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No End In Sight For Latest Meme Stock Frenzy · Bloomberg Intelligence

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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
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Speaker 1: my co host Matt Miller. Every business day, we bring
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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
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Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
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Speaker 1: at Bloomberg dot com slash podcast. Let's take a look
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Speaker 1: at those meme stocks. I mean again, I think about
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Speaker 1: the beginning of the meme stock mania, if you will.
0:27
Speaker 1: It was a lot of smaller cab mid cap stocks,
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Speaker 1: high short interest, uh and easy for these Reddit traders
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Speaker 1: to kind of force a short squeeze, if you will.
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Speaker 1: And it was really exacerbated by social media. But it
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Speaker 1: seems still broadened out a little bit from that limited
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Speaker 1: kind of scope. Barry Billy Lipscholtz, equities reporter for Bloomberg News,
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Speaker 1: joins us on the phone here. Bailey, thanks so much
0:49
Speaker 1: for joining us here. The meme stock craze, it was there,
0:52
Speaker 1: it kind of went away. I'm thinking game stop and
0:55
Speaker 1: things like that, but it's come back. What's what's going
0:58
Speaker 1: on these days? Well, the biggest difference we're seeing now
1:01
Speaker 1: compared to where it was back in early January or
1:04
Speaker 1: into late January. Really has been kind of this incessant
1:09
Speaker 1: desire to find the next hot stock, and we're seeing
1:12
Speaker 1: that with hedge funds dipping their toe into it. Obviously,
1:15
Speaker 1: people on Reddit or stock twits or especially Twitter these
1:18
Speaker 1: days UM are pumping up their newest bets um. It's
1:21
Speaker 1: it's been really interesting just because it's we're seeing one
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Speaker 1: stock really pop off for a day or a week,
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Speaker 1: and then very quickly the scope tends to shift, which
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Speaker 1: is obviously, again very different than what we saw in
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Speaker 1: late January, where game stop AMC costs express. We're all
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Speaker 1: kind of mimicking each other. By the way, is that
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Speaker 1: the order now is Twitter um the king of locations
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Speaker 1: for the meme stock mafia, and then stock twits and
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Speaker 1: then read it. I mean, how should we follow this best?
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Speaker 1: I think it's still probably goes Reddit Twitter than stock twits. Twitter,
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Speaker 1: though Death really has become more and more popular simply
2:02
Speaker 1: because of the way the platforms laid out in the
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Speaker 1: ability to follow um individual accounts that may have more
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Speaker 1: insider perceived insight than others. Read it still kind of
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Speaker 1: is a wild wild West where there's a mega thread
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Speaker 1: and a lot of game stop being pushed um and
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Speaker 1: then I would say stock to it's probably his third
2:20
Speaker 1: in line. But we're definitely seeing more of a more
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Speaker 1: of a focus on Twitter um over the last you know,
2:25
Speaker 1: month or so, just because again, I think that the
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Speaker 1: layout kind of amends itself more toward a average gambler
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Speaker 1: or an average investor excuse me, or average gambler attention.
2:37
Speaker 1: I think the average gambler is fine. Yeah, that's fine.
2:39
Speaker 1: I think even the apes would defined with that Billy
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Speaker 1: talk to us about like, I'm starting to see some
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Speaker 1: more reporting that it's not just the retail investors or
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Speaker 1: you know, the Dave portnoise of the world from Barstool Sports,
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Speaker 1: who's got a big social media following, but it might
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Speaker 1: actually be some professional investors, hedge funds getting in it.
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Speaker 1: Do we have evidence, said, Golden Sound algorithm? What's that
3:02
Speaker 1: Goldman's got an album? An algorithm? Right? So, I mean,
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Speaker 1: what's the role of the professional investor in here, Bailey?
