Speaker 1: Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane.
Speaker 1: Daily we bring you insight from the best in economics, finance, investment,
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Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. The
Speaker 1: Dow a long from long way from ten percent correction
Speaker 1: negative four percent, maybe negative five percent, and the VIX
Speaker 1: that measurement twenty two point three two it was above
Speaker 1: twenty three. To put that in perspective in the great
Speaker 1: markets of Vix's twelve thirteen. Maybe you expand out in
Speaker 1: the new regime of the VIX to seventeen or eighteen
Speaker 1: and we come out as well. We have the perfect
Speaker 1: guest to frame this this morning, Drewmatics, not only with
Speaker 1: the clarin An Award winning economic work for years, but
Speaker 1: it met life now driving forward their strategy as well.
Speaker 1: Drewmatics of till your equity strategy into your first class economics.
Speaker 1: How do you fit those two together right now? Well,
Speaker 1: I you know, I think what you're seeing. Um, so
Speaker 1: there's there's two factors. One, it's just kind of the
Speaker 1: risk on, risk off, which we've talked about everyone decided
Speaker 1: they didn't want to be long over the weekend. That
Speaker 1: seemed to have been the right call this time. UM,
Speaker 1: and so people went risk off and they were rewarded
Speaker 1: for it. UM. I think if you look ahead, we
Speaker 1: were kind of drifting in this environment where where margin
Speaker 1: compression was beginning to happen. It looked like, in our
Speaker 1: view at least corporations, we're begetting to pull back on
Speaker 1: hiring and we're going to drift into a recession sometime
Speaker 1: in kind of like the middle of next year. That
Speaker 1: seemed to be, you know, that was the scenario we
Speaker 1: were working with. UH. In the current environment, you have
Speaker 1: to you have to maybe be pulling that forward a
Speaker 1: little bit and thinking to yourself, you know, if these
Speaker 1: trends continue in terms of disruptions to supply chains, that
Speaker 1: that you know, maybe, um, maybe those margins compressed a
Speaker 1: little faster, Maybe from back a little faster. Maybe they're
Speaker 1: disinclined to invest heading into something where they have as
Speaker 1: much uncer and t is the average consumer has drew.
Speaker 1: Is the concept of a V shaped recovery dead? I no,
Speaker 1: I but I think you know it requires the right
Speaker 1: kind of construct. But I think what what you're pointing towards, though,
Speaker 1: is something that I think a lot of people have
Speaker 1: focused on, which is um for the vast majority of people,
Speaker 1: not the vast majority of people, but for a lot
Speaker 1: of people. And for I think the vast majority of
Speaker 1: people on Wall Street actually who actually are are charged
Speaker 1: with trading. Uh, two thousand eight is the recession. They know,
Speaker 1: that's the only recession they know. They don't remember two
Speaker 1: thousand one, where if you blinked you could have missed it. Um.
Speaker 1: They don't remember kind of the slowdown. UM. So you know,
Speaker 1: the the actual life experience for a lot of people
Speaker 1: on Wall Street, it doesn't include recessions that don't look
Speaker 1: like two thousand eight. And and so I don't think
Speaker 1: a two thousand eight V shaped re car I don't
Speaker 1: think a V shaped recovery is dead. But you're not
Speaker 1: going to get one if you have a recession like
Speaker 1: two thousand and eight. Fortunately we're not expecting one like
Speaker 1: two thousand and eight. So, Drew, I mean a lot
Speaker 1: of times we've been talking over the last week or two,
Speaker 1: is this coronavirus kind of evolved and we saw a
Speaker 1: lot of impacts, say in the commodity markets, in the
Speaker 1: bond market, we didn't necessarily see a concern consistent in
Speaker 1: the equity markets. Maybe we're seeing a little bit of
Speaker 1: it today. Are you concerned that maybe the equity markets
Speaker 1: is not are not discounting the long term economic impacts
Speaker 1: of what a coronavirus could mean. Uh? You know, I
Speaker 1: I think that they're struggling with it, and I think
Speaker 1: that's that's the problem is this. Uh it's very hard
Speaker 1: to assign weighted probabilities to all the different outcomes because
Speaker 1: there's so many potential outcomes. Uh. And then if you
Speaker 1: take that sector by sector and company by company, you
Speaker 1: just you could drive yourself nuts going through the permutations. Um.
Speaker 1: And so people then just go into do I want
Speaker 1: to be along the market? Do I want to be
Speaker 1: short the market? And people are now saying, hey, you
Speaker 1: know what, I don't want to be along it because
Speaker 1: I don't know what's going on and I think that
Speaker 1: kind of environment is going to continue. So I'm struggling though,
Speaker 1: because I'm looking right now at the FED model. This
Speaker 1: has been one of the big humans for why to
Speaker 1: buy stocks that basically bond yields go lower, making the
Speaker 1: relative valuation case for stocks better. Today that valuation case
Speaker 1: got a whole lot better. Even still, as thirty year
Speaker 1: treasury yields go further into record low territory, why shouldn't
Speaker 1: people buy this dip? Well, it's not a so we
Speaker 1: don't really focus on equities in my life. But I'll
Speaker 1: just I'll just say this. This is why you can't
Speaker 1: just blindly follow models. Right. The question is the relationship
Speaker 1: is a good and an interesting one to use as
Speaker 1: a factor. All right, so components your model. But if
Speaker 1: you just close your eyes and say it doesn't matter
Speaker 1: why the bond yield is going down, then you're going
Speaker 1: to put yourself into a situation where you're taking more
Speaker 1: risk than you ever thought was possible. Uh, and you're
Speaker 1: and you're blind to it because you're following this model
Speaker 1: that just works off of why the yield is moving,
Speaker 1: or that the yield is moving, rather than why is
Speaker 1: the yield moving? And that's that's why I don't really
Speaker 1: worry about artificial intelligence. You know, like I play my
Speaker 1: son and you know in FIFA, and it's like the
Speaker 1: A I never does what I wanted to do um
Speaker 1: and and I'm thinking to myself, can't even run the
Speaker 1: soccer probes explain why the Thoughts got crushed by Chelsea
Speaker 1: this weekend for the failure, but my son was happy
Speaker 1: to see the bluest triumph over over Tottenham. Oh really,
Speaker 1: thank you? I mean John emails in where John John
Speaker 1: emails in from Turks and Caicos No excuse me antigua
Speaker 1: of course more. You know it's fancier Farrell, he wanted
Speaker 1: he brought this up. Chelsea like crushed the Thoughts this weekend.
Speaker 1: Farrell's not even Lisa's like, what I'm learning, I'm studying? Yeah,
Speaker 1: she's yes, so am I let met me tell you
Speaker 1: every day. This is really critical. You say that MetLife
Speaker 1: isn't focused on uh stocks, that's because it's an adult
Speaker 1: house focused on our futures. Do you assume going to
Speaker 1: work every day that your actual assumption is going to
Speaker 1: come down and that that locked in boggie rate that
Speaker 1: we have is not going to be ex percent. It's
Speaker 1: going to come down down, down, you know. I. I
Speaker 1: think what we assume is, um, we have to plan
Speaker 1: for every environment that we can imagine UM. And I
Speaker 1: think when you think about the current world we've been
Speaker 1: in for a long time, we've been in a very
Speaker 1: low rate environment for a very long period of time,
Speaker 1: and I think you know, the ongoing assumption you know
Speaker 1: has been you know, you can't expect just because you
Speaker 1: want you'ld to move higher, you can't expect that they
Speaker 1: are going to move higher. Do you sell jump ons here? Uh?
