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Wall Street Hit by US Recession Fears · Bloomberg Intelligence

0:02
Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
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Speaker 3: Let's check in on what we're doing with this market.
0:27
Speaker 3: I'm bringing in Geena Martin Adams. I'm just going to
0:29
Speaker 3: radio by right, the age for Bloomberg Intelligence.
0:33
Speaker 4: Gina. I left Thursday. I don't work Fridays in the summer,
0:36
Speaker 4: as you well know. I come back in the world.
0:38
Speaker 4: What happened?
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Speaker 3: We left Thursday with a nice soft landing discussion, right,
0:42
Speaker 3: you know, the markets, Maybe we'll get a little friendly pullback.
0:46
Speaker 4: We come in today and you.
0:47
Speaker 3: Know I've got I had the nastak off more than
0:49
Speaker 3: a thousand points earlier this morning.
0:51
Speaker 5: Also the last three trading days, the NASA slaw seven percent.
0:54
Speaker 5: So this will stretch since June of twenty twenty two.
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Speaker 1: Well, I think one big thing happened, and that was
1:01
Speaker 1: tech disappointed forecasts. I think that this has been actually
1:05
Speaker 1: underway for more than just Friday. Friday was an exacerbation
1:08
Speaker 1: of trends that really started a couple of weeks ago.
1:11
Speaker 1: We wrote a note early last week and we called
1:14
Speaker 1: it four than three hundred and forty four reasons text
1:16
Speaker 1: stocks may struggle with high expectations because tech stock valuations
1:20
Speaker 1: are three hundred and forty four basis points above recent
1:24
Speaker 1: five year average. It just got to the point where
1:27
Speaker 1: valuations were so extreme in an environment where tech stacks
1:30
Speaker 1: were nearly faced with impossible expectations. Now, what's interesting about
1:34
Speaker 1: the earning season is all the tech stacks beat. They
1:38
Speaker 1: beat forecasts for second quarter earnings, but they were unable
1:41
Speaker 1: to sustain forecasts for going forward margin growth. And they
1:44
Speaker 1: started to talk about how much they're going to have
1:47
Speaker 1: to spend going forward, and well, they need to cut
1:50
Speaker 1: cap X and they're going to write size AI expectations.
1:53
Speaker 1: And that created a tremendous amount of uncertainty that was
1:55
Speaker 1: then exacerbated by two big macro indicators last week which
2:00
Speaker 1: fell back to twenty twenty three low levels, which unfortunately
2:04
Speaker 1: would suggest the manufacturing sectors sort of niscent tiny recovery
2:08
Speaker 1: that kind of sort of emerged by March is now
2:11
Speaker 1: could put and we're back to twenty twenty three, which
2:14
Speaker 1: was clearly a recession in the manufacturing sector. And then
2:17
Speaker 1: also the employment report, which you know, honestly, I'm kind
2:20
Speaker 1: of shocked by the degree of extreme, exaggerated move that
2:24
Speaker 1: we've had to the employment report, because all we're seeing
2:26
Speaker 1: is slowing job growth so far and still extreme entry
2:31
Speaker 1: into the labor force, which as a resulting in modest
2:33
Speaker 1: uptick in the unemployment rate. But we are seeing a
2:36
Speaker 1: slow on an average hourly earnings growth, which may cause
2:39
Speaker 1: questions about the consumer. The other note that we wrote
2:42
Speaker 1: last week is Amazon is entirely holding up the house
2:45
Speaker 1: of cards of consumer discretionary. So I think that also
2:47
Speaker 1: played out last week is when all your hopes and
2:50
Speaker 1: dreams are on one stock and that stock cannot sustain
2:52
Speaker 1: expectations and then the consumer outlook starts to deteriorate somewhat,
2:57
Speaker 1: you see some real weaknesses emerge there.
2:59
Speaker 4: And I'm glad you brought.
2:59
Speaker 5: Up because overall, if you look at the S and P.
3:01
Speaker 5: Five hundred, as you know, twelve percent earning growth year
3:04
Speaker 5: over year here. But you've talked so much also about
3:07
Speaker 5: when people want to argue about the broadening out, but
3:10
Speaker 5: then when you're looking on the fundamental side, what you're
3:12
Speaker 5: seeing beyond Tech, as you're seeing kind of that growth
3:14
Speaker 5: as opposed to narrow between Tech and the rest of
3:17
Speaker 5: the index. So what improvements are we seeing in other components.
3:20
Speaker 1: It's actually really fascinating, and I think that this is
3:23
Speaker 1: part of the reason, as much as it feels so painful,
3:26
Speaker 1: this market meltdown has looked very different than the meltdown
3:29
Speaker 1: of last fall. Remember we corrected ten percent in the
3:31
Speaker 1: third quarter of last year as well. It seems like
3:33
Speaker 1: a distant memory because we've had such a great pair
3:35
Speaker 1: in stock so far, but we did have a ten
3:37
Speaker 1: percent meltdown led by Tech, but the market's decline was
3:41
Speaker 1: one for one with Tech. This time, Tech has doubled
3:44
Speaker 1: the decline of the market, and so there is some
3:46
Speaker 1: internal rotation that's quite different characterizing the twenty twenty four
3:50
Speaker 1: tech meltdown and the overall market impact relative to twenty
3:54
Speaker 1: twenty three. And I do think that that's because of
3:56
Speaker 1: the cyclical the cyclicality of earnings, whereas in twenty two
4:00
Speaker 1: twenty three when tech melted down, there was nothing to
4:02
Speaker 1: kind of hang your hat on because the rest of
4:03
Speaker 1: the sectors we're producing accelerating downside on earnings today that's
4:09
Speaker 1: very different. We're actually seeing earnings growth improve so x
4:12
Speaker 1: mag seven the four to ninety three are posting seven
4:14
Speaker 1: percent earnings growth. It's the first positive quarter that we've
4:18
Speaker 1: seen in more than four so starting to see some earnings.
4:22
Speaker 1: The most fascinating part about this earning season also is guidance.
4:26
Speaker 1: As much as I think the market narrative has been
4:29
Speaker 1: all the companies are guiding terribly, now the reality is
4:32
Speaker 1: that tech companies have been guiding us to expect less,
4:36
Speaker 1: but the rest of guidance is actually net positive. We're
4:39
Speaker 1: actually seeing positive guidance momentum emerge in the rest of
4:42
Speaker 1: the groups. There's going to be so much confusion as
4:45
Speaker 1: to how this plays out. If we do indeed move
4:48
Speaker 1: into a state where we're seeing accelerated layoffs, we're seeing
4:52
Speaker 1: much greater jobless claims emerge, and that's going to imply
4:55
Speaker 1: that maybe we have some actual employment losses around the corner.
