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Speaker 1: Hello, and welcome to What Goes Up, a weekly markets podcast.

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Speaker 1: My name is Mike Reagan. I'm a senior editor at Bloomberg,

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Speaker 1: and I'm Lodona Hio, Across Acid reporter with Bloomberg. This

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Speaker 1: week on the show, well do you remember Tina, the

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Speaker 1: acronym standing for there is no alternative two stocks for

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Speaker 1: investors looking for positive returns? Well, Tina left the building

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Speaker 1: in two and no one seems to expect her to

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Speaker 1: return this year. Either. With investment grade corporate bonds offering

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Speaker 1: yields of almost six percent and even to year treasuries

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Speaker 1: yielding well above four there are alternatives two stocks this year.

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Speaker 1: We're gonna get into it with the director of Global

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Speaker 1: Macro at a major investment firm. But Voldonna before that,

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Speaker 1: I've noticed it's a new year. I am still not

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Speaker 1: a member of your professional network. On Lincoln, this week's

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Speaker 1: guess actually is a member of I think I'm a

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Speaker 1: member of his professional network. I don't know how it works.

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Speaker 1: I definitely added him because I was looking at his

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Speaker 1: LinkedIn earlier and in preparation for the show, and he

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Speaker 1: has some really great posts about food. He's a good follow,

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Speaker 1: he's a good chef. He's a good person to follow.

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Speaker 1: I was just going to say, you can make a

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Speaker 1: name in social media either with great charts, financial charts

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Speaker 1: or with good food picks. Yeah, good foods. I think

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Speaker 1: he's got both bases, have both. I'm getting hungry. I

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Speaker 1: get hungry every time I see is. Can I just

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Speaker 1: tell you I have so many invites pending on LinkedIn. Now,

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Speaker 1: even if I tried to add I would never You

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Speaker 1: couldn't possibly even find it. Take me like years. Yeah,

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Speaker 1: that's that's the reason I'm not. But I am friends

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Speaker 1: with with our guests. It's it's Ran tim Or. He's

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Speaker 1: the director of Global Macro ad Fidelity Investments. Yourian, thank

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Speaker 1: you so much for joining us on the podcast. Yeah, well,

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Speaker 1: thank you for having me. And you know, it's funny

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Speaker 1: you mentioned the food on on social media because you

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Speaker 1: can never please everyone, you know, like I'll get comments saying, oh,

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Speaker 1: you know, just you know what is his Facebook? You know,

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Speaker 1: just just to stick to the market commentary. And then

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Speaker 1: how about the vegans out there, like show me somety

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Speaker 1: and so you can never please everyone? Will want some cauliflower.

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Speaker 1: I think I love cauliflower. I am vegetarian, so I

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Speaker 1: actually would like to see more vegetables. Yeah, absolutely he did. Uh.

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Speaker 1: I think he did bee fund for for Christmas. I

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Speaker 1: did not know that was legal that you could do

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Speaker 1: beef fun. You can actually dip the beef in the cheese.

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Speaker 1: This is like a dream come true for me. It's

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Speaker 1: an old recipe from It's a recipe from my My

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Speaker 1: mom is a great chef. She's eighty eight years old.

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Speaker 1: But some of my my best recipes are really vintage

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Speaker 1: retro recipes that were hers from the nineteen seventies. And

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Speaker 1: you know, beefund was like a big thing back there

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Speaker 1: back then. So most people think of cheese fondu, but

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Speaker 1: beefndu is a very good social social type of dinner.

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Speaker 1: You can have ten people over, so it's a lot

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Speaker 1: of fun. I'm salvating just thinking about it. Should have

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Speaker 1: a party mine. You're into the party. Yeah, But I think,

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Speaker 1: all right, you're let's let's shift to your recipe for

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Speaker 1: the markets. Though, I think, how's that sege? That's a

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Speaker 1: really good segue. So on one of your LinkedIn posts,

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Speaker 1: actually you said two was challenging, So I'm wondering what

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Speaker 1: you foresee for three? And maybe if you don't want

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Speaker 1: to give a full year outlook what you see for

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Speaker 1: the next couple of months at least. So two was

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Speaker 1: all about undoing the excesses in the markets stemming from

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Speaker 1: the basically the over stimulated system following the COVID you

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Speaker 1: know crash and the lockdowns um and you know that

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Speaker 1: whole that whole story episode, which I hope is behind us,

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Speaker 1: but you never know with with COVID UM. But you know,

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Speaker 1: when the FED went, you know, on the on the

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Speaker 1: gas pedal together with the Treasury, and we had that

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Speaker 1: one to punch of fiscal monetary stimulus. Obviously it was

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Speaker 1: needed at the time. It was a very timely, very

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Speaker 1: active response. It certainly did what it was supposed to do,

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Speaker 1: but I think we can probably all agree that there

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Speaker 1: was maybe too much and it stayed around for too long.

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Speaker 1: The FED appreciated the supply chain bottlenecks and the you know,

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Speaker 1: the transitory nature of that. Obviously the FED could not

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Speaker 1: see the Russia Ukraine war coming, But in retrospect, maybe

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Speaker 1: there should have been more of an appreciation for the

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Speaker 1: kind of the magnitude of the fiscal stimulus that happened

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Speaker 1: that we haven't really seen since world War two, UM,

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Speaker 1: and so was about taking that punch bowl away in

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Speaker 1: a very big way. And it cost evaluation reset in

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Speaker 1: all markets, right, the bond market, the stock market, the

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Speaker 1: crypto market, the commodity markets, you name it. And so

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Speaker 1: that was so it was a big valuation reset. Basically,

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Speaker 1: the FED raised the cost of capital on everyone, homeowners,

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Speaker 1: the government, corporations, consumers, um, and the bond market. You

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Speaker 1: know you mentioned Tina early here. The bond market went

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Speaker 1: back to being a viable competitive asset class, I mean

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Speaker 1: positively correlated to the stock market. Unfortunately for anyone in

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Speaker 1: a sixty forty type portfolio, which is really most of us,

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Speaker 1: but that level the playing field that we now actually

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Speaker 1: have a menu of asset classes that actually is more

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Speaker 1: closely resembles what we have historically seen rather than you know,

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Speaker 1: the last few years. So now we're in three and

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Speaker 1: for me, the big question and for many investors of course, is,

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Speaker 1: you know, will the FET be able to thread the

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Speaker 1: needle by raising rates just high enough to tame the

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Speaker 1: inflation monster, but without causing a severe recession, which would

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Speaker 1: then mean an earnings contraction, which then would point to

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Speaker 1: the risk of another leg down for the stock market.

