Latest / Bloomberg Intelligence / Fundamentals Still Matter Despite Reddit Noise: Federated's Orlando

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Fundamentals Still Matter Despite Reddit Noise: Federated's Orlando · Bloomberg Intelligence

• 0:01
  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney. Along
• 0:04
  Speaker 1: with my co host of Bonnie Quinn. Every business day
• 0:06
  Speaker 1: we bring you interviews from CEOs, market pros, and Bloomberg experts,
• 0:10
  Speaker 1: along with essential market moving news. Find the Bloomberg Markets
• 0:13
  Speaker 1: Podcast on Apple podcast or wherever you listen to podcasts,
• 0:17
  Speaker 1: and on Bloomberg dot com. Let's get to our next guest, now,
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  Speaker 1: Phil Orlando, with chief equity market strategist and ahead of
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  Speaker 1: client portfolio managing at Federated Hermes and always has really
• 0:27
  Speaker 1: interesting things to say. Phil, Since the last time we
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  Speaker 1: spoke with you, I think maybe a couple of structural
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  Speaker 1: fragilities have been exposed in this market and also some
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  Speaker 1: froth in places, more places now than before. What's your
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  Speaker 1: big take on what's going on between the redditors and
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  Speaker 1: the market and the brokerages and the hedge funds. Well,
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  Speaker 1: you know this whole uh reddit game, stop robin hood
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  Speaker 1: saying is is very interesting and certainly very entertaining. But
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  Speaker 1: but the reality is that that ultimately fundamentals still matter.
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  Speaker 1: You know. I don't know if you stayed up late
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  Speaker 1: to watch the Saturday Night Live skit with Kate McKinnon
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  Speaker 1: and Pete Davidson. But you know, all kidding aside, that
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  Speaker 1: really shone a light on what ultimately matters longer term,
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  Speaker 1: and that if a company's fundamentals are strong, revenues and
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  Speaker 1: earnings will go up and that will drive share prices higher.
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  Speaker 1: If the business is weak, revenues and earnings are going
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  Speaker 1: the wrong way, ultimately the share price will decline. Now
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  Speaker 1: that there could be noise in the interim, and that's
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  Speaker 1: what we're seeing now with with you know, the hedge
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  Speaker 1: funds and the redded people and whatever. But but you know, um,
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  Speaker 1: longer term, ultimately, these companies are going to succeed or
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  Speaker 1: fail on the basis of the underlying supply and demand
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  Speaker 1: and strength of their business. Still. I mean, you know,
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  Speaker 1: we've seen these stype the phenomena in the past and
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  Speaker 1: kind of you know, a term of old day trader,
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  Speaker 1: if you will. But I guess what's new here is
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  Speaker 1: there's so much liquidity on the sidelines, so much liquidity
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  Speaker 1: in the marketplace. You've got the advent of social media
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  Speaker 1: and the ability for retailers to kind of really team
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  Speaker 1: up if you will, in a particular security. Um, you've
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  Speaker 1: got the pandemic, people are kind of locked in their homes.
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  Speaker 1: How much of this is kind of a one off,
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  Speaker 1: short term phenomena versus maybe a new wrinkle to the
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  Speaker 1: market going forward. Everything you've said is absolutely true that
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  Speaker 1: we you know, the advent of social media, the fact
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  Speaker 1: that they're somewhere between four and five trillion dollars of
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  Speaker 1: cash sitting on the sidelines. Uh, we're sitting here. Uh.