4:59
Speaker 1: That's going to create a lot of confusion in this
5:01
Speaker 1: market if we get there. But that's not where we
5:04
Speaker 1: are right now. Where we are is actually companies outside
5:06
Speaker 1: of tech are showing still improvement in their outlook.
5:09
Speaker 3: We had a guest on earlier this morning that a
5:11
Speaker 3: fund manager just flat out says his note to the
5:13
Speaker 3: clients is by the dip.
5:14
Speaker 4: Yeah.
5:16
Speaker 1: Wow, listen, when you get to a VIX that's the
5:20
Speaker 1: highest level since COVID. It's very clear that there is
5:25
Speaker 1: panic right now in the equity market, and panic usually
5:29
Speaker 1: results in major buying opportunities. So I completely understand that
5:34
Speaker 1: we haven't even seen absolute nonfarm job losses yet, and
5:38
Speaker 1: the market is already completely and totally panicked. And this
5:42
Speaker 1: is really because tech really drove a lot of our optimism.
5:46
Speaker 1: It was the only source of optimism. Now we're starting
5:48
Speaker 1: to see those tech stocks melt down, and the manict
5:50
Speaker 1: the market is completely panicked.
5:52
Speaker 3: Although you could have bought Nvidia at the open today
5:54
Speaker 3: at ninety two, which training at ninety eight.
5:56
Speaker 5: Yeah, Andrew Tyler over a GP Mortgan's treat so he
6:00
Speaker 5: made that tactical call this morning about buying the dip.
6:03
Speaker 4: Yeah. Interesting.
6:04
Speaker 5: Yeah, so we'll keep an eye on.
6:05
Speaker 3: I remember being on a desk in nineteen eighty seven. Uh,
6:09
Speaker 3: don't out pick up the phone.
6:11
Speaker 5: Did we start right before the eighty seven crash?
6:13
Speaker 6: Yes?
6:13
Speaker 7: I did.
6:14
Speaker 3: I was on the floor at eighty seven October nineteenth
6:16
Speaker 3: so anyway, Gina, thank you so much for joinings. Really
6:18
Speaker 3: really appreciate it. Gina Martin Adams. She is our equity
6:22
Speaker 3: strategist for Bloomberg Intelligence. We really appreciate gatting few minus
6:26
Speaker 3: or a times. Michael McKee joins is here and he
6:28
Speaker 3: does all the economy stuff for Bloomberg Television.
6:30
Speaker 5: Mike.
6:30
Speaker 4: I left the studio Thursday.
6:33
Speaker 3: All my discussions were soft landing, some variation of soft landing.
6:37
Speaker 4: And then today people are talking about a recession.
6:40
Speaker 7: Well it's only genus people.
6:41
Speaker 8: Yeah, exactly, it's only the equity market you were talking
6:46
Speaker 8: about nineteen eighty seven. I made a reference this morning
6:49
Speaker 8: when I was on with to people opening the windows
6:52
Speaker 8: down on Wall Street, and I got a note from
6:55
Speaker 8: a trader who's been around for a while who said,
6:59
Speaker 8: the twenty two year old sitting next to me had
7:01
Speaker 8: no idea.
7:01
Speaker 7: What you were talking about.
7:03
Speaker 8: So maybe we come up with a different analogy. I said,
7:09
Speaker 8: just a minute ago, it's it's an Emily Lettella moment
7:11
Speaker 8: now because we got the ism services index, and now
7:15
Speaker 8: there's another reference. Nobody she was a comedian, saiday live
7:20
Speaker 8: who would come on and say never mind? Right, and
7:23
Speaker 8: the services ism comes in and everything is higher, including employment,
7:28
Speaker 8: and that was the thing that everybody worried about on Friday.
7:31
Speaker 8: And with the ism factory orders on factory index on
7:37
Speaker 8: Wednesday Thursday, and you know, production's up, everything is up
7:42
Speaker 8: in that number comes in better than expected, and that's
7:45
Speaker 8: two thirds of the economy. So soft landing might still
7:49
Speaker 8: be in the cards. I think probably what you're seeing,
7:53
Speaker 8: and I'm going way beyond my level of expertise, is
7:57
Speaker 8: that Gina Martin Adams is right and that the equity
8:02
Speaker 8: markets were overly dependent on a few stocks that then
8:05
Speaker 8: didn't have great numbers, and you put the data on
8:10
Speaker 8: Friday behind them, and everybody panicked, And now maybe they
8:13
Speaker 8: don't need to.
8:14
Speaker 5: Also this morning, when we're looking at the yield curve,
8:17
Speaker 5: as I'm sure you saw as well, Mike, it's turning
8:19
Speaker 5: positive for the first time since July twenty twenty two.
8:21
Speaker 5: If you're looking at the twos tens part of that.
8:24
Speaker 5: So isn't that something also that you would potentially want
8:27
Speaker 5: to see as far as what that means for the
8:29
Speaker 5: direction of the economy after it was inverted for so long.
8:32
Speaker 8: Well, yes, and no. People don't realize is that the
8:35
Speaker 8: yield curve disinverts right before recessions because people are anticipating
8:41
Speaker 8: FED action, and I think that's one of the reasons
8:44
Speaker 8: we saw a big move. It's been slowly flattening, but
8:48
Speaker 8: I think today it was basically the two year went
8:52
Speaker 8: way down, the two year yield went way down, people
8:54
Speaker 8: anticipating the FED would be cutting rates and maybe an
8:57
Speaker 8: emergency rate cut and things like that. And right after
9:00
Speaker 8: this ISM number came out, it went back to where
9:03
Speaker 8: it was yesterday. So we're either slightly positive or back
9:08
Speaker 8: to slightly disinverted. So I'm not sure that's a signal,
9:13
Speaker 8: but there are a lot of different signals you can
9:14
Speaker 8: point to these days one way or the other. And
9:18
Speaker 8: I had an argument with another strategist this morning over
9:22
Speaker 8: the Bloomberg suggesting who was suggesting the FED needs to
9:26
Speaker 8: act now, and I thought, don't you think it probably
9:28
Speaker 8: be good for them to wait a few days and
9:31
Speaker 8: get a little more data and see if this is
9:33
Speaker 8: just a panic or a real collapse. And I think
9:36
Speaker 8: the waiting part is what the FED is going to endorse.
9:39
Speaker 3: It just remind us how rare is it for the
9:42
Speaker 3: FED to do an emergency like intrameding kind of rate cut.
9:46
Speaker 8: Very rare, and they only do it when the market
9:49
Speaker 8: stops functioning. And that's what we saw during the pandemic
9:53
Speaker 8: in March of twenty twenty. That's what we saw in
9:55
Speaker 8: the fall of two thousand and eight when Lehman Brothers
10:00
Speaker 8: went out of business and we saw the market seize
10:03
Speaker 8: up there. But there doesn't seem to be any indication
10:08
Speaker 8: that you can't trade today. So as long as you
10:10
Speaker 8: can trade, that's what the FED is concerned about. If
10:14
Speaker 8: you lose money, that's your problem exactly, not theirs.
