320 --> 0:12:46.400 people can't go out and have experiences in the same 0:12:46.440 --> 0:12:49.000 way because of the pandemic, and there's been a shift 0:12:49.040 --> 0:12:52.839 from spending in services to spending on goods. Is that 0:12:52.880 --> 0:12:55.640 going to last and enough of a way to keep 0:12:55.679 --> 0:12:58.840 this supercycle going as people are predicting, or could this 0:12:58.880 --> 0:13:01.960 be skewing some of what seeing currently, Dennis, as long 0:13:02.000 --> 0:13:04.600 as the monetary authorities continue to be expansionary, and it's 0:13:04.640 --> 0:13:06.240 not just a FED that is that way. It's the 0:13:06.240 --> 0:13:08.160 Bank of Candidates, the Bank of England, it's the e 0:13:08.200 --> 0:13:10.079 c B, It's the People's Bank of China, it's the 0:13:10.120 --> 0:13:12.960 people It's a Reserve Bank of Russia, the reserve banks 0:13:12.960 --> 0:13:15.680 of Australia and New Zealand. All of them are all expansionary. 0:13:15.760 --> 0:13:18.840 All of them are expanding reserves at a pace far 0:13:18.920 --> 0:13:22.800 past any reasonable expectation of GDP and population growth. So 0:13:22.840 --> 0:13:25.080 it is inflationary around the world. And this is not 0:13:25.160 --> 0:13:27.520 going to go away anytime soon. As I've said many 0:13:27.559 --> 0:13:29.840 times before and I'll continue to say in the future. 0:13:29.840 --> 0:13:32.400 This is something sponsored by the central banks and it's 0:13:32.440 --> 0:13:35.360 not going to stop. And I just want to mention folks, 0:13:35.400 --> 0:13:38.120 but Mr Gartman just mentioned there in trading strategy is 0:13:38.160 --> 0:13:42.160 called an anti Martingale strategy. This is from the Bibles 0:13:42.200 --> 0:13:44.720 of years ago when people used to lose money. Maybe 0:13:44.720 --> 0:13:48.720 with a more informed view, Dennis Garman, John Farro demands 0:13:49.000 --> 0:13:51.840 I go to the real yield. You know, the focuses 0:13:51.920 --> 0:13:55.040 on treasury, the money they have at the FED. It's 0:13:55.040 --> 0:13:58.480 gonna flood the system. Do we go to negative interest 0:13:58.559 --> 0:14:01.080 rates and money market fund and do we go to 0:14:01.679 --> 0:14:05.360 I'll call it a volatile real yield. I think what's 0:14:05.360 --> 0:14:07.280 going to happen, or what has been happening and what's 0:14:07.280 --> 0:14:09.040 going to continue to happen, is the yield curve is 0:14:09.040 --> 0:14:12.200 going to continue to widen. The back end of the curve, 0:14:12.360 --> 0:14:14.720 which is the which is the area that the Fed 0:14:14.760 --> 0:14:17.120 has very little control over, is going to continue to 0:14:17.120 --> 0:14:19.840 see higher and higher interest rates. The long bond went 0:14:19.960 --> 0:14:22.160 above two percent just this past week. It's going to 0:14:22.200 --> 0:14:23.680 go to three or four percent over the course of 0:14:23.680 --> 0:14:25.680 the next several years. But the Fed is going to 0:14:25.760 --> 0:14:28.160 continue to keep the overnight Fed funds right. They've told 0:14:28.240 --> 0:14:30.440 us this. I believe them. They're gonna keep the overnight 0:14:30.440 --> 0:14:32.840 Fed funds rate at or near zero. Can they take 0:14:32.880 --> 0:14:35.920 it to negative numbers. It's possible, I doubt it. But 0:14:35.960 --> 0:14:37.960 the important thing is to notice that the spread between 0:14:37.960 --> 0:14:40.000 the overnight Fed funds rate and the long end of 0:14:40.040 --> 0:14:41.480 the curve is going to continue to wide. And this 0:14:41.520 --> 0:14:44.640 will help the banking system and more than anybody else. 0:14:44.720 --> 0:14:48.760 But it's this is something that's predicated upon inflation continuing 0:14:48.760 --> 0:14:50.240 for a long period of time. So the Fed is 0:14:50.280 --> 0:14:52.760 not going to tighten monetary policy at the short end, 0:14:53.160 --> 0:14:55.840 but the market itself is tightening monetary policy at the 0:14:55.840 --> 0:14:57.640 long end. And that's what people have to get have 0:14:57.720 --> 0:14:59.960 to understand, and they'd be plugging that into the funance 0:15:00.000 --> 0:15:01.600 of sect of the banks have been flying. Dennis is 0:15:01.600 --> 0:15:04.040 great to catch up, Sir Dennis Galman, Chairman. I think 0:15:04.080 --> 0:15:11.800 University of akrons in down and fun James Bianco with 0:15:11.920 --> 0:15:15.800 this Bianco research, UH this morning, Jim Bianco, real simple 0:15:16.240 --> 0:15:19.760 does the carnage of the Midwest deep freeze? Does that 0:15:19.920 --> 0:15:25.120 adjust national