Speaker 1: You know, I leave that to our credit portfolio managers.
Speaker 1: How about so all right, we're more than eighty percent
Speaker 1: away through the earnings this quarter? Your key takeaways here?
Speaker 1: Do you feel a little bit better? You feel a
Speaker 1: little bit more concerned the last time I looked at earnings?
Speaker 1: What what you know? So one of our one of
Speaker 1: our thoughts is, you know, when you're trying to time
Speaker 1: the recession, how do you time it? And the way
Speaker 1: that I'm trying to work it is looking at the
Speaker 1: erosion of margins in the economy as a whole, So
Speaker 1: not just SMP five hundreds. So but if we look
Speaker 1: at if we look at those earnings numbers, I'm seeing
Speaker 1: revenue go up and I'm seeing or you know, um
Speaker 1: earnings go up by less and so that tells me
Speaker 1: that the margins are compressing a little bit further. So
Speaker 1: it's consistent with our view that that erosion is continuing Um,
Speaker 1: and that's you know, you know, absent other factors. It
Speaker 1: still looks to me like one is when we have
Speaker 1: to really think about there being a recession in the US.
Speaker 1: Drew manis thank you so much for that right now
Speaker 1: on politics and we'll be jumping back and forth on
Speaker 1: this end of the Tuesday UH debate in South Carolina,
Speaker 1: Todd Marianna joins us from eur Asia Group. Todd. Every weekend,
Speaker 1: I go, I have a panic, and I go, I
Speaker 1: gotta get smarter fast on something. And without question, off
Speaker 1: of Mr Saunders relative performance in Las Vegas and Nevada. UM,
Speaker 1: I had to read it on a Latino vote. Latino vote,
Speaker 1: help me here? How important will Latino vote be? Super Tuesday?
Speaker 1: Good morning, Tom. Great to be with you as always,
Speaker 1: And I think we're all of that same camp these days,
Speaker 1: given uh all that's going on in politics, trying to
Speaker 1: get smart on things over the weekend. The Latino vote is,
Speaker 1: you know, it's it's something that's become of increasing importance
Speaker 1: to US politics generally, Um, but of critical importance to
Speaker 1: winning the Democratic nomination, and Nevada showed that very clearly.
Speaker 1: But UM, you know we've known that for several cycles. Now,
Speaker 1: what I think is different here in Nevada is the
Speaker 1: fact that a candidate like Sanders could come out with
Speaker 1: entrance polls, you know, uh, indicating that he had above
Speaker 1: fifty Latino vote. He struggled with minority votes the last
Speaker 1: time around. And again, as we said, we've known for
Speaker 1: several cycles that Latino vote is growing. That's places like
Speaker 1: you know, South Carolina, Texas obviously, but across the South
Speaker 1: and even the Midwest. So the fact that a candidate
Speaker 1: like Sanders could get that kind of draw, I think
Speaker 1: is a real important lesson of Nevada. The money question
Speaker 1: this morning, Greg Valier wrote it up. I know you've
Speaker 1: been looking at it as well, is if Sunder Sanders prevails,
Speaker 1: is a Democratic House at risk? I think it is
Speaker 1: at risk. You know what, what exactly that risk is,
Speaker 1: um kind of remains to be determined. It's still it's
Speaker 1: still early to say, but I mean, I think the
Speaker 1: fact that it's at least at risk is what's motivating
Speaker 1: a lot of Democratic leaders and the elites as a
Speaker 1: party to have feared of Bernie Sanders candidacy, you know,
Speaker 1: from from the get go, from t and certainly continuing
Speaker 1: through this cycle. UM, you know, you you don't look
Speaker 1: at the national level there, you look on a district
Speaker 1: by district basis, where you know, Republicans are going to
Speaker 1: hammer a message, an anti socialist message, and in places like,
Speaker 1: for example, the Virginia seventh district, which which was flipped
Speaker 1: very very famously in UM, that message will probably resonate.
Speaker 1: So it's it's at least at risk. But we don't
Speaker 1: know is how many new people and disaffected voters Bernie
Speaker 1: could turn out at the polls. That's that's the real
Speaker 1: argument behind his candidacy. But the risk is clearly there.
Speaker 1: So Todd, what's ex what's at stake on the debate
Speaker 1: tomorrow in South Carolina? Number one? I think that Um,
Speaker 1: Michael Bloomberg certainly has has you know, some some work
Speaker 1: to do, I think to uh to get past the
Speaker 1: you know what what happened last week, and you know
Speaker 1: many indications that that certainly can happen. We we've seen
Speaker 1: that before. Um. You know, Joe Biden another he's another
Speaker 1: I think strong debate performance to uh solidify his lead
Speaker 1: in South Carolina. Last year, bid Fleet in South Carolina
Speaker 1: was you know, double digits, getting into the twenties at points,
Speaker 1: and you know, on average, he's up about three points
Speaker 1: about over standers now, So that's good news for Biden
Speaker 1: if you can take home in South Carolina went heading
Speaker 1: into Super Tuesday. But the fact that it's so close
Speaker 1: means that um certainly that I think there's more pressure
Speaker 1: on him in in this debate than before. The third
Speaker 1: thing I'd say is whether the candidates can really kind
Speaker 1: of circle the wagons and attack Burnie Sanders if they
Speaker 1: really don't want him to be the nominee. I think
Speaker 1: it behooves them to stop fighting among themselves for you
Speaker 1: to say the moderate vote and uh and and turn
Speaker 1: on him. But there's there's certainly a sense among campaign
Speaker 1: strategies that it that it might be too late. Do
Speaker 1: you mentioned Michael Bloomberg, the founder a majority owner of
Speaker 1: Bloomberg LP, the owner of this radio station and Bloomberg News,
Speaker 1: And I am wondering if this is a make it
Speaker 1: or break it moment for him, given that he was
Speaker 1: widely panned and his performance at the last debate. I
Speaker 1: don't think it's naked or break it for him because
Speaker 1: he is he's self financed number one and all along
Speaker 1: he's had a Super Tuesday strategy. So the real maker
Speaker 1: breaks with him, I think comes on Tuesday, where he's
Speaker 1: already made you very significant in rows across a whole
Speaker 1: host of states that you know that it's been a
Speaker 1: little bit surprising, and I think a reflection of the
Speaker 1: weakness of some other candidates in the race that just
Speaker 1: be undecided of Democratic voters in general. But it's it's
Speaker 1: clearly a very important moment for him, I think, to
Speaker 1: keep that momentum going facing you know, the American public again,
Speaker 1: of which he had not you know, up until his
Speaker 1: debate last week. So Todd, you know, if I'm the
Speaker 1: Democratic National Committee, if I'm the establishment, the Democratic establishment,
Speaker 1: how am I thinking about Bernie Sanders here to the
Speaker 1: extent that he is the front runner and his potential
Speaker 1: in November. I think I think you're very worried, you know,
Speaker 1: quite frankly, because, uh, the argument for Bernie is that
Speaker 1: he could be like Trump in and you know, the
Speaker 1: sort of anti establishment vote could confound expectations and you know,
Speaker 1: provide a lot of surprise, uh in this in this race.