10:17
Speaker 5: Well, you also spoke to Austin Golesby on Friday. He
10:20
Speaker 5: spoke again this morning, but kind of unpacked for us
10:23
Speaker 5: what he in his reaction to the jobs report, because
10:26
Speaker 5: it seems like again they followed trends and that was
10:28
Speaker 5: just one report.
10:29
Speaker 8: Well, it was interesting because Goolesby has been one of
10:32
Speaker 8: the more dubbish members of the FED, suggesting that they
10:35
Speaker 8: needed to start the process of normalizing rates, and yet
10:39
Speaker 8: he wouldn't really go there on Friday. He didn't want
10:44
Speaker 8: to front run what they might do. He said, you know,
10:47
Speaker 8: we're okay with where we are. Let's see what happens
10:50
Speaker 8: in the rest of the data. And he had a
10:53
Speaker 8: vote this time filling in for the vacant Cleveland seat,
10:58
Speaker 8: and he did not dissent. He voted for the Fed
11:02
Speaker 8: to hold rates where they were. So if one of
11:06
Speaker 8: the biggest doves was okay with it, then probably the
11:10
Speaker 8: rest of the Fed is going to be feeling okay
11:12
Speaker 8: with it for the moment.
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Speaker 3: Right, all right, very good, Michael McKee, Thank you so
11:15
Speaker 3: much for joining us. Michael McKee covers all the economics
11:18
Speaker 3: for Bloomberg, and we appreciate getting some of his thoughts here.
11:23
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11:41
Speaker 3: So just went and sitting in for Alex Steel here
11:43
Speaker 3: for the next couple hours. Again, John was just reporting
11:46
Speaker 3: this ism data came in better than expected. Let's go
11:49
Speaker 3: right to that because we could use some good news here.
11:51
Speaker 3: Steve Miller, Chair of im Services PMI, it seems Steve
11:56
Speaker 3: some pretty solid results. What do you take away from
11:58
Speaker 3: some of this ism data.
12:00
Speaker 9: Yeah, we were certainly happy to see it return to
12:03
Speaker 9: expansion territory. You know, it seems like things are moderating
12:08
Speaker 9: in terms of terms of feedback that we're getting through
12:10
Speaker 9: the survey. We saw from a GDP standpoint, kind of
12:15
Speaker 9: almost dead even those that were in expansion versus those
12:18
Speaker 9: that were in contraction, with just a slight percent but
12:20
Speaker 9: three percent higher on the expansion side. As you see
12:24
Speaker 9: in the number, it's just just slightly above in the
12:26
Speaker 9: expansion range. So happy to see it's less volatile than
12:30
Speaker 9: we've seen in the past. With last month it was
12:32
Speaker 9: about ten percent higher a GDP represented in the contraction
12:37
Speaker 9: territory versus expansion.
12:39
Speaker 5: And when you're looking at the Atlanta Feds GDP now model,
12:42
Speaker 5: obviously we know that's volatile, but still the next update
12:44
Speaker 5: is going to come later this week, but it's around
12:46
Speaker 5: two and a half percent for the third quarter, so
12:48
Speaker 5: I know there's a lot of concern when we had
12:50
Speaker 5: some of the manufacturing data lasts Thursday. Obviously the jobs
12:53
Speaker 5: are port on Friday, but when you still have economic
12:55
Speaker 5: growth forecasted to be pretty solid here, how do you
12:58
Speaker 5: sort of unpack some of the latest wave of data
13:01
Speaker 5: here and how this latest when you're looking at ISM
13:03
Speaker 5: sort of fits into this.
13:05
Speaker 9: Yeah, so on average for twenty twenty four, what we're
13:10
Speaker 9: seeing is gradual expansion. The latest reading is about I
13:14
Speaker 9: believe it's point eight percent represents about a point eight
13:16
Speaker 9: percent increase in GDP growth. So I wouldn't be surprised
13:22
Speaker 9: to see that kind of a growth a growth number,
13:25
Speaker 9: but certainly what we see in our survey data on
13:27
Speaker 9: average is continued growth in GDP.
13:32
Speaker 3: All right, Steve, thank you so much for joining us.
13:33
Speaker 3: Really appreciate you coming on and breaking down some of
13:35
Speaker 3: these numbers. For Steve Miller, Chair of the ISM Services PMI,
13:38
Speaker 3: again some better than expected services PMI fifty one point
13:42
Speaker 3: four was the actual reading consensus was fifty one. Last
13:45
Speaker 3: period is forty eight point eight, so a nice improvement there.
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14:04
Speaker 3: Jess Meant and sitting in for Alextel on Paul Sweeney
14:07
Speaker 3: here on Bloomberg Intelligence Program. We're live on a Bloomberg
14:10
Speaker 3: Interactive Brokers studio streaming live on YouTube as well here,
14:14
Speaker 3: and John's just talking about the ten year treasury three
14:16
Speaker 3: point seventy five percent. We were low with three point
14:19
Speaker 3: sixty six percent, so it's moving all around.
14:21
Speaker 4: That's right there. Today we missed that five percent mark. Paul, Yes, exactly,
14:27
Speaker 4: so bad, exactly all right.
14:29
Speaker 3: Next guest Joints is here in studio making a big
14:31
Speaker 3: trip over the pond, Chris Watling, CEO and chief market
14:34
Speaker 3: strategist for Longview Economics based out of London. We got
14:38
Speaker 3: him here in the big town. Chris, thanks for coming
14:41
Speaker 3: into our studio here.
14:42
Speaker 4: What do you make of the last several days here?
14:44
Speaker 3: It's just been a real readjustment for the market in
14:47
Speaker 3: terms of its outlook.
14:49
Speaker 7: Yeah, I think it's fascinating.
14:50
Speaker 10: I mean it seems to me we've evolved from sectu otation,
14:53
Speaker 10: which was kind of a mid July theme, to really
14:57
Speaker 10: we're oute to a liquidation event. And as as we
15:00
Speaker 10: were saying just off air, it's really all about the
15:03
Speaker 10: Bank of Japan's governor Yoida, who came out they surprised
15:06
Speaker 10: markets with a fifteen bit hike. But then of course,
15:09
Speaker 10: on top of that he talked about the idea that
15:11
Speaker 10: neutral rates are a long way away, so in other words,
15:13
Speaker 10: as a weight hiking cycle, and he's done that into
15:16
Speaker 10: you know, we've done it's very interesting. So the Fed's
15:18
Speaker 10: talked about cutting and we've got a bit of that
15:20
Speaker 10: from Power last week, a bit firmer and the boj
15:23
Speaker 10: is raising, and they've done that into two extreme positionings
15:26
Speaker 10: in markets. Everyone was short the end and everyone was
15:30
Speaker 10: max along the MAG seven and those both those rate cutting,
15:34
Speaker 10: those rate cycles changing influenced that position. So it's like
15:37
Speaker 10: we're in a giant repositioning in global markets and.