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Speaker 1: So I think the bond market has largely reset itself.

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Speaker 1: We went from one sent long yields to you know,

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Speaker 1: over four point three were now at about three and

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Speaker 1: three quarters or so. So I think that reset is

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Speaker 1: behind us. But for the stock market, when you look

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Speaker 1: at historical cycles, there are some cycles where all of

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Speaker 1: the reset in the market, all of the bear market

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Speaker 1: basically was evaluation component, and by the time earnings maybe

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Speaker 1: did start to fall, enough of it was discounted that

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Speaker 1: the market actually was able to rally because price generally

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Speaker 1: bottoms before earnings. That certainly happened in two happened in

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Speaker 1: twenty I should say happened in two thousand nine. But

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Speaker 1: you know, when you look at the macro data and

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Speaker 1: you look at the inversion in the yield curve, you know,

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Speaker 1: we when the yield curve was the most inverted about

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Speaker 1: a month ago, we were at the nine percent of

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Speaker 1: most inversion of all time, you know, the most inverted

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Speaker 1: since nineteen the early nineteen eighties. And you have a

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Speaker 1: FED basically saying, as per the December f o MC

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Speaker 1: meeting that you know, we're gonna go to five ish percent,

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Speaker 1: which given where inflation expectations are now via the tips,

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Speaker 1: market would be in a you know, at a significantly

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Speaker 1: restrictive zone, and the Fed is saying, you know, we're

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Speaker 1: going to kind of stay there for a while. And

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Speaker 1: so if if when you combine that with the possibility

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Speaker 1: or the likelihood of a recession maybe in the second

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Speaker 1: half of the year, which would then cause an earnings contraction,

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Speaker 1: you know, it's not unreasonable to worry that there was

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Speaker 1: another shoe that's going to drop. But again, it's it's

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Speaker 1: a very much a nonlinear type of thing because price

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Speaker 1: does bottom before earnings. I don't know if you remember

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Speaker 1: two and a half years ago. You know, in the

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Speaker 1: summer of the market was roaring back, going to new

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Speaker 1: all time highs fairly quickly after the crash in in

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Speaker 1: February and March, and a lot of people were scratching

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Speaker 1: their heads, saying, how how is this possible? The world

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Speaker 1: is coming to an end, people are dying, the economy

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Speaker 1: is lockdown. How can the market be justified by going

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Speaker 1: to new highs? And in retrospect, the market was just

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Speaker 1: feeling that that lead lag timeline between price and earning.

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Speaker 1: So it is possible that the October lows were the

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Speaker 1: lows um and that if we get a mild recession

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Speaker 1: or a mild earnings contraction or only an earnings contraction

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Speaker 1: in real terms but not in nominal terms, that we've

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Speaker 1: seen the worst of it. But it is a risk

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Speaker 1: that there is an earnings wave coming in uh let's

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Speaker 1: say later, and that we're not out of the woods yet.

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Speaker 1: So my very safe forecast is that is going to

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Speaker 1: be kind of a choppy, sideways market where we're going

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Speaker 1: to revisit the lows maybe once or twice as kind

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Speaker 1: of the fear grows that there's an earnings wave coming.

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Speaker 1: But at the same time, there's going to be opportunities.

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Speaker 1: There's gonna be a lot of under the surface rotation.

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Speaker 1: I think, like we saw in two, I think international

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Speaker 1: markets are looking a lot more interesting. Value I think

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Speaker 1: will continue to outperform growth. So I think it's going

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Speaker 1: to be a very very bifurcated market where at the

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Speaker 1: beta level not much is going to happen, but at

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Speaker 1: the alpha level, at the second order asset allocation level,

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Speaker 1: there will be opportunities. And I think the forty side

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Speaker 1: of the sixty forty will be a port in the storm.

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Speaker 1: Uh If if that's sixty side still has another down lick.

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Speaker 1: It's interesting your and I are colleague Sam Potter in

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Speaker 1: London put together this monster compilation of sort of every

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Speaker 1: strategists or fund managers predictions for three and that notion

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Speaker 1: that there's a lot of bullishness on bonds. Obviously some

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Speaker 1: even saying well maybe you flip the sixty relationship and

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Speaker 1: got bonds or even bonds thirty equities. But I feel

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Speaker 1: like embedded in all this bond bullishness is this notion

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Speaker 1: that inflation has peaked, might not get back down to

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Speaker 1: that supercent level this year, but it's going to head

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Speaker 1: in that direction. We've seen the worst of it. I

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Speaker 1: just get nervous when I see a consensus like that

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Speaker 1: where everyone's sort of thinking the same thing. It makes

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Speaker 1: a lot of sense that that should happen. I think,

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Speaker 1: you know, if you have, if you're forced in your

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Speaker 1: career to make predictions for the coming year, that one

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Speaker 1: makes tons of sense. But how big of a tail

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Speaker 1: risk or regular risk is the idea that inflation isn't

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Speaker 1: as under control as everyone hopes it is. You know,

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Speaker 1: is there a risk there that's that's not really being appreciated? Yes,

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Speaker 1: I think that that is correct. And if you look

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Speaker 1: at the tips market, uh, and the tips market is

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Speaker 1: by no means always correct. No, no market is I mean,

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Speaker 1: any market is just a subset of human behavior and

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Speaker 1: human expectations, and so market signals are often wrong, which

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Speaker 1: of course is a risk for the FED when they

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Speaker 1: look at financial conditions. But that's another conversation. But it

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Speaker 1: seems like a no brainer that if we're going to

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Speaker 1: have economic weakness and now that inflation is going down,

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Speaker 1: I mean it is right. I mean, the c p

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Speaker 1: I piked at nine percent year over year in June,

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Speaker 1: and it's you know, it's well off of those levels,

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Speaker 1: and most economists that I follow, and even our in

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Speaker 1: house economics team, it seems fairly likely that inflation will

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Speaker 1: continue to come down at least still about four percent.