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Speaker 1: I think they're kind of picking off where they can
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Speaker 1: make money. Obviously, if you just look at Alane, some
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Speaker 1: of the trading volume in these stocks, it's kind of
3:16
Speaker 1: hard to sit back and argue that a retail crowd
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Speaker 1: is able, you know, to have trade hundreds of millions
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Speaker 1: of shares of AMC while also investing in Wendy's and
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Speaker 1: other parts of the market. So I do think, and
3:27
Speaker 1: we have been hearing more and more that hedge funds
3:29
Speaker 1: have to be playing some part in this, especially when
3:32
Speaker 1: you look at kind of some of the call option
3:34
Speaker 1: trading and the underlying stock trades. It can't really be
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Speaker 1: in the consensus that I've been hearing more and more
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Speaker 1: um from my sources is that it can't really be
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Speaker 1: just a coordinated retail attack. It has to be folks
3:45
Speaker 1: on Wall Street, your professional traders who are kind of
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Speaker 1: jumping in on these trades, and whether they're getting in
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Speaker 1: earlier or later continuing to help ride some of the momentum,
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Speaker 1: are definitely playing apart. I'm waiting for a hedge fund
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Speaker 1: to embed people on Wall Street beats, you know. I
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Speaker 1: saw the other day somebody posted a screenshot of his
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Speaker 1: td A Meritorie account with a one million dollar investment
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Speaker 1: in a meme stock, and I thought, this has got
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Speaker 1: to be a hedge fund dude who just wants to
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Speaker 1: to pretend he's among the masses and try and speak
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Speaker 1: as insensitively as he can to to stir up some
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Speaker 1: drama around his stock. Also, they don't want to call
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Speaker 1: it a meme stock. A lot. I know a lot
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Speaker 1: of people on Wall Street Best Now are saying, hey,
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Speaker 1: of course there's not a meme stock. That's not fair.
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Speaker 1: Do you hear that a lot too? Yeah? No, I
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Speaker 1: think you're seeing a divide. I remember I wrote something
4:34
Speaker 1: we mentioned Bill the Bear in the meme stock basket
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Speaker 1: back in January. The amount of people who emailed me
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Speaker 1: saying Bill the Bear is not a meme stock and
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Speaker 1: has a solid core business and we're fundamentally long it.
4:45
Speaker 1: I think the term memes stock gets thrown around a bit,
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Speaker 1: and depending on who's investing in the company or what
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Speaker 1: the company is, definitely does trigger push back um because
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Speaker 1: they don't want to group you know, some of these
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Speaker 1: other companies with the likes of you know, an AMC
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Speaker 1: creating at the market capital is at now or something
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Speaker 1: like Express. It is definitely fascinating. Bailey, thanks so much
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Speaker 1: for joining us. Bailey lip Schultz, equities reporter for Bloomberg News.
5:09
Speaker 1: I tell you can lose time. I went on Wall
5:11
Speaker 1: Street Bets the other day and I looked up and
5:13
Speaker 1: all of a sudden hour had passed. It was like
5:15
Speaker 1: I was playing Red Dead, Redemption two or something. When
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Speaker 1: Chairman pal does speak this afternoon in two thirty Wall
5:25
Speaker 1: Street time, which Bloomberg will bring to you live, investors
5:28
Speaker 1: will be focusing uh many topics, but clearly inflation is
5:32
Speaker 1: top of the list, as the Fed chairman continue to
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Speaker 1: believe that the inflation we are seeing in this economy
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Speaker 1: is transitory or is it perhaps something more that will
5:42
Speaker 1: certainly be key. Let's check in with Marcus Schomer. He's
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Speaker 1: a chief economist for pine Bridge Investments. Marcus, I'll love
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Speaker 1: to get your thoughts here on inflation, um, and how
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Speaker 1: you're viewing it and maybe what we might hear from
5:55
Speaker 1: Chairman Powell on this issue. Well, I it's not to
6:00
Speaker 1: be back on the show, um, And you know those
6:03
Speaker 1: are the themes that I talked a lot of our
6:06
Speaker 1: clients about as well. UM. I don't think we're going
6:08
Speaker 1: to hear much from from the feeding from Power today.