15:40
Speaker 7: A giant liquidity event on the back of it.
15:43
Speaker 10: So it's a lot going on. It's pretty interesting, not
15:45
Speaker 10: to mention the macro data, which we haven't got to.
15:48
Speaker 5: Right well, looking at the MAG seven index here in
15:51
Speaker 5: the terminal down almost five percent a days on peace
15:54
Speaker 5: for its worst day actually since July twenty fourth here,
15:57
Speaker 5: so keeping close eye on that. But also you neutral
16:00
Speaker 5: to US equities in late July, actually it was ahead
16:03
Speaker 5: of the Federal reserves decision last Wednesday. Kind of unpack
16:08
Speaker 5: us how you're advising clients to position, where are you
16:11
Speaker 5: telling them to put their money and like, what would
16:13
Speaker 5: you want to buy what would you want to sell
16:14
Speaker 5: at this point?
16:15
Speaker 10: Well, I think it depends on obviously your time frame.
16:18
Speaker 10: So if you're sort of, you know, the next couple
16:20
Speaker 10: of months, I'd just be cautious. I think markets haven't
16:24
Speaker 10: finished their sell off today, where you know, we're in
16:26
Speaker 10: the midst of it and there's more to come. And
16:28
Speaker 10: generally when markets sell off this sharply, the price section
16:31
Speaker 10: dictates you get a we test unless we get something
16:34
Speaker 10: dramatic out of the FED in terms of you know,
16:36
Speaker 10: inter meeting cut or very dramatic strong signaling. So so
16:41
Speaker 10: short term I do that. In the medium term, I
16:43
Speaker 10: think one wants to see this as an opportunity to
16:45
Speaker 10: start moving portfolios around in terms of that global sector rotation,
16:50
Speaker 10: So our viue is that markets have fashions. Every six
16:54
Speaker 10: or seven years, the global sector leaderships change, and you know,
16:58
Speaker 10: it's been tech, it's been strong, and we think it's
17:01
Speaker 10: now starting to change.
17:02
Speaker 7: We're coming into a rate cutting cycle.
17:04
Speaker 10: I think we can get cyclical week acceleration in the West,
17:07
Speaker 10: and you know, we think people should stop positioning for that.
17:10
Speaker 10: That's smaller midcaps in the US, that's overseas equities non
17:14
Speaker 10: US equities. So I think, I think, you know, the
17:16
Speaker 10: headline is we're going back to the noughties in terms
17:19
Speaker 10: of what does well, you know, I mean, it's like
17:22
Speaker 10: back to the future all over again.
17:24
Speaker 7: But what goes around comes around.
17:26
Speaker 10: And I think we're going to get a consumer and
17:28
Speaker 10: housing boom over the next one to four years across
17:31
Speaker 10: the Western world, and that's going to change the equity
17:33
Speaker 10: sector leadership in the global stock market.
17:36
Speaker 3: Look at that de Vic's here, it's up about nineteen
17:38
Speaker 3: points to just north of forty two. It was up
17:41
Speaker 3: to a level of sixty five earlier this morning, just
17:43
Speaker 3: blowing out like crazy.
17:45
Speaker 4: Does that tell you that panic is out there earlier today?
17:49
Speaker 10: Well, it's definitely panic, isn't there. I mean, sixty is
17:51
Speaker 10: a big I mean I remember when I started in
17:52
Speaker 10: this business, if it went over twenty, you thought it
17:54
Speaker 10: was a big number, and then of course that's all changed.
17:57
Speaker 10: But sixty is undoubtedly a big number, very very rarely
18:00
Speaker 10: to get above that. So I think very short term
18:03
Speaker 10: what people want to watch is do you get a
18:05
Speaker 10: bullish keydo reversal in markets today? You know, obviously the
18:08
Speaker 10: voting below the lows to their close above levels that
18:12
Speaker 10: they saw on Friday. I mean, it seems a long
18:14
Speaker 10: stretch from here, but still a few more hours of trading.
18:16
Speaker 10: This market is very volatile. It can move along very quickly.
18:20
Speaker 10: But look, most sell offs happen in three or five waves.
18:22
Speaker 10: So we've had wave one. We're going to get a
18:25
Speaker 10: Willie Fraley. If you're a trader at some stage over
18:28
Speaker 10: the course of this week, you want to get involved
18:29
Speaker 10: in that. On alongside, when you're.
18:31
Speaker 5: Talking to your clients, what are some of their top
18:34
Speaker 5: questions right now?
18:36
Speaker 10: Well, I mean I haven't talked to many today because
18:39
Speaker 10: I think the questions might have changed over the last
18:42
Speaker 10: twelve eighteen hours.
18:43
Speaker 7: But no, I mean we've been, we've been.
18:45
Speaker 10: You know, the big question has really been when you
18:49
Speaker 10: get out of the MAC seven, and I think that's
18:51
Speaker 10: becoming increasingly obvious. And of course I think the really
18:54
Speaker 10: big question will be, now, has the psychology really broken
18:59
Speaker 10: in that sector? Is this genuinely the top on a
19:02
Speaker 10: relative basis for the MAG seven? I would definitely argue
19:05
Speaker 10: it is because it happened on July the eleventh, on
19:07
Speaker 10: that CPI day when we changed better inflation and so on,
19:11
Speaker 10: and better therefore interest rate outlook for the FED. But look,
19:15
Speaker 10: I mean, there are you know, there are tons of questions.
19:17
Speaker 10: People are going to be asking about this liquidity out
19:19
Speaker 10: of Japan. They're going to be asking about neutral weights
19:21
Speaker 10: in Japan, what is your aid to mean? And we're
19:25
Speaker 10: going to be looking for FED, FED and other central
19:27
Speaker 10: bankers to accelerate their weight cutting torque.
19:30
Speaker 7: I think I'm glad.
19:31
Speaker 5: You brought up July eleventh, the CPI day when we
19:34
Speaker 5: got that last report for the month of June, because
19:36
Speaker 5: if you look at the flows data, a lot of
19:38
Speaker 5: that rotation. Of course, people were talking so much about
19:41
Speaker 5: small caps last month, but now they're coming under pressure.
19:43
Speaker 5: But those kind of income driven type proxy bond like sectors.
19:47
Speaker 5: If you're thinking about utilities, real estate, a lot of
19:50
Speaker 5: flows going into that. Even last week, if you counted
19:52
Speaker 5: both of those sectors with Bloomberg Intelligence data, it was
19:55
Speaker 5: close to about a billion dollars going into those two sectors.
