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SEC Commissioner Crenshaw: We Need To Close Insider Trading Loopholes · Bloomberg Intelligence

• 0:00
  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
• 0:04
  Speaker 1: my co host Matt Miller. Every business day we bring
• 0:06
  Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
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  Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
• 0:15
  Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
• 0:18
  Speaker 1: at Bloomberg dot com slash podcast. Well, Matt, when I
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  Speaker 1: first got to Wall Street in the mid eighties, uh,
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  Speaker 1: you know, insider trading was a big thing. It was
• 0:29
  Speaker 1: all over the headlines, names like Ivan Bowski, Dennis Lavine,
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  Speaker 1: movies like Wall Street. Um, apparently it is still a thing.
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  Speaker 1: Our next guest is focused on a Caroline Crunchhaw. She's
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  Speaker 1: a commissioner at the Securities and Exchange Commission based in Washington,
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  Speaker 1: d c Uh. She's out with a Bloomberg opinion Colm
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  Speaker 1: entitled Insider trading Loophole's need to be Closed. Caroline, thanks
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  Speaker 1: so much for joining us here. We'd love to get
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  Speaker 1: your thoughts on kind of where you think the state
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  Speaker 1: of insider trading and enforcement of insider trading rules art
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  Speaker 1: right now? Yeah, good morning, it's great to be here.
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  Speaker 1: Before I start, I do have to say quickly that
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  Speaker 1: the views I expressed today are my own and do
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  Speaker 1: not necessarily reflect the views of the commission uh, my,
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  Speaker 1: the staff, or my fellow commissioners. UM. But as to
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  Speaker 1: your your question, you know, I think, um, you know,
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  Speaker 1: insiders something insider trading is something we always take seriously. UM.
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  Speaker 1: But UM right, you know, recent evidence suggests that some
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  Speaker 1: of the rules designed uh to make sure that corporating
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  Speaker 1: executives who always have insider information or material non public information,
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  Speaker 1: UM you know sometimes uh, they they also are paid
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  Speaker 1: in stock uh and and and to ensure that they
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  Speaker 1: are not uh you know, trading their stocks while they
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  Speaker 1: have insider information. The SEC established about twenty years ago
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  Speaker 1: a rule called B five one. And this rule UH
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  Speaker 1: basically puts in place a schedule, fixed schedule for them
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  Speaker 1: to make trades so that they're not trading on insider information.
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  Speaker 1: But it makes sense, right because they get a lot
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  Speaker 1: of these UM men and women get a huge portion
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  Speaker 1: of their pay in stock. So in order to live
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  Speaker 1: the life of a respectable chief executive, you've got to
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  Speaker 1: you've got to sell the stock occasionally to pay for
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  Speaker 1: your stuff. UM. But I guess the problem you found
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  Speaker 1: is that they set up these schedules commissioner to sell
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  Speaker 1: the stock UM, and then they can cancel the sale
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  Speaker 1: or delay the sale UH to to better position themselves
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  Speaker 1: around an event that they know is coming up. That's
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  Speaker 1: exactly right. UM. The recent academic evidence UH some by
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  Speaker 1: my co author Daniel Taylor out of Wharton Business School
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  Speaker 1: UM has shown that there are there are lots of
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  Speaker 1: red flags with these plans UM, and that they can
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  Speaker 1: be modified, they can be canceled, and that could allow
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  Speaker 1: executives to time trades and thus perhaps to be trading
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  Speaker 1: on insider information ahead of other investors are the rest
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  Speaker 1: of the market. So, Carol, I excuse a sense of
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  Speaker 1: the state of insider trading today, how prevalent is it.
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  Speaker 1: UM has the SEC and other regulators, UM maybe learn
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  Speaker 1: some things from back from those the nineteen eighties that
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  Speaker 1: I that I referenced. You know, I think, UM, it's
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  Speaker 1: always something we are looking at. UM. You know, I think, UM,
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  Speaker 1: there's always going to be insider trading. There's always going
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  Speaker 1: to be UM. You know, folks who are inclined to
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  Speaker 1: break the rules. That's why we have an enforcement program. UM.
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  Speaker 1: They're actively looking at this. But I think UM, to
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  Speaker 1: to the degree. Um, we want to modernize the rules
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  Speaker 1: and and help put stricter parameters in place. Uh. These
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  Speaker 1: ten five one plans are an area that I think
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  Speaker 1: we can really look to modernize and provide much clearer
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  Speaker 1: rules of the road. UH that will help lead to um,
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  Speaker 1: uh perhaps level more level playing field and promote fair
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  Speaker 1: and efficient markets, which is you know what the SEC
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  Speaker 1: is is always thinking about. Have you ever heard anybody
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  Speaker 1: like on a stakeout or something, a blue horse shoe
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  Speaker 1: loves Annicott steel all the time, Because that's a tip off.