6:11
Speaker 1: I think they they still have enough time to hide
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Speaker 1: behind the transitory sense that they've built around this issue. UM.
6:20
Speaker 1: I've sort of been quite critical of this because we're
6:22
Speaker 1: seeing inflation everywhere, right, and we shouldn't forget what the
6:26
Speaker 1: Fed is doing is they're choosing the smallest, narrowest and
6:29
Speaker 1: slowest inflation measure that we have where everywhere else outside
6:34
Speaker 1: of the PC to fate that which they prefer as
6:36
Speaker 1: the inflation measure in CPI and PPI, in financial markets
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Speaker 1: and the housing market everywhere else, inflation is wanting much
6:43
Speaker 1: much higher than what they measure. Um but we kind
6:46
Speaker 1: of know that they're hiding behind this this CPS, this
6:50
Speaker 1: PC into a corner, Marcus. I mean a lot of
6:54
Speaker 1: people are starting to say, you know, they can't get
6:56
Speaker 1: out now without royally markets. I don't think it's a
6:59
Speaker 1: corner that they don't see it that way. They want
7:02
Speaker 1: to be there. I mean, I think what they're telling
7:03
Speaker 1: us is actually honest. They think running the economy hot
7:06
Speaker 1: is a good idea, Whereas if you look at the economy,
7:09
Speaker 1: I'm not so sure that it is such a good
7:11
Speaker 1: idea because I start to see more and more science
7:14
Speaker 1: that rising inflation, rising prices are now slowing growth. Because
7:18
Speaker 1: that's also the answer to this question, is inflation transitory,
7:22
Speaker 1: And in my view, inflation is always transitory if it
7:25
Speaker 1: doesn't also translate into higher wages, because if prices go up,
7:28
Speaker 1: purchase and tall goes down, and consumption will slow. And
7:31
Speaker 1: I think that's what start, that's what starting to see.
7:34
Speaker 1: I'm getting more nervous about the growth outlook in the
7:36
Speaker 1: US in the second half because of the surgeon prices
7:39
Speaker 1: that you've seen and the lack of follow up in wages.
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Speaker 1: So Marcus, but as you were suggesting here, wage inflation,
7:46
Speaker 1: we haven't generally seen it. And even before the pandemic,
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Speaker 1: when we're running in you know, effectively, you know, full employment,
7:53
Speaker 1: wage inflation was only you know, three and a half percent.
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Speaker 1: I mean that that didn't seem too terrible. Do you
7:59
Speaker 1: think wage inflation is a material risk for this U
8:02
Speaker 1: S economy? Um? No, I think it's it's the opposite, right.
8:06
Speaker 1: If we were to get wage inflation, then this growth
8:10
Speaker 1: story can continue. We would have a different narrative. Then
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Speaker 1: we would have we we have to talk about too
8:15
Speaker 1: much inflation and too much growth potentially, and that would
8:18
Speaker 1: be a problem for the FED. But I think what
8:20
Speaker 1: we're seeing right now is prices are going up because
8:22
Speaker 1: we have supplied issues and we have to stimulants fuel
8:25
Speaker 1: demand surge. At the same time, but wages are not
8:29
Speaker 1: keeping up to consumer purchasing powers going down. Real incomes
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Speaker 1: are declining, and that would slow growth in the second half,
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Speaker 1: and that I think feeds very well into that position
8:38
Speaker 1: to FED is in they don't care about the inflation.
8:41
Speaker 1: They want interest rate to stay low. And if the
8:44
Speaker 1: economy actually slows a little bit in the second half,
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Speaker 1: that plays perfectly into their narrative. And they're going to
8:49
Speaker 1: be sitting there doing nothing, nothing for the rest of
8:51
Speaker 1: the year. So Muhammad Arian writes a piece for US today.