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  Speaker 1: The last personal savings rate we saw was around thirteen
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  Speaker 1: or fourteen percent. So people are flush with cash, stock
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  Speaker 1: markets up, They've got nothing to do. We're locked in
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  Speaker 1: our house. We've got a snowstorm here in the northeast, um,
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  Speaker 1: you know, And and people are bored, and they say, well,
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  Speaker 1: let's let's stick it to the man. Let's let's take
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  Speaker 1: out some of these wealthy hedge fund guys and team
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  Speaker 1: up and drive these stocks higher and force them to
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  Speaker 1: cover their shorts. All of that's true, But the reality is,
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  Speaker 1: where's the endgame? At what point do fundamentals matter and
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  Speaker 1: individuals need to sell to lock in their profits or
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  Speaker 1: create some additional liquidity. Who are they going to sell
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  Speaker 1: to if the fundamentals are poor and everyone who uh,
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  Speaker 1: you know, potentially they would need to buy the stock
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  Speaker 1: is already in UM, so you run the risk of
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  Speaker 1: looking at the mirror image of this somewhere down the
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  Speaker 1: road now is that? Is that somewhere down the road tomorrow,
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  Speaker 1: next week, next month timing? I have no idea, So yeah,
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  Speaker 1: and I suppose that was my original question, Phil. I mean,
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  Speaker 1: we have a combination of market makeup, positioning, hedge, fund positioning,
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  Speaker 1: retail positioning, so much leverage, technicals, economic risk thanks to COVID,
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  Speaker 1: there are so many difficulties out there. What would make
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  Speaker 1: you want to trade in this market or I mean,
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  Speaker 1: would you even want to sort of deleverage a little
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  Speaker 1: bit here? Well, certainly we're not buying into this. We're
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  Speaker 1: we're not buying these stocks that we think or you know,
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  Speaker 1: have poor fundamentals that are getting driven up because of
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  Speaker 1: these market dynamics. Ultimately, we're looking across the proverbial valley
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  Speaker 1: and seeing, you know, what could happen on the other
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  Speaker 1: side when when you've got some margin calls or when
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  Speaker 1: you start to get a tsunami of selling in order
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  Speaker 1: to create some liquidity. So we're studying the underlying fundamentals
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  Speaker 1: of the market, which frankly we think are pretty good.
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  Speaker 1: So so, you know, as if there is an air
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  Speaker 1: pocket here, if there is a dislocation over the course
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  Speaker 1: of the next month or two, and you know, the
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  Speaker 1: market gets flapped around and drops by, you know, a
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  Speaker 1: fairly significant amount. And we still think the fundamentals are
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  Speaker 1: good based upon the things the President Biden is doing,
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  Speaker 1: and the rollout of the vaccine, and the fact that
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  Speaker 1: the set is keeping interest rate to zero. All of
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  Speaker 1: those things the things that truly matter. At that point
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  Speaker 1: the decision maybe, well, let's let's throw to the log
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  Speaker 1: on the fire here, expecting that stock prices will work
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  Speaker 1: higher longer term. All right, so let's go a little
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  Speaker 1: bit on the on the fundamentals here, get away from
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  Speaker 1: the redditors. Earnings were about the third or the way through.
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  Speaker 1: What are you seeing here. We're seeing a great earning season.
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  Speaker 1: We're as you said, we're about forty of the way through. Uh,
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  Speaker 1: we are seeing The consensus expectation going into the quarter
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  Speaker 1: was that earnings would be down something in the order
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  Speaker 1: of about nine or ten percent on a year of
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  Speaker 1: a year basis. So far, earnings are up. Three of
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  Speaker 1: the companies that have already reported have beaten by an
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  Speaker 1: average of seventeen and a half percent. That is the
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  Speaker 1: third best beat rate in history, trailing only the second
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  Speaker 1: quarter in the third quarter of last year. So the
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  Speaker 1: earnings are coming in strong again, the vaccines rolling out,
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  Speaker 1: the sets staying at zero, all of that suggests that
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  Speaker 1: the underlying fundamentals for the market, the stuff that truly matters,
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  Speaker 1: isn't pretty good shape. Hey Phil, thanks as always, always
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  Speaker 1: appreciate getting your bullish call on the market. You've been
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  Speaker 1: absolutely spot on. Uh So we'll see how the rest
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  Speaker 1: of these earnings come through this quarter. Phil Orlando, chief
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  Speaker 1: equity market strategist and head of client portfolio Management of
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  Speaker 1: Federated Hermes. Uh they're based he is based in New
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  Speaker 1: York City and eighty billion dollars in equities under management,
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  Speaker 1: six fifteen billion firm wide, So Federated Hermes all over
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  Speaker 1: the market. And Phil certainly has a great handle on
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  Speaker 1: the market. And again, as I said, he's been consistently bullish,
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  Speaker 1: you know, over the last couple of years, and he's
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  Speaker 1: been absolutely spot on. Well, the trading activity we've seen
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  Speaker 1: in a handful of stock starting last week with game
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  Speaker 1: Stock Game Stop and then expanding to others really highlighted
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  Speaker 1: a trading strategy of looking for stocks relatively small to
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  Speaker 1: MidCap stocks with big short interest and jumping in on
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  Speaker 1: those and creating a good old fashioned short squeeze. One
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  Speaker 1: of the folks that's involved in in just kind of
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  Speaker 1: the whole process of the data around short interests is
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  Speaker 1: Bob Sloan, founder and managing partner of S three Partners
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  Speaker 1: S three Partners of finance company that provides data analytics.