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  Speaker 1: I'm just telling you no, seriously, Um, Caroline, do you
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  Speaker 1: worry on the other side at all, on the short side,
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  Speaker 1: because that's been brought up a lot in well the
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  Speaker 1: court of public opinion and in front of Congress as well.
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  Speaker 1: Short sellers have been attacked, and um, maybe there have
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  Speaker 1: been implications that maybe they even banned together to bring
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  Speaker 1: companies down. Well, obviously, in the wake of the activity
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  Speaker 1: area in January, we're we're looking at that behavior. We're
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  Speaker 1: we're looking at the consequences, We're looking at what happened there,
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  Speaker 1: and I think that's something we we are closely looking
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  Speaker 1: at again to make sure that to the degree we
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  Speaker 1: need changes in the market, the degree we need to
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  Speaker 1: modernize our rules. UM that we're doing so. You know, again,
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  Speaker 1: it's the the SEC's mission to promote fair, orderly efficient markets,
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  Speaker 1: and I want to make sure we're preventing a two
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  Speaker 1: tiered market, one where insiders can train and one where
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  Speaker 1: everyone else can trade. And I think this is another
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  Speaker 1: area that we can look at along with some of
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  Speaker 1: the changes perhaps that we're looking at after the January
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  Speaker 1: activity to again to promote this fair and efficient market.
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  Speaker 1: So what's the political support or pressure or environment for
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  Speaker 1: toughening up potentially insider trading rules. UM. Caroline just gives
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  Speaker 1: a sense of kind of what's what what's the mood
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  Speaker 1: within Washington. You know, I think we always want to
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  Speaker 1: make sure the markets are fair and efficient. UM. You know,
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  Speaker 1: there is a Preferrara Commission that's that's looking at this. UM.
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  Speaker 1: I think there's always there's always interest in making sure
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  Speaker 1: that we have the tools we need UH to to
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  Speaker 1: ensure that the markets are level and that the playing
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  Speaker 1: fields are as they should be for both the market
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  Speaker 1: participants and investors. You know, in the last couple of days,
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  Speaker 1: we've been talking a lot about UM efficiency improvements that
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  Speaker 1: could be wrought out of the I R s. For example, UM,
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  Speaker 1: people have been telling us if you give for every
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  Speaker 1: extra dollar you give them, they could go out and
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  Speaker 1: collect five more. Do you feel the same is true
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  Speaker 1: with funding at the SEC you had more funding, could
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  Speaker 1: you bust more inside traders? I think our enforcement division
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  Speaker 1: could always do more. Our whole agency could always do
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  Speaker 1: more with more funding. We do have limited resources, UH,
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  Speaker 1: and that results in you know, often trying to decide
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  Speaker 1: what cases over time or are going to be the
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  Speaker 1: most effective, had the most market impact. UM. But we're
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  Speaker 1: always out there, We're always making sure that UM, we're
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  Speaker 1: we're using those limited resources to the degree we can
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  Speaker 1: UH to bring inside or trading cases, to bring fraud cases,
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  Speaker 1: to bring UM the cases that will help ensure UM
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  Speaker 1: that the investors and the markets are protected appropriately. Currently,
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  Speaker 1: what about politicians who engage in trading maybe a head
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  Speaker 1: of legislation or after receiving classified information that seemed to
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  Speaker 1: have been a thing before the the pandemic really hitting
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  Speaker 1: and the market crash. Is that a big issue? You know,
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  Speaker 1: it's certainly it's certainly gotten a lot of attention. UM.
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  Speaker 1: I I know there was some investigations. Uh you know
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  Speaker 1: that that that we're being talked about in the news.