economics? You know, you normally think it would, 0:15:25.280 --> 0:15:28.040 but given that we're already in the mode of working 0:15:28.080 --> 0:15:30.840 from home, the impact is far less than it would 0:15:30.840 --> 0:15:34.320 have been in a pre pandemic era. So a lot 0:15:34.400 --> 0:15:37.960 of people like me are hit home working and while 0:15:37.960 --> 0:15:40.440 it's snowing outside, as I talked to you, not a 0:15:40.440 --> 0:15:42.400 whole lot it's going to change with my work habits 0:15:42.520 --> 0:15:46.280 just because of the pandemic. Many people missed they recovery 0:15:46.440 --> 0:15:49.120 last year and how quickly, more specifically, how quickly the 0:15:49.160 --> 0:15:53.240 u S would recover. Are we doing that all over again? Uh? 0:15:53.480 --> 0:15:56.280 As far as missing it no, because I think a 0:15:56.320 --> 0:15:59.720 lot of people are expecting a booming recovery. If there's 0:15:59.760 --> 0:16:03.200 any thing we might be missing, the return of inflation. 0:16:04.040 --> 0:16:05.960 I've heard that, you know, Wall Street has been upping 0:16:05.960 --> 0:16:10.200 their forecast for real GDP growth, And I would just 0:16:10.280 --> 0:16:12.680 put a little finer tune on that and say, maybe 0:16:12.680 --> 0:16:15.160 it turns out to be nominal GDP growth that's gonna 0:16:15.200 --> 0:16:18.320 go up, and that more of that component is going 0:16:18.360 --> 0:16:20.800 to be inflation and a little less of that component 0:16:21.120 --> 0:16:23.280 is going to be real growth. But I don't think 0:16:23.320 --> 0:16:25.560 that there's a lot of people that are looking for 0:16:25.960 --> 0:16:29.520 the economy to turn south anytime soon, unless something comes 0:16:29.520 --> 0:16:31.560 along to break it. Markets are picking up on that. 0:16:31.600 --> 0:16:34.240 It feels like economist behind the curve. Though on this 0:16:34.280 --> 0:16:37.200 gym you speak to many market parts, hispan sound economists separately. 0:16:37.240 --> 0:16:39.560 It just feels like the economists haven't quite upgraded their 0:16:39.560 --> 0:16:42.080 forecasts yet, and the same way this market has, particularly 0:16:42.080 --> 0:16:45.200 in the bond market. Yeah, I think what they're they're 0:16:45.280 --> 0:16:49.560 being influenced by is interest rates. They're heading higher, and 0:16:49.600 --> 0:16:51.520 I think they're going to continue to head higher. But 0:16:51.640 --> 0:16:54.880 it's been a gradual grind, and so when I talk 0:16:54.960 --> 0:16:57.880 about the potential of inflation coming. I understand there's a 0:16:57.880 --> 0:17:00.320 base effect, but then after that and ray it's might 0:17:00.320 --> 0:17:03.320 continue to move higher. On inflation, the answer, or the 0:17:03.400 --> 0:17:06.080 question is why aren't they going up? Now? You've got 0:17:06.080 --> 0:17:08.119 the Federal Reserve buying a trillion and a half dollars 0:17:08.119 --> 0:17:11.600 of bonds a year, and that's probably dampening the type 0:17:11.600 --> 0:17:14.399 of move we would have x them as well. But 0:17:14.480 --> 0:17:16.440 I do think it's there, and I think that they're 0:17:16.480 --> 0:17:20.240 just economists are starting to pick up on this idea that, 0:17:20.359 --> 0:17:22.919 as Dennis Gartman said in the last hour, the supercyclist 0:17:22.920 --> 0:17:26.320 turned commodities are moving higher and inflation looks like something 0:17:26.359 --> 0:17:29.040 that is coming back that we haven't seen in about 0:17:29.080 --> 0:17:31.600 thirty years. So it's also something that's very new for 0:17:31.640 --> 0:17:33.080 a lot of people. That's actually what I was going 0:17:33.160 --> 0:17:35.160 to say, that there's been a conditioning over the years 0:17:35.200 --> 0:17:37.439 that just because the Federal Reserve is incredibly involved in 0:17:37.480 --> 0:17:41.440 markets doesn't necessarily mean that we're going to get higher inflation. 0:17:41.560 --> 0:17:43.960 I am wondering, and not to harp on this, but 0:17:44.000 --> 0:17:46.520 good inflation versus bad inflation. You know, if if the 0:17:46.680 --> 0:17:48.959 goods that you buy and everyone is buying more of 0:17:49.000 --> 0:17:51.520 them and no services or not as many services during 0:17:51.520 --> 0:17:54.840 the pandemic, and those goods are getting more expensive because 0:17:54.840 --> 0:17:57.680 of the increased demand. So the real inflation is going 0:17:57.760 --> 0:17:59.919 up faster than perhaps some of the headline E gauges 0:18:00.080 --> 0:18:05.639 is is that good do wages necessarily follow? What's your sense? Well, 0:18:05.720 --> 0:18:09.359 the two things on the goods inflation, you're not seeing 0:18:09.400 --> 0:18:12.359 it as much in the data. But matt I Glaciers 0:18:12.359 --> 0:18:14.439 brought up a good point on Twitter over the weekend. 