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Speaker 1: But as you point out that, the risk is that

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Speaker 1: it stops there or that it doesn't go all the

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Speaker 1: way back back down to two. And one thing that

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Speaker 1: the FED has been very clear about recently is that

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Speaker 1: it's not enough just to see inflation come down. It

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Speaker 1: has to come down to the FEDS target, which is

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Speaker 1: two pc, which generally the CPI runs a little higher

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Speaker 1: than that because of the different compositions. So basically two

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Speaker 1: and a half percent on the c P I would

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Speaker 1: is the Fed's target. And the risk is that, you know,

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Speaker 1: the FED will go to around five percent in the

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Speaker 1: next three months or so. I mean, the FED has

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Speaker 1: been fairly clear about that. The dot plot suggests the

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Speaker 1: same thing. Uh, But there's a disconnect between what the

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Speaker 1: forward curve, you know, the SOFA curve or the FED

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Speaker 1: funds curve is saying the FEED will do and what

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Speaker 1: the FED is saying the FED will do. Right, if

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Speaker 1: you look at the three dot plot, the median dot

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Speaker 1: is like four and three eight or so, and the

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Speaker 1: FED funds curve or the SOFA curve is at three.

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Speaker 1: I mean, that's a big disconnect, right, And so I

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Speaker 1: think the risk is that, and I think the FED

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Speaker 1: sees this, is that the FED wants to contain inflation

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Speaker 1: all the way back to its target because if it

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Speaker 1: doesn't do it now, even at the risk of a recession,

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Speaker 1: then it may never be able to do it unless,

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Speaker 1: you know, unless much more severe measures are taken. And

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Speaker 1: imagine we do go into a recession second half of

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Speaker 1: this year and inflation goes all the way to four

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Speaker 1: which is of course help of a lot better than

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Speaker 1: nine um. But that's then the trough. And let's say

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Speaker 1: inflation then accelerates in the following expansion off of a

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Speaker 1: base of three or four instead of you know what

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Speaker 1: normally would be zero or one, right, because the pendulum

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Speaker 1: is always swinging through that average target. And I think,

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Speaker 1: you know, I mean, it's a conversation for another time,

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Speaker 1: because we're very far from that happening. But that would

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Speaker 1: create the risk that bonds are indeed no longer support

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Speaker 1: in the storm because if you think about where the

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Speaker 1: term premium is, which is around zero or so. Uh.

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Speaker 1: And let's say that inflation does become more embedded at

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Speaker 1: a higher rate, even if it's only three or four,

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Speaker 1: it's still you know, almost double what the FED would

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Speaker 1: like to see. Then you could see a period of

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Speaker 1: structurally higher real rates and nominal rates. But I think

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Speaker 1: for the focus will be more on recession risk and

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Speaker 1: the forty starting to negatively correlate again against the sixty,

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Speaker 1: which is what has happened in the last few months. Again,

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Speaker 1: although it's only a few nts, do you just want

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Speaker 1: to pause and say it's the year finally people are

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Speaker 1: talking about SOFA it's taken a while. Finally the secured

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Speaker 1: overnight financing rate that replaced library Are you impressed with

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Speaker 1: You're not as impressed as I am. Not just you know,

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Speaker 1: because I bug you with these topics all the time,

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Speaker 1: where I email I'm like, what does this mean? All

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Speaker 1: the time? So first, huge, Now going forward, we were

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Speaker 1: finally out from under the shadow of live work. We've

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Speaker 1: been talking about it for years. Yeah, well you're in.

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Speaker 1: I wanted to ask you if you feel that we've

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Speaker 1: definitively made the switch from worrying about inflation to worrying

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Speaker 1: about growth and what it is in terms of economic

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Speaker 1: signals that you're tracking that might sort of give you

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Speaker 1: clues in terms of whether or not or how severe

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Speaker 1: of a recession. We get, Yes, I think for that

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Speaker 1: is correct. Maybe we'll be worrying again again about inflation,

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Speaker 1: but for now, clearly inflation is on a decelerating track.

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Speaker 1: We see this in your w prices, used car prices,

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Speaker 1: I mean, you know, price of energy commodities, uh that,

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Speaker 1: and you know the p M I price is paid,

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Speaker 1: So all of those numbers are heading in the right direction.

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Speaker 1: Of course, the FED is focused on the labor market,

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Speaker 1: which remains very tight. But um, I think for three,

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Speaker 1: the big question is, you know, last year the first

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Speaker 1: shoe dropped, which was the valuation reset driven by the FED,

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Speaker 1: driving the cost of capital higher for everything. And remember

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Speaker 1: all assets are are really just the present value of

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Speaker 1: future cash flows, whether it's a bond or you know,

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Speaker 1: a rental property or a stock. And so when when

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Speaker 1: the discount rate in that discounted cash flow model goes up,

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Speaker 1: the present value of those cash flows goes down, even

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Speaker 1: if the cash flows themselves are still growing. And that, really,

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Speaker 1: in a nutshell, is what explains what happened last year.

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Speaker 1: So that that I think is largely in the rear

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Speaker 1: view mirror. When you look at past economic cycles or

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Speaker 1: past bear markets, even the really really bad ones like

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Speaker 1: the financial crisis, the dot com bubble four, all of

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Speaker 1: those rarely produced a rate of change in the PE

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Speaker 1: ratio that was more negative than what we've seen in two.

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Speaker 1: So it's really it's it's it's a stretch to me

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Speaker 1: to argue that the PE ratio is going to go

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Speaker 1: down even more than it already has. Right, it went

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Speaker 1: from the twenties mid twenties to fifteen, but the PE

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Speaker 1: is only as good as the E, of course, and

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Speaker 1: so the E is what the question is, fore will

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Speaker 1: that E hold up? And maybe it holds up in

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Speaker 1: nominal terms because of inflation, but not in real terms.

