Speaker 1: Strap on your parachute. It's time for What Goes Up
Speaker 1: with Sarah Ponzick and Mike Reagan. Hello and welcome to
Speaker 1: What goes Up, a Bloomberg Weekly Markets podcast. I'm Sarah
Speaker 1: pons a reporter on the Cross Asset team, and I'm
Speaker 1: Mike Reagan, a senior editor at Bloomberg. This week on
Speaker 1: the show, nothing about the past year has seemed normal.
Speaker 1: A global pandemic, widespread lockdown, so what could be seen
Speaker 1: as a medical miracle with vaccine creation? But then, of
Speaker 1: course there's the market angle. We had the quickest fall
Speaker 1: into a bear market on record, and that was then
Speaker 1: followed by a historic comeback. But according to our guests,
Speaker 1: we're now in the midst of an expansion just like
Speaker 1: any other, just likely a shorter one. He'll explain, And
Speaker 1: of course we will close out the episode with our
Speaker 1: tradition the craziest thing I saw in markets this week,
Speaker 1: and by all means, if you saw something crazy, give
Speaker 1: us a call on the Bloomberg Podcast Hotline at six
Speaker 1: four six three to four nine. Oh and let us
Speaker 1: know what crazy thing you saw. Leave us a voicemail
Speaker 1: and maybe we'll play it on the show. Uh And Sarah,
Speaker 1: I trust you have a crazy thing. You had two
Speaker 1: weeks a week off there to prepare, so I expect
Speaker 1: you to bring it this week. Yeah. So I brought
Speaker 1: you two crazy things this week. I might even throw
Speaker 1: in a third if you're lucky. But for everyone listening,
Speaker 1: I know you demanded it, and we did get the
Speaker 1: demand on our ratings on Apple Podcasts. So luckily you
Speaker 1: don't just have to stick around today for the crazy things.
Speaker 1: You also get to stick around for one of Mike's nicknames.
Speaker 1: How exciting that is. Remember this into it. This is
Speaker 1: not the high value nickname. I'm holding out for two
Speaker 1: hundred ratings to give the high value nickname. This. We're
Speaker 1: getting there. This is a bargain nickname. It's a flattering
Speaker 1: nickname to me. So I keep those ratings coming. I
Speaker 1: think we're at one seventy something now, so we get
Speaker 1: the two. I'll deliver the really embarrassing nickname for this
Speaker 1: right at this right, Mike, give it a week, give
Speaker 1: it a week, just so you can all roast me
Speaker 1: on Twitter. I know that is the entire purpose of this,
Speaker 1: which is fine. That's that's as it should be. But
Speaker 1: new guest, and we won't roast him on Twitter anywhere else.
Speaker 1: We're very happy to have him first time on the show.
Speaker 1: He is the chief strategist at the clock Tower Group.
Speaker 1: His name is Marco Peppitch. Marco, welcome to the show.
Speaker 1: It's a real pleasure to be here. Thank you for
Speaker 1: having me. Oh absolutely, Marco. Let's start. Let's talk a
Speaker 1: little bit about the clock Tower Group. Um, and it
Speaker 1: tell us a little bit about you know, what kind
Speaker 1: of work you do for them. I know the main
Speaker 1: business is sort of seating new hedge funds, right, um, So,
Speaker 1: so tell us about what else the company does and
Speaker 1: what your role is. We're in an alternative investment management firm,
Speaker 1: so we we do several things. We we set hedge funds,
Speaker 1: macro discretionary hedge funds. We also UM have a seating
Speaker 1: platform actually in China with on shore managers there. We
Speaker 1: also are doing private investing, specifically in fittex space, but
Speaker 1: we're also looking to expand from there as well. So
Speaker 1: there's several sort of business lines that we have. We
Speaker 1: have great relationships we've built over the last twenty years
Speaker 1: with institutional investors and we really listen to our clients.
Speaker 1: We hear what they are looking to do and um,
Speaker 1: we you know, we claim to be able to answer
Speaker 1: most of their challenges and deliver with some innovative business
Speaker 1: ideas and investment products. So just to expand on that
Speaker 1: a little bit, how do you go about deciding where
Speaker 1: to send money to if you're seating hedge funds? I mean,
Speaker 1: how do you go about doing that process? You know? Um,
Speaker 1: it requires a real in depth knowledge of the industry
Speaker 1: and I think also of m where the young talent is.
Speaker 1: I mean that's the fundamental, uh, fundamental issue. I mean, um,
Speaker 1: you have to know how to kind of have a
Speaker 1: draft board. Think about like a professional sports team. You
Speaker 1: throughout the season, you're looking at the college studs coming
Speaker 1: through the program and you're looking at where they are
Speaker 1: and how they rank. Um, So that's one part of
Speaker 1: the process. It's very difficult because of course the industry
Speaker 1: I mean not like you have statistics of hedge fund
Speaker 1: portfolio managers somewhere publicly available. But you also have to
Speaker 1: know where the sport is going, you know, so you
Speaker 1: have to know kind of whether three point shooters are
Speaker 1: more likely to succeed or you need big, big guys rebounding.
Speaker 1: So there's also that component where we have to constantly
Speaker 1: be thinking where is macro going? And so I guess
Speaker 1: my role is not really on the former. You know,
Speaker 1: I'm not really like a talent scout. I enjoy talking
Speaker 1: to really smart people and hopefully I can add value there,
Speaker 1: but my expertise really is on the ladder, so kind
Speaker 1: of thinking where the macro industry is going, where the trends?