Speaker 1: But the reason you're worried is that Bernie is so
Speaker 1: much more extreme, you know, across the board, uh than
Speaker 1: than Trump as ever was. Trump has you know, many
Speaker 1: positions which are very orthodox Republican views on you know,
Speaker 1: economic policy judges, things like that. Bernie, there's not an
Speaker 1: issue out there on which he's not extreme. So they're
Speaker 1: they're very nervous because again, like I was saying, that
Speaker 1: argument for his candidacy was completely contested. I mean, this
Speaker 1: came up over cocktails last night and and uh, todmer
Speaker 1: Marianna with us your Aisier group right now. I mean,
Speaker 1: who of the candidates would you see dovetail with Senator
Speaker 1: Sanders if he tries to put together a ticket. I mean,
Speaker 1: I mean it's ridiculous to talk about a vice presidential
Speaker 1: prospect right now. I get that. But are all of
Speaker 1: these different candidates so removed from his democratic socialism that
Speaker 1: they would be uncomfortable even standing with him? I think
Speaker 1: most of them would be. And so you know, again
Speaker 1: you could you could see something very similar to to
Speaker 1: Trump sixteen, where Bernie would be reaching beyond you know,
Speaker 1: the the usual back bench, the usual names that are
Speaker 1: that are floated here. Um. I mean, you know, people
Speaker 1: talk about a potential Lawrence Sanders tickets. I I myself think, uh,
Speaker 1: you know, standers would probably look for, you know, a
Speaker 1: little bit more diversity in in the ticket, but you know,
Speaker 1: in terms of policy positions, the establishment will pressure him
Speaker 1: to moderate. I think Bernie could credibly argue that he
Speaker 1: hasn't gotten this far by moderating. Is there any is
Speaker 1: there any history of Senator Sanders quote unquote moderating If
Speaker 1: if there is, it's not significant, and I'm and I'm
Speaker 1: not aware of it. You know, his his views are
Speaker 1: are very similar to you know, what they what they
Speaker 1: were in the nineteen eighties. When you hear sometimes is
Speaker 1: that his support for certain groups, especially in foreign policy,
Speaker 1: has you know, has moderated versus some of the people
Speaker 1: he was supporting in the nineteen eighties, which will hear
Speaker 1: plenty about if he's the nominee against Trump, Latin dictatorships
Speaker 1: and all that kind of Well, there's a question here
Speaker 1: to about momentum and how much moment tim the Democrats
Speaker 1: have or don't have due to how big the field is.
Speaker 1: Who are the next candidates that you expect to drop out?
Speaker 1: I think the spotlight is really on Elizabeth Warren and
Speaker 1: Amy Clobature. For me, I think Pete boota judge probably
Speaker 1: has enough money to stay in through Super Tuesday. Elizabeth
Speaker 1: Warren probably does as well. But you know, unlike boota
Speaker 1: judge who at least had good results in Ireland at Hampshire,
Speaker 1: you know, Warren has been you know, sort of relegated
Speaker 1: in the ranking so far. I think that's why you
Speaker 1: saw her pivot back to sort of protecting the progressive
Speaker 1: agenda in the debate rather than necessarily you know, selling
Speaker 1: her own candidacy. There's not really a state on Super
Speaker 1: Tuesday in which she u is very likely to win.
Speaker 1: She's competitive in her homestead of Massachusetts. Clobature is also
Speaker 1: competitive in Minnesota, which both Super Tuesday. Um, but both
Speaker 1: of them. I think the odds are against their Their
Speaker 1: candidacy is going a lot further. The trouble there is that, um,
Speaker 1: you know, that's not going to provide much of a
Speaker 1: tailwind for the other candidates and the Ray simply because
Speaker 1: they're not um you know, uh, grabbing a whole lot
Speaker 1: of boat share at the moment. Anyway, let's leave it there.
Speaker 1: Thank you so much, Todd, Marianna, thank you so much
Speaker 1: for the briefing. Here is all everybody tries to adjust
Speaker 1: digest Rather what we saw Saturday and onto that CBS
Speaker 1: debate Tuesday in Charleston, South Carolina. Our focus this morning,
Speaker 1: as in the last twelve hours, has been on the
Speaker 1: spread of the virus and the let's be clear here,
Speaker 1: there's been no annwn statement of epidemic to pandemic, and
Speaker 1: yet that is a source of conversation this morning. We
Speaker 1: need a briefing now on China and get that in
Speaker 1: Beijing from our Selena waiting Selena, Selena very simply here,
Speaker 1: is there a better outlook on a Monday into your
Speaker 1: Tuesday in China? Well, Tom, the only outlook that seems
Speaker 1: to be somewhat improving, it's at the rate of use.
Speaker 1: Who they taught in China do seem to be stabilizing that.
Speaker 1: As you said, the conversation is now growing around whether
Speaker 1: or not the World Health Organization escalates this from an
Speaker 1: international public health emergency to a global pandemic, which essentially
Speaker 1: means us a sustained during of cases outside of that
Speaker 1: outbreak area. And because there's seeing an increased cases outside
Speaker 1: of China and Italy, new cases emerging in the Middle East,
Speaker 1: a very strong ramp up of stasies in South Korea,
Speaker 1: that does beg the question of just how much faster
Speaker 1: this is when to continue to accelerate outside of the
Speaker 1: center of the outbreak, Selena, can you put that into
Speaker 1: perspective when we hear about a reopening of some of
Speaker 1: the previously quarantined areas in China, is this because basically
Speaker 1: Beijing is admitting conceding that containment has failed, so we
Speaker 1: aren't seeing the reopening of the lockdown area. There was
Speaker 1: a bit of confusion, so essentially, at first China had
Speaker 1: released a statement allowing some travel for non residents out
Speaker 1: side of the hunt, but then that was very shortly reversed.
Speaker 1: The top officials said that that was not authorized, that
Speaker 1: was a mistake. So this has brought a lot of
Speaker 1: continued confusion after Cuba Province has changed their county methodology
Speaker 1: multiple times over the past month as well. But to
Speaker 1: put things into perspective, there are now more than seventy
Speaker 1: seven thousand cases in China. This is still the vast
Speaker 1: majority of total cases around the world. You do still
Speaker 1: have sweeping craft downs in terms of travel restrictions and
Speaker 1: quarantines across the country. You have seen some provinces sees
Speaker 1: that slightly, but overall people's travel and movement are still
Speaker 1: respected across the country. So Selena, give us a sense
Speaker 1: of one of the areas that we've been seeing some
Speaker 1: reporting recently, is this concept getting back to work in China.
Speaker 1: What is the expectation of the government of trying to
Speaker 1: ramp up production, get people back into the factories back
Speaker 1: to work. Where are we in that regard, Yeah, exactly,
Speaker 1: that's a really the problem right now is trying to
Speaker 1: get those migrant workers that are stuck in their hometowns
Speaker 1: to get back to their place of work. For instance,
Speaker 1: in Beijing, they had earlier instituted this looking day quarantine
Speaker 1: for people who were coming back for places outside of Beijing,
Speaker 1: so a lot of people have a trouble getting out
Speaker 1: of their city, but be also are buried that once
Speaker 1: when they get to where they need to be that
Speaker 1: they're going to have to be self quarantined again. So
Speaker 1: that's been a really big problem because according to Boomberg Economics,
Speaker 1: China's econmuny is only running about half of its capacity
Speaker 1: over the past week, and a lot of these companies
Speaker 1: as well are having trouble paying their employees. Access. Survey
Speaker 1: of small and medium sized companies in China said that
Speaker 1: only a third of them had enough cash to cover
Speaker 1: expenses for a month. What do you see on the streets?
Speaker 1: I mean, Selena, through the weekend and into your all
Speaker 1: day Monday. Now it's there. Let's call it seven pm
Speaker 1: almost eight p m Monday evening. What did you actually
Speaker 1: observe in the streets this weekend. Well, it's really interesting
Speaker 1: because across Beijing, different communities, how different levels of activities.