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Speaker 1: Maybe it doesn't hold up in either. But when you

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Speaker 1: think about disconnects, and you mentioned, you know earlier about

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Speaker 1: the bond market where everyone seems to be bullish, you know,

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Speaker 1: another disconnect is that it seems like a lot of

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Speaker 1: people are worried about the recession. But you look at

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Speaker 1: the earnings estimates, the aggregated estimates, and I get mine

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Speaker 1: from from my Bloomberg terminal every Friday. It still points

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Speaker 1: to positive expected growth in and you know, I would

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Speaker 1: be a lot happier. It sounds silly, but uh, you know,

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Speaker 1: sort of wearing my contrarian hat if the earnings estimates

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Speaker 1: were really bad right now, because then you have a sense, okay,

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Speaker 1: investors are under paying for you know, what could be

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Speaker 1: a positive surprise if we end up getting either no

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Speaker 1: recession or a mild recession. And that's one of the

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Speaker 1: disconnects that kind of worries me a little bit. That uh,

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Speaker 1: that the that you know, that's something that's not apparently

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Speaker 1: in the price that the p is, but the E

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Speaker 1: still is kind of hanging in there, and that I

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Speaker 1: think is what in a nutshell is going to be about,

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Speaker 1: is will the E hold up right, especially in those

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Speaker 1: further out quarters in the year. You know, it seems

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Speaker 1: like everyone seems to backload the growth for an EPs

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Speaker 1: towards the end of the year, and slowly that gets

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Speaker 1: whittled down perhaps, but you're in One post of yours

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Speaker 1: really caught my attention because it talked about both the

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Speaker 1: two day moving average in the SMP five and just

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Speaker 1: the basic trend line. And for listeners who who aren't aware, basically,

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Speaker 1: if you take a chart of the SMP five hundred

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Speaker 1: uh and you start at the record last about a

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Speaker 1: year ago, almost exactly last January, and just connect the

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Speaker 1: top of the chart going down, it's just a straight

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Speaker 1: trend line down. And what's really been fascinating is that

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Speaker 1: any sort of rebound in the market over the past

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Speaker 1: year has failed right at that trend line, and if not,

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Speaker 1: the two day moving average a similar trend line, though

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Speaker 1: not as straight. For a lot of fundamentally investors minded investors,

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Speaker 1: um that's a hard thing to to swallow, you know,

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Speaker 1: How can you draw a simple trend line and have

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Speaker 1: it work. You know, is is it really that simple? Something?

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Speaker 1: I'm curious, you know, how important are the technical goals

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Speaker 1: these days, specifically that trend line? Is it really that simple?

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Speaker 1: And do we need sort of some big fundamental change

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Speaker 1: of tides to break that trend line? Well you ask

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Speaker 1: a great question, and it actually it brings me back,

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Speaker 1: and I hope you don't mind me digressing for a moment,

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Speaker 1: but it brings me back to the start of my career,

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Speaker 1: which is like almost uh just years ago, thirty eight

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Speaker 1: years ago. I started in the business working at a

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Speaker 1: bond desk of a Dutch bank in New York, a

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Speaker 1: b N bank which became a ban Emero. Then I

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Speaker 1: ended up running that small bond desk. So my history

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Speaker 1: starts as a bond geek, but I got really into

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Speaker 1: charting and technical analysis and that still is in my

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Speaker 1: d n A today. But you know, then ten years later,

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Speaker 1: so so almost twenty eight years ago, I was hired

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Speaker 1: by Fidelity as a chartist. I like it, like we

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Speaker 1: have a chart room. Tom Keane always speaks very highly

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Speaker 1: of of that, of that whole history and legacy. But

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Speaker 1: I was hired as a technical analyst, and I quickly

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Speaker 1: found out the hard way. I guess that I was

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Speaker 1: catering to an audience of mostly fundamentally oriented portfolio managers,

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Speaker 1: and they all look at charts, or at least many

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Speaker 1: of them do. But if I you know, you know,

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Speaker 1: back in the day, I was an analyst on knocking

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Speaker 1: on doors, you know, trying to trying to you know,

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Speaker 1: show you know, ideas to people like Bob Stansky and

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Speaker 1: George van der Hyden and you know, people running the

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Speaker 1: really big funds. And you know, when you're a one

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Speaker 1: trick pony and you just have a chart with some

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Speaker 1: lines drawn on it, the conversation is going to end

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Speaker 1: pretty quickly. So I realized that, um, that technical analysis

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Speaker 1: is important. It's a very important compliment to other analysis.

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Speaker 1: But you need to have you still, you know, like

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Speaker 1: the technical analyst to me is the is the when

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Speaker 1: and how much part of the question, But the fundamental

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Speaker 1: side is the what and why right and so UM,

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Speaker 1: I think to your specific question about the SMP peaking

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Speaker 1: your right January four two at eighteen on the SMP

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Speaker 1: UM from that peak until the low UM in October,

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Speaker 1: you look at all the little counter trend highs you

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Speaker 1: draw a trend line, and the last one held perfectly,

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Speaker 1: and that was also at the two day moving average.

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Speaker 1: And by the way, if you look at a chart

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Speaker 1: of kind of the overall liquidity in the market, it's

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Speaker 1: not a chart that I created, I've seen it elsewhere.

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Speaker 1: But you take the FATS balance sheet minus reverse repose

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Speaker 1: minus the t g E the Traadury general account, and

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Speaker 1: it's that same line, right. So, um, I think technical

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Speaker 1: analysis is used by a lot of people either as

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Speaker 1: something to confirm or deny a thesis, but for instance,

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Speaker 1: for the c T a crowd which had a banner

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Speaker 1: year last year, I think it actually provides actual signals.

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Speaker 1: You say, Okay, you know, I'm long. I'm going to

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Speaker 1: sell at the declining two hund day moving average, especially

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Speaker 1: if there are other technical features that complement that. And

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Speaker 1: so I do think that there is a cohort of

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Speaker 1: traders and investors who actually will use those indicators as

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Speaker 1: as ways to execute trades. And the nice thing is,

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Speaker 1: you know, if if a moving average is kind of

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Speaker 1: a confirmed resistance point or a down trend line, and

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Speaker 1: you sell against that trend line, you know very quickly

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Speaker 1: if you're wrong and right for and for c t

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Speaker 1: as or hedge funds. Uh, that's the name of the game.

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Speaker 1: It's risk management. So if you sell at four thousand

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Speaker 1: and it goes to well, then you're out, and then

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Speaker 1: you'll you'll wait and see what happens next. And so

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Speaker 1: I think in that sense, these technical tools are still

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Speaker 1: very very viable tools for trade location and timing, But

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Speaker 1: from my perspective as a longer term investor, it's really

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Speaker 1: there to confirm or deny a thee and to help

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Speaker 1: with kind of trade sizing and timing and things like that. Mike,

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Speaker 1: do you know where you can find the best technical analysis?

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Speaker 1: Why don't you tell them? In crypto? Oh? Yeah, Well

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Speaker 1: that's what it's all about. You can make up chart patterns.