Speaker 1: Do you want to see someone who is an expert
Speaker 1: in emerging markets stress that more classical macro. You know,
Speaker 1: those are questions we also have to ask ourselves. I
Speaker 1: can't quite say that you have a five star rating
Speaker 1: or four star rating a quarterback or anything like that.
Speaker 1: We don't you know, you don't have that. But you've
Speaker 1: got to keep your ear to the ground and kind
Speaker 1: of figure out who's who's out there, Who's who, who's good?
Speaker 1: So you're on Wall Street pets looking for writers. I
Speaker 1: assume that I'm I'm just kidding of No, no no, no,
Speaker 1: actually I think my eight year old son, you know,
Speaker 1: could could be good next, next one up. He played
Speaker 1: a lot of computer games. Yeah, absolutely absolutely, But let's
Speaker 1: get to that point. Then, your role, as Sarah mentioned, um,
Speaker 1: you have an interesting take on on what we can
Speaker 1: expect from this economic cycle. Uh, it's gonna be like
Speaker 1: a normal cycle, just shorter. Uh. And you wrote in
Speaker 1: a recent note, you know this augurs for a more volatile,
Speaker 1: manic and brief bowl market. Talk us through that a
Speaker 1: little bit. How do you see that unfolding and kind
Speaker 1: of you know, what inning are we in now in
Speaker 1: your view of this expansion and bowl market? You know,
Speaker 1: let me first give you sort of a sense of
Speaker 1: where I'm coming from in terms of my competency. Um,
Speaker 1: I feel that my kind of methodological bias is probably
Speaker 1: political analysis. So that's where I cut my teeth at
Speaker 1: on south side research. And so when I look at
Speaker 1: what happened in the last expansion and I sort of
Speaker 1: try to figure out, why was it as prolonged, tepid,
Speaker 1: Why was it all about secular stignation. I call it
Speaker 1: the Charlie Brown expansion because it was always kind of depressed.
Speaker 1: Um So why A lot of people give you a
Speaker 1: lot of really complicated answers like, oh, people are getting
Speaker 1: old demographics, you know, technologies deflation. Yes, okay, maybe to
Speaker 1: me it was very simple. Politics flipped and we got
Speaker 1: this huge push towards austerity. Not just in the US
Speaker 1: with the Tea Party, but even with David Cameron in
Speaker 1: the in Europe mircle of course everywhere. Only really could
Speaker 1: you say that abanomics kind of moved a little bit
Speaker 1: against that. But there was this big political consensus that
Speaker 1: we had to tighten our belts because what households did,
Speaker 1: so the governments had to do the same. And I
Speaker 1: think that was a huge component of prolonging the recovery,
Speaker 1: making it, you know, tepid, make ensuring that the output
Speaker 1: gap could continue to be basically open and not closed.
Speaker 1: I think that this time around, it's very clear that
Speaker 1: we're in a different paradigm, and so I think that
Speaker 1: we're probably done. I would say with you know, I
Speaker 1: don't know. I'm just throwing this out there, but like
Speaker 1: this recovery I think is behind us. We ask me
Speaker 1: again in twelve months, maybe I'll reassess. I think we
Speaker 1: have two stimulus programs coming through using reconciliation, which is novel,
Speaker 1: and we can talk about why that's novel. I think
Speaker 1: they're gonna be huge. I think there's gonna be no
Speaker 1: revenue offsets. This this fantasy that they'll be corporate tax
Speaker 1: increases likely will not happen, So we're just gonna have unadultered,
Speaker 1: high powered spending. That makes this, I think, meaningfully different
Speaker 1: from the previous expansion. And I will say, of course, Marco,
Speaker 1: you have a book. It's called Geopolitical Alpha, and it
Speaker 1: was ranked one of the best books by Bloomberg of
Speaker 1: so if you're intrigued, definitely check it out. So what
Speaker 1: that said, I mean, with the flip that we have seen,
Speaker 1: of course there's a lot of spending coming down the pipeline.
Speaker 1: If this is yes, it's a faster expansion in, but
Speaker 1: then it also means it's a shorter expansion. What is
Speaker 1: it then that is the nail in the coffin? What
Speaker 1: is it that actually ends the expansion? If it's faster
Speaker 1: yet also shorter, you have to assume the end comes
Speaker 1: sooner as well. Yes, and I think eventually we do
Speaker 1: run out of fiscal policy um at some point. And
Speaker 1: I think that sort of my my mental framework for
Speaker 1: this would be the short and quick recessions that happen
Speaker 1: after the Korean War or World War two, where you
Speaker 1: had a fiscal cliff recession. I mean right now, you know,
Speaker 1: speaking on February eighteen twenty one, I would say three
Speaker 1: looks like potentially the end end line. I think in
Speaker 1: two will get another two trillion dollar stimulus package infrastructure deal, um.
Speaker 1: And I think by three, after the mid terms, it's
Speaker 1: it's unlikely they will be able to keep up with
Speaker 1: this high water mark we've now established in terms of
Speaker 1: fiscal spending. But you know, that's a very low conviction
Speaker 1: of you. All I know is that for the next two,
Speaker 1: you know, two years, it's like diamond hands and to
Speaker 1: the moon. You know, I got anything else to tell
Speaker 1: you other than that, And let me tell you one
Speaker 1: more thing. Let me tell you one more thing, just
Speaker 1: really quickly, I think, uh, think about it this way. Okay,
Speaker 1: let's let's let's say we're listening to your podcast, amazing podcast,
Speaker 1: whichever one should listen to. Let's say they were listening
Speaker 1: to your podcast in a car and we pull up
Speaker 1: to the takeout window. All right, but I'd like to
Speaker 1: listen to your podcasts at three X. Okay. I don't
Speaker 1: know if anyone does that, but let's say I do.