Speaker 1: So around where I live at a pretty commercial disference,
Speaker 1: and it's still very quiet. A lot of shops and
Speaker 1: restaurants are still closed. Everybody is required to wear masks
Speaker 1: out side, a lot of big public gatherings are are
Speaker 1: not allowed to occur. And if you lost when I
Speaker 1: just went over the weekend, when East do a mall
Speaker 1: and there are some more residential areas, you actually started
Speaker 1: to see more movement on the streets. And actually some
Speaker 1: of the public parks not quite crowded. I went to
Speaker 1: Reton Park. The elderly folk still exercising and walking out
Speaker 1: and about with the government does not encourage that, but
Speaker 1: people are really getting stick inside of being stuck inside
Speaker 1: all day. Selena, thank you so much. Loved that anecdotal
Speaker 1: work from Beijing as well. Selena Wayne reporting from Beijing.
Speaker 1: Let's dive into a global Wall Street conversation, and this
Speaker 1: really works to Lesa's theme this morning, which is Catharsis.
Speaker 1: Stewart Kaiser writes exceptionally detailed notes for Ubs on the
Speaker 1: moments of the mark. This is the mathematics. You know,
Speaker 1: the bell curve in high school folks. And then there's
Speaker 1: a squishiness to the bell curve, which is variants and
Speaker 1: a thing called skewness or skewness if you're British. And
Speaker 1: then this thing called crotosis, which is not the mold
Speaker 1: in your feet. Right now, do you have any idea,
Speaker 1: Mr Kaiser, where the cross moments are right now? Well,
Speaker 1: I mean obviously this uh the move this morning. You're
Speaker 1: gonna change things a little bit um on the pricing
Speaker 1: if you look at it coming into this week, you know,
Speaker 1: the vix curved flattened out, which is sort of what
Speaker 1: happens when the market is a little bit confused about
Speaker 1: what's going on. Um, what we're gonna see today, which
Speaker 1: we are seeing, is the curve getting very steeply inverted
Speaker 1: and effectively, if you think of what the VIX is,
Speaker 1: the vix is the twenty five delta put implied volatility loosely,
Speaker 1: which is telling you it's the price for protection to
Speaker 1: head your portfolio, and that's back above twenty. So what
Speaker 1: you're seeing is a very big bid for skew and
Speaker 1: that's happening in the US, that tends to happen in
Speaker 1: the SMP. This is great. I mean, this suppis will
Speaker 1: be jargonted a hockey games alta new Jerseys out in
Speaker 1: the Garden State Parkway and drove off the road three
Speaker 1: times on let's unpass what you said in English. The
Speaker 1: bottom line is, guys like you look at the dynamics
Speaker 1: of the volatility of the SMP five hundred as a
Speaker 1: guestimate of confidence in the market. Did I get that right? Yeah?
Speaker 1: So the victure is gonna tell you two things. Just
Speaker 1: gonna tell you how concerned people are, I how much
Speaker 1: they're willing to pay for insurance. And then because there's
Speaker 1: a term structure, they'll tell you when they want that insurance.
Speaker 1: And what you see when the market is really really
Speaker 1: stressed like it is today, is they want insurance really badly,
Speaker 1: and they wanted a meetia. I'm like, come on, this
Speaker 1: is an August of two thousand seven or August. I mean,
Speaker 1: how stressed is stressed today? Sweeney's you know, got you
Speaker 1: get your brokers on the phone here, you're not ready
Speaker 1: to do a toime keen you go all to cash? Right?
Speaker 1: How stressed are we? Look? I think there's there's three
Speaker 1: aspects to this. The first is the psychology part, which
Speaker 1: which Amy touched on, which is when we got the
Speaker 1: initial sell off on China, it was relative. It's at
Speaker 1: least Amy Amy's in last week It's ok, you can
Speaker 1: call me Amy, it's two sell of it worked, I apologize,
Speaker 1: ke So what happened in late January was the market
Speaker 1: didn't sell off very much, and that's suggested by the mentality. Um.
Speaker 1: We think that also might have been impacted by the
Speaker 1: fact that people would already hedge their portfolios against election
Speaker 1: risk because you had all that coming in early February.
Speaker 1: The second thing is what's going on with growth? And
Speaker 1: last week what we saw in Europe was the p
Speaker 1: m I S printed strong, but within the p M
Speaker 1: I S was a very long increase in delivery times.
Speaker 1: Typically that's right, is positive for growth. We actually read
Speaker 1: that as negative for growth because what that means today
Speaker 1: is that the supply change, you're getting massively disrupted. The
Speaker 1: third part is you know what's going on from a
Speaker 1: global perspective, and you know this is now affected the
Speaker 1: West and it's in Europe, so that's gonna you know,
Speaker 1: hit a third aspect of us. You're seeing three sort
Speaker 1: of impacts I think on the market. So from a
Speaker 1: technical perspective, there's a question do you sell your holdings
Speaker 1: if this is going to be temporary. How much do
Speaker 1: you look at the VIX curve? How much do you
Speaker 1: look at what people are doing there as a way
Speaker 1: of hedging without selling, sort of the knee jerk response
Speaker 1: that could give some sense of just how much fear
Speaker 1: could end up bleeding in to the market and causing
Speaker 1: forced sales. Yeah, look, I mean I think the mentality
Speaker 1: market is probably still too by the dip um. But
Speaker 1: when you see these types of moves in the market,
Speaker 1: I mean, the SMP is down almost two and a
Speaker 1: half percent overnight. I think the worst selloff we had
Speaker 1: in January was probably one to one and a half percent,
Speaker 1: So this is a different degree of it. So I
Speaker 1: think generally speaking, what you're probably going to see is
Speaker 1: people keep their core portfolio intact and hedge it unless
Speaker 1: and until and so then. In other words, how much
Speaker 1: do you have to see the vics spike up from
Speaker 1: here right now? At one point it was the most
Speaker 1: since two thousand and eighteen. How much more do we
Speaker 1: have to see before we really are starting to feel
Speaker 1: the capitulation? The catharsis at least expressed in derivatives. I
Speaker 1: think from my perspective, you know, come and talk to
Speaker 1: me when it's on a handle um and I think
Speaker 1: that that type of level suggests, like in the scrim
Speaker 1: and in discriminate hedge, what's the bet in the market
Speaker 1: right now? I mean, Paul helped me here. The the
Speaker 1: idea that we've seen is institutional money has been comfortable
Speaker 1: in bonds, in cash and has been reticent to pile
Speaker 1: into equities. Is at a generally correct statement? I think?
Speaker 1: So I'm looking at the tenure on one thirty night time.
Speaker 1: What do you do? I mean, what's the what's the
Speaker 1: bet on the street right now? Around the derivative strategies
Speaker 1: you live in every day? I mean, what are people
Speaker 1: putting on? Look at? I think what you've actually seen?
Speaker 1: You think more Grave Simmons is taking over products that
Speaker 1: I would say what I think you've seen more generally
Speaker 1: is two things. One some hedging, usually or mostly around
Speaker 1: election risks, and the second is people frankly buying upside
Speaker 1: in more cyclical parts of the market on the assumption
Speaker 1: that US growth is going to bottom at the end
Speaker 1: of the first quarter of the early second quarter, and
Speaker 1: this China thing is gonna be temporary. And I want
Speaker 1: to explosure. Let's go a Greek letter right now. How
Speaker 1: are you managing Gamma right now? The second derivative the
Speaker 1: accelerations in the market. Are you thrilled to buy Gamma
Speaker 1: and believe we're going to accelerate or you selling it
Speaker 1: bringing in premium because you think the acceleration call is wrong.