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  Speaker 1: I think to the re individuals are trading with information
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  Speaker 1: that the rest of the investors, so the rest of
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  Speaker 1: the market doesn't have, uh, there there's always going to
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  Speaker 1: be questions around that and whether that's promoting market confidence effectively, UM,
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  Speaker 1: and whether that's going to lead to problems. So I
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  Speaker 1: think that's something that that we are always looking at, UM,
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  Speaker 1: and that that everyone should always be looking at to
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  Speaker 1: make sure that you know, individuals with insider information or
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  Speaker 1: trading at the same time as everybody else and with
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  Speaker 1: this information as everybody else. Commissioner, thanks so much for
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  Speaker 1: joining us. Really fascinating column at say, Caroline Crenshaw wrote
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  Speaker 1: with Daniel Taylor, a great piece and I recommend if anybody, um,
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  Speaker 1: will anybody with access to the Bloomberg go ahead and
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  Speaker 1: search Caroline Crenshaw and you'll find it. I did not
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  Speaker 1: uh know about what seems like a pretty simple loophole,
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  Speaker 1: and Paul I think it's um it's the kind of
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  Speaker 1: thing that well, this is what these people are doing,
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  Speaker 1: this is what they're they're up there for, right, They're
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  Speaker 1: gonna put a stop to this so that markets can
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  Speaker 1: be more efficient for everybody else, including you and me.
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  Speaker 1: So Caroline Crenshaw, thanks very much for your time and
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  Speaker 1: your service. This is Bloomberg going a busy, busy week
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  Speaker 1: in terms of economic data. We had retail sales manufacturing
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  Speaker 1: data today, We've got market moving news tomorrow with potentially
• 8:25
  Speaker 1: with the Fit and what j Powe will say. What
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  Speaker 1: a great time it is then to speak to our
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  Speaker 1: next guest, Constance Hunter. She's a chief economist at KPMG.
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  Speaker 1: She joins us Constant, thanks so much for your time here.
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  Speaker 1: Let's start with some of the economic data points we
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  Speaker 1: got today. Retail sales UH and manufacturing activity came in
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  Speaker 1: below expectations. A lot of folks are just saying, hey,
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  Speaker 1: it's an aberration. We had a really bad weather across
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  Speaker 1: much of the country in February. Is that your calls? Well, yeah,
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  Speaker 1: I mean there's there's two things as far as the
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  Speaker 1: retail sales um impacting the noise. So the first, of
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  Speaker 1: course is so whether as you mentioned, and the second
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  Speaker 1: is the yo yo effect of stimulus checks that got
• 9:05
  Speaker 1: spent in January. So of course the January month over
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  Speaker 1: month was up seven point six and we just saw
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  Speaker 1: a pull back from that on a month over a
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  Speaker 1: month basis for February down three percent, and of course
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  Speaker 1: the weather didn't help that UM. But when we look
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  Speaker 1: at the year over year, February still up six point
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  Speaker 1: three percent for retail sales and then for manufacturing. Of course,
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  Speaker 1: it was very impacted by the weather. And it's always
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  Speaker 1: good to look at these data on a three month
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  Speaker 1: moving average just to get a better sense of the
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  Speaker 1: trend when you have some noisy factors like weather and
• 9:38
  Speaker 1: stimulus checks in there. First of all, I want to
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  Speaker 1: say hello, Constance, Matt Miller here. It's been a long time,
• 9:45
  Speaker 1: but I want you to know that Paul and I
• 9:47
  Speaker 1: were invited to Camp Ko talk, so we may see
• 9:49
  Speaker 1: you next year. That would be fabulous. I hope you come,
• 9:54
  Speaker 1: you come fishing, and I hope we're all you know
• 9:58
  Speaker 1: it mass free. Do you believed we're all going to
• 10:00
  Speaker 1: be vaccinated? Yeah? Yeah, I I we hope so too.
• 10:04
  Speaker 1: Me and Paul are lined up for the astros Nika shot.
• 10:06
  Speaker 1: So just as a public service announcement, we'll take it. UM.
• 10:10
  Speaker 1: I wanted to ask you about UM inflation. Of course,
• 10:14
  Speaker 1: it's the hottest debate right now and A listener earlier
• 10:19
  Speaker 1: in the program wrote a great question to me. He says,
• 10:21
  Speaker 1: where does the ten year ago if we see a
• 10:23
  Speaker 1: minor Rosenberg or Tepper scenario i e. Short lived inflation,
• 10:28
  Speaker 1: the short sharp shock as uh, that then comes down
• 10:32
  Speaker 1: as all the Street research maybe has it wrong. What
• 10:35
  Speaker 1: do you think about that? So basically the idea is
• 10:40
  Speaker 1: that we would have a short sharp shock due to
• 10:42
  Speaker 1: base effects, I assume, and then basically saying the Street
• 10:47
  Speaker 1: is wrong. We're not gonna We're not gonna get anywhere
• 10:49
  Speaker 1: close to the two percent of that is forecasting, or
• 10:52
  Speaker 1: even the slightly above two percent. But the inflation year
• 10:54
  Speaker 1: over year starts to fall once we get past that shock.