Speaker 1: And so what I'm saying about the cycles, it's like
Speaker 1: listening to you guys. And then suddenly at the takeoff window,
Speaker 1: I realized they forgot my fries, they didn't put the
Speaker 1: milk I want in my coffee, and I'm arguing with
Speaker 1: you know, like whatever I get that done and coffee together,
Speaker 1: you know, like you got a tough day, you need
Speaker 1: energy and I guess whatever carbohydrates. Anyways, my point is
Speaker 1: that what happens is that when you come back to
Speaker 1: the podcast, you've missed meaningfully more of that pod. Kist
Speaker 1: him you did if you listen to it at one X.
Speaker 1: And I think that's the difference between the cycle and
Speaker 1: the previous one. If you're sitting on the sideline being
Speaker 1: cautious because evaluations this or that, waiting for a correction,
Speaker 1: three months on the sidelines, it's like nine months in
Speaker 1: the previous cycle. I do have a friend who listens
Speaker 1: to it. I think it like one and a half
Speaker 1: times speed. And then every time he sees me starry,
Speaker 1: he's like, you know, and I talked him. He's like,
Speaker 1: you really talk, you know, the same energy that you
Speaker 1: usually do when I hear you on your podcast, Marco.
Speaker 1: I wonder, you know, another thing you've written a little
Speaker 1: bit about is inflation, the outlook for inflation. I wonder
Speaker 1: how that fits into the sort of inevitable death of
Speaker 1: of the the expansion cycle. You know this sort of
Speaker 1: uh stereotype that's probably true of true of most times
Speaker 1: is that you know, the central banks typically snuff out
Speaker 1: expansionary time reacting to inflation uh and and raising interest rates. Um.
Speaker 1: And I think you make a good point. You say
Speaker 1: that there's obviously gonna be this second quarter bumping inflation
Speaker 1: as the world kind of gets back to normal. And
Speaker 1: you know, you have some you know, comparisons to prices
Speaker 1: last year that that we're obviously uh deflated because of
Speaker 1: the pandemic. So you think sexual banks will dismiss that
Speaker 1: sort of outlier of a big hot second quarter inflation. Um,
Speaker 1: But you do think it's it's coming. Uh. You point
Speaker 1: out to, uh, maybe oil going to eight dollars a barrel?
Speaker 1: So is it is that going to be a typical
Speaker 1: sort of boom and bust scenario as past cycles that
Speaker 1: ultimately it's the central banks that sort of ruined the party.
Speaker 1: And you know, how fast do we have to worry
Speaker 1: about inflation and the reaction function from central banks if
Speaker 1: not the second quarter? Yeah, So definitely that could be
Speaker 1: part of the calculus. And think three again could be
Speaker 1: a moment when central banks realized that they kind of
Speaker 1: made a mistake mathematically center a sparables like completely understand
Speaker 1: why they're saying it's transitory, But inflation is not a
Speaker 1: monitory phenomenon. It's not even a mathematical phenomenon. It's as
Speaker 1: many in many ways a psychological phenomenon. And I'm just
Speaker 1: not sure how economic agents, you know, households and CEOs
Speaker 1: are going to react to this coming quote unquote transitory
Speaker 1: about of inflation. I think they will react. And this
Speaker 1: is just my, you know, basically educated guess, but I
Speaker 1: think they'll react vibe uh forwarding their purchases to the
Speaker 1: present from the future. Um. So that's that's the first
Speaker 1: part of this. Now to your question of does Dad's
Speaker 1: then bring the end of the cycle, I think yes.
Speaker 1: I think you can add that to sort of the
Speaker 1: soup with the fiscal thrust argument, but I am not
Speaker 1: sure how fast it will happen. And and here's here's
Speaker 1: what I would kind of add a political lends to this. Um,
Speaker 1: they told us what they want to do, central bankers
Speaker 1: of tolls, they wan't hire inflation. It is the easiest way,
Speaker 1: and I know most investors don't like to hear this
Speaker 1: because their savers. But it's the easiest way to kind
Speaker 1: of redistribute wealth and to deal with because because a
Speaker 1: lot of people are indebted at very high levels. Of course,
Speaker 1: provided their wages rise as well, which I think they will.
Speaker 1: So I think that this is something that's coming by Paulson,
Speaker 1: because I think they'll delay the kind of acts of
Speaker 1: central banking that comes and cuts inflation in its tracks.
Speaker 1: I know that we know how to do it. I
Speaker 1: know that Paul Walker did. But Paul Wulker was a
Speaker 1: man of the moment and he managed to fight and
Speaker 1: you know, swat away inflation through two recessions that increased unemployment.