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  Speaker 1: It's most used product is black app. It's the market
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  Speaker 1: standard for real time short interests and securities finance for
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  Speaker 1: about forty thousand security so clearly on top of that
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  Speaker 1: short interest data. Bob, thanks so much for joining us here.
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  Speaker 1: What did what did you make of last week? Your
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  Speaker 1: company and you you've been involved in the this. We
• 7:51
  Speaker 1: may have lost Paul in the blizzard. It's kind of
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  Speaker 1: to make us noment, but Bob, the general point is
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  Speaker 1: well taken. So what did you make of last week? Well,
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  Speaker 1: we were seeing the markets change right in front of
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  Speaker 1: our eyes. There's a new socially mobilized force and investing
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  Speaker 1: and it has taken to targeting short sellers as its
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  Speaker 1: investment strategy and opportunity for the time being. How many
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  Speaker 1: times can this happen? So for example, this week it
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  Speaker 1: seems to be silver, but it's a whole different bowl
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  Speaker 1: game taking on something like silver then taking on a
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  Speaker 1: stock like game stock. I think what we're seeing isn't
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  Speaker 1: just an attack on institutions generally. Um. That's one of
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  Speaker 1: the things I wrote in the piece UM that I
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  Speaker 1: put up on on on our website, is that you know,
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  Speaker 1: the the attack on the capitol, Um, you're seeing an
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  Speaker 1: attack on financial institutions, just just an attack on institutions generally.
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  Speaker 1: And this has become the nexus of Reddit. Combined with
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  Speaker 1: socially scaled activists, investing has become an attack on institutions.
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  Speaker 1: And this is why they love Elon must so much.
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  Speaker 1: You know, he's like, how can they love a billionaire
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  Speaker 1: because he took on the short sellers in one It's
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  Speaker 1: that simple for now, at least. I mean, you know,
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  Speaker 1: these stories are never over until they're over. But they
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  Speaker 1: also embrace a lot of people that sort of say
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  Speaker 1: the right thing but aren't necessarily doing the right thing.
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  Speaker 1: I mean, um, you know, he took he may have
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  Speaker 1: taken all the short sellers, but in their own way,
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  Speaker 1: the short sellers can flush out things like fraud and
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  Speaker 1: you know, wrong valuations and stuff on Wall Street. So
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  Speaker 1: why are short sellers in particular the bad guy? I
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  Speaker 1: don't think that they are, you know, I obviously have
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  Speaker 1: a very long history of understanding and defending the right
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  Speaker 1: to have negative views expressed in the marketplace. There's no
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  Speaker 1: marketplace unless there's two way price discovery, meaning, you know,
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  Speaker 1: it can't just be all up. It's like having a
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  Speaker 1: democra see where you can only vote yes. That's not
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  Speaker 1: a society, right. You have to be able to vote
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  Speaker 1: no too. And so I think when you see these
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  Speaker 1: things like on Meet the Press yesterday where Chuck Todd
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  Speaker 1: is asking, you know, people from the White House, should
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  Speaker 1: short selling be banned? You know, that's just kind of stupid.
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  Speaker 1: That's just not how markets work. We need short selling
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  Speaker 1: and we need that function to be in the marketplace
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  Speaker 1: because otherwise when we want to get our money, when
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  Speaker 1: we want our money, it's not going to be there.