• 10:57
  Speaker 1: Is that's my question? Yeah, exactly, And I mean Scott
• 11:00
  Speaker 1: Miner told us a couple of weeks ago he thinks
• 11:01
  Speaker 1: in this scenario the tenure could go negative. It's obviously
• 11:05
  Speaker 1: an outlier call. But um, I was reading some research
• 11:08
  Speaker 1: from an economist last year who said, get ready for
• 11:11
  Speaker 1: the Great Depression. Now we didn't have that. I was
• 11:13
  Speaker 1: thinking to myself this morning yet, right, I mean, maybe
• 11:18
  Speaker 1: it could go, maybe it could all go. I don't
• 11:21
  Speaker 1: know a nice way of saying what I was going
• 11:23
  Speaker 1: to say, but maybe you could go all go bad.
• 11:24
  Speaker 1: It could all go yes, it could. I would never
• 11:29
  Speaker 1: want to rule out the possibility we have a shock
• 11:32
  Speaker 1: or a black Swan event. Or let's look at some
• 11:34
  Speaker 1: of these mutated effects from the virus. Look at Italy
• 11:37
  Speaker 1: has reshut itself down. This this virus, as I said
• 11:41
  Speaker 1: in the beginning, is very pernicious, and it just continues
• 11:44
  Speaker 1: to prove to be more and more pernicious. So certainly
• 11:47
  Speaker 1: we could have additional adverse economic shocks that would would
• 11:52
  Speaker 1: push us to lower consumption, which would push us to
• 11:54
  Speaker 1: lower inflation. But let's think about what causes inflation or deflation, right,
• 11:59
  Speaker 1: There's a too factors. There's overall the demand level, it's
• 12:02
  Speaker 1: the most important um. And then what influences the demand
• 12:06
  Speaker 1: level the level of employment wages um uh and in
• 12:12
  Speaker 1: this case income. Right, so we're seeing income to household
• 12:15
  Speaker 1: that's not from wages, it's from government uh, supplemental income.
• 12:20
  Speaker 1: But it's still income that's going to influence demand. And
• 12:23
  Speaker 1: so it's hard for me to see that scenario playing
• 12:26
  Speaker 1: out given the current course of events. But given a shock,
• 12:31
  Speaker 1: if we were to have a severe negative shock on
• 12:33
  Speaker 1: top of what we've just experienced. Yeah, maybe we could
• 12:35
  Speaker 1: go negative on the tenure, wouldn't be my base call,
• 12:39
  Speaker 1: all right, Constance, So given that backdrop, what do you
• 12:43
  Speaker 1: expect to hear from that Chairman J Pale tomorrow? So
• 12:48
  Speaker 1: I expect him to talk a lot about sort of
• 12:50
  Speaker 1: what are the transitory factors and how do they look
• 12:53
  Speaker 1: through that? And the real question is going to be
• 12:56
  Speaker 1: how clearly does one communicator does he communicate this very
• 13:00
  Speaker 1: technical information to the market. Now, there's a good swath
• 13:04
  Speaker 1: of the market that's already very well read in on that,
• 13:06
  Speaker 1: but he's communicating to the market participants and the public
• 13:10
  Speaker 1: at large, and so he needs to communicate that, yes,
• 13:13
  Speaker 1: we're going to see an increase in demand, that yes,
• 13:15
  Speaker 1: we're going to have some supply bottlenecks that push up
• 13:18
  Speaker 1: prices for goods. That yes, on the year of a
• 13:21
  Speaker 1: year print, we're going to see higher inflation numbers through
• 13:24
  Speaker 1: the summer, but that as we get more and more
• 13:28
  Speaker 1: people vaccinated, those supply bottlenecks will dissipate. We're not at
• 13:31
  Speaker 1: production I'm sorry, we're not at industrial production levels that
• 13:35
  Speaker 1: would suggest we're out of room to add production once
• 13:38
  Speaker 1: people are vaccinated. So he needs to explain very clearly
• 13:44
  Speaker 1: why the said believes this is transitory. All right, Constance,
• 13:48
  Speaker 1: next time I see you, hopefully we have fishing rods. Well, actually,
• 13:52
  Speaker 1: now that I think about now, I'm back in the
• 13:53
  Speaker 1: US hours now, so I hope I can get you
• 13:56
  Speaker 1: booked back on my television program. So i'll see you
• 13:58
  Speaker 1: before that. Good, I'm gonna have a producer call you.