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Speaker 1: I've seen the Bart Simpson chart patterns. You're in one

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Speaker 1: more quick thing, and you kind of made me think

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Speaker 1: about this. When you talk about your career started thirty

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Speaker 1: eight years ago. One thing you hear a lot of

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Speaker 1: people say these days is, oh, these so many fund managers, strategists, traders, whatever,

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Speaker 1: today are young. They haven't worked through a high interest

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Speaker 1: rate environment like you saw in the eighties, um to

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Speaker 1: which I often reply, well, yes, but they've also been

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Speaker 1: working with high powered computers their whole career. You know,

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Speaker 1: they're able to back test stuff much more quickly and

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Speaker 1: efficiently than anyone could back then. But I'm wondering how

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Speaker 1: you think about that notion that you know, there's this

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Speaker 1: generation of investors, fund managers, market participants all over the

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Speaker 1: place who who haven't lived through this type of inflation

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Speaker 1: shock that we've seen. Have you noticed any sort of

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Speaker 1: you know, effects of that already or anything you would

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Speaker 1: suspect going forward, or is it just a just a

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Speaker 1: bunch of talk. Uh? No, I think it's important, and

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Speaker 1: it doesn't just pertain to to inflation. It's just you know,

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Speaker 1: market cycles in general, you know, Like so I've been

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Speaker 1: around for a while, I've directly experienced a lot of cycles,

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Speaker 1: and I remember, like yesterday, the green span cycle. Um.

430
00:24:49,840 --> 00:24:52,080
Speaker 1: And that doesn't mean you can't be a good strategist

431
00:24:52,119 --> 00:24:55,399
Speaker 1: or investor if you weren't around back then. But for me,

432
00:24:55,840 --> 00:24:59,200
Speaker 1: as a strategist, especially one who is you know, very

433
00:24:59,280 --> 00:25:02,920
Speaker 1: visually oriented, I find it very helpful that the more

434
00:25:03,000 --> 00:25:08,639
Speaker 1: cycles I've experienced, the more context I have in my head,

435
00:25:08,760 --> 00:25:11,360
Speaker 1: because you know, you kind of I can I can

436
00:25:11,359 --> 00:25:14,159
Speaker 1: look at this cycle and say, you know, no cycle

437
00:25:14,400 --> 00:25:17,719
Speaker 1: repeats exactly, like, that's not how it works. Every cycle

438
00:25:17,800 --> 00:25:21,520
Speaker 1: is unique in some way, but we kind of borrow

439
00:25:21,640 --> 00:25:24,440
Speaker 1: different things from different cycles, right, I mean, the fourties

440
00:25:24,520 --> 00:25:26,760
Speaker 1: is one area. I mean I wasn't around back then,

441
00:25:26,840 --> 00:25:30,639
Speaker 1: but that's one major cycle that I have kind of

442
00:25:30,760 --> 00:25:32,879
Speaker 1: used as an analog because that's the last time we

443
00:25:32,960 --> 00:25:37,280
Speaker 1: had this huge, double powered fiscal monetary response to you know,

444
00:25:37,320 --> 00:25:39,840
Speaker 1: to an event, which back then was of course the

445
00:25:39,920 --> 00:25:45,159
Speaker 1: US entering World War Two, but has some parallels the

446
00:25:45,200 --> 00:25:48,840
Speaker 1: way Greenspan kind of went nonlinear in and how often

447
00:25:48,840 --> 00:25:51,479
Speaker 1: and in what increments he would raise rates. And of

448
00:25:51,520 --> 00:25:56,320
Speaker 1: course the nineties seventies are their lessons learned the late sixties,

449
00:25:56,400 --> 00:25:58,919
Speaker 1: and of course the late nineties have things in common

450
00:25:59,000 --> 00:26:01,760
Speaker 1: even though they were totally different periods in time, but

451
00:26:01,840 --> 00:26:05,320
Speaker 1: they had a lot of speculation in what today are

452
00:26:05,359 --> 00:26:07,320
Speaker 1: are the meme stocks, but back then it was the

453
00:26:07,359 --> 00:26:10,560
Speaker 1: space stocks or the dot com stock. So an advantage

454
00:26:10,600 --> 00:26:14,480
Speaker 1: of having a long experience is that you know, even

455
00:26:14,480 --> 00:26:17,200
Speaker 1: if you don't directly remember it, it kind of rings

456
00:26:17,200 --> 00:26:19,400
Speaker 1: a bell saying, you know, this kind of feels like that.

457
00:26:19,520 --> 00:26:23,800
Speaker 1: So whether it comes down to inflation or just appreciating

458
00:26:23,840 --> 00:26:26,880
Speaker 1: what happens in a recession. I mean, you know, like

459
00:26:27,040 --> 00:26:28,680
Speaker 1: you know, we used to have recessions every four or

460
00:26:28,680 --> 00:26:30,520
Speaker 1: five years, right, That's why it was called the four

461
00:26:30,560 --> 00:26:33,520
Speaker 1: year cycle. But over the last couple of decades, we've

462
00:26:33,520 --> 00:26:36,160
Speaker 1: had recessions only one every ten years or so, and

463
00:26:36,200 --> 00:26:39,320
Speaker 1: the Great Recession was the last one. And actually that

464
00:26:39,359 --> 00:26:44,680
Speaker 1: creates the opposite kind of confirmation bias, because people think

465
00:26:44,840 --> 00:26:47,439
Speaker 1: of recession, they think of recession, they think of the

466
00:26:47,440 --> 00:26:50,359
Speaker 1: financial crisis, even though that was a perfect storm that

467
00:26:50,440 --> 00:26:53,480
Speaker 1: only happens, you know, every hundred years or so. There

468
00:26:53,520 --> 00:26:57,000
Speaker 1: are much milder recessions that we can look at the

469
00:26:57,040 --> 00:27:01,040
Speaker 1: dot com period, So it's a it's limitation. But as

470
00:27:01,040 --> 00:27:04,000
Speaker 1: you as you mentioned, you know, we have lots of information,

471
00:27:04,080 --> 00:27:06,359
Speaker 1: a lot of it that I get from my Bloomberg terminal.