Speaker 1: I just don't see any willingness to impost pain on
Speaker 1: the media voter at this point, and so I think
Speaker 1: that we will look through inflation longer than most investors
Speaker 1: probably think. So. So speaking of inflation and looking at commodities,
Speaker 1: and Mike mentioned how you said oil could go to
Speaker 1: eighty dollars a barrel. Of course, as speaker, was a
Speaker 1: remarkable week in the United States. In Texas, we had
Speaker 1: the freeze, we saw oil prices shoot through sixty dollars
Speaker 1: a barrel. West Texas intermediate for the first time in
Speaker 1: a year. So is this just the beginning? And obviously
Speaker 1: that that's on the supply side of the equation, But
Speaker 1: what comes next to really push oil higher? Is is
Speaker 1: it the recoveries, the vaccine roll up, things getting back
Speaker 1: to normal, and then what does that mean for the
Speaker 1: inflation picture overall? You know, Sarah, I mean it's all
Speaker 1: of those, all of the above, you know. So, Um,
Speaker 1: I also think jue political tensions you can add in
Speaker 1: there too. Um. You know, the sort of the hope
Speaker 1: of a quick supply shock, positive supply shock because of
Speaker 1: a Biden administration is dissipating. Um iran elections midyear, it's
Speaker 1: unlikely we get a deal. I mean, it's a very
Speaker 1: complicated situation. But I think fundamentally, um, one of the
Speaker 1: most ironic and paradoxical uh kind of effects of the
Speaker 1: E s G sustainability push is that many energy companies
Speaker 1: just do not want to put topics in two very
Speaker 1: expensive projects. And so I you know, like you have
Speaker 1: demand which is basically stable around nine million barrels a
Speaker 1: day globally, and if Capex doesn't produce four to six
Speaker 1: million new barrels a year, of product of production to
Speaker 1: replace depleted oil wells. You can't make meet that demand.
Speaker 1: So we could have a meaningful problem when demand does
Speaker 1: recover to global kind of average demand and CAPEX doesn't
Speaker 1: show up to replace the usual depleted barrels that just
Speaker 1: happened through well depletion. So that's the first issue. I
Speaker 1: think the second issue and what it means for inflation,
Speaker 1: it's tricky. So I would actually say all price increases
Speaker 1: over the longer term are deflation ary if not accompanied
Speaker 1: by commensurable increases in wages. And this is really tough
Speaker 1: for economists and market participants to forecasts, like how do
Speaker 1: you forecast wage increases? You know, the Phillips Group hasn't
Speaker 1: really hopped in any way. There's also some ways in
Speaker 1: which we don't really know where kind of wage pressures
Speaker 1: are going to come from. But I think there are
Speaker 1: two things that are happening right now. One, many labor
Speaker 1: unions are seeing in this crisis an opportunity to renegotiate
Speaker 1: and to um you have a real problem in many
Speaker 1: major cities in the US as an example, where you know,
Speaker 1: schools are not going to open for a long time,
Speaker 1: and so if women can't and they've been uh, disproportionately
Speaker 1: hurt by dis crisis. If they can't get back into
Speaker 1: the labor force, they're an incredibly important input into the
Speaker 1: service economy of the US, and that will boost wages
Speaker 1: as well, I think in parts of the economy that
Speaker 1: haven't really seen much wage pressures. Putting all this together,
Speaker 1: I think trying to figure out if wage pressures show
Speaker 1: up over the next twell months is a critical component
Speaker 1: into figuring out whether any inflationary impact of commodities is sustainable.
Speaker 1: And I would lean towards yeah, there will be wage pressures,
Speaker 1: you know, Marcus, sticking in your wheelhouse stare of geopolitics. Um,
Speaker 1: there was one line in the notes we got from
Speaker 1: you that that I'm gonna be honest, that kind of
Speaker 1: scared my my shoes off here. So so of course
Speaker 1: you know I have to read that, Sarah, this this
Speaker 1: the scary stuff you gotta bring up. But let me
Speaker 1: let me just read this itself. Fear cells. Yeah. Um,
Speaker 1: so you write that the odds of a military confrontation
Speaker 1: with the US are rising as China achieves greater energy
Speaker 1: independence and gains a critical footprint in the global renewable
Speaker 1: supply chain. Um, I'm just glad I'm above the draft
Speaker 1: age when I read something like that. But but unpack
Speaker 1: us that for us a little bit. UM, I guess
Speaker 1: the argument is that um, China is becoming so competitive
Speaker 1: globally in technology, green energy. Recently, we we even saw
Speaker 1: headlines about China does not want to export rarer earth
Speaker 1: materials to the US because they can be used in
Speaker 1: military projects. That sort of thing unpack that for US
Speaker 1: is that basically it that that the trade, aid and
Speaker 1: economic competition is getting so fierce between China and the
Speaker 1: US that this UH necessarily raises the odds of an
Speaker 1: actual UH military conflict. Let me step back. I I actually, um,
Speaker 1: you know, I've had a view on this for a
Speaker 1: very long time. So I started my career in finance
Speaker 1: by basically trying to make politics and geopolitics investment relevant
Speaker 1: to my clients. And one of the frustrating things in
Speaker 1: thirteen is that nobody was paying attention to Asia, really nobody,
Speaker 1: and especially in Singapore in Hong Kong, they would like
Speaker 1: throw you out of the office if you said, well,
Speaker 1: I think China U s dnsion is good on no, no, no,
Speaker 1: it's all about you know, isis. It's all yeah, tell
Speaker 1: me about and so that was very frustrating for me,
Speaker 1: and I was trying to explain why there is this,
Speaker 1: you know, very very theoretical, very political science based problem
Speaker 1: between US and China that's been identified before Garhame Ellison
Speaker 1: wrote that great book, The CD of This Trap, and
Speaker 1: so on and so on. However, I think there's two
Speaker 1: things that are going on right now. Two man people
Speaker 1: are linearly extrapolating the last ten years into the future,
Speaker 1: and so they're extrapolating using the only mental framework they have,
Speaker 1: which is the Cold War. So ironically, Mike, I'm actually
Speaker 1: going to kind of disagree with you and agree with
Speaker 1: you at the same time. I would say that the
Speaker 1: trade tensions, the economic tensions, are likely going to surprise
Speaker 1: to the downside, you know. And and why well, because
Speaker 1: we don't live in a bipolar world where so union
Speaker 1: in the US can carve up the planet in two
Speaker 1: neat spheres and then tell their allies plain ice or
Speaker 1: will punish you. We live in more of a nineteenth
Speaker 1: century kind of a world, which is exciting. It's a
Speaker 1: swashbuckling there's just a lot of messiness and geopolitical volatility,
Speaker 1: and it's gonna be very difficult for US to keep
Speaker 1: its allies and chat in China to do the same.