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Speaker 1: He basically says what the FED should be doing is
9:00
Speaker 1: start now reducing exposure to a more risky posture by
9:04
Speaker 1: moving forward with a partial pivot I'm quoting directly from
9:08
Speaker 1: his op ed in light of the change circumstances, thereby
9:11
Speaker 1: keeping their options open and better balancing risk um and
9:16
Speaker 1: and but that's not what they're going to do, and
9:20
Speaker 1: he says that really they risk both an economic recession
9:23
Speaker 1: and financial market instability, especially the latter. Marcus, the concern
9:27
Speaker 1: that financial market instability is one of the big risks
9:31
Speaker 1: is something we're hearing echoed across global Wall Street, because
9:36
Speaker 1: you know, with rates this low, everybody gets such cheap money.
9:40
Speaker 1: You know, junk bonds are trading at their tightest spreads
9:45
Speaker 1: in all time, and um, it just seems like, you know, uh,
9:51
Speaker 1: ratings agencies are coming out upgrading everybody because they don't
9:54
Speaker 1: have to pay very much the service this debt. But
9:57
Speaker 1: meanwhile leverage is growing and growing and growing. Isn't it
10:00
Speaker 1: a worry? I think it should be a worry on
10:05
Speaker 1: the Fat's radio screen. That's true, But I think, well,
10:06
Speaker 1: hammaga Aaron still looking at the old world. Right, Remember
10:10
Speaker 1: a couple of years ago when when Jannet Yellen was
10:12
Speaker 1: raising raids, the argument was, well, we need to raise
10:15
Speaker 1: rights so we can custom again, right, we need to
10:18
Speaker 1: refill the arsenal so we can do something in the
10:20
Speaker 1: next crisis. The Power Fat doesn't think that way at all.
10:23
Speaker 1: They think, right now, we're fine. We're only going to
10:25
Speaker 1: do something if there really is a problem on the rise,
10:28
Speaker 1: and then we will change. So where we are today
10:30
Speaker 1: is normal, is neutral. This is where we're gonna stay
10:33
Speaker 1: until something changes. There's no idea that, oh, if things
10:37
Speaker 1: are not so bad anymore, we need to go back
10:39
Speaker 1: to something as neutral. That's not the way power the
10:41
Speaker 1: power FET looks at it. So I think we will
10:43
Speaker 1: get nothing from the feed for the foreseeable future marks
10:48
Speaker 1: just real quick thirty seconds here, Um do you is?
10:52
Speaker 1: I mean, how do you view GDP for the remainder
10:55
Speaker 1: this year and next year? What's your forecast? Well? I
10:59
Speaker 1: actually think we're we're gonna That's why I was seeing earlier.
11:02
Speaker 1: I think there's a bit of a downside risk emerging
11:04
Speaker 1: here for g d p UM. But you know, the
11:07
Speaker 1: numbers are so high, so much above what what's normal.
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Speaker 1: What we all think is sort of the underlying potential
11:12
Speaker 1: growth with whether it's gonna be five percent or six
11:14
Speaker 1: percent or seven that's of the range of all the forecasts.
11:17
Speaker 1: Our number is five point nine, but I don't have
11:20
Speaker 1: a lot of confidence in that number. Next year's number
11:22
Speaker 1: will also be significantly about potential. I think that's all
11:25
Speaker 1: that matters, all right, Marcus, thanks very much for joining us.
11:29
Speaker 1: Marcus Schomer, their chief economist at pine Bridge Investments, talking
11:33
Speaker 1: to us about the FED. We're all going to be
11:35
Speaker 1: watching the special coverage starting today at one thirty pm
11:38
Speaker 1: Wall Street Time with Tom Keene and Lisa Obramo. It's
11:41
Speaker 1: this is Bloomberg. I want to bring in Daniel d
11:47
Speaker 1: Martino Booth. We've been waiting to hear from her all days.