472
00:27:06,440 --> 00:27:09,560
Speaker 1: You guys have done a great job building that arsenal

473
00:27:09,680 --> 00:27:12,959
Speaker 1: of data um and um and you know, and this

474
00:27:13,040 --> 00:27:15,719
Speaker 1: is one of the reasons why I make my stuff

475
00:27:15,840 --> 00:27:20,400
Speaker 1: publicly available on Twitter and LinkedIn, because even though it's proprietary,

476
00:27:20,480 --> 00:27:22,800
Speaker 1: of course, it's our I p. I think if it

477
00:27:22,880 --> 00:27:26,240
Speaker 1: helps everyone make better decisions, then I think we all

478
00:27:26,240 --> 00:27:29,359
Speaker 1: win in the end. Well you're in timmer head of

479
00:27:29,359 --> 00:27:32,639
Speaker 1: Global Macro at Fairy. Great to catch up with you

480
00:27:32,680 --> 00:27:35,120
Speaker 1: and hear your thoughts. Well thought it. Maybe he can

481
00:27:35,119 --> 00:27:40,959
Speaker 1: get us recipe for cauliflower. I will make it and

482
00:27:40,960 --> 00:27:44,480
Speaker 1: I will tag you on the post. How's that? Absolutely?

483
00:27:45,200 --> 00:27:47,239
Speaker 1: But before we let you go you're in. We do

484
00:27:47,359 --> 00:27:50,480
Speaker 1: have to get to our attrition. Hear the craziest things

485
00:27:50,800 --> 00:27:53,720
Speaker 1: we saw in markets. I'm gonna get it started because

486
00:27:53,760 --> 00:27:57,400
Speaker 1: our good friend Twiggy. Sunday, he tweeted at me thebanna

487
00:27:57,480 --> 00:28:03,760
Speaker 1: of Reuter's video. It was about the Saudi Arabia Camel Festival.

488
00:28:04,119 --> 00:28:08,639
Speaker 1: We've talked about this, the King Abdullah's Ease Camel Festival,

489
00:28:08,680 --> 00:28:13,880
Speaker 1: forty five days long. It features daily auctions of camels. Now,

490
00:28:14,960 --> 00:28:17,400
Speaker 1: camels are big in Saudi Arabia. They like to race them,

491
00:28:17,600 --> 00:28:22,119
Speaker 1: They have miss pets, transportation, everything, and according to this video,

492
00:28:22,280 --> 00:28:25,840
Speaker 1: at least an ordinary domestic camel goes for about four

493
00:28:25,840 --> 00:28:30,040
Speaker 1: thousand dollars. But it's time to play. You're in the

494
00:28:30,080 --> 00:28:36,080
Speaker 1: prices precise, the prices precise, first prices, percise prices precise.

495
00:28:36,320 --> 00:28:39,720
Speaker 1: Not the prices right, You're absolutely not completely different game.

496
00:28:40,880 --> 00:28:44,640
Speaker 1: What do you suppose the highest price ever paid at

497
00:28:44,680 --> 00:28:51,520
Speaker 1: auction for a very nice camel ever ever, according to

498
00:28:51,560 --> 00:28:55,760
Speaker 1: the Riders video at the King Abdullah's Ease Camel Festival

499
00:28:55,800 --> 00:28:58,280
Speaker 1: in Saudi Arabia, was it? Was it in the past year.

500
00:28:59,040 --> 00:29:04,040
Speaker 1: I do not know the date of it. No, shoot, okay,

501
00:29:04,280 --> 00:29:08,480
Speaker 1: but I do feel like there's a bowl market in camels. Okay, okay,

502
00:29:08,480 --> 00:29:11,680
Speaker 1: I'm going with three d seventy dollars ran in seventy

503
00:29:11,680 --> 00:29:13,880
Speaker 1: five dollars. You're in. What do you think? What do

504
00:29:13,880 --> 00:29:17,320
Speaker 1: you think the highest price paid for a camel at

505
00:29:17,360 --> 00:29:20,960
Speaker 1: auction in the King's Camel auction if you go over island,

506
00:29:21,400 --> 00:29:23,880
Speaker 1: so the average you set is four thousand, that's sort

507
00:29:23,880 --> 00:29:27,840
Speaker 1: of the entry that's your entry level camel, you know. Yeah, yeah,

508
00:29:28,400 --> 00:29:34,040
Speaker 1: it comes down to the pe ratio of camel ratio there.

509
00:29:34,040 --> 00:29:36,280
Speaker 1: Maybe there's some hump rate you know analysis you can

510
00:29:36,280 --> 00:29:39,560
Speaker 1: do if during the dot com bubble the pe of

511
00:29:39,600 --> 00:29:42,520
Speaker 1: a NASDAC one hundred stock was a hundred, where normally

512
00:29:42,520 --> 00:29:45,480
Speaker 1: it would be twenty. That's five x so that but

513
00:29:45,560 --> 00:29:49,840
Speaker 1: that's only twenty thousand. That seems too low. I'm gonna

514
00:29:49,880 --> 00:29:57,520
Speaker 1: say a hundred thousand, hundred, five point five million, five remember,

515
00:30:00,680 --> 00:30:03,280
Speaker 1: oh my God, I think for for grants kind of

516
00:30:03,280 --> 00:30:05,360
Speaker 1: a bargain. I wonder if I could get one shipped over.

517
00:30:07,080 --> 00:30:09,480
Speaker 1: I think we're gonna should go. You put in that

518
00:30:09,520 --> 00:30:12,080
Speaker 1: second to see what we put in the ticket. Yeah, wow,

519
00:30:12,200 --> 00:30:14,800
Speaker 1: I'm so shocked by this. And thank you Twiggy Sunday.

520
00:30:14,840 --> 00:30:18,240
Speaker 1: Of course, of course, thank you Twiggy. Okay, I'll go next.

521
00:30:18,400 --> 00:30:21,719
Speaker 1: So you probably saw this, but fourteen years ago this

522
00:30:21,760 --> 00:30:25,880
Speaker 1: week was when the very first bitcoin block was mined.

523
00:30:26,240 --> 00:30:30,520
Speaker 1: Okay years ago, fourteen years ago this week and since then,

524
00:30:31,040 --> 00:30:33,200
Speaker 1: this is a story courtesy of Joe Wisenthal, who I

525
00:30:33,240 --> 00:30:37,280
Speaker 1: think is your seat mate. We don't sit in the

526
00:30:37,320 --> 00:30:39,720
Speaker 1: same seat. That would be awkward. That would be awkward

527
00:30:39,880 --> 00:30:43,520
Speaker 1: because you have competing podcasts. But since then, Bitcoin is

528
00:30:43,600 --> 00:30:51,040
Speaker 1: up one six nine zero seven zero six nine seven one. Wait,

529
00:30:51,640 --> 00:30:54,600
Speaker 1: how many commas in a million percent? Three? No, there's

530
00:30:54,680 --> 00:30:58,960
Speaker 1: three commas a billion percent? Yeah, oh my goodness. Because

531
00:30:58,960 --> 00:31:02,479
Speaker 1: it was trading for like it went from a penny

532
00:31:02,560 --> 00:31:07,560
Speaker 1: basically for a fraction of a penny. Too. Well, you're in.