0:18:14.880 --> 0:18:17.480 You're getting rational in go buy something at home depot 0:18:17.560 --> 0:18:20.400 or lows and it's the price is cheap and you'll 0:18:20.400 --> 0:18:22.840 get it in April. You're you know, so they're rationing 0:18:22.840 --> 0:18:25.760 out their supply as opposed to raising their prices. Well, 0:18:25.760 --> 0:18:28.560 that's a form of inflation. It's just not showing up 0:18:28.960 --> 0:18:32.280 in in the data as well too. As far as 0:18:32.320 --> 0:18:34.760 where we're gonna go from here, I think you know, 0:18:34.800 --> 0:18:37.840 when you talk about bad inflation, the question is gonna 0:18:37.880 --> 0:18:41.919 be once we reopen with all the stimulus and services 0:18:41.920 --> 0:18:43.800 start to move because a lot of them are dormant 0:18:43.920 --> 0:18:47.320 right now because of the lockdown restrictions, are we gonna 0:18:47.320 --> 0:18:51.720 see that start to move? And finally you mentioned about wages, Uh, 0:18:51.880 --> 0:18:55.000 we have already been, you know the vernacular even using 0:18:55.040 --> 0:18:57.440 we've been mailing people money. We just got done mailing 0:18:57.480 --> 0:19:00.040 them six hundred dollars. We're gonna mail them fourtellars. I 0:19:00.119 --> 0:19:04.000 understand why we're doing it. That's the American income right 0:19:04.040 --> 0:19:07.480 now is being sent to you via the government in 0:19:07.480 --> 0:19:09.760 the form of stimulus. And there's another big one coming. 0:19:10.080 --> 0:19:13.800 Don't need wage inflation, you have personal income inflation because 0:19:13.840 --> 0:19:16.560 the government is making up that difference, and that's going 0:19:16.600 --> 0:19:19.560 to lead to a big stimulus. One thing's reopen later 0:19:19.600 --> 0:19:21.520 this year. And this is the big distinction that people 0:19:21.560 --> 0:19:24.320 are pointing to. Why we're going to get inflation that's 0:19:24.400 --> 0:19:28.800 much faster than people are expecting. As economists become more 0:19:28.840 --> 0:19:33.080 accepting of this idea, how high can yields go? Well, 0:19:33.119 --> 0:19:36.320 you know that that's the that is the concern, because 0:19:36.359 --> 0:19:39.600 we have a deeply negative real yield right now. If 0:19:39.600 --> 0:19:43.280 you were to get inflation back to the Fed says 0:19:43.359 --> 0:19:45.800 that they'll tolerate two and a half percent, Okay, fine, 0:19:45.840 --> 0:19:48.840 let's use that, and then people believe that inflation is 0:19:48.840 --> 0:19:51.000 is something to stick with. We might have to move 0:19:51.040 --> 0:19:53.600 the positive yields that could get you at least to 0:19:53.640 --> 0:19:55.240 two and a half percent in the ten year note. 0:19:55.400 --> 0:19:57.159 I mean over a long period of time like the 0:19:57.240 --> 0:20:00.520 end of next year, and in this leveled b on market, 0:20:00.880 --> 0:20:04.800 that kind of move would be very unsettling. Even though 0:20:04.840 --> 0:20:06.440 you might look at it from a long history and 0:20:06.480 --> 0:20:07.920 say it's still two and a half percent. It's a 0:20:08.000 --> 0:20:11.560 very low yield. But from the perspective of the way 0:20:11.600 --> 0:20:14.800 that bonds are traded and held and especially financed through 0:20:14.840 --> 0:20:17.560 the repo market, that kind of moving yields will not 0:20:17.720 --> 0:20:20.640 will be a very difficult one for everybody to swallow. Jim, 0:20:20.640 --> 0:20:22.520 I want you to go back to your training and 0:20:22.560 --> 0:20:26.919 technical analysis. You are a CMT. How do you find 0:20:27.000 --> 0:20:31.440 the breaking of trend on the real yield? The real 0:20:31.560 --> 0:20:33.840 yield breaking of trend is going to be very difficult 0:20:33.880 --> 0:20:36.879 to find right now because it's it's been in a 0:20:36.960 --> 0:20:40.320 down trend and it really hasn't turned very much. But 0:20:40.640 --> 0:20:42.679 what I have found in looking at those charts is 0:20:42.720 --> 0:20:48.119 when it does break, it tends to move rapidly, you know. 0:20:48.200 --> 0:20:50.159 So you know, I heard John say, you know what, 0:20:50.320 --> 0:20:52.160 you know, maybe there's a little bit of a turn here, 0:20:52.160 --> 0:20:55.000 and that's inaccurate description, and then there's a little bit 0:20:55.000 --> 0:20:57.320