Speaker 1: And in that world, it's going to be very difficult
Speaker 1: to actually have a clean break. Now. I fully expected
Speaker 1: Biden administration to be very tough on emergency knowledge is
Speaker 1: high tech and so on, for sure, but I think
Speaker 1: the tariffs and blanket, uh, the coupling is unlikely to happen.
Speaker 1: And we saw that last year, by the way, the
Speaker 1: height of the trade war, you know, we had massive
Speaker 1: inflows into China into the bond market that was one
Speaker 1: of the number like number one favorite trades for many
Speaker 1: investment institutional investors and so on. So that's the first
Speaker 1: part of this. You can have geopolitical rivalry and still
Speaker 1: trade with one another and still invest in one another.
Speaker 1: And actually history and political science tells us that this
Speaker 1: is what happens in the multipolar world. However, military conflict
Speaker 1: still remains a problem right as a risk. I mean,
Speaker 1: look at Germany and the UK before n Their trade
Speaker 1: increased right up until the day of World War One,
Speaker 1: and so those tensions are still there, and those are
Speaker 1: meaningful tensions of a rising power trying to carve out
Speaker 1: its sphere of influence and the status quot power trying
Speaker 1: to kind of limit its influence, and and that's just
Speaker 1: the that's just the world we live in today. So
Speaker 1: what I was saying in that particular analysis was that
Speaker 1: some of the emerging technologies is sustainability and alternative energy,
Speaker 1: which of course we all kind of welcome because they
Speaker 1: will resolve climate change. Ironically and paradoxically, there is an
Speaker 1: outcome here where they also allow countries like China but
Speaker 1: also US to become more energy independent, and that reduces
Speaker 1: constraints to conflict because if China US don't have to
Speaker 1: worry about international trade flows or access to commodities to
Speaker 1: fuel their economies, if they become more out of autarchic
Speaker 1: which is mouthful out tartic, they gain sovereignty and independence
Speaker 1: and can then decide to pursue, you know, foreign policy
Speaker 1: moves that could lead to conflict. You know, it's it's
Speaker 1: a fascinating point. What I also find so interesting is
Speaker 1: how the focus of not just markets, but people who
Speaker 1: watch and pay attention to markets has changed. I mean,
Speaker 1: the past couple of years, it was all trade war,
Speaker 1: trade war, trade US US China relations then switched a
Speaker 1: bit to the election, and now these days it's all
Speaker 1: diamond hands into the moons, you said earlier. So so
Speaker 1: we'll see if if the narrative and the focus does
Speaker 1: shift back under the new administration. But you know, Sarah,
Speaker 1: one of the reasons that happens is also because, uh,
Speaker 1: something that's front and center becomes background noise. It becomes
Speaker 1: priced in, so in you know, you walk into an
Speaker 1: office and you say, hey, China US serious problem. People
Speaker 1: are looking at you like, maybe I don't know what's
Speaker 1: Trump gonna do. He's a dealmaker. Don't worry about it.
Speaker 1: I mean, that's that was the consensus, right. Have you
Speaker 1: read the Art of War like or whatever? The Deal
Speaker 1: is another book, but that one was not written by
Speaker 1: President Trump. I'm pretty sure you know, like, yeah, the
Speaker 1: Art of the Deal. You know, you've got to read
Speaker 1: the Art of the Deal to figure it out. It's
Speaker 1: there's not going to be a trade war. Like Okay,
Speaker 1: thanks Dives. You know, that's great. Happened, um, But but
Speaker 1: what I'm getting at here is that I think what's happened, Sarah,
Speaker 1: is that a lot of this stuff has become price
Speaker 1: then in its background, and investors can kind of look
Speaker 1: through it, which is I think in some ways appropriate.