• 14:02
  Speaker 1: I'll see you, um then very soon via satellite. But
• 14:06
  Speaker 1: next time, me and Paul Cy will be wearing vests
• 14:09
  Speaker 1: with flies all over the podcast. And don't forget, we
• 14:12
  Speaker 1: have to ship cases of wine up there, so we'll
• 14:13
  Speaker 1: be fishing with with wine or beer or the beverage
• 14:16
  Speaker 1: of your choice. Yeah, well, I'll be drinking wine or
• 14:18
  Speaker 1: beer while you guys are fishing. Is probably how it
• 14:20
  Speaker 1: really is gonna work out. Constance Hunter is the chief
• 14:24
  Speaker 1: economist at KPMG. Let me bring in John Butler right now.
• 14:30
  Speaker 1: He's a senior telecom analyst for Bloomberg Intelligence, and John
• 14:37
  Speaker 1: um five G has been I guess the idea has
• 14:40
  Speaker 1: long been there, but we've now heard uh, a swathe
• 14:45
  Speaker 1: of people, a swath, a swath, a swath of people.
• 14:49
  Speaker 1: We've heard a slew of people UH talk about getting
• 14:52
  Speaker 1: into it um, including Mark Andy from UH UM, what's
• 14:57
  Speaker 1: Tom Barrick's shop called that Marcolin Colony Capital Um this
• 15:02
  Speaker 1: is he says, where you're going to see the infrastructure
• 15:05
  Speaker 1: build out in five g Do you agree, John? Yes?
• 15:09
  Speaker 1: In fact, I'll go as far as to say this, Matt,
• 15:12
  Speaker 1: I would liken it to what the world looked like
• 15:16
  Speaker 1: after iPhone versus what it looked like before the iPhone
• 15:20
  Speaker 1: was introduced. I think it's going to have that kind
• 15:23
  Speaker 1: of powerful change, But I don't think it's going to
• 15:26
  Speaker 1: happen in one year. It's going to take time. And
• 15:30
  Speaker 1: you know, we're in literally like the first inning of
• 15:34
  Speaker 1: the rollout here. You know, the carriers have sort of
• 15:36
  Speaker 1: set foundational coverage in the US, but that foundational coverage
• 15:42
  Speaker 1: doesn't have the kind of spectrum you need to really
• 15:45
  Speaker 1: offer five G s full feature set or full potential,
• 15:49
  Speaker 1: if you will. So fast forward two years, three years.
• 15:53
  Speaker 1: I think we're going to see profound changes. I'm getting that,
• 15:58
  Speaker 1: you know what I gotta tell you. I gotta tell you, John,
• 16:01
  Speaker 1: I was so when I first started working as a
• 16:04
  Speaker 1: young squid here at Bloomberg News in Frankfurt. My job
• 16:08
  Speaker 1: was to cover the U MTS auctions, so I was,
• 16:13
  Speaker 1: you know, covering these three G auctions at a time
• 16:15
  Speaker 1: when three G was like the great pie in the sky,
• 16:18
  Speaker 1: and it took me a while to realize what the
• 16:20
  Speaker 1: result of three G was. It really was iPhone. That's
• 16:23
  Speaker 1: what made iPhone possible. And then they jumped, of course
• 16:26
  Speaker 1: to forge you with their next model. But uh, that
• 16:29
  Speaker 1: was a massive shift, a tectonic shift, as Tom would say,
• 16:34
  Speaker 1: well it was. I mean what three G gave us
• 16:37
  Speaker 1: texting and limited web access, four G gave us full
• 16:41
  Speaker 1: web access in the pump up our ham plus streaming video.
• 16:45
  Speaker 1: Five G for the consumer, for you and me, is
• 16:49
  Speaker 1: going to provide even a higher speed four K video,
• 16:53
  Speaker 1: interactive gaming, augmented reality ultimately. But I think the bigger
• 16:59
  Speaker 1: changes are going to be on the enterprise side for businesses,
• 17:02
  Speaker 1: because literally five G can replace a lot of wires
• 17:06
  Speaker 1: in your life. So when I was talking to A
• 17:08
  Speaker 1: T and T the other day and they said, you know,
• 17:10
  Speaker 1: we're doing tests in hospitals because hospitals have wires everywhere.
• 17:16
  Speaker 1: Doctors need to have patient information on the move, and um,
• 17:21
  Speaker 1: so they're putting five G in a private network in
• 17:24
  Speaker 1: these hospitals where you can literally cut the cord onto everything.