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  Speaker 1: And that's really vitally. Bob, you said a few minutes
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  Speaker 1: ago that this is a populist revolution in financial markets,
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  Speaker 1: and indeed, if you look at some of the language,
• 10:34
  Speaker 1: you know that's obviously what what some of the characteristics
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  Speaker 1: of this sort of quote unquote revolution are but it
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  Speaker 1: was a real revolution. Wouldn't these people be be targeting
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  Speaker 1: long positions just as much as short positions? Well, you know,
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  Speaker 1: you know, I think that, Um, the revolution is in
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  Speaker 1: the use of the technology, and it's made them an
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  Speaker 1: activist investor. So typically an activist would show up to
• 11:02
  Speaker 1: a company and say, you know, I own six percent
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  Speaker 1: of the shares and you know, these are the things
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  Speaker 1: I like the company to go do, and the company
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  Speaker 1: would the other adopt a strategy not to do that,
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  Speaker 1: or they generally would say, okay, you know, let's let's
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  Speaker 1: fire people. And this is something much more basic. It's hey,
• 11:20
  Speaker 1: I like the popcorn at AMC. You know, I like
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  Speaker 1: my flip phone. I like talking to my person at
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  Speaker 1: game stuff. It's much more about a cultural thing, and
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  Speaker 1: it just so happens to be. These stocks are all
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  Speaker 1: more or less in one sector, consumer and retail, and
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  Speaker 1: so this is why it's happening. Um, this cross current
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  Speaker 1: between socially mobilized investing and short interest in this area. Hoop,
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  Speaker 1: are you surprised that some big hedge funds really really
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  Speaker 1: got hurt here? UM? Name me a risk model from
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  Speaker 1: the Federal Reserve to any hedge fund in the world
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  Speaker 1: that saw this as a risk. A good point. What
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  Speaker 1: do you think is next year, Bobo, We're gonna see
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  Speaker 1: more of this going forward, this combination of social media
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  Speaker 1: and trading activity. It's a really it's a really sticky
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  Speaker 1: question because the little person, as it were, and they're
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  Speaker 1: not little people, and that's not you know, I'm just
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  Speaker 1: saying the smaller investor is retail is now empowered with
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  Speaker 1: something massively potent, and so how do you regulate that?
• 12:29
  Speaker 1: That is the sixty foll question. Yeah, this, of course,
• 12:32
  Speaker 1: as we just get news that Robin Hood had to
• 12:35
  Speaker 1: recapitalize itself once again. According to Dow Jones, it's taken
• 12:39
  Speaker 1: another more than two billion dollars to point four billion
• 12:42
  Speaker 1: dollars from shareholders scaring requirements. Yeah, Vonnie, So that's a
• 12:47
  Speaker 1: great point. You know, one of the things that should
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  Speaker 1: be examined here is what happened with that company in
• 12:55
  Speaker 1: terms of how they were handling margin, What were the
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  Speaker 1: risk parameters that they had in place? Um as this
• 13:01
  Speaker 1: flow is happening. So that's certainly an area of you know,
• 13:05
  Speaker 1: rightful scrutiny. You're gonna have to promise come on again
• 13:08
  Speaker 1: very soon, because we want to keep our eye on
• 13:09
  Speaker 1: this story, or it'll keep its eye on us, for sure.
• 13:13
  Speaker 1: Bob Sloan as founder and managing partner at S three Partners,
• 13:17
  Speaker 1: And it's interesting listening to Bob Sloan just about you know,
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  Speaker 1: short selling being a part of the market of Annie
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  Speaker 1: and I think that's uh, I think what most people
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  Speaker 1: tend to conclude, uh, you know, as they think about
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  Speaker 1: short selling. We seem to have this discussion about short
• 13:29
  Speaker 1: selling every five or six years or so and whether
• 13:32
  Speaker 1: it should be allowed in the marketplace. And I think
• 13:34
  Speaker 1: where we always come down as a marketplaces it is
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  Speaker 1: a normal part of a healthy market. Although sometimes ago
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  Speaker 1: I always thought the short sellers were the black sheep
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  Speaker 1: of the market. For the populace to jump on the
• 13:44
  Speaker 1: short seller is is it's it's a little ironic. I mean,
• 13:46
  Speaker 1: I think it has something to do with GM as well. Yeah,
• 13:49
  Speaker 1: we'll have more on that coming up. This is Bloomberg. Well,
• 13:54
  Speaker 1: today is the first day of Black History Month. As
• 13:57
  Speaker 1: a country continues to struggle with how to address racial inequality,
• 14:02
  Speaker 1: our next guest can discuss how individuals can support racial
• 14:05
  Speaker 1: diversity with their investments joining us now is Marvin Owens.
• 14:08
  Speaker 1: It's the chief Engagement Officer at Impact Shares and a
• 14:11
  Speaker 1: former Senior Director of Economic Development at the n double
• 14:14
  Speaker 1: A CP. Marvin, thanks so much for joining us here.
• 14:16
  Speaker 1: I love to start out with just getting a description
• 14:19
  Speaker 1: of what Impact Shares does. Hey, thanks for having me.