11:50
Speaker 1: Cee On, director of intelligence at Quill Intelligence, a former
11:53
Speaker 1: advisor of the Dallas Fed, also a Bloomberg Opinion contributor,
11:56
Speaker 1: and she's got a lot to say about what we
11:58
Speaker 1: should expect today. Danielle Um. There has been a brewing
12:03
Speaker 1: I guess, uh brewing opinion um anti to the Fed,
12:10
Speaker 1: to the Fed's outcome based framework, coming from Peter Hooper
12:15
Speaker 1: at Deutsche Bank, Andy hal Dane at the Bank of England,
12:18
Speaker 1: now from Muhammad al Arian as well, that he's been
12:20
Speaker 1: writing about this for a while, saying that they're they're
12:23
Speaker 1: really taking a huge risk and really getting into danger
12:26
Speaker 1: by sticking to um this policy of of watching and
12:31
Speaker 1: waiting for inflation transitory. So they say to to to
12:34
Speaker 1: go back away. What do you think, well, Um, I
12:38
Speaker 1: think you have to look at the fact that the
12:41
Speaker 1: Fed is taking comfort from certain silos, if you will,
12:45
Speaker 1: of inflation. If you look at the c RBND, for example,
12:48
Speaker 1: it's down on the week, and we've we've seen the
12:50
Speaker 1: number of commodities that are rising come down appreciably, So
12:54
Speaker 1: the Fed's going to take comfort in that pocket. On
12:56
Speaker 1: the other hand, we're seeing the kind of inflayation that
13:00
Speaker 1: becomes sticky, becomes very problematic. Zillo reported that rents are
13:06
Speaker 1: up two plus percent uh in in May over April
13:09
Speaker 1: in the in the largest cities largest the top eight
13:13
Speaker 1: cities of the in the United States that were fift
13:17
Speaker 1: So if this starts to percolate through, it's the largest
13:21
Speaker 1: input to inflation, that Fed's gonna have a serious problem
13:25
Speaker 1: on its hand, especially because it's playing chicken with the
13:29
Speaker 1: millions of people who are slowly flowing back into the
13:33
Speaker 1: labor pool. That that process won't end, if you will,
13:36
Speaker 1: until after schools is fully reopened and the supplemental unemployment
13:40
Speaker 1: benefits have fully expired nationwide. So Danielle, before I ask
13:44
Speaker 1: this next question, I have to prefaces by saying you
13:46
Speaker 1: are the author of a book entitled fed Up and
13:49
Speaker 1: Insiders take on why the Federal Reserve is bad for America.
13:52
Speaker 1: So my question is has to FED. I mean, are
13:56
Speaker 1: they basically done? Should they just step away here and say, Okay,
13:59
Speaker 1: we did our job here. Now we're gonna let this
14:02
Speaker 1: economy kind of go on its own. I think that
14:07
Speaker 1: if the FED was to do a full rip off
14:09
Speaker 1: the band Aid approach that the harm that would be
14:12
Speaker 1: created given stocks remain of the nine percentile historically would
14:16
Speaker 1: be would would would do more damage than they're acknowledging
14:21
Speaker 1: that inflation has become problematic. They have a very elegant solution, however,
14:25
Speaker 1: and that is that they can pull back from their
14:26
Speaker 1: mortgage backed security. Uh, I'm very damning optically the housing market.