Speaker 1: But then there's uh, there are issues that I think
Speaker 1: would alarm me and would say, you know, for example,
Speaker 1: anything that has to do with Taiwan, I think would
Speaker 1: be a serious confrontation. So Marco, to sort of boil
Speaker 1: it all down to how how you would have your
Speaker 1: clients are listeners sort of position themselves. Uh, it sounds
Speaker 1: like for now, at least for the foreseeable future, it's
Speaker 1: kind of the classic reflation trade that everyone's talking about,
Speaker 1: you know, uh, value over growth, emerging markets, commodity producers, energy,
Speaker 1: uh and and tips. I guess is that sort of
Speaker 1: a safe kind of summary of of how you would
Speaker 1: be positioning right now. Yes, And I think that over
Speaker 1: the next couple of months there's going to be two
Speaker 1: narratives that will fight each other in the market. So
Speaker 1: the two narratives that I see battling it out is
Speaker 1: the growth differential narrative and the relative real yield. Let
Speaker 1: me explain what I mean. The dollar is so important
Speaker 1: to the story for for me to be bullish and
Speaker 1: everything you're just listed, which I am. I also have
Speaker 1: to be a dollar bear. But it's so clear the
Speaker 1: US is going to outperform in terms of global in
Speaker 1: terms of growth. I mean, we're looking at double digit
Speaker 1: nominal growth this year potentially. So how can you be
Speaker 1: a dollar bear? Well, you have to believe the growth
Speaker 1: differentials don't lead currencies. So what leads currencies? Well, I
Speaker 1: think that real yield differentials will lead currencies. And I
Speaker 1: think that in the US we will have more localized inflation,
Speaker 1: We will have a very unorthodox physical and monetary policy
Speaker 1: to a greater degree than anywhere else in the developed
Speaker 1: world or in major economies. And so I think that
Speaker 1: that will pull dollar lower. And this is contraintuitive for
Speaker 1: many investors. Growth differential story has been the way they've
Speaker 1: traded currencies over the past, of the past expansion, that
Speaker 1: the all dollar to dollar smile story. And you know,
Speaker 1: on the one side, with the USA performing right, and
Speaker 1: and and all I would say is that remember that
Speaker 1: worked when the central bank was orthodox, when it followed
Speaker 1: the precepts. We learned a nick on one on one
Speaker 1: when basically the central bank will respond to higher inflation expectations,
Speaker 1: high growth expectations, but becoming hawkish. If that's suddenly no
Speaker 1: longer the case, I think the relative real yield differential
Speaker 1: becomes the leading sort of leading factor in currencies. And
Speaker 1: I think that there will be a battle Mike over
Speaker 1: the next couple of months. Maybe my view will not
Speaker 1: win out in the next month or two, maybe the
Speaker 1: dollar gets a little bit of a bump. It's at
Speaker 1: a critical juncture two hundred day moving average. You know
Speaker 1: that we're we're really now at this moment. And I
Speaker 1: think you'll have some really interesting guests and you'll be
Speaker 1: able to ask him which which camp they're in, UM,
Speaker 1: and it'll be interesting to see it playoff. It is
Speaker 1: an interesting moment, and it seems like we are at
Speaker 1: a critical juncture when it comes to yields, both nominal
Speaker 1: and real, when it comes to the dollar, and different
Speaker 1: areas of the market that are going to drive whether
Speaker 1: you believe in the reflation trade or not going forwards. UM.
Speaker 1: I think that's a great place to leave it. And Mike,
Speaker 1: I know you know what time it is this week?
Speaker 1: It is that time. It is that time stand clear
Speaker 1: of the craziest things we saw in markets this week.
Speaker 1: Charlie Pellett just told us what time it is. UM,
Speaker 1: So I got a couple to I'm gonna start with
Speaker 1: just this natural gas market. Um, with everything that's going
Speaker 1: on in Texas, and I know I'm getting out of
Speaker 1: my specialty of the alternative assets space. No, uh, Michael
Speaker 1: Jordan's or Michael Jackson or I got something that's number two.
Speaker 1: But just you know, to see in Oklahoma spot natty
Speaker 1: gas go as high as fifty dollars one day, back
Speaker 1: down to four dollars per million b to you the
Speaker 1: next day, trap. I mean, it's all explainable with what's
Speaker 1: going on in Texas and the you know, they stopped
Speaker 1: allowing natural guests to leave Texas and then just the
Speaker 1: demand from the power plant plants and everything else. But
Speaker 1: to me still to see natty gas hit one thousand,
Speaker 1: twent and fifty dollars spot out of Oklahoma and then
Speaker 1: back down the floor the next day, I I haven't
Speaker 1: seen that. I guess we saw something crazier when oil
Speaker 1: went negative, but that that, to me was pretty wild.
Speaker 1: It's the opposite direction, pretty crazy. Yeah. Uh. The other thing, okay,
Speaker 1: and I'll give you my second one while we're at it.
Speaker 1: Have you heard of these things non fungible tokens? So
Speaker 1: it's basically you can put some piece of digital information
Speaker 1: on the blockchain. It's usually on on the Ethereum blockchain. Um.
Speaker 1: So you have people making digital art, which obviously can
Speaker 1: be copied a million times, but if you put the
Speaker 1: original on the blockchain, there are people willing to pay
Speaker 1: a fortune for it. Uh, you know, tens of thousands
Speaker 1: of dollars um now, Sarah, and this is courtesy. There's
Speaker 1: a good Bloomberg story on that, and it talks about
Speaker 1: how Christie is now accepting cryptocurrencies to buy this type
Speaker 1: of artwork. They're not accepting the premium what they collect
Speaker 1: that you still have to pay that in dollars, but
Speaker 1: for the principal value of the art, they they'll accept
Speaker 1: the crypto. Jeff Billbro, one of our listeners who's a
Speaker 1: very good source of crazy things, points out people are
Speaker 1: doing this with tweets now, so you can take your tweet,
Speaker 1: put it on the blockchain, and then sell it. So
Speaker 1: Mark Cuban did this. He sold a tweet that said basically,
Speaker 1: the store of value generation is kicking your butt and
Speaker 1: you don't even know it. He didn't say, but he
Speaker 1: said a different word that I can't say on the podcast.
Speaker 1: And then he looked to his blog with a blog
Speaker 1: post that I confess I haven't read. But you know
Speaker 1: what this time is, Sarah, It's time to play some prices, right,
Speaker 1: What are you paying for Mark Cuban's tweet on the blockchain?
Speaker 1: You can own it forever. I have no idea. I'll
Speaker 1: give you one head. Usually I I bring these things
Speaker 1: up because they're outrageously high priced. H this isn't dollars, uh,
Speaker 1: I would say this one. Well, I guess it's all
Speaker 1: in the eye of the beholder. It's still kind of
Speaker 1: outrageous to buy a tweet? What at any price? I think?