• 14:23
  Speaker 1: It's good to be here. UH. Impact Shares It's is
• 14:27
  Speaker 1: a first of its kind nonprofit fund manager that really
• 14:30
  Speaker 1: focuses on how you connect capital with social causes. We
• 14:35
  Speaker 1: are an engagement for where engagement platform where investors and
• 14:39
  Speaker 1: corporations and advocacy organizations have come together um to use
• 14:43
  Speaker 1: capital to move the needle on social issues. So in
• 14:46
  Speaker 1: the case of our current our current platform we have,
• 14:50
  Speaker 1: of course are in a CP fund which is The
• 14:53
  Speaker 1: advocacy organization is the a c P. We have the
• 14:56
  Speaker 1: w O MN and fund which is focused on gender
• 14:58
  Speaker 1: equity is UH Ethics. The organization is the y w
• 15:02
  Speaker 1: c A, and we're working with the u N on
• 15:06
  Speaker 1: our fund sd g A, which focuses on sustainable development goals,
• 15:09
  Speaker 1: all of which are our platforms that create an opportunity
• 15:13
  Speaker 1: to kind of really move the needle on social issues
• 15:15
  Speaker 1: and using capital to really make that happen, which is fantastic.
• 15:19
  Speaker 1: Let's start with n A c P, which is the
• 15:21
  Speaker 1: in fact shares a CP Minority Empowerment e t F.
• 15:25
  Speaker 1: Right now, you have a hundred and seventy four holdings
• 15:27
  Speaker 1: in there, and the top one is Apple, followed by Microsoft.
• 15:31
  Speaker 1: What can you do in order to pressure Apple, Microsoft
• 15:35
  Speaker 1: and the other major companies like that that are you know,
• 15:38
  Speaker 1: just one four of the e t F to make
• 15:41
  Speaker 1: some positive changes. Well, here's the thing. I think that
• 15:45
  Speaker 1: in the current environment in which their number of companies
• 15:49
  Speaker 1: that have come out and made some very explicit statements
• 15:52
  Speaker 1: of standing against racial discrimination and wanting to really engage
• 15:55
  Speaker 1: and change, UM, we now have this e t F
• 15:59
  Speaker 1: which is another tool to really insent those kinds of changes.
• 16:03
  Speaker 1: I mean, uh, this is really not just driven by
• 16:06
  Speaker 1: the advocacy community, but it really is being driven by
• 16:08
  Speaker 1: the investor community as well. UM. Investors really do want
• 16:11
  Speaker 1: to see companies UM truly engaged in the kind of
• 16:15
  Speaker 1: social issues that reflective of of society within the society's
• 16:19
  Speaker 1: best interests. So when it comes to racial equity, UM,
• 16:22
  Speaker 1: now it's not just the advocacy community kind of voicing
• 16:25
  Speaker 1: these concerns, but now it's also the investor communities pushing
• 16:28
  Speaker 1: for these changes, which I think is going to help
• 16:31
  Speaker 1: these corporations to move the needle. Marvin, the pandemic and
• 16:36
  Speaker 1: the economic fallout UM is really shown. I say, brighter light,
• 16:40
  Speaker 1: if you will, on the economic disparity in this country. Um,
• 16:45
  Speaker 1: how are you kind of viewing that, how much of
• 16:47
  Speaker 1: this potential damage to some of these minority communities might
• 16:50
  Speaker 1: be a little bit more permanent than temporaries relates to
• 16:54
  Speaker 1: the pandemic. Yeah, we're really concerned about that. You know,
• 16:57
  Speaker 1: in the middle of this pandemic, black workers have really
• 16:59
  Speaker 1: been impacted disproportionately, just like black workers have been impacted
• 17:03
  Speaker 1: by UM the infections of the disease itself. I think
• 17:06
  Speaker 1: it's important to note that black workers have lost a
• 17:09
  Speaker 1: disproportionate amount of jobs as well, and so we are
• 17:12
  Speaker 1: concerned about that because you add this COVID reality to
• 17:17
  Speaker 1: an already widening wealth gap and and and wage gap
• 17:21
  Speaker 1: that exists in this country, and you have been making
• 17:23
  Speaker 1: something that is more devastating and hopefully not permanent. But
• 17:27
  Speaker 1: I think there's some things we can do to change that,
• 17:29
  Speaker 1: which means we really need to look at legislation that
• 17:32
  Speaker 1: really understands what these issues all about and really moves
• 17:35
  Speaker 1: the needle on making sure that we close some of
• 17:38
  Speaker 1: these gaps. I think there's a lot we can do
• 17:40
  Speaker 1: to gather them, and I'm encouraged by the current administration
• 17:44
  Speaker 1: which is making all the all the right moves and
• 17:47
  Speaker 1: saying the right things. We just need to make sure
• 17:49
  Speaker 1: that we are able to push to make sure the
• 17:52
  Speaker 1: changes are really implemented policy wise, right exactly? How you know,
• 17:56
  Speaker 1: what do you like about the Widen racial Equity Plan,
• 17:59
  Speaker 1: Let's say, Marvin, I mean, what are the parts that
• 18:01
  Speaker 1: we really need to make sure come to fruition. Well,
• 18:05
  Speaker 1: I think, um, first of all, you have to just
• 18:06
  Speaker 1: kind of just kinda give them some some some recognition
• 18:11
  Speaker 1: for being able to even use the words like white supremacy,
• 18:14
  Speaker 1: which I don't think any other American president has really
• 18:17
  Speaker 1: used in an in an inauguration speech, which says a lot.