14:32
Speaker 1: Nobody doubts that housing has run off the rails, and
14:35
Speaker 1: they could say, you know what, we and and in fact,
14:38
Speaker 1: yesterday the New York Fed released a statement saying that
14:41
Speaker 1: they were gonna be test driving. They're gonna be testing
14:43
Speaker 1: out selling, outright selling mortgage backed securities starting next week. Um,
14:50
Speaker 1: will that do anything to help the housing market? Well,
14:54
Speaker 1: if the housing market has overheated, right, too much stimulus
14:58
Speaker 1: or too little stimulus can break housing. And that's what
15:01
Speaker 1: we've learned in the current episode, that too much stimulus
15:03
Speaker 1: can actually break housing. So it's the objective is to
15:08
Speaker 1: take some of the heat out of the market. You
15:10
Speaker 1: would certainly do that by reducing the mortgage back securities
15:13
Speaker 1: market and getting the FED out of the mortgage market. Danielle,
15:16
Speaker 1: how do you view the labor market here? You know,
15:18
Speaker 1: we're the jobs that have been edit have been over
15:21
Speaker 1: the last couple of months have been less than expected,
15:23
Speaker 1: and uh, you know, I presumably that gives the FED
15:26
Speaker 1: some more leeway to kind of stay on the sidelines here.
15:29
Speaker 1: The risk of wage inflation, presumably is is is not
15:32
Speaker 1: necessarily front and center. How do you view the labor market?
15:36
Speaker 1: So again, I think that it is a wait and see.
15:40
Speaker 1: We are seeing, uh, the unemployment rate in these states
15:43
Speaker 1: that are pulling out for four states last Saturday, eight
15:46
Speaker 1: states is coming Saturday total between now and in July nineteen.
15:51
Speaker 1: We are seeing activity and movement move up in these
15:55
Speaker 1: states in the as these labor pools are replenished. We're
15:58
Speaker 1: also seeing teenagers poor into the labor market at the
16:02
Speaker 1: fastest pace. Since I think you have an eight I mean,
16:05
Speaker 1: it's a magnificent number, and that's great for teams. You're
16:07
Speaker 1: gonna make a ton of money this summer making My
16:10
Speaker 1: seventeen year old was offered eighteen dollars an hour just
16:13
Speaker 1: yesterday hopefully doing nothing. Um So, because it's it's the
16:18
Speaker 1: low skilled work that needs to be fulfilled, and people
16:22
Speaker 1: aren't factoring in the fact that it's not just people
16:24
Speaker 1: going from state an average of six d and thirty
16:26
Speaker 1: to three d and thirty a week in unemployment benefits
16:29
Speaker 1: if they're on extended state. The gig workers, the contractors.
16:33
Speaker 1: If these states are pulled in the plug earlier they
16:35
Speaker 1: they run, their safety net goes away completely. And you
16:39
Speaker 1: have rental eviction moratoriums that are expiring also at the
16:42
Speaker 1: end of June. So you know, I think the FEDS
16:45
Speaker 1: wait and see on wage inflation is appropriate for a
16:47
Speaker 1: little while longer until we know what the labor pool really,
16:51
Speaker 1: what the population of the labor pool truly is here
16:54
Speaker 1: in the coming twelve weeks. I think you're underestimating the
16:57
Speaker 1: skills of your seventeen year old. I just want to
17:00
Speaker 1: quickly ask you if you can fly a plane, Oh,
17:03
Speaker 1: that's all right, airlines need pilots. Uh, then he should
17:07
Speaker 1: be getting paid more. I just want to quickly ask you,
17:10
Speaker 1: we only got about thirty seconds here, but I've been
17:12
Speaker 1: watching the reverse repo facility with wide eyes. Is it
17:16
Speaker 1: really that big of a deal or on what's happening there?
17:20
Speaker 1: So you know it would be that big of a
17:22
Speaker 1: deal had we not had yesterday dot dot dot and
17:25
Speaker 1: one data point does not make for a trend. But
17:26
Speaker 1: the fact that we came down from five four to
17:28
Speaker 1: five oh nine as the Treasury is checking account, that
17:32
Speaker 1: tells us the FED, if you will, is depleted as
17:34
Speaker 1: we as we head into the end of July when
17:36
Speaker 1: they want to get that balance down to five billion dollars.