• 17:28
  Speaker 1: So there in lies the biggest potential I think for
• 17:32
  Speaker 1: five G in that enterprise sector. And that's great news
• 17:36
  Speaker 1: for the carriers because a lot of those services are
• 17:39
  Speaker 1: very high margins. Hey, John, I see, you know, just
• 17:42
  Speaker 1: in the last couple of days the big carrier's Verizon
• 17:45
  Speaker 1: T mobile tapping the bond markets for more billions of dollars.
• 17:50
  Speaker 1: Here what are they raising the money for? What are
• 17:53
  Speaker 1: they using it for? So you know, I'll start with this.
• 18:00
  Speaker 1: The c band auction was way more expensive for the
• 18:03
  Speaker 1: carriers than anyone anticipated. That's the bad news. I think
• 18:08
  Speaker 1: the good news is that Spectrum can be used not
• 18:12
  Speaker 1: only for five G, but six G and seven G.
• 18:15
  Speaker 1: I mean, those licenses have long lives to them. I
• 18:19
  Speaker 1: think of them almost as a life lease, and so
• 18:24
  Speaker 1: it's gonna be very costly up front. I think even
• 18:27
  Speaker 1: they were surprised at how much they had to spend.
• 18:30
  Speaker 1: So in the end you're seeing them raise a lot
• 18:32
  Speaker 1: of debt to meet those payments, which are all due
• 18:36
  Speaker 1: this month, and then over time the hope is with
• 18:40
  Speaker 1: some of them to pay off debt with obviously excess
• 18:43
  Speaker 1: free cash flow, but also some assets sales in the
• 18:47
  Speaker 1: case of a T and T, and there're sort of
• 18:51
  Speaker 1: instituting the shrink to grow strategy, and so I think
• 18:55
  Speaker 1: they can monetize some of the assets that don't make sense,
• 18:59
  Speaker 1: like a T in T Latin America, the Brio satellite
• 19:03
  Speaker 1: business in Latin America, and who knows, maybe even Turner eventually.
• 19:08
  Speaker 1: I've been thinking that might be. That was that was
• 19:12
  Speaker 1: the harder. It just dawned on me. It just dawned
• 19:17
  Speaker 1: on me that when uh, you know, when Deutsche Telecom
• 19:20
  Speaker 1: bought Voice Dream, I flew out to Seattle with Ron
• 19:23
  Speaker 1: Summer and he threw the first pitch out of the
• 19:25
  Speaker 1: Mariners game. Paul, were you there? Were we both there?
• 19:29
  Speaker 1: I don't think so. I didn't know if you were
• 19:31
  Speaker 1: in on the deal, because this is you're a wheelhouse, right. Yeah.
• 19:34
  Speaker 1: We did a bunch of deals there, and John's kind
• 19:37
  Speaker 1: of the the expert on on the kind of how
• 19:39
  Speaker 1: Telecom has evolved and kind of what is our our
• 19:41
  Speaker 1: future here with five G So John is it? You know,
• 19:45
  Speaker 1: if I were an investor, I mean, can I gauge
• 19:47
  Speaker 1: out who might be a winner and a loser here?
• 19:49
  Speaker 1: If I want to play five G, because that's what
• 19:51
  Speaker 1: I hear a lot from all the tech and telecom
• 19:54
  Speaker 1: FOLKUS is all that five G? How do I play it?
• 19:56
  Speaker 1: As an investor? So I always look for leadership, right,
• 20:04
  Speaker 1: and I'd look for leadership and growth in what really
• 20:08
  Speaker 1: traditionally has been a non growth sector. But if you
• 20:11
  Speaker 1: look back over the past ten years, T Mobile has
• 20:15
  Speaker 1: done great, right, and they were the growth name in
• 20:18
  Speaker 1: the segment, but Verizon was the one that really dominated
• 20:22
  Speaker 1: in terms of being the early mover and orgy and
• 20:25
  Speaker 1: then leading over the next ten years, and their reward
• 20:29
  Speaker 1: was higher margins than the other carriers. I think T
• 20:33
  Speaker 1: Mobile is now in that position right now on both fronts.
• 20:38
  Speaker 1: They're going to continue to outgrow a T and T
• 20:40
  Speaker 1: and Verizon, and I think their margins are going to
• 20:43
  Speaker 1: expand over time as they get the technology rolled out.