Speaker 1: I think it's a very hard thing to estimate what
Speaker 1: the neck Gamma position, but we do that Gama. I
Speaker 1: would say that generally the street has probably been caught
Speaker 1: short Gamma for the most excuse me, um, excuse me.
Speaker 1: The market is generally been caught long Gamma. The street has.
Speaker 1: And the reason what happens when that happened is when
Speaker 1: the market moves. You have selling. When market was up,
Speaker 1: you have selling. Me the market moves down to your buying,
Speaker 1: and that's one of the reasons that market has been
Speaker 1: so well behaved recently because the street just kind of
Speaker 1: been in that position and will that change today? It could?
Speaker 1: You know, we're busting chops here, folks, but Stewart kais
Speaker 1: just killing it here on how adults on Wall st
Speaker 1: long gamma they did flock of seagulls like, alright, alphabeta
Speaker 1: gamma delta. What am I buying here? To say? What
Speaker 1: do you think? What are you seeing on your desk?
Speaker 1: You know, you know, maybe over the last several days,
Speaker 1: are people kind of going out on the risk curve
Speaker 1: or they saying I'm pulling in my horns. I'm kind
Speaker 1: of going conservatives. From from an equity perspective, I think
Speaker 1: people were moving up the risk curve until the middle
Speaker 1: of last week, and the the Apple News last week
Speaker 1: caught people, I think a little bit wrong footed. And
Speaker 1: the reason I say that is because most people expected
Speaker 1: this to be a very sharp V shaped recovery and
Speaker 1: the Apple you know, the speed with which they were
Speaker 1: willing to cut or you know, say we're gonna miss
Speaker 1: our guidance basically in less than two weeks. I think
Speaker 1: people say, wait a second, is this going to be
Speaker 1: a deeper pullback or perhaps some more pronounced pullback than
Speaker 1: I expected. If a company of that size is willing
Speaker 1: to move their guidance that quickly, so I think that
Speaker 1: was kind of shot across the bow. And now what
Speaker 1: you see in the last couple of days is obviously
Speaker 1: a different but an acceleration or an expansion of that.
Speaker 1: This has been a wonderful Stewart Kaiser, thank you so much.
Speaker 1: With UBS really adult RelA, we again we protect the
Speaker 1: copyright of all of our guests. If you want this
Speaker 1: exquisite mathematics from UBS, get it from UBS. Mr Kaiser,
Speaker 1: how to derivatives there with right now we start strong
Speaker 1: with Christina Hooper. She is with strategy at Investco. Christine
Speaker 1: and Arianna Cuta Dakota published in Bloomer Opinion in the
Speaker 1: last hour. Very important statement. This from the former head
Speaker 1: of the Minneapolis Fed and now at Rochester, one of
Speaker 1: our great mathematicians, great students of the dynamics of the economy.
Speaker 1: He says, the Fed can't wait, they should cut rates now.
Speaker 1: He even says, or fifty basis points, what's the urgency
Speaker 1: of the Fed to accommodate this virus? I'm not sure
Speaker 1: there should be an urgency of the FED. I think
Speaker 1: a lot of it has to do with business confidence,
Speaker 1: and if we do see an erosion there, that's when
Speaker 1: the FED does need to step in, at least to
Speaker 1: make more statements that suggests that it stands ready to
Speaker 1: provide an insurance cut for the purposes of fending off
Speaker 1: the negative impact of the coronavirus. I don't. I don't
Speaker 1: think there's a sense of urgency yet, although there does
Speaker 1: seem to be a feeling of I know, earlier today
Speaker 1: you talked about how it felt like a controlled sell off.
Speaker 1: I think that changed a bit out of control. I
Speaker 1: think that's not a bit out of control sincent exactly.
Speaker 1: And so I think that the said has to be
Speaker 1: measured and thoughtful. It can't be completely reactionary, but is
Speaker 1: clearly um suggested that it's willing to provide insurance cuts
Speaker 1: just by its behavior last year and the way we
Speaker 1: triangulate that. Folks on the Bloomberg and I've got the
Speaker 1: Bloomberg launch pad in front of me. It's got probably
Speaker 1: a hundred and fifty data points. As you triangulate, Paul,
Speaker 1: certain trends away from the blunt instrument of the vix
Speaker 1: at twenty three point two one to tape a little
Speaker 1: better in the last fifteen minutes. I triangulate by looking
Speaker 1: at stronger yet and critically Paul to Christina's perfect point,
Speaker 1: how we've given away to a little bit of sweat
Speaker 1: Nimex crew. The West Texas Intermediate was a solid fifty one.
Speaker 1: It's now fifty point nine five, down two dollars three cents,
Speaker 1: So that's oil giving way as well. Yeah, that's down
Speaker 1: four and a half percent, so clearly reflecting potentially our
Speaker 1: global growth. Christina. So when you look at the price
Speaker 1: performance this morning, is this healthy? Is this a reasonable
Speaker 1: reaction to what is a dynamic story as it relates
Speaker 1: to the coronavirus. Well, I think it may not be reasonable,
Speaker 1: but it is perfectly understandable given that markets in the
Speaker 1: short term are voting machines and only in the longer
Speaker 1: term are weighing machines. So I think it's it's perfectly
Speaker 1: understandable and not surprising. What I'm a bit more surprised
Speaker 1: about is what we've seen with the plummet in UH
Speaker 1: yields on treasuries UH to see where the tenure is,
Speaker 1: where the thirty year is is a bit surprising, especially
Speaker 1: since I've always believed that the Tenure U S Treasury
Speaker 1: yield is a better fear gage than the vix Um.
Speaker 1: But I will tell you, I'll give you the caveat
Speaker 1: that the Tenure does not have medical training, and I
Speaker 1: think that's an important point to make. We'll believe their
Speaker 1: Christine over way too short today, but very very valuable
Speaker 1: on of course, so she is with invest what we're
Speaker 1: gonna do as we drive forward through this half, however,
Speaker 1: special coverage with do we get the negative one thousand?
Speaker 1: I don't think. We don't think first we bounced up
Speaker 1: a hundred points negative eight fifty nine now on the
Speaker 1: Dow that we're gonna bring in a select number of guests,
Speaker 1: all of them with different views. Cameron christ joins us
Speaker 1: now with Bloomberg, and of course he has a wonderful
Speaker 1: ability to synthesize correlation into all this. Cameron, what do
Speaker 1: you see within the correlations of the market. Well, I
Speaker 1: mean right now, everything is uh uh, it is pricing
Speaker 1: fair right um for the equi market. That's a relatively
Speaker 1: recent phenomenon. Obviously we had last month's episode, but it
Speaker 1: was only a few days ago. This time last week,
Speaker 1: we were pretty much the dingy um treasury or government bonds.
Speaker 1: I've been fairly consistent since the whole virus thing um
Speaker 1: broke UH pricing risk aversion. I think it's the previous
Speaker 1: gustum guest mentioned. And the interesting nexus in between the
Speaker 1: two is credit um, where I think you can are
Speaker 1: you that high yield at the moment is trading like
Speaker 1: a government bond um, and that is pretty unsustainable if
Speaker 1: there is a legitimate economic hit um that spreads from
Speaker 1: the from from the virus. That looks like a particular
Speaker 1: point of vulnerability to name, How does factor investing play
Speaker 1: into this? Paul just mentioned. You know, it can be
Speaker 1: the virus, or it can be other things as well.