17:40
Speaker 1: I think that as long as we see these numbers
17:42
Speaker 1: continue to come down, they might pop back up by
17:45
Speaker 1: the way going into quarter, and they always do window
17:47
Speaker 1: dressing purposes. But as long as we see that it's
17:49
Speaker 1: been coming back down, then the Fed can claim it's
17:52
Speaker 1: purely mechanical in nature. If it keeps going up, that
17:55
Speaker 1: starts to flash credit risk. All right, daniel thank you
17:57
Speaker 1: so much for joining us to really appreciate getting your
17:59
Speaker 1: thoughts on this FED day. Danielle di Martino bou the
18:02
Speaker 1: CEO and director of Intelligence at Quill Intelligence and a
18:06
Speaker 1: former advisor at the Federal Reserve of Dallas and a
18:09
Speaker 1: Bloomberg opinion contributor. Well more coming up this is Bloomberg.
18:17
Speaker 1: Well the metrics as it relates to vaccines, they remained positive.
18:21
Speaker 1: Here in the US. The reopening is continues to accelerate.
18:26
Speaker 1: We saw the state of California fully reopened new York
18:28
Speaker 1: yesterday fully reopened, joining a number of other states. So
18:32
Speaker 1: the question is how do you play that in the
18:35
Speaker 1: stock market. Scott Rent, Senior global market strategist for the
18:38
Speaker 1: Wells Fargo Investment Institute Joints is Scott, thanks so much
18:42
Speaker 1: for joining us here. You know, love to get your
18:44
Speaker 1: thoughts on kind of your positioning in the equity markets. Here.
18:48
Speaker 1: We've you know, had this rotation trade into uh let's
18:51
Speaker 1: call it, some cyclical names, some smaller cap names, some
18:54
Speaker 1: names that might benefit from, you know, a reopening economy.
18:57
Speaker 1: They performed so well and perhaps even out warmed, you know,
19:00
Speaker 1: some of the tried and true growth stocks, the Amazon's
19:02
Speaker 1: Apples of the world, that have been such good performers
19:05
Speaker 1: really since the financial crisis of twelve years ago. How
19:08
Speaker 1: do you kind of think about, you know, your portfolio
19:12
Speaker 1: construction talking to your clients, Well, Paul, I think you
19:15
Speaker 1: have to you have to say to yourself, is this
19:18
Speaker 1: recovery in the early stages, which we think it is.
19:21
Speaker 1: Do we think it's going to be a global recovery?
19:23
Speaker 1: We do, um, So we've been leaning toward these more
19:27
Speaker 1: cyclical areas, these more cyclical sectors like you know, financials, industrials, materials.
19:33
Speaker 1: As a matter of fact, just about a month ago
19:36
Speaker 1: or so, we downgraded UH tech, we downgraded consumer discretionary,
19:41
Speaker 1: and we had been overweight those two sectors for a
19:43
Speaker 1: long long time. So we want, you know, growth is
19:46
Speaker 1: going to have to participate here if the market is
19:50
Speaker 1: going to do what we think it's going to do
19:51
Speaker 1: over the next six months or eighteen months. So we
19:55
Speaker 1: have a full allocation to tech, which is about of
19:58
Speaker 1: the market cavity s P. Five hundred, But we have
20:01
Speaker 1: been been basically leaning towards those sectors energies included in
20:07
Speaker 1: that communication services, UM materials that we think are going
20:12
Speaker 1: to to participate. So that's what we've been talking to
20:14
Speaker 1: our clients about. Is that in the US, Scott or
20:17
Speaker 1: is that are you talking about globally because we've run
20:22
Speaker 1: up there, Yeah, right, you know when we have and
20:24
Speaker 1: we've we've stuck with them, and I think we're going
20:26
Speaker 1: to and we're gonna have some back and forth here,
20:29
Speaker 1: especially whether it's around a FED meeting or are we
20:32
Speaker 1: going to have a lot of inflation or not, which
20:34
Speaker 1: is is obviously a quick key question. But you know,
20:37
Speaker 1: we like emerging markets as well as an asset class.