• 20:47
  Speaker 1: Interesting as always big tech telecom jump, but others seeing
• 20:50
  Speaker 1: telecom analysts for Bloomberg Intelligence, we appreciate that we're gonna
• 20:56
  Speaker 1: talk about f X, which already was, you know, one
• 21:00
  Speaker 1: of the biggest markets in the world and absolutely fascinating,
• 21:04
  Speaker 1: but it could be set to get even better. At
• 21:07
  Speaker 1: least that's what Our next guest, says Vincent Delire joins
• 21:10
  Speaker 1: US global macro strategists for stone X. Vincent. UM, you know,
• 21:15
  Speaker 1: Ray Dalio was out overnight talking about UM, the dollar
• 21:20
  Speaker 1: and how he wants to stay away from assets connected
• 21:22
  Speaker 1: to that as all the stimulus goes into the economy
• 21:25
  Speaker 1: and taxes are ready to get raised. And he was
• 21:29
  Speaker 1: even talking about countries limiting capital movements. What do you think,
• 21:34
  Speaker 1: M well, UM, it's it's possible. I think at the
• 21:40
  Speaker 1: end of the day, we go back to UM what's
• 21:43
  Speaker 1: called the impossible trinity that any UM, if you have
• 21:46
  Speaker 1: the free capital movements, UH, you have to either target
• 21:50
  Speaker 1: the exchange rate UH or the interest rate in a country. UH.
• 21:56
  Speaker 1: And it seems to me that UM, as we have
• 21:59
  Speaker 1: a on the global pandemic. UM, no central bank in
• 22:04
  Speaker 1: the world is able or willing to let go of
• 22:07
  Speaker 1: its interest rate to accept the move in interest rates
• 22:09
  Speaker 1: that would be viewed as as harmful to the economy.
• 22:12
  Speaker 1: So there's only two consequences from that. UM. The one
• 22:16
  Speaker 1: that I expect, I we tolerate a much higher level
• 22:20
  Speaker 1: of currency volatility because we cannot use movements in the
• 22:23
  Speaker 1: interest rate to cush and that currency volatility or the
• 22:27
  Speaker 1: one that rate values suggesting, which is eventually imposing capital controls,
• 22:31
  Speaker 1: which may indeed be possible, but I would expect I
• 22:33
  Speaker 1: would expect that to come later. The first thing that
• 22:36
  Speaker 1: I expect to see is what I call the global
• 22:38
  Speaker 1: macro disorder, the global monetory disorder, where you see a
• 22:42
  Speaker 1: lot more currency volity to your new regime, very much
• 22:44
  Speaker 1: like the seventies, where you see huge wins in currency
• 22:46
  Speaker 1: alatility because central banks have to focus on their domestic
• 22:50
  Speaker 1: constituencies instead of trying to provide stability to global economy.
• 22:55
  Speaker 1: All right, So, Vincent, when I start on Wall Street,
• 22:57
  Speaker 1: the every firm I worked at the a whole floor
• 23:01
  Speaker 1: dedicated to trading currencies, talk to me about the liquidity
• 23:06
  Speaker 1: in the global f FX markets here, Um, is it
• 23:10
  Speaker 1: enough to deal with what you call great monetary to
• 23:14
  Speaker 1: disorder or is that also a concern on the biggest
• 23:18
  Speaker 1: pair currency pairs? For sure? I mean it is, you know,
• 23:21
  Speaker 1: the most liquid market in the world open um. So no,
• 23:26
  Speaker 1: I don't think there's I mean maybe on the you know,
• 23:29
  Speaker 1: kind of a smaller emerging current market currencies, of course,
• 23:31
  Speaker 1: big flows will impact the market. But on the bigger one, um, No,
• 23:36
  Speaker 1: it will be. It will be very exciting. I think
• 23:39
  Speaker 1: as m as we see traditional assets are now being
• 23:42
  Speaker 1: priced beyond perfection, right, I mean you you you have
• 23:46
  Speaker 1: to expect negative returns on equities. Uh, you know you're
• 23:49
  Speaker 1: gonna get negative returns on at least you know, intriguents
• 23:52
  Speaker 1: of bombs that have a negative return, negative yield. So
• 23:55
  Speaker 1: the world of currency, which is effectively there was some game.
• 23:58
  Speaker 1: Uh you know, if one goes of, the other goes down,
• 24:01
  Speaker 1: actually becomes the most exciting gaming town. So I expect
• 24:03
  Speaker 1: more liqually and more expitement. I think that's over the
• 24:06
  Speaker 1: next decade the big fortunes will be made in the
• 24:10
  Speaker 1: currency market. I mean, you can think of the year
• 24:12
  Speaker 1: of you know, sorrows and drugn Miller as as coming back. Yeah,
• 24:16
  Speaker 1: except for now they're gonna be out there buying n
• 24:19
  Speaker 1: f t s of people art works. You know. The
• 24:23
  Speaker 1: massive fortunes that are sort of being wasted on the
• 24:27
  Speaker 1: internet seemed to be coming from crypto. What's your view
• 24:29
  Speaker 1: of the digital currencies? Uh, this is a hard one
• 24:36
  Speaker 1: and it's a hard question, Vincent, but it's one that
• 24:40
  Speaker 1: you know, everyone's got to contend with this question. Now,
• 24:43
  Speaker 1: even people who don't want to talk about it. From
• 24:45
  Speaker 1: Jamie Diamond to Howard Marks, they have to embrace this question.