19:58
Speaker 5: And then if you looked at technology, there was a
20:01
Speaker 5: little bit of a bid for the buy that did
20:02
Speaker 5: there's around three hundred million that wouldn't that sector. But
20:04
Speaker 5: when you're thinking about the bond proxy type corners of
20:07
Speaker 5: the market, I mean, are we still clearly seeing rotation.
20:10
Speaker 5: It's just rotations now continuing to move. If you're pulling
20:12
Speaker 5: up at those expectations for when rate cuts could potentially have.
20:15
Speaker 10: Yeah, I mean, you know, markets set off, you go defensive,
20:18
Speaker 10: you go bomb boxes.
20:19
Speaker 7: That's that's what you do, that's where you go and hide.
20:20
Speaker 10: So you know, generally, I think I always think of
20:23
Speaker 10: the market as cyclicals, defensives, and long duration growth. And
20:27
Speaker 10: you know, there's an argument you go defensive before you
20:29
Speaker 10: go into the cyclicals. But yeah, it's no wonder we're
20:33
Speaker 10: seeing that. And I think that three hundred million into
20:35
Speaker 10: tech is probably they're probably regrading every penny of.
20:37
Speaker 4: That right now.
20:39
Speaker 10: But yeah, look, I mean I travel around the world
20:42
Speaker 10: talking to investors. Over the last six months, every single
20:46
Speaker 10: man and his dog has owned in video and now
20:49
Speaker 10: every single man and his dog is probably selling it
20:51
Speaker 10: if they haven't already.
20:52
Speaker 5: So so is the buying opportunity then well, there is
20:56
Speaker 5: stuck like that.
20:56
Speaker 10: I mean, if you if you look at tech in
20:59
Speaker 10: two thousand when it had its major T and T peak,
21:02
Speaker 10: the sector de weighted relative to the market until twenty fourteen,
21:05
Speaker 10: which didn't mean you didn't not buy it for fourteen years,
21:08
Speaker 10: but it just means don't be too quick so outside
21:12
Speaker 10: Sorry sorry, I was going to say that is the
21:14
Speaker 10: absolute key question here for an equent investor.
21:16
Speaker 7: Has the psychology in the MAKES seven change?
21:19
Speaker 10: Is global equity sect sector leadership changing at this moment?
21:23
Speaker 7: That is the crux.
21:24
Speaker 3: Well, there's argued in me that if tech doesn't lead
21:26
Speaker 3: this market, this market doesn't go anywhere that tech is
21:29
Speaker 3: by definition market cap wise, has to be a leader.
21:33
Speaker 10: Well that's absolutely right in the US, but outside the
21:36
Speaker 10: US not so Globally the market can be led by
21:38
Speaker 10: other stuff.
21:39
Speaker 7: But you're right, the US will really really struggle with that.
21:41
Speaker 3: At the European I'm just looking at the European markets,
21:44
Speaker 3: you know, selling off today as well here.
21:46
Speaker 10: Of course, But interestingly, in the first two weeks of
21:49
Speaker 10: the tech sell off you're held up really nicely. So
21:52
Speaker 10: you know, these things have phases. We're now into the
21:54
Speaker 10: liquidation phase, so you've got to sell everything. Gold's selling off.
21:57
Speaker 4: Yeah, and you don't have an in the European markets.
21:59
Speaker 4: The the tech exposure that they have in US mark
22:01
Speaker 4: not where it changes the treating dynamics, the evaluation exactly.
22:04
Speaker 7: The sectors are very different. We have ASML. But that's
22:07
Speaker 7: about it really. I like SAP too. I like SAP.
22:11
Speaker 10: Yes we are a couple, but it's pretty thin exactly
22:16
Speaker 10: that you have the I mean the European companies to
22:18
Speaker 10: have that exposure to China to a greater ease.
22:20
Speaker 7: They do, yeah, they do.
22:21
Speaker 10: We love Spanish mid caps just to go really Spanish. Okay,
22:26
Speaker 10: no one's talked about Spain for fifteen years. But the
22:28
Speaker 10: pigs are coming back. Okay, pigs about you remember the
22:31
Speaker 10: pigs in the noughties. Yeah, they're coming back. It goes around,
22:34
Speaker 10: comes around.
22:35
Speaker 4: Very good, Chris Wilding. Actually we're going to keep you
22:38
Speaker 4: for a little bit.
22:38
Speaker 3: So all right, so as you travel around here, are
22:41
Speaker 3: you talking about European equities more than US equities?
22:45
Speaker 7: The folks this year we've started talking about European equities
22:48
Speaker 7: and UK as well. UK. I mean, I don't know.
22:51
Speaker 10: How much you've seen of our riots over the weekend,
22:53
Speaker 10: so maybe people are a little off the UK at
22:55
Speaker 10: the moment. But actually that you know, the UK is
22:57
Speaker 10: a very interesting opportunity because we're going to get it.
23:00
Speaker 10: We're going to get a consumer and housing boom. There's
23:02
Speaker 10: going to be great earnings growth it's a cheap market.
23:05
Speaker 10: I would argue we have political stability. It doesn't quite
23:07
Speaker 10: feel like that in the last few days. Maybe maybe
23:11
Speaker 10: our riots haven't hit your news wise, I don't know,
23:13
Speaker 10: but it's been pretty brutal in the UK over the weekend.
23:16
Speaker 10: But yeah, we're talking a lot about European UK, even
23:19
Speaker 10: some of the emerging markets, but not in this liquidation event.
23:22
Speaker 10: This is when you pick them up on weekdays. In
23:25
Speaker 10: this liquidation event, if you're you know, one, two, three,
23:27
Speaker 10: four year investor, it's going to be a really interesting
23:30
Speaker 10: four year.
23:30
Speaker 7: It's been very different from the last five to fifteen.
23:34
Speaker 3: Really, So what do you tell people that walk up
23:36
Speaker 3: to this market and see this kind of volatility here?
23:39
Speaker 3: What do you telling those folks that this is maybe
23:42
Speaker 3: perhaps of a part of a reasonable correction, or.
23:45
Speaker 4: Is just something else gone on?
23:46
Speaker 10: Well, I think I mean to be honest, it depends
23:48
Speaker 10: on their timeframe and whether a trade or an investor.
23:51
Speaker 10: But what I think the really important thing here is this,
23:53
Speaker 10: you know, just look at the end. The end tells
23:55
Speaker 10: you everything. The short positioning, it's the carry trade currency.
23:59
Speaker 10: Everyone's been the short end long Brazilian or Mexican currencies
24:04
Speaker 10: on long that mag seven or whatever it is, you
24:06
Speaker 10: fund out at the end, so you're getting killed at
24:08
Speaker 10: the moment.