Speaker 1: But what's your bid for a Mark Cuban tweet? Let's
Speaker 1: go with thirty five thousand, thousand, Marcat. What are you
Speaker 1: bidding for Mark Cuban? Well, give it to my market view.
Speaker 1: I'm just gonna do two x whatever, Sarah says. You
Speaker 1: would hide though, so I'm a little more into here.
Speaker 1: You're like a double double levered Ponzi. There the you say,
Speaker 1: all right, well, Cuban is gonna be happy to hear
Speaker 1: about you guys, because he got a thousand bucks apparently
Speaker 1: for it. Okay, for this tweet. You prefaced it by saying,
Speaker 1: you know, these things go absurdly highs. Then I'm thinking, Okay,
Speaker 1: this has got to be ridiculous. Every single time, this
Speaker 1: is what happens this particular one. Yeah, I really overthink
Speaker 1: it every single time. And I was just locked into
Speaker 1: with two X things, so I had no way to
Speaker 1: go in one. Technically, I appreciate the two x uh
Speaker 1: your two excellent lover loves leverage. I appreciate the leverage.
Speaker 1: Did instinct though that I will say, Katie Gray felt
Speaker 1: filled in for you last week and she was willing
Speaker 1: to pay like twitter fifty thousand for a pair of
Speaker 1: Barack Obama basketball sneakers. So uh. But by the way,
Speaker 1: I just want to say, I just want to say
Speaker 1: everyone here is just following what wood Tank did years ago. Yeah,
Speaker 1: I mean wood Tank released that album, like you know,
Speaker 1: it was sold for two million bucks, Like come on,
Speaker 1: you know they need they need a little shot out here.
Speaker 1: They did. We appreciate that. That's all I got, Sara,
Speaker 1: how about you? All right? So I'll just start with
Speaker 1: my favorite part of the week. I've got to say.
Speaker 1: So the Game Stop hearing on Thursday, clearly that the
Speaker 1: best part of it was when on Roaring Kitty himself
Speaker 1: in in in the light of the lawyer who had
Speaker 1: a cat face accidentally and that video went viral. He
Speaker 1: basically started his testimony by saying, I want a few
Speaker 1: clear up a few things. I am not a cat
Speaker 1: and this is the best part of the week. But
Speaker 1: also just crazy that that was being said in the
Speaker 1: mix of a hearing on Capitol Hill. You gotta love
Speaker 1: it these days. But also I just have a pretty
Speaker 1: classic one these days. Classic name mix up. So Clubhouse
Speaker 1: which has become pretty popular these days, a lot of
Speaker 1: people using it to get conversation going and get people
Speaker 1: to come on and listen to them have a conversation. Well,
Speaker 1: there's a public company called Clubhouse Media Group and they're
Speaker 1: a self described marketing and media firm that does target
Speaker 1: social media inflowers and they actually changed their name just
Speaker 1: last month from tong g Healthcare Group to promote its
Speaker 1: influentier and social media focus. So good timing because now
Speaker 1: the Clubhouse has become really really popular. Clubhouse Media Group
Speaker 1: shares have surged over one thanks to their name change.
Speaker 1: So just a classic name mix up. You've got like
Speaker 1: the Long Island Iced Tea and block Islanchain. Yet I
Speaker 1: was hoping that Vlad to Nev, the CEO of robin Hood,
Speaker 1: after Roaring Kitty spoke. I was hoping he would say,
Speaker 1: he's not a cat, and I am not Jackson Brown,
Speaker 1: no matter how much I look like Jackson Brown, and
Speaker 1: the fact my brokerage was running on empty. You're laughing plainly.
Speaker 1: I know you don't, I am. I think some more
Speaker 1: more more people believe that Keith Gill and Glad Toe
Speaker 1: are actually the same person. You should say, I am
Speaker 1: not Roaring Kitty. I was. I was hoping they'd come
Speaker 1: back to Keith Gil with the actual zoom filter of
Speaker 1: a cat on his face at some point. Unfortunately that
Speaker 1: didn't happen. Well, I have one for you guys were
Speaker 1: in the market, let's hear it alright. So um, I've been.
Speaker 1: I've been just seeing so many like bubble, bubble bubble
Speaker 1: comments everywhere. So what I did is I went to
Speaker 1: Google Trends and I charted, you know, the mentions of
Speaker 1: stock bubble, and I can now definitively claim that we
Speaker 1: are in an epic bubble of people calling stock bubble.
Speaker 1: Just do it. You go through Google Trends throwing stock bubble,
Speaker 1: and the chart that comes out is extraordinary. I mean
Speaker 1: it is I think four times greater for x what
Speaker 1: it was at previous highs. Right now, Wow, so like
Speaker 1: four x I assume maybe a previous high was around well,
Speaker 1: I know, Google trends goes back to what's the first year.
Speaker 1: It doesn't go that far um, but it does cover
Speaker 1: the nineties and it's it's actually two eighteen was was higher.
Speaker 1: It was the previous high, which we've been at a
Speaker 1: bubble for five years out right. But it's a great
Speaker 1: example too, Like it doesn't actually correlate. You can you
Speaker 1: can put it with an SMP five hundred charge to
Speaker 1: see if it had any real information, and it didn't really.