Speaker 1: When you look at the vogue of momentum or value
Speaker 1: or style investment and all the other almost marketing ideas
Speaker 1: wrapped around a legitimate finance theory called factors, how do
Speaker 1: factors play in when you see a four or five
Speaker 1: drop from the top and intiquities, Well, I think what's
Speaker 1: happening is that you've got an increasing number investors piling
Speaker 1: into an increasingly narrow range of night um, whether it's
Speaker 1: hedge funds or retail kind of everybody has decided that
Speaker 1: they cap tech um is where to be. And it
Speaker 1: takes a lot of the boxes that you see in
Speaker 1: terms of these factors, certainly in terms of momentum UH,
Speaker 1: in terms of growth, which as we know, has trounced value,
Speaker 1: and insofar as the human animal is ultimately a momentum
Speaker 1: based animal, deducing that that which happened yesterday and that
Speaker 1: which happens today is likely to happen tomorrow. UM, that
Speaker 1: we've got everyone kind of long these these relatively narrow
Speaker 1: basket of names. The risk, obviously is if it goes wrong, UM,
Speaker 1: that the exit door might not be sufficiently large to
Speaker 1: accommodate everyone who wants to get out at the same time.
Speaker 1: And Um. The upshot, I think is that liquidity is
Speaker 1: going to be is going to is going to be
Speaker 1: at a premium, and the volatility of volatility UH is
Speaker 1: going to remain elevant. It's very important, folks, that phrase
Speaker 1: of volatility of volatility is Mr christ gets a little
Speaker 1: Matthew Paul, let me frame uh here where we are
Speaker 1: on the opening. We're down five point four percent from
Speaker 1: the recent highs of middle February. I think that will
Speaker 1: be called the Valentine Day high and after that the massacre. Uh,
Speaker 1: and a correction on the Dow is if I can
Speaker 1: get the fame cursorout, twenty six thousand, six hundred would
Speaker 1: be a traditional correction, right, we're points above that down
Speaker 1: known eight d one point. Lukawa just darkened the door,
Speaker 1: as you like to say, Tom Lukawa, Bloomberg News cross
Speaker 1: asset reporter joining us with the camera crisis as well.
Speaker 1: So Luke kind of a rocky opening to the market,
Speaker 1: a little bit of a new view, it seems like
Speaker 1: from financial markets on the potential risk of this Corona crisis.
Speaker 1: What are your early thoughts here as we're you know,
Speaker 1: about eight minutes into the opening of the cash equities markets. Oh, many,
Speaker 1: many assorted thoughts. So let's start with Mark Dow of
Speaker 1: Dow Global Advisors is frequent market commentator, former I M
Speaker 1: F A. Anymous. He's pointed out a lot of the
Speaker 1: times that markets have this tendency to have belated overreaction.
Speaker 1: So we all know what the event is. Not many
Speaker 1: facts about the event of change. There's a lot of
Speaker 1: the knowns, but then we just freak out later anyways,
Speaker 1: rather than when we first hear about it. This strikes
Speaker 1: me as quite memorable compared to the Chinese evaluation that
Speaker 1: did not happen at the end of August. That happened
Speaker 1: with August twelve, and yet it took, you know, a
Speaker 1: couple of weeks later before we open limit down. Second
Speaker 1: of which which ties into this the strictures of the
Speaker 1: options market and how that leads to realize volatility. Last
Speaker 1: Friday was options expiry. When you have all of that
Speaker 1: open interest in strikes hanging around and then it completely
Speaker 1: falls off the table. This is freedom to move, and
Speaker 1: what you're seeing this morning is definitely freedom to move
Speaker 1: to the downside. Look and camera Christ with us with
Speaker 1: down negative seven seven two the vix twenty two points
Speaker 1: three for a better tape in the last five minutes
Speaker 1: here often ugly almost down one thousand, opening to the
Speaker 1: both of you and Luke, let me start with you
Speaker 1: right now. What do institutions do when they see this drop?
Speaker 1: I mean they're in cash? Are they deploying now? Or
Speaker 1: how do they measure the mood the catharsis? Do they
Speaker 1: revert to technical analysis? What do they do where they
Speaker 1: say here's the entry point? Well, are they really in
Speaker 1: cash is the first question. And if you've looked at
Speaker 1: you know, like SMP five under, if you look at
Speaker 1: the asset managers UH in the CFTC and their allocation
Speaker 1: to stocks, that's those numbers in terms of what we
Speaker 1: get are actually quite high. So the real question would
Speaker 1: be is, I think, is how much is institutional dumping
Speaker 1: on this and joining the party? And by the fact
Speaker 1: that what you're seeing from this phase of the coronavirus
Speaker 1: correction that's different from the late January one is all
Speaker 1: of your beloved stocks are joining in and not only
Speaker 1: joining in, their leading to the downside. So you know,
Speaker 1: if you were all up in Microsoft, will be all
Speaker 1: up in Apple, all up in those expensive text stocks,
Speaker 1: especially in software, those are the ones that are get
Speaker 1: hit more now, which does suggest that you know, there
Speaker 1: is a bit more of an active selling component and
Speaker 1: cutting even exposure to the stocks you love that is
Speaker 1: taking place this time around. So Camra christ I'm looking
Speaker 1: at the three months to the ten year treasury UH
Speaker 1: minus seventeen here down eight and a half points today,
Speaker 1: is that what is that telling you? Should we really
Speaker 1: pay close attention to that because we've seen that go
Speaker 1: negative in the past with no real implications. Yeah, I
Speaker 1: mean that curve. I don't think it's particularly useful on
Speaker 1: a sort of very very high frequency basis, because really
Speaker 1: it's just telling what the tenure does because um, three
Speaker 1: month bills don't really you know, three month bill yields
Speaker 1: don't really um don't really move so much. Twos tens
Speaker 1: perhaps offers a little more forward looking um uh color
Speaker 1: and uh, it's interesting that curve hasn't really moved at
Speaker 1: all today. It's been a parallel shift, UM to the
Speaker 1: to the downside. What is the camera that's well said.
Speaker 1: What is a parallel shift where all yields go down?
Speaker 1: What is that signal to a fete? I mean, is
Speaker 1: is that signaling to them? Signals signals cut rates and
Speaker 1: keep them down. Um. Now, I think you could make
Speaker 1: a pretty good argument that rape cuts UM, while they
Speaker 1: might cheer up UM equity investors temporarily, would have a
Speaker 1: vanishingly small impact on on the real economy. Um. You know,
Speaker 1: not only in the United States, but sort of in
Speaker 1: the rest of the world. UM. You know, uh, you know.
Speaker 1: In terms of the previous discussion of what's actually changed, well,
Speaker 1: I think something has changed, which is that you've started
Speaker 1: to see an economic impact extend beyond China's borders. UM
Speaker 1: for Venice to to cancel the carnival is I mean,
Speaker 1: they're not doing that because interest rates are too high.
Speaker 1: They're doing it as a public health scare. UM schools
Speaker 1: are closing. That's something that that I think has impacted
Speaker 1: or infected, if you will, um uh investor in best
Speaker 1: investor consciousness, because it was kind of easy to write
Speaker 1: off UM as an ephemeral thing or a contained thing,
Speaker 1: and it was contained within China. But when you're starting
Speaker 1: to see business UM and the economy being impacted outside
Speaker 1: of China, then it's kind of like who let the
Speaker 1: dogs out? And how do we get them back in
Speaker 1: the cage? And that's a that's a more difficult proposition.