20:41
Speaker 1: And if you look at China, South Korea, Taiwan, you
20:44
Speaker 1: know they're going to make up whatever e M index
20:47
Speaker 1: you're looking at. They're making up the bulk of the
20:49
Speaker 1: market cap. And you know, if those if those countries
20:52
Speaker 1: are doing well, which we think they are, dollars a
20:55
Speaker 1: little lower, commodity prices are up, we think emerging markets
20:58
Speaker 1: is a good place to be. Scott, what do you
21:01
Speaker 1: expect to hear from FED Chairman Pal today? Well, I
21:07
Speaker 1: think it's going to be largely status quo. And what
21:11
Speaker 1: what I believe that means is that acknowledging that you know,
21:14
Speaker 1: growth has really come back quickly, that we're seeing some
21:17
Speaker 1: higher inflation, that the FED believes it's transitory, and we
21:21
Speaker 1: certainly believe that inflation is going to decelerate in um.
21:27
Speaker 1: I think it's key. You know, the market is going
21:29
Speaker 1: to be hanging on is the FED talking about potential tapering?
21:34
Speaker 1: And I believe it was a Bloomberg interview I saw
21:36
Speaker 1: with the Loretta Mester and she said, you know, we've
21:39
Speaker 1: been talking about the exit strategy since we had the
21:42
Speaker 1: plan together, So you know, I think it's naive to
21:45
Speaker 1: think that the FED is not talking about what you know,
21:48
Speaker 1: what the end plan is to to remove some of
21:52
Speaker 1: this accommodation. But you know, for us, we think it's
21:55
Speaker 1: likely not today. We think it could be at Jackson Hole,
21:59
Speaker 1: or it could be in September something like that. But
22:01
Speaker 1: I think for now, you know, the FED was all
22:04
Speaker 1: in on these easy policies, you know, just really the
22:08
Speaker 1: last meeting. So I don't think they're gonna, you know,
22:11
Speaker 1: make a big turn here in just one one meeting,
22:14
Speaker 1: and it's likely to start to be an easy turn
22:17
Speaker 1: probably a couple of meetings from now. So what do
22:20
Speaker 1: you think about rates? Does it make sense to you
22:22
Speaker 1: to see the tenure at one nine? Um? Since you know,
22:28
Speaker 1: if the FED steps out of line at all, it
22:30
Speaker 1: has to be to the hawkish side. It's not like
22:32
Speaker 1: they can get any more devish. And if they do that, um,
22:36
Speaker 1: don't you see a sell off in treasuries? Well, I'll
22:39
Speaker 1: tell you, Matt. You know, as an old foreign exchange
22:42
Speaker 1: guy and as an equity strategy guy, it's it's you know,
22:45
Speaker 1: when I think about the growth we expect seven this
22:49
Speaker 1: year in the US, five next year, is it hard
22:53
Speaker 1: for me to rationalize a sub one tenure? It absolutely
22:57
Speaker 1: is now we know there's a lot of demand out
23:00
Speaker 1: there for yield um negative and that's part of it. Yeah, yeah,
23:04
Speaker 1: well yeah, and and the negative real yield actually obviously
23:08
Speaker 1: as you said, but it is a bit of a mystery.
23:11
Speaker 1: We think it's going to back up a bit, maybe
23:13
Speaker 1: two and a quarter by the end of this year,
23:15
Speaker 1: two and a half by the end of twenty two,
23:17
Speaker 1: so we you know, we certainly do expect rates to
23:21
Speaker 1: better reflect the type of economic environment that we think
23:24
Speaker 1: we're in and headed toward. Totally good to get some
23:28
Speaker 1: time with you, Scott. Always love getting insight from you.
23:32
Speaker 1: Scott Ran, Senior Global market strategist at Wells Fargo Investment Institute.
23:37
Speaker 1: Thanks for listening to the Bloomberg Markets podcast. You can
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