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  Speaker 1: But I also think we've got to move the needle
• 18:22
  Speaker 1: on making sure that these uh, these policies are really
• 18:26
  Speaker 1: focused on how do we really tap into the needs
• 18:29
  Speaker 1: of black business owners. UM. I like what they're what
• 18:32
  Speaker 1: they're saying in terms of everything wanting to UM target
• 18:36
  Speaker 1: uh communities of color and making sure that we're talking
• 18:38
  Speaker 1: about racial equity in terms of policy. But we've also
• 18:41
  Speaker 1: got to make sure that UM that we're utilizing black
• 18:45
  Speaker 1: fund managers, that we're utilizing black asset managers. We're looking
• 18:48
  Speaker 1: at how to make sure that we are using minority
• 18:50
  Speaker 1: depository institutions when we roll out these new COVID packages
• 18:55
  Speaker 1: and the COVID relief bills that are coming out. There's
• 18:57
  Speaker 1: a lot we can do to make sure that we
• 19:00
  Speaker 1: are really impacting the communities that need to help UM.
• 19:03
  Speaker 1: And I'm encouraged by what the the Biden administration is saying.
• 19:07
  Speaker 1: I just need to we just needed to make sure
• 19:09
  Speaker 1: they're really following through on their promises. Marvin, If you
• 19:14
  Speaker 1: know our listeners want to maybe incorporate equality issues into
• 19:20
  Speaker 1: their investing, what's the best way to do it. Is
• 19:21
  Speaker 1: it to kind of look at the E s G
• 19:22
  Speaker 1: scores and things like that. Yeah, it's been really important
• 19:26
  Speaker 1: for us to be able to talk about companies that
• 19:29
  Speaker 1: are that are really in our index. And I think
• 19:32
  Speaker 1: that as you look at companies not just in terms
• 19:34
  Speaker 1: of their returns, but also in terms of what they are,
• 19:36
  Speaker 1: how they're engaging in the broaderest society. It's important to
• 19:40
  Speaker 1: make sure that the investor community is looking at all
• 19:43
  Speaker 1: of this. And I think that you can go to
• 19:46
  Speaker 1: our website impact ets dot org and you can look
• 19:49
  Speaker 1: at our holdings. But I think an important thing to
• 19:52
  Speaker 1: do is to make sure that are these companies are
• 19:54
  Speaker 1: not just not just performing well, but they're also doing
• 19:58
  Speaker 1: what they what they should do around me. So so issues.
• 20:00
  Speaker 1: The truth in the matter is diversity helps with business.
• 20:03
  Speaker 1: I think more diverse companies tend to be better, better operators,
• 20:08
  Speaker 1: tend to be more profitable, tend to be folks who
• 20:11
  Speaker 1: do the right thing in larger ways. So um look
• 20:14
  Speaker 1: at our go to our website and you can check
• 20:15
  Speaker 1: it out. Marvin, thank you for joining us today. Marvin
• 20:18
  Speaker 1: Owen's junior is Chief Engagement Officer Impact Shares, former senior
• 20:22
  Speaker 1: director of Economic Development. At the end, double a CP
• 20:28
  Speaker 1: green on the screen today and it looks like the
• 20:30
  Speaker 1: Reddit traders they've have expanded the scope of their buying,
• 20:34
  Speaker 1: moving on from individual equities to commodities such as silver
• 20:38
  Speaker 1: that SOB stuff about eight percent today trading just below
• 20:41
  Speaker 1: thirty dollars and ounce. Let's get a sense of what's
• 20:43
  Speaker 1: going on across markets. We talked to Katie Dreifeld, cross
• 20:47
  Speaker 1: asset reporter for Bloomberg News. Joining us on the phone
• 20:50
  Speaker 1: from New York Mike McLoone commodity strategist for Bloomberg Intelligence.