Speaker 1: But that's that's mine. That's that's an interesting one. I
Speaker 1: didn't know how to, Like, it's a qualitative issue that
Speaker 1: a lot of people are throwing out bubbles, but you
Speaker 1: can quantify it. Who in Google treads that they could
Speaker 1: look at the chart. If everyone thinks it's a bubble,
Speaker 1: is it impossible that it's a bubble? I mean you
Speaker 1: can you can wrap your head and not trying to
Speaker 1: figure out the contrarian take on that. I mean, yeah,
Speaker 1: and it may very well be, but I think, uh,
Speaker 1: we're at a point where I think this market segment
Speaker 1: will just I think you guys will have plenty, plenty
Speaker 1: material for this. I think you're right. I think it's
Speaker 1: almost hard to choose every week. Um, but I will say, Mike,
Speaker 1: it's time to pay up. Because Mike promised that if
Speaker 1: we got to one fifty seven ratings on Apple Podcasts Marco,
Speaker 1: that he would air his flattering high school nickname with us.
Speaker 1: Now I'll say we're currently the last sight checks were
Speaker 1: around a hundred seventy two. We need to get to
Speaker 1: two hundred for the embarrassing one. Um, so everyone gets
Speaker 1: to Apple Podcasts. I don't leave us some ratings, so
Speaker 1: so we'll hear the best from Mike. In the meantime,
Speaker 1: I remembered I had a few other nicknames I could
Speaker 1: do like a structured product out of this if we
Speaker 1: get If we get to fifty, I'll tell you I
Speaker 1: will reveal the most embarrassing nickname I've ever had, which
Speaker 1: my older brothers gave to me when I was I
Speaker 1: was very young. But for one fifty seven, you only
Speaker 1: get the flattering nickname, and that was Sarah. Most of
Speaker 1: my nicknames were awarded to me on the basketball court
Speaker 1: and I don't have an impressive basketball resume. I played
Speaker 1: a lot, but pretty pretty mediocre lifetime stats. But if
Speaker 1: you were able to compress it to one highlight reel,
Speaker 1: I'm telling you it's it's pure fire. I mean, it
Speaker 1: exists only in my imagination because there were no video
Speaker 1: cameras on me at any time when I was playing
Speaker 1: but on one ground court in the late eighties in
Speaker 1: suburban Pennsylvania. I'll set the stage for you here. It's
Speaker 1: like Hoosier's I was just on fire. I don't know
Speaker 1: what what became of me, but I was just killing it.
Speaker 1: And for every pick up basketball game, there's always one
Speaker 1: guy who's just kind of like talking trash the whole
Speaker 1: team against against the other team. So he was just
Speaker 1: kind of given the play by play of my performance.
Speaker 1: You know, I was going coast to coast laying it up,
Speaker 1: and he kept saying, Reagan's on a mission, Reagan's on
Speaker 1: a mission, It's a Reagan mission, and then that turned
Speaker 1: into it's a recon mission, a recon. So to this day,
Speaker 1: a bunch of guys from high school still call me
Speaker 1: Recon is the nickname. I know it's disappointing, but that's
Speaker 1: what you get for only seven ratings. No, it's a
Speaker 1: good one, and it just means that we'll have to
Speaker 1: have more ratings. Also read this was a great rating
Speaker 1: that we got from Brick Brack. Been listening to this
Speaker 1: since it began. I love it in parentheses and don't
Speaker 1: usually write reviews. But we need to hear Mike's nicknames,
Speaker 1: so we need to get more so we can hear
Speaker 1: the embarrassing. I'm sure that you'll get the poppych bump
Speaker 1: after this, so like I'm by the way, Mike, listen,
Speaker 1: we could we could go for like twenty minutes of
Speaker 1: like really really not that impressive basketball stories, but in
Speaker 1: your mind that's all that matters. Though, alright, No, I
Speaker 1: like basketball, all right, Marco, since you spoke up, we
Speaker 1: need one nickname out of you. I know you had
Speaker 1: one grown up sometimes you know, um, my last name
Speaker 1: is like very nickname, herble, so that's what you know.
Speaker 1: It was just like Papa. That was like just the
Speaker 1: easy thing. And also I find I find that like
Speaker 1: anglophones find it really awesome. So they just call me
Speaker 1: by my last name. That's that's that's really all it is,
Speaker 1: and most of my basketball stories involved like backdoor screens
Speaker 1: and giving people whiplash. So I don't know, there's nothing
Speaker 1: as cool as recon Recon Papa and Ponzi's quite quite
Speaker 1: the motley crew we've got going on right now. But
Speaker 1: next time we will get the other nickname out of Mike.
Speaker 1: I believe in everyone to go and rate the show.
Speaker 1: But Marco, it has been an absolute pleasure having you
Speaker 1: on this week. It's been a great time and thanks
Speaker 1: so much for joining us. Absolutely it's been a pleasure.
Speaker 1: Thank you guys. What Goes Up We'll be back next week.
Speaker 1: Until then, you can find us on the Bloomberg Terminal
Speaker 1: website and app or wherever you get your podcasts. We'd
Speaker 1: love it if you took the time to rate and
Speaker 1: review the show on Apple Podcasts so more listeners can
Speaker 1: find us as you can find us on Twitter, follow
Speaker 1: me at Sarah Ponzack, Mike is that Rey Anonymous, and
Speaker 1: you can also follow Bloomberg Podcasts at Podcasts. Also, thank
Speaker 1: you to Charlie Pellett of Bloomberg Radio and the voice
Speaker 1: of the New York City Subway System. What Goes Up
Speaker 1: is produced by Topur Foreheads, the head of Bloomberg podcast
Speaker 1: is Francesca Levie. Thank for listening, See you next time.