24:09
Speaker 7: So this is very much a liquidity event.
24:11
Speaker 10: Short term, it'll burn through, hopefully the central banks will
24:14
Speaker 10: turn up, and then you start picking out what you
24:16
Speaker 10: want for the next twelve eighteen months. And that is
24:19
Speaker 10: when we think about this movingto cyclicals and move overseas
24:22
Speaker 10: or into mid and small caps.
24:24
Speaker 5: So what's the next big sort of event that you're
24:26
Speaker 5: keeping your eyes on? Because obviously we have Jackson Holtz
24:28
Speaker 5: until later this month, but we'll have a ton of
24:30
Speaker 5: different FED speakers coming out, and then still a lot
24:32
Speaker 5: of consumer related earnings in the US this week.
24:35
Speaker 10: There's a ton of stuff going on, isn't it. Even
24:37
Speaker 10: though it's August, there's no going on holiday. Luckily I've
24:39
Speaker 10: been so I don't have to worry about it. But yeah,
24:42
Speaker 10: I mean I think are we going to get an
24:43
Speaker 10: into meeting cut? I think that really depends on how
24:47
Speaker 10: much financial conditions titan and the price action in markets.
24:51
Speaker 10: What is the market pricing in Are we going to
24:53
Speaker 10: potentially get fifty as the market probably priced in fifty
24:56
Speaker 10: for the next meeting already. I don't know I'm out
24:59
Speaker 10: of date to mows but but yeah, I mean, I
25:05
Speaker 10: think all of that is critical. The data is critical.
25:07
Speaker 10: Ism services Today was very interesting for the soft landing.
25:10
Speaker 3: On Kim yep kim in better than expected. Hey, Chris,
25:13
Speaker 3: thanks for joining us here. Chris Watling, he's the CEO,
25:15
Speaker 3: chief market strategist for Longview Economics based in London, but
25:19
Speaker 3: he's doing his US tour here because we worked during
25:23
Speaker 3: the month of August unlikes.
25:26
Speaker 4: I'm just laid it out Friday.
25:30
Speaker 6: So appreciate it.
25:32
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
25:36
Speaker 2: weekdays at ten am Eastern on Apple card Play and
25:39
Speaker 2: Android Auto with the Bloomberg Business. You can also listen
25:43
Speaker 2: live on Amazon Alexa from our flagship New York station
25:46
Speaker 2: Just Say Alexa playing Bloomberg eleven thirty.
25:50
Speaker 3: Jess Meant sitting in for Alex Deel on Paul Sweeney.
25:53
Speaker 3: We're live here in our Bloomberg Interactive Brooker's Studio, or
25:56
Speaker 3: streaming live on YouTube as well as you can hit
25:57
Speaker 3: over to YouTube dot com search Bloomberg pot. I mean,
26:00
Speaker 3: who reports earnings on a Saturday. Only Warren Buffey could
26:05
Speaker 3: do that at Berkshire Hathaway. I was not paying attention
26:09
Speaker 3: whatsoever on the Jersey shore, but somebody who was paying
26:12
Speaker 3: attention to Matt Palozoli. He's the senior analyst covers all
26:15
Speaker 3: the insurance geeks for Bloomberg Intelligence. He joins us here
26:18
Speaker 3: in our Bloomberg Interactive Broker Studio. So what'd you learn
26:20
Speaker 3: from Berkshire. I'm guessing more cash and even more cash, more.
26:24
Speaker 7: Cash and even more cash.
26:25
Speaker 11: So the big story was really them selling half of
26:28
Speaker 11: their Apple shares. We had mentioned in our earnings preview
26:33
Speaker 11: note that we thought they might lighten the stake a
26:35
Speaker 11: little bit more. I didn't expect them to be this much,
26:38
Speaker 11: but that was the big story coming out of it.
26:40
Speaker 5: And why was this like what ended up being the
26:44
Speaker 5: kind of cause for them to want to pull back
26:46
Speaker 5: in Triumpid's tag.
26:47
Speaker 11: Sure, just so we had mentioned also they kind of
26:50
Speaker 11: telegraphed a little bit that they were probably going to
26:52
Speaker 11: sell more at their annual meeting in May. Buffett had
26:56
Speaker 11: warned about tax rates going up potentially in the future
26:59
Speaker 11: and maybe taking some gains off the table. Tim Cook
27:02
Speaker 11: was actually sitting there and the audience was kind of funny,
27:04
Speaker 11: and that they had sold I think it was like
27:06
Speaker 11: ten to thirteen percent of their holdings at that time,
27:10
Speaker 11: and they got questions on it, and it just seemed
27:12
Speaker 11: body language wise that they would be selling a little more.
27:15
Speaker 11: So I think tax rates, he if it's been a
27:18
Speaker 11: little weary on exposure to China for some company. So
27:21
Speaker 11: I think those two played a big role.
27:23
Speaker 5: And actually had mentioned to you before when we're off air,
27:26
Speaker 5: kind of trying to pick your brain because Apple if
27:29
Speaker 5: just for people to remind them it was underperformed the
27:32
Speaker 5: S and P five hundred tremendously in the first quarter.
27:34
Speaker 5: It was one of its worst quarters relative to the index,
27:37
Speaker 5: probably like the fourth or fifth worse since the dot
27:38
Speaker 5: com bubble burst. But then it bottomed in April and
27:42
Speaker 5: has been up close to thirty percent since then, and
27:44
Speaker 5: so the S and P five hundred that span has
27:46
Speaker 5: only been up about four percent. So you were saying
27:49
Speaker 5: you didn't think even just the rally that we've seen
27:51
Speaker 5: was as much of a factor either as far as
27:53
Speaker 5: why they turned their stick.
27:54
Speaker 7: Yeah, I don't think so.
27:55
Speaker 11: I mean, more buff it's not out there trying to
27:57
Speaker 11: time the market one way or another. And you know,
28:00
Speaker 11: he looks at these stock investments as if he's, you know,
28:04
Speaker 11: buying the company. So he also said at the annual
28:07
Speaker 11: meeting he expected Apple to be their biggest holding at
28:10
Speaker 11: the end of this year. It still is, so, I mean,
28:13
Speaker 11: it was that stock was about forty percent of their
28:16
Speaker 11: portfolio before this move. So I'm not surprised to see
28:19
Speaker 11: him take some concentration of how much.
28:21
Speaker 3: Cash did they have at Berkshire Hathway today and so
28:24
Speaker 3: any any ideas what they might do with it.
28:27
Speaker 11: Always a tough one, Paul. It's I think at a
28:29
Speaker 11: two hundred and seventy eight billion dollars, which I thought
28:32
Speaker 11: was a mistake when I first saw it because they
28:35
Speaker 11: were at like less than two hundred before the sale
28:40
Speaker 11: of the Apples like brought in a lot of cash.