• 20:53
  Speaker 1: He follows the silver market closely. Katie, give us a
• 20:56
  Speaker 1: sense of kind of what you're seeing in the market here.
• 20:58
  Speaker 1: I'm looking at some of those Reddit stocks last week,
• 21:00
  Speaker 1: some divergent performance there. Yeah, today is an interesting dynamic
• 21:05
  Speaker 1: where you have the broad indexes at least up so
• 21:08
  Speaker 1: far about an hour into treating. But you're also seeing
• 21:11
  Speaker 1: some of those Reddit UH favorites, like you say, they're
• 21:14
  Speaker 1: higher to you a MC higher for example, even as
• 21:17
  Speaker 1: Game Stop takes a bit of a pause. But if
• 21:20
  Speaker 1: you look at what is moving the broader indexes, I
• 21:23
  Speaker 1: mean it helps that you have Tesla, Amazon, Apple all
• 21:26
  Speaker 1: higher today. That's dragging those benchmarks up and it might
• 21:31
  Speaker 1: be helping that if you look at the new short
• 21:33
  Speaker 1: interest that's out of UH partners such as S three
• 21:37
  Speaker 1: Partners and I h S Market, you you can see
• 21:41
  Speaker 1: that short interest on game Stop has actually dropped a bit.
• 21:45
  Speaker 1: It's still relatively high. It's about thirty nine percent going
• 21:49
  Speaker 1: by I h SS numbers, but that was theorized to
• 21:52
  Speaker 1: have created a sort of the gross thing hedge funds
• 21:55
  Speaker 1: having to take down risks and bleeding into the broader markets.
• 21:58
  Speaker 1: It appears that that may be easing now, Mike, what
• 22:03
  Speaker 1: can happen in the silver market. I mean, it's it's
• 22:05
  Speaker 1: a bit more complicated, and there are various ways of
• 22:08
  Speaker 1: trading it, and also there's various ways of market making
• 22:11
  Speaker 1: in it that aren't the same as an individual stock.
• 22:13
  Speaker 1: What are these redators getting into and how are they
• 22:16
  Speaker 1: playing this particular trade? But hello, Vanni, I'm hearing they're
• 22:20
  Speaker 1: buying a lot of calls, most notably out of money calls.
• 22:23
  Speaker 1: But if the narrative plays out as Paul and I
• 22:25
  Speaker 1: know and from b I a lot of us are
• 22:27
  Speaker 1: ex traders. As an ex trader, I will tell them
• 22:29
  Speaker 1: what will probably happen is their cause will expire close
• 22:32
  Speaker 1: to near worthless, and then the market will go up.
• 22:35
  Speaker 1: Because this is a fundamentally bullish market that's very deep.
• 22:38
  Speaker 1: So there's a there's a Bloomberg terminal Um index that
• 22:42
  Speaker 1: I like. It's a total holdings of silver ets that's
• 22:45
  Speaker 1: a twenty four billion dollars And then you look at
• 22:47
  Speaker 1: open interests in futures that's just silver futures. That's twenty
• 22:50
  Speaker 1: six billion dollars. So that's just fifty billion dollars right there.
• 22:54
  Speaker 1: That doesn't even include the physical or a lot of
• 22:57
  Speaker 1: what other trading, so it's a massive market. The differences
• 23:00
  Speaker 1: this case is they just added a little bit, a
• 23:02
  Speaker 1: bit of a narrative to an already fundamentally bullish market.
• 23:06
  Speaker 1: And you know it's helping it for now. But good
• 23:09
  Speaker 1: luck with you by calls, because a lot of times
• 23:10
  Speaker 1: that's just a good way to mess up a good trade.