533
00:31:07,800 --> 00:31:11,000
Speaker 1: You know, Fidelity has made a big inroads in the crypto.

534
00:31:11,080 --> 00:31:14,360
Speaker 1: What what's your thoughts after this? You know, just disastrous

535
00:31:14,400 --> 00:31:17,640
Speaker 1: year for crypto going for Yeah, I mean, I think

536
00:31:17,840 --> 00:31:19,880
Speaker 1: a lot of what we've seen and certainly what's in

537
00:31:19,920 --> 00:31:23,080
Speaker 1: the headlines now, you could argue that doesn't really even

538
00:31:23,120 --> 00:31:25,480
Speaker 1: have to do with with crypto like that. That's an

539
00:31:25,480 --> 00:31:29,680
Speaker 1: old story as old as as as human kind. But

540
00:31:29,760 --> 00:31:33,240
Speaker 1: it happens when you have a newly developed market that

541
00:31:33,400 --> 00:31:37,720
Speaker 1: is unregulated or underregulated and that you know, has a

542
00:31:37,760 --> 00:31:40,040
Speaker 1: lot of promise, gets a lot of people excited, but

543
00:31:40,120 --> 00:31:43,840
Speaker 1: the lack of regulation also creates creates the opportunity for fraud.

544
00:31:43,920 --> 00:31:47,200
Speaker 1: And you know that that's a very old story that

545
00:31:47,320 --> 00:31:51,479
Speaker 1: keeps getting repeated, but just with different circumstances. And you know,

546
00:31:51,600 --> 00:31:54,360
Speaker 1: when I look at this year, I kind of think

547
00:31:54,360 --> 00:31:59,200
Speaker 1: back to two thousands. You know, it was a different technology,

548
00:31:59,200 --> 00:32:02,560
Speaker 1: but there are similarities, right, and and and that translates

549
00:32:02,560 --> 00:32:05,120
Speaker 1: not just into crypto but the meme stocks in general.

550
00:32:05,640 --> 00:32:08,880
Speaker 1: And it just shows you that speculation. You know, you know,

551
00:32:09,120 --> 00:32:12,120
Speaker 1: people learn from their mistakes, but they don't learn it

552
00:32:12,160 --> 00:32:15,240
Speaker 1: for very long or or the next generation then has

553
00:32:15,280 --> 00:32:17,520
Speaker 1: to learn it from scratch, which and that's why these

554
00:32:17,560 --> 00:32:22,160
Speaker 1: bubbles tend to be spaced a couple of decades apart um.

555
00:32:22,680 --> 00:32:25,040
Speaker 1: I think that will be you know, there is still

556
00:32:25,040 --> 00:32:28,920
Speaker 1: a future. I think there will be another wave coming.

557
00:32:29,000 --> 00:32:31,680
Speaker 1: I don't know when it it happens. Usually when you

558
00:32:31,720 --> 00:32:34,800
Speaker 1: see the kind of winter that we're seeing now and

559
00:32:34,840 --> 00:32:36,719
Speaker 1: that we saw, for instance, in two thousand and one

560
00:32:36,760 --> 00:32:39,440
Speaker 1: and two for tech stocks, it does take a couple

561
00:32:39,480 --> 00:32:42,840
Speaker 1: of years for uh kind of those animal spirits to

562
00:32:42,920 --> 00:32:46,600
Speaker 1: come back. I think, you know, the next wave, when

563
00:32:46,640 --> 00:32:50,760
Speaker 1: it happens, will be the one that's based on hopefully

564
00:32:50,800 --> 00:32:55,000
Speaker 1: prudent regulation that gives you know, institutions, um and other

565
00:32:55,240 --> 00:32:59,040
Speaker 1: investors a sense that, Okay, the water is safe in

566
00:32:59,080 --> 00:33:01,880
Speaker 1: that sense that to play in. And then it's a

567
00:33:01,960 --> 00:33:05,880
Speaker 1: question of you know, again using the dot com boom

568
00:33:05,880 --> 00:33:09,960
Speaker 1: and bubble as an example, is which ones which tokens

569
00:33:10,040 --> 00:33:13,320
Speaker 1: or which assets are the pets dot COM's of the

570
00:33:13,400 --> 00:33:16,640
Speaker 1: nineties and which ones are the Apples and the Amazons

571
00:33:17,240 --> 00:33:20,360
Speaker 1: because Apple and Amazon and Google will Google was launched

572
00:33:20,400 --> 00:33:23,400
Speaker 1: after but those all had very large draw downs, but

573
00:33:23,480 --> 00:33:26,480
Speaker 1: they all came back, and Apple is now sevent of

574
00:33:26,520 --> 00:33:30,800
Speaker 1: the NASDAC And so I think it's it's separating the

575
00:33:31,280 --> 00:33:35,000
Speaker 1: ones that are you know, that are long term market

576
00:33:35,040 --> 00:33:37,560
Speaker 1: share leaders from from the ones that were kind of

577
00:33:37,560 --> 00:33:40,760
Speaker 1: a flash in the pen. I think that's being separated

578
00:33:40,840 --> 00:33:42,880
Speaker 1: right now, of course as we speak, and the fact

579
00:33:42,880 --> 00:33:45,880
Speaker 1: that Bitcoin, even though it's down a lot, is still

580
00:33:45,960 --> 00:33:48,880
Speaker 1: there um. And what's happened to you, of course in

581
00:33:48,880 --> 00:33:51,800
Speaker 1: the rest of the space, if anything is is is

582
00:33:51,960 --> 00:33:56,640
Speaker 1: um justification for why bitcoin was better than all the

583
00:33:56,680 --> 00:33:59,280
Speaker 1: other stuff? Um. So I think all of that will

584
00:33:59,320 --> 00:34:03,080
Speaker 1: be sorted out. But but these these massive cycles take

585
00:34:03,120 --> 00:34:06,680
Speaker 1: time to to to play out. Do you think a