Speaker 1: Kevin Christ, thank you so much for joining us in
Speaker 1: a short notice today with Bloomberg of course, looking particularly
Speaker 1: at the cross at space, Paul Sweni and Tim King
Speaker 1: worldwide with our special coverage, we are without commercial interruption
Speaker 1: in this special half hour getting the markets open. We
Speaker 1: opened near negative one thousand, and the down down negative
Speaker 1: eight three seven down. We went captured, the bid, bounced
Speaker 1: back up, and we went back a little bit with
Speaker 1: a vix was a twenty four handle now twenty two
Speaker 1: point seven eight. The yield is in ten basis points
Speaker 1: were in eleven earlier one point three six seven two
Speaker 1: on the tenure, Luke, is it general? You know? I
Speaker 1: I make jokes about your three Bloombergs, but it's true.
Speaker 1: It isn't What is? What is? That's a hell of
Speaker 1: a monthly bill that we say, thank you? What What
Speaker 1: do you see right now off your Bloomberg screen? Like
Speaker 1: what's the the delineating feature of panic or critically non panic?
Speaker 1: To me, it'll still be kind of the the starting
Speaker 1: point where we were for this and how quickly things change.
Speaker 1: So like equity put call ratios in terms of the
Speaker 1: volumes traded on the put side versus the call side,
Speaker 1: they've been below one pretty much every day this year,
Speaker 1: a k more calls changing hands, then puts. I. I
Speaker 1: want to see how dramatically something like that changes, just
Speaker 1: like I want to see not only does the greed disappear,
Speaker 1: but also does the demand for protection orally skyrocket, because
Speaker 1: really you haven't had both things happen consistently. Even in
Speaker 1: late January. He's so seventies. He's like Wall Street he's
Speaker 1: wearing a shirt today that could have been worn with
Speaker 1: leud Wolfson, Gordon g Michael Holland would have warned twenty
Speaker 1: years ago. It's got the blue stripe, that's got the
Speaker 1: Glary Caudlow statement blue stripe shirt with the white cord.
Speaker 1: And this this is my Kevin really special pull off
Speaker 1: something like this. It's very it's very fashion forward. Daward
Speaker 1: Ay time joining us with Lucawa. We have Gina Martin Adams. Uh.
Speaker 1: She's our strategist for Bloomberg Intelligence giving us I think
Speaker 1: so yes, she that's kind of where she was. So Gina,
Speaker 1: thanks so much for joining us. Give us your perspective
Speaker 1: on this opening here and what may be different here
Speaker 1: for the US equity markets. Well, I think the equity
Speaker 1: market has been riding on the hotels of the better
Speaker 1: than expected fourth quarter earning season and able to therefore
Speaker 1: dismiss underlying weaknesses in the earning stream related to coronavirus
Speaker 1: um dampened outlook which has emerged in revision. It's pretty persistently.
Speaker 1: But now the earning season is fading, and you've had
Speaker 1: really strong spikes in a sort of risk off tone
Speaker 1: across other asset classes. The equity market is following suit.
Speaker 1: So if you actually look at the technicals of the
Speaker 1: equity market, the two week rally that we had in
Speaker 1: early February was really running on steals anyway. It was
Speaker 1: largely supported by just a few names and tech and
Speaker 1: some defensive rotation into utilities. So it was signaling that
Speaker 1: the equity market was on fairly weak footing as it was.
Speaker 1: But I do think that the end of earning season
Speaker 1: was inevitably going to be difficult for stocks, and we're
Speaker 1: going to go through a period of churning here, probably
Speaker 1: a modest correction related to the fact that the economic
Speaker 1: outlook is not going to improve in the short run
Speaker 1: and estimates are a little too high for the next
Speaker 1: couple of quarters of growth. The rule of thumbs as
Speaker 1: a correction, is that still true or the markets so
Speaker 1: adjusted or boloxed up right now that we're on the
Speaker 1: cusp of a correction? Now, which is it? You know,
Speaker 1: I think it's some the arbitrary, honestly, Tom, it's a
Speaker 1: ten percent is known as the correction, is known as
Speaker 1: a bear market. Some people would say we haven't had
Speaker 1: any bear markets over the course of the last ten years.
Speaker 1: I would say, we've actually had three, maybe even four,
Speaker 1: just based on the fact that we had very severe
Speaker 1: contraction in the equity market nearing. So, you know, I
Speaker 1: think that any correction always feels somewhat difficult, whether it
Speaker 1: be five percent, ten percent, or fifteen percent, particularly when
Speaker 1: in the company's of really strong spike and volatility and
Speaker 1: a strong risk off tone. That's likely what we're in
Speaker 1: for um at least for the next couple of days.
Speaker 1: Just the massive rally that we saw in gold, the
Speaker 1: big rally we saw in the thirty year on Friday,
Speaker 1: would have indicated that we were in for weakness at
Speaker 1: least in the short run here in the equity market.
Speaker 1: And I think unless you get some really really strong
Speaker 1: earnest results from the retailers, which is highly unlikely, it's
Speaker 1: just going to continue for the near terms, kind of
Speaker 1: blowing off some of the excess that we had to
Speaker 1: see left earlier this year. Well, I look for a
Speaker 1: forward your team and they're writing this afternoon from Bloomberg Intelligence,
Speaker 1: Gina Martin Adams out of all of our equity coverage today, Paul, Yeah,
Speaker 1: look at you know, I'm looking at my commodity screen
Speaker 1: that g l C O screen, which is just for us,
Speaker 1: you know, equity people just the savior. And I'm seeing
Speaker 1: so much red across the commodities uh space here And
Speaker 1: is this just you know, the US equity markets just
Speaker 1: kind of catching up with what commodity has been telling us,
Speaker 1: which is global growth is you know, tepid at best
Speaker 1: and may even be at risk with this coronavirus. Is
Speaker 1: that kind of we're just seeing maybe a little bit
Speaker 1: of catchup, as maybe Gina suggested, Yeah, I totally think
Speaker 1: there's you know, that's that's the way to frame it
Speaker 1: when you look at how commodities have been on a
Speaker 1: sustained basis coppercruede week for quite a while. Commodities have
Speaker 1: been showing the demand implications of the coronavirus for quite
Speaker 1: some time. Equity markets have been focused on the temporary
Speaker 1: supply implications of the coronavirus for quite a while. So
Speaker 1: the kind of scaring that circle here is is a
Speaker 1: law of what we see. And one one thing that's
Speaker 1: really jumping out to me right now is I'm looking
Speaker 1: at implied correlations for the SMP five hundred, So the
Speaker 1: extent to which things are expected to move together, you know,
Speaker 1: generally in a crisis. Does one do that? Uh, the
Speaker 1: SPX one month, I see bee ball index on your terminal.
Speaker 1: And so one thing that's really struck me is this
Speaker 1: was one of the rare occasions where you had correlations spike,
Speaker 1: implied correlations spike in late January and then immediately immediately
Speaker 1: fade to where they were before. Generally, when you have
Speaker 1: a spike and implied correlations, it means, hey, there's some
Speaker 1: kind of macro thing going on that we're going to
Speaker 1: worry about for a while. It's gonna be some kind
Speaker 1: of episode that we have to work our way through.