• 23:13
  Speaker 1: So what is the fundamental call on silver? Mic aside
• 23:17
  Speaker 1: from this short term reddit interest, I look at it,
• 23:21
  Speaker 1: it's a most likely most likely metal to match or
• 23:24
  Speaker 1: to get to near it to make new highs maybe
• 23:27
  Speaker 1: this year, just doing what gold did. So that all
• 23:29
  Speaker 1: time high for silver's around fifth. Yes, it's kind of
• 23:31
  Speaker 1: far right now, but gold did that last year it
• 23:33
  Speaker 1: got up to over two thousand dollars. And there's this
• 23:36
  Speaker 1: gold silver ratio. It's silvered a little bit low versus
• 23:39
  Speaker 1: a twenty year average right now. But to me, it's
• 23:41
  Speaker 1: just a matter of time it gets there. It's just
• 23:43
  Speaker 1: a question how it does it. It might not happen
• 23:46
  Speaker 1: this year, but fundamentally just very strong. Let's look at
• 23:48
  Speaker 1: the supply has been declining, most notably of South American. Now,
• 23:51
  Speaker 1: of course COVID helped reduce supply, but the big pictures
• 23:54
  Speaker 1: prices have been in a bear market for so long,
• 23:56
  Speaker 1: so there hasn't been a lot of sentim to bring
• 23:58
  Speaker 1: on the new supply. And then we have this massive
• 24:00
  Speaker 1: trend in electrification, in decarbonization. All that means a lot
• 24:04
  Speaker 1: of it is demand for metals, demand for silver and
• 24:07
  Speaker 1: not you know, and it's creating less less demand for
• 24:11
  Speaker 1: energy and fossil fuels. Yeah, Katie, have you been on
• 24:15
  Speaker 1: the redded boards today? Are traders there? Those kinds of
• 24:19
  Speaker 1: traders saying that, you know, they're done with game Stop?
• 24:22
  Speaker 1: Does game stop even come up this week? That's going
• 24:26
  Speaker 1: to be interesting. I mean, there's also the nuance that
• 24:29
  Speaker 1: if you look at robin Hood for example, there's still
• 24:32
  Speaker 1: trading restrictions on eight stocks and GameStop for example, you
• 24:36
  Speaker 1: can only buy one shared a time right now, So
• 24:39
  Speaker 1: that has kind of cooled the uh, the mania around
• 24:43
  Speaker 1: game stop. I mean, if you spend time on Wall
• 24:46
  Speaker 1: Street sets, it's interesting you are seeing sort of fissures
• 24:49
  Speaker 1: emerge among the crowds as they latch onto this silver trade.
• 24:53
  Speaker 1: Some are pointing out that if you look at the
• 24:56
  Speaker 1: s l v EPF where which is it seems that
• 24:59
  Speaker 1: retail traders have been getting their exposure to silver through
• 25:02
  Speaker 1: ets like that. CNEL is the sixth largest holder there,
• 25:06
  Speaker 1: so that seems to be occupying the board rate. Now,
• 25:09
  Speaker 1: just this the date over. What are we doing when
• 25:12
  Speaker 1: it comes to the silver trade, Katie. What's the latest
• 25:16
  Speaker 1: on the robin Hood and the other platforms getting pushed
• 25:19
  Speaker 1: back from kind of how they handle things last week? Well,
• 25:23
  Speaker 1: it's it's difficult. I mean, a lot of the heat
• 25:25
  Speaker 1: has come down on robin Hood, but you know, when
• 25:27
  Speaker 1: this started on Thursday, it was it was a wide
• 25:31
  Speaker 1: range of these retail platforms. Of course, the likes of
• 25:35
  Speaker 1: Interactive Broker has resolved those issues. Robin Hood continues to
• 25:39
  Speaker 1: be a question mark, as we know by now they
• 25:42
  Speaker 1: they raised about one point five billion in additional capital.
• 25:46
  Speaker 1: It's gonna be interesting to see whether, you know, as
• 25:49
  Speaker 1: the likes of a MC continue to rally, game Stop
• 25:52
  Speaker 1: is fooling a bit, whether they run into the same
• 25:55
  Speaker 1: sorts of issues that they ran into last week. With
• 25:57
  Speaker 1: the clearinghouses, all right, you too. Thank you so much
• 26:01
  Speaker 1: for giving us up to date with what's happening this morning,
• 26:03
  Speaker 1: this Monday morning, that is Katie Greifeldt and Mike mcgloane,
• 26:08
  Speaker 1: Mike with Bloomberg Intelligence and Katie with Bloomberg Editorial, and
• 26:11
  Speaker 1: will continue to follow what happens throughout the day with
• 26:14
  Speaker 1: the memes, docks and silver in particular. Thanks for listening
• 26:19
  Speaker 1: to Bloomberg Markets podcast. You can subscribe and listen to
• 26:23
  Speaker 1: interviews at Apple Podcasts or whatever podcast platform you prefer.
• 26:27
  Speaker 1: I'm Bonnie Quinn. I'm on Twitter at Bonnie Quinn, and
• 26:30
  Speaker 1: I'm Paul Sweeney. I'm on Twitter at pt Sweeney. Before
• 26:33
  Speaker 1: the podcast, you can always catch us worldwide at Bloomberg
• 26:35
  Speaker 1: Radio