586
00:34:06,800 --> 00:34:09,600
Speaker 1: much lower interest rates are pre prerequisite to get those

587
00:34:09,640 --> 00:34:12,799
Speaker 1: animal spirits going again? Well? So, you know, for for

588
00:34:12,880 --> 00:34:15,320
Speaker 1: crypto assets, of course, it's all about the network, and

589
00:34:15,320 --> 00:34:17,920
Speaker 1: I'm glad you just mentioned that, um, And certainly for

590
00:34:18,000 --> 00:34:20,880
Speaker 1: bitcoin it's about the adoption curve, right, and that and

591
00:34:20,920 --> 00:34:23,759
Speaker 1: I've done work on this looking at god knows real

592
00:34:23,840 --> 00:34:26,640
Speaker 1: road miles, you know from a hundred and fifty years ago,

593
00:34:26,960 --> 00:34:29,920
Speaker 1: or you know, or the our cell phone adoption or

594
00:34:30,000 --> 00:34:34,120
Speaker 1: internet adoption. And so bitcoin and other cryptos follow that

595
00:34:34,520 --> 00:34:38,520
Speaker 1: adoption curve. And that curve is going to grow on

596
00:34:38,520 --> 00:34:41,480
Speaker 1: on a micro level because of the use case of

597
00:34:41,520 --> 00:34:44,520
Speaker 1: the token or the asset, but it can certainly be

598
00:34:44,680 --> 00:34:48,319
Speaker 1: sped up or slowed down by macro right, and so

599
00:34:48,400 --> 00:34:51,719
Speaker 1: the macro was very favorable in because you know the

600
00:34:51,760 --> 00:34:54,360
Speaker 1: money printer stuff and all that, and of course it

601
00:34:54,480 --> 00:34:58,280
Speaker 1: was very unfavorable in. And so I think the macro

602
00:34:58,560 --> 00:35:02,880
Speaker 1: of real rates and at policy matters because they can

603
00:35:02,920 --> 00:35:05,640
Speaker 1: speed up or slow down the adoption curve, but ultimately

604
00:35:05,680 --> 00:35:09,560
Speaker 1: the adoption curve has to grow on its own. And

605
00:35:09,600 --> 00:35:13,040
Speaker 1: so those are the two dimensions that I look at. Vildonna.

606
00:35:13,160 --> 00:35:18,120
Speaker 1: You know where animal spirits are always present, the camel market.

607
00:35:18,400 --> 00:35:23,319
Speaker 1: Camel market. I was trying to find something clever to say, down, Wow,

608
00:35:25,239 --> 00:35:27,120
Speaker 1: that's well you're in. How about you? Have you seen

609
00:35:27,160 --> 00:35:29,960
Speaker 1: anything crazy in markets this week? Well, the year is

610
00:35:29,960 --> 00:35:34,319
Speaker 1: still young, so not so far this week, but we've

611
00:35:34,360 --> 00:35:37,560
Speaker 1: certainly seen plenty of crazy stuff. And part of it

612
00:35:37,600 --> 00:35:40,640
Speaker 1: I think is the result of the machines taking over

613
00:35:40,719 --> 00:35:43,839
Speaker 1: the short term flow. Right. If you think about how

614
00:35:43,960 --> 00:35:47,520
Speaker 1: much of the options value in the SMP has a

615
00:35:48,320 --> 00:35:51,320
Speaker 1: maturity or an exploration like less than forty eight hours,

616
00:35:51,360 --> 00:35:53,840
Speaker 1: I mean that we used to never see that happen,

617
00:35:54,320 --> 00:35:56,840
Speaker 1: and so it creates a lot of volatility. And I remember,

618
00:35:56,880 --> 00:35:59,200
Speaker 1: you know the October thirteen low, which so far is

619
00:35:59,280 --> 00:36:01,120
Speaker 1: the low for the SMP. I don't know if it's

620
00:36:01,120 --> 00:36:03,839
Speaker 1: going to stay that way. But uh, in the two days,

621
00:36:03,880 --> 00:36:06,120
Speaker 1: you know, we had that very big reversal and I

622
00:36:06,120 --> 00:36:08,440
Speaker 1: think the SMP was up something like seven percent in

623
00:36:08,480 --> 00:36:11,360
Speaker 1: two days. But the meme stocks, you know, the Goldman

624
00:36:11,400 --> 00:36:17,279
Speaker 1: Sachs nonprofitable growth basket, I think it was up in

625
00:36:17,360 --> 00:36:20,600
Speaker 1: two days. And that's just that's not normal. And that's

626
00:36:20,680 --> 00:36:23,400
Speaker 1: the machines, right, that is the algoes and the machines

627
00:36:23,480 --> 00:36:27,279
Speaker 1: taking over. And I think it's important for regular investors

628
00:36:27,440 --> 00:36:30,560
Speaker 1: not to get kind of swept away by that, thinking like,

629
00:36:30,600 --> 00:36:32,560
Speaker 1: oh my god, something is happening and I'm missing it.

630
00:36:32,600 --> 00:36:36,080
Speaker 1: But no, it's it's it's options and machines and stuff

631
00:36:36,120 --> 00:36:39,680
Speaker 1: like that. Yeah, fascinating stuff. Urian Simmer had a global

632
00:36:39,719 --> 00:36:42,480
Speaker 1: macro at Fideliti. Really great to catch up with you,

633
00:36:42,520 --> 00:36:45,200
Speaker 1: and I hope we can bring you back again sometimes great. Well,

634
00:36:45,200 --> 00:36:53,960
Speaker 1: thank you for having thank you for coming on What

635
00:36:54,120 --> 00:36:56,160
Speaker 1: Goes Up. We'll be back next week. And so then

636
00:36:56,200 --> 00:36:58,480
Speaker 1: you can find us on the Bloomberg Terminal, website and

637
00:36:58,640 --> 00:37:01,880
Speaker 1: app where wherever you get your podcast. We love it

638
00:37:01,920 --> 00:37:03,680
Speaker 1: if you took the time to rate and review the

639
00:37:03,680 --> 00:37:06,680
Speaker 1: show on Apple Podcasts, so more listeners can find us

640
00:37:07,239 --> 00:37:09,440
Speaker 1: and you can find us on Twitter, follow me at

641
00:37:09,480 --> 00:37:14,040
Speaker 1: reag Anonymous Bildonna hierarch Is at Bldonna Hirach. You can

642
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