Speaker 1: Been the case for, you know, for the trade war,
Speaker 1: was the case in late was the case during the
Speaker 1: the Chinese hard landing fears. Right now those are still
Speaker 1: probably subdued. So if you're looking for a way for
Speaker 1: volatility to move up, it's through this conduit where we
Speaker 1: start pricing in everything moving together to the downside. And
Speaker 1: I just put that up on the screen, and we're
Speaker 1: now out the four standard deviations is a general of
Speaker 1: four standard deviation. Move is where the sweat clicks in
Speaker 1: and we're getting there. We're getting we're getting there, but
Speaker 1: we're not quite there yet. So looking at the you know,
Speaker 1: we we talk a little bit about crude oil and
Speaker 1: it's down about four percent or four point two barrel.
Speaker 1: I mean, is that kind of a is that a
Speaker 1: place where people should look for, you know, where is
Speaker 1: global growth going to be? And if I see weakness
Speaker 1: in that commodity, that's really a flag for me. I
Speaker 1: mean probably copper would be the even bigger one, or
Speaker 1: the or the complementary, or you know, at least both
Speaker 1: of them telling the same story. Yeah, it's I would
Speaker 1: say definitely commodities are pricing in the lower demand global
Speaker 1: growth outlook much more than any asset class has been
Speaker 1: for a while. But hey, commodities have been financialized for
Speaker 1: quite some time, more than they are necessarily indicative of
Speaker 1: supply demand conditions for real end users for quite some time.
Speaker 1: So probably more of a tendency to overshoot in both cases.
Speaker 1: Very good. I don't knowough jargon from Calah, but I
Speaker 1: learned a new function today, so you know that was
Speaker 1: there was as good as Stewart Kaiser from ubs time.
Speaker 1: It was pretty good. Do we get through this without
Speaker 1: mentioning a backup goaltender, because that's that's that's how bad
Speaker 1: things must be right now, Michael Reagan with us here
Speaker 1: as we look at that, He's trying to log onto
Speaker 1: the hurt when I'm like the backup goaltender around here
Speaker 1: driving the surveillance. When when the market goes down a
Speaker 1: thousand points, Michael, can you log on? I'd rather not.
Speaker 1: I should have said I should have work at home.
Speaker 1: But what is the color of the market you? Michael
Speaker 1: Reagan was, folks, leading just all of our intellectual coverage
Speaker 1: in Bloomberg News on the equity markets. You go into
Speaker 1: a morning call, what's the theme that you want to
Speaker 1: attack here? Negative seven sixties seven on the dough? Well,
Speaker 1: I guess you know. Obviously the question on everyone's mind
Speaker 1: is gonna be how bad will this get? God bless
Speaker 1: anyone who can even attempt to try to answer that.
Speaker 1: I mean, I think obviously the Italian outbreak is really
Speaker 1: the focus of everyone uh ire right now. And just
Speaker 1: looking at sort of the leadership in the stock market,
Speaker 1: what do you see that? Well, a lot of that
Speaker 1: sort of the high flyers are leading your Apple, Microsoft, Amazon,
Speaker 1: the ones that we're really sort of leading this this
Speaker 1: uh rally on the way up. What I find interesting
Speaker 1: he's looking at the healthcare stocks. They're pretty much down
Speaker 1: across the board. I mean, Gillyad is up because they
Speaker 1: might have the vaccine. What are you seeing in Johnson
Speaker 1: and Johnson might have a well that's the thing. Everything's
Speaker 1: down pretty steeply. And I find it interesting because less
Speaker 1: we forget Bernie Sanders did win a pretty a pretty
Speaker 1: big better than my mind had was thirty nine percent, folks,
Speaker 1: And he's clocking here with yeah, so I would be curious.
Speaker 1: It's hard to isolate what is happening to say, the
Speaker 1: managed care stocks. United Healthcare is down like seven, so
Speaker 1: obviously that you know, could could be a lot of
Speaker 1: the coronavirus fear. But you also gotta wonder if Bernie
Speaker 1: is in the market a little bit too. I don't know,
Speaker 1: but um it's hard to separate the two because obviously
Speaker 1: a coronavirus is not gonna be good for your your
Speaker 1: healthcare stocks, but neither is so um uh, you know,
Speaker 1: I would love to see what this market was would
Speaker 1: look like this morning if it had just been the
Speaker 1: Bernie news over the weekend and not the not the virus.
Speaker 1: And Michael Reagan with us and he'll continue on Bloemark
Speaker 1: Radio with reports through the day. Right now, we have
Speaker 1: to digress for a global audience for something that was
Speaker 1: absolutely extraordinary this weekend. There's been a lot of coverage
Speaker 1: in it in America and certainly within Canada as well.
Speaker 1: This is where two goalies get hurt and you don't
Speaker 1: have another goalie, and every team has an agreement that
Speaker 1: there's always an emergency goalie who if they play, gets
Speaker 1: five hundred dollars and they get to keep their jersey. Yeah,
Speaker 1: it's it's in the contract and the agreement, and this occurs,
Speaker 1: but it doesn't occur like it did this weekend in Toronto.
Speaker 1: Is Carolina had two people injured and Luke it was
Speaker 1: absolutely extraordinary, without question, I've never seen it before. Tavarus
Speaker 1: took the giant John Tavirus took that first shot and
Speaker 1: he looked like a goalie completely out of his well
Speaker 1: that's because he was a goalie completely out of his
Speaker 1: league too. So for backstory here, the Carolina Hurricanes two
Speaker 1: goalies injured, they had to turn to the leaf's appointed
Speaker 1: back up, who is the Zamboni drivers, and the teams
Speaker 1: have an in Toronto, but so in front of a
Speaker 1: home team, we embarrass ourselves like this so Carolina has
Speaker 1: to turn to the Merley's Zamboni driver. The Toronto Marley
Speaker 1: Zamboni driver ted into net before he had even faced
Speaker 1: a shot. He hadn't even bigger lead than he started with.
Speaker 1: He himself got a shot on net, banking it off
Speaker 1: the boards, and he made I believe, seven saves in
Speaker 1: the third period. But Tom, if you remember the old
Speaker 1: Scott Stevens era in New Jersey Devils, I have not
Speaker 1: seen a team play suffocating defense like that there was.
Speaker 1: You couldn't get a puck through to the net. Not
Speaker 1: that the Leafs are really trying. This will go down
Speaker 1: is perhaps more embarrassing than the four one collapse in
Speaker 1: Game seven to the Brewers look very quickly. And we'll
Speaker 1: expand on this later. Ex going to our audience, his
Speaker 1: junior banus, I was at a junior B level when
Speaker 1: I was you know, Colorado, million years ago. But what
Speaker 1: does junior B now mean versus the minors or the NHL.
Speaker 1: I would say Junior B in a lot of cases
Speaker 1: means you care about the sport, you stuck around to
Speaker 1: play it for a while, but you were not one
Speaker 1: of the top tier talented guys. You're nobody had a
Speaker 1: chance at this level to play an the NHL. Essentially,
Speaker 1: oh yeah, that's you. You're not going to go to junior.
Speaker 1: Being Austin Matthews had the puck off the left side
Speaker 1: in his stomach. He shot it. Even I could have
Speaker 1: stopped that. He he dotted the eye in canes. As
Speaker 1: we say, see the suffering there. It's like if he
Speaker 1: was long Apple calls here yesterday, Luke Kawa, Thank you
Speaker 1: so much for that perspective on the markets, and of
Speaker 1: course I'm truly an historic moment. Thanks for listening to
Speaker 1: the Bloomberg Surveillance podcast. Subscribe and listen to interviews on
Speaker 1: Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm
Speaker 1: on Twitter at Tom Keene before the podcast. You can
Speaker 1: always catch us worldwide. I'm Bloomberg Radio.