28:44
Speaker 11: Higher interest rates have taken a lot of pressure off
28:46
Speaker 11: them holding cash. I was calculating that just a simple
28:50
Speaker 11: after tax return on the cash would help their earnings
28:54
Speaker 11: by at least five percent next year, right, so just holding.
28:57
Speaker 4: It will be okay.
28:59
Speaker 11: You know, they bought it big steak and shove. That
29:00
Speaker 11: would be an interesting, mega, mega deal and not really
29:04
Speaker 11: predicting that would happen, but just seeing that, I mean,
29:08
Speaker 11: I think the next deal buff It does probably something
29:11
Speaker 11: we don't even really understand what it is, like, you know,
29:14
Speaker 11: makes unique parts for some materials or something like that.
29:18
Speaker 5: It's interesting too because at a certain point they're holding
29:21
Speaker 5: an Apple was so big that it took up basically
29:24
Speaker 5: half of its portfolios. So for in your kind of view,
29:27
Speaker 5: does it make sense to make a move like that, Yeah.
29:29
Speaker 11: I mean, you know, I don't know if anyone wants
29:31
Speaker 11: to have one stock makeup you know, half of their
29:34
Speaker 11: their portfolio. You know, he had said he would love
29:39
Speaker 11: to have owned the whole company at one point or something.
29:41
Speaker 11: You know, it does seem like he was worried about
29:45
Speaker 11: global economic situation. I think the timing of this is
29:49
Speaker 11: just kind of a coincidence. Why everything imploding today and
29:52
Speaker 11: this happening. Also keep in mind Bank of America was
29:56
Speaker 11: also their second biggest holding them and selling a lot
29:58
Speaker 11: of that in the third quarter, So I do think
30:00
Speaker 11: he's really looking at concentration.
30:03
Speaker 3: So some reporting, I think it was in the Times
30:06
Speaker 3: about Bill Gates and Warren Buffett relationship maybe not as
30:09
Speaker 3: tight as before, any thoughts there.
30:12
Speaker 11: So what has been happening is Buffett's part of the
30:15
Speaker 11: Giving Pledge where he gives away a bunch of his
30:19
Speaker 11: his wealth over time.
30:20
Speaker 4: And I am not on you to spend every least dollar.
30:23
Speaker 11: I'm not either, I don't have enough wealth to give away.
30:25
Speaker 11: So but he was giving a lot of his money
30:29
Speaker 11: annually to the Bill Gates Foundation. What happened, I don't
30:33
Speaker 11: remember when it was. I think it was probably the
30:34
Speaker 11: end of last year. He had announced that when he
30:38
Speaker 11: passes away that his children are going to inherit the
30:42
Speaker 11: shares in a foundation to be used for charity. I
30:46
Speaker 11: think before that the buffet found the Gates Foundation was
30:51
Speaker 11: I don't know if it was official, but was at
30:53
Speaker 11: least thought was going to get some of that. I
30:54
Speaker 11: don't know about the relationship between the two of them.
30:57
Speaker 11: I just know that that is the case. And I
31:00
Speaker 11: think you know he's given tens of billions to the
31:03
Speaker 11: Gates Foundation over time.
31:04
Speaker 7: Anyway.
31:05
Speaker 5: What about insurance, because I always think about the insurance
31:08
Speaker 5: companies in relation to obviously Warren Buffett. If you look
31:12
Speaker 5: at that group though in the S and P five
31:13
Speaker 5: hundred down about three percent today but up fifteen percent
31:16
Speaker 5: year to date, what kind of view do we have
31:18
Speaker 5: as far as how he viewsed that particular core of
31:20
Speaker 5: the market.
31:20
Speaker 11: Yeah, So insurance is kind of the engine that drives
31:23
Speaker 11: the float for Berkshire Hathaway.
31:25
Speaker 7: They have a.
31:26
Speaker 11: Primary insurance business, They have a reinsurance business, and they
31:30
Speaker 11: have the auto insurance business, which is Geico. These companies
31:34
Speaker 11: as a whole, and Buffett obviously loves that industry. They
31:37
Speaker 11: made a big play in flight last year, which doesn't
31:40
Speaker 11: look seem.
31:41
Speaker 4: Like they read it. And today hurricane hitting.
31:43
Speaker 11: So hurricane we have a note down on Hurricane Debbie.
31:46
Speaker 11: Not really a big deal for the insurance companies, will
31:49
Speaker 11: be very minimal for Berkshire Hathaway, if any impact on
31:52
Speaker 11: them as a whole. But for the group we seem
31:56
Speaker 11: to be hitting maybe pek Arowi's maybe this year and
31:59
Speaker 11: next year. The valuations generally peak before the roe s do,
32:02
Speaker 11: so it seems like less rosy times ahead from a
32:06
Speaker 11: fundamental standpoint for the insurance companies. But I'm Buffett hasn't
32:10
Speaker 11: been hasn't changed his view on insurance at all.
32:13
Speaker 4: All right, Matthew, thank you so much for joining us.
32:15
Speaker 3: Matt Palizola, Senior Alice covering all the property and casualty
32:18
Speaker 3: insures for Bloomberg Intelligence, joining us live here in a
32:21
Speaker 3: Bloomberg Interactive Brokers Studio Warren Buffett in the Berkshire Hathaway.
32:25
Speaker 4: Folks reporting earnings over the weekend.
32:27
Speaker 3: Again, huge cash haul, and for those of us on
32:29
Speaker 3: Wall Street, we're just like, how do you ever deploy that?
32:33
Speaker 4: I don't know how you ever deploy that?
32:35
Speaker 5: I know.
32:37
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
32:41
Speaker 2: weekdays at ten am Eastern on applecard Play and Android
32:45
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32:48
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32:51
Speaker 2: Just say Alexa Play, Bloomberg eleven thirty.
32:56
Speaker 4: Markotsoft two point four percent, the S and P four hundred.
32:58
Speaker 3: So a lot of folks are saying is a natural,
33:00
Speaker 3: healthy pullback in what is otherwise a pretty solid market.
33:04
Speaker 3: We're just the beginning of something more on the downside.
33:07
Speaker 3: People trying to get a sense there. What's going on?
33:09
Speaker 3: Carol Pepper, founder and CEO of Pepper International, joins us
33:13
Speaker 3: from New York via zoom. Carol, what are you hearing
33:16
Speaker 3: from your clients? What are you telling your clients on
33:19
Speaker 3: a day like today, We've had a big move to markets.
33:22
Speaker 12: Yeah, I'm telling my clients keep calm and carry on.
33:26
Speaker 12: This is a little bit of a pullback, but not unexpected.
33:29
Speaker 12: When Warren Buffett went and sold hath this Apple position, that.