• 24:49
  Speaker 1: I mean, obviously there's an element of it that's a
• 24:51
  Speaker 1: that's the bubble um. One thing that UM, it seems
• 24:57
  Speaker 1: clear to me is that the more the sector grow
• 25:00
  Speaker 1: was the bigger threat it becomes for UM governments. Really.
• 25:04
  Speaker 1: I mean, if you give people the ability to transact
• 25:08
  Speaker 1: outside the banking sector without supervision, uh, you're really um
• 25:13
  Speaker 1: taking shipping up an essential element of sovereignty like that,
• 25:16
  Speaker 1: you know, the ability of governments to issue currency and
• 25:19
  Speaker 1: money to transaction UM. And I think the next battle
• 25:24
  Speaker 1: here is going to be between governments and crypto because
• 25:28
  Speaker 1: I don't think really governments can function uh if um
• 25:32
  Speaker 1: and I mean I'm not making a more case here.
• 25:34
  Speaker 1: I have a lot of sympathy for for what crypto
• 25:37
  Speaker 1: is trying to do, but I don't think that governments
• 25:40
  Speaker 1: are willing to let that happened. I mean it was
• 25:44
  Speaker 1: a cool experiment. I think at the beginning it grew
• 25:46
  Speaker 1: in kind of a dark hole. Regulators were not paying attention.
• 25:49
  Speaker 1: The technology was exciting it. But now it's getting so
• 25:53
  Speaker 1: big that I think you'll see a lot more a
• 25:56
  Speaker 1: lot more government interventions, and that could be maybe the
• 25:59
  Speaker 1: what ultimate see and still what what is very interesting
• 26:03
  Speaker 1: and and and and beautiful experiments? Vincent, about thirty seconds
• 26:07
  Speaker 1: left as the world reopens here, what's the trade that
• 26:11
  Speaker 1: makes the most sense to you? Um, well, a lot,
• 26:17
  Speaker 1: I like to say, a lot of cash and very
• 26:19
  Speaker 1: few good ideas. So most of the reopen trades that
• 26:23
  Speaker 1: cleek in the US I think have been played and overplayed.
• 26:25
  Speaker 1: I mean you'll get the wrestle wrest of two thousand
• 26:27
  Speaker 1: small gap value, all that stuff that has rallied so much,
• 26:30
  Speaker 1: that is corpus teamage shoes left. Uh. The only place
• 26:33
  Speaker 1: is where you could find one of the Jews I
• 26:34
  Speaker 1: think is the maybe Europe, and I like that time.
• 26:37
  Speaker 1: I like Latin American currencies. You see a huge disconnect
• 26:41
  Speaker 1: between the performance of Latin American currencies and the performance
• 26:44
  Speaker 1: of their their main exports. I mean the Brazilian realbus
• 26:47
  Speaker 1: is the old prices and based ovices copper um and
• 26:51
  Speaker 1: and over time. These are commodity economies, so it's very
• 26:55
  Speaker 1: unlikely that divergence remains, so I would expect these two trampthon. Hey, Vincent,
• 27:01
  Speaker 1: thank you so much as always for joining us Vincent Ward,
• 27:04
  Speaker 1: global macro strategists for stone X. They're based in San Francisco,
• 27:09
  Speaker 1: UH talking to us about the global FX markets of
• 27:12
  Speaker 1: global currency markets, suggesting maybe e M particularly Latin America,
• 27:16
  Speaker 1: might be some places to find value. Thanks for listening
• 27:20
  Speaker 1: to the Bloomberg Markets podcast. You can subscribe and listen
• 27:24
  Speaker 1: to interviews with Apple Podcasts or whatever podcast platform you prefer.
• 27:28
  Speaker 1: I'm Matt Miller. I'm on Twitter at Matt Miller three.
• 27:33
  Speaker 1: Put on false Sweeney I'm on Twitter at pt Sweeney
• 27:35
  Speaker 1: before the podcast. You can always catch us worldwide at
• 27:38
  Speaker 1: Bloomberg Radio