33:34
Speaker 13: Made people nervous.
33:35
Speaker 12: But frankly, the fundamentals have not changed the fact that
33:40
Speaker 12: there's a slight correction. Nothing will go up every single
33:43
Speaker 12: day forever into infinity, and if you think that it will,
33:47
Speaker 12: then you shouldn't be in the stock market because it
33:49
Speaker 12: never does that.
33:50
Speaker 13: But you have to look at long term trends.
33:52
Speaker 12: Over time, growth stocks and particularly the Magnificent Seven.
33:56
Speaker 13: Have done extremely well.
33:58
Speaker 12: Should there be occasional pullback, yes, but does that mean
34:01
Speaker 12: that we're in serious trouble.
34:03
Speaker 6: No.
34:03
Speaker 12: So if you hold these stocks and you're nervous right now,
34:07
Speaker 12: this is not the time to sell. Obviously, even the
34:10
Speaker 12: plunge from this morning has paired back its losses. Some
34:13
Speaker 12: of this was the fact that a lot of the
34:15
Speaker 12: traders are on vacation, so whoever is in the market
34:18
Speaker 12: is moving things around much more than they normally would
34:22
Speaker 12: when it would not be in the middle of August.
34:25
Speaker 5: What are the top questions you're getting from your clients.
34:29
Speaker 13: Well, obviously people wonder is this the beginning of the end?
34:32
Speaker 13: Have we run as far as we should. Should we
34:34
Speaker 13: be pulling everything back?
34:35
Speaker 12: And again I manage money for people with over one
34:37
Speaker 12: hundred million dollars who are who have single family offices,
34:41
Speaker 12: and we make bets, not unlike Warren Buffett, not that
34:45
Speaker 12: I was as good as him, but we make bets
34:46
Speaker 12: for multiple generations.
34:48
Speaker 13: So again, if you.
34:49
Speaker 12: Look over the last five or ten years, how much
34:52
Speaker 12: has growth and check in the US outperformed everybody else.
34:56
Speaker 12: AI is the new entrant into the tech scene. It
34:58
Speaker 12: will continue to perform. Will there be moments like now
35:02
Speaker 12: and maybe the market enthusiasm god ahead of the reality
35:05
Speaker 12: where the price should be. Yes, But does that mean
35:08
Speaker 12: that it's going to plunge to zero?
35:10
Speaker 6: No?
35:11
Speaker 13: Are we having a dot com crash?
35:12
Speaker 1: No?
35:13
Speaker 12: Why because there's actual earnings underneath these stock.
35:17
Speaker 13: Prices, whereas in the dot com day there was nothing underneath.
35:21
Speaker 13: It was all air.
35:22
Speaker 12: So for that reason, I tell people, yes, it looks scary, No,
35:26
Speaker 12: don't do anything. This is a typical August doldrums, you know,
35:29
Speaker 12: buy the news, sell the news kind.
35:30
Speaker 13: Of market movement that we see almost every summer.
35:35
Speaker 3: So where should people if they maybe want to look
35:38
Speaker 3: for some values here in a market that that's pulled
35:40
Speaker 3: back a little bit.
35:42
Speaker 4: Where are you suggesting they go first again?
35:44
Speaker 12: If you're underweight in tech, Depending on your own weights,
35:47
Speaker 12: this is a great time to get into tech. If
35:49
Speaker 12: you want to get in. Having the price draw up
35:51
Speaker 12: five or ten percent terrific. Get in now. If you're
35:54
Speaker 12: not in there, if you're not wanting to kind of
35:58
Speaker 12: test or bat when things are going to move one
36:00
Speaker 12: direction to the other, just sit in cash, let us
36:02
Speaker 12: settle out for a couple of days, and then proceed
36:05
Speaker 12: in an ornerly fashion as usual with your investment program.
36:08
Speaker 12: So I'm telling people just to remain calm. I don't
36:11
Speaker 12: think this is the beginning of the end. I don't
36:13
Speaker 12: think Warren Buffett was doing something sinister. I do believe
36:16
Speaker 12: him what he said. It was a tax move on
36:19
Speaker 12: his part to sell half of his Apple position.
36:22
Speaker 13: So you know, just calm down, everybody. It's going to
36:25
Speaker 13: be fine.
36:26
Speaker 5: When you have the ten year last week's sliding below
36:28
Speaker 5: four percent for the first time since earlier this year
36:32
Speaker 5: in February, and then you have obviously income kind of
36:35
Speaker 5: driven type bond proxy sectors, utilities roots that were taking
36:40
Speaker 5: in a large amount of the inflows, especially since that
36:42
Speaker 5: CPI report on July eleventh, as well as last week
36:46
Speaker 5: when we saw the sell off accelerate the last few days.
36:49
Speaker 5: Are you putting money or suggesting clients put money in
36:53
Speaker 5: those particular corners of the market that would obviously benefit
36:56
Speaker 5: from rate cuts.
36:57
Speaker 13: Yeah, I mean, I do think the right cuts are coming.
37:00
Speaker 12: I hope that we will go back to having at
37:01
Speaker 12: least two rate cuts this year, maybe September and November.
37:05
Speaker 13: So certainly, if you're.
37:06
Speaker 12: Underweight your fixed income and you've been just relying on
37:09
Speaker 12: you know, good positions in your cash accounts, those rates
37:12
Speaker 12: are going to go down, so perhaps the time to
37:14
Speaker 12: consider getting into bonds a little bit. But again, you
37:17
Speaker 12: can never time exactly when that's going to happen. Well,
37:20
Speaker 12: you hit it exactly, No, who may hit it exactly?
37:23
Speaker 12: Are the program traders not human beings. It's impossible to
37:27
Speaker 12: outtrade this market, so you can't be that smart. But
37:30
Speaker 12: if you've been sitting in very high cash shields and
37:32
Speaker 12: you're worried about you know where cash shields are going
37:35
Speaker 12: to go, which is down when they start cutting the rates.
37:38
Speaker 12: And yes, it may not be a bad time to
37:39
Speaker 12: put a little bit more into bonds, but timing that
37:42
Speaker 12: date is still going to be tough about.
37:44
Speaker 4: I don't know if you have any views on crypto,
37:46
Speaker 4: but that's been whacked.
37:47
Speaker 3: All over the place today, with a bitcoin off about
37:49
Speaker 3: eight percent today.
37:51
Speaker 12: Yeah, well again, there's fear days and there's greed days.
37:55
Speaker 12: On fear days, everything that looks risky quote unquote goes down.
37:58
Speaker 12: So crypto is considered a risky or a growthy asset.
38:02
Speaker 12: So of course it's been hit. But I know a
38:04
Speaker 12: lot of people who are buying massive amounts of crypto
38:06
Speaker 12: right now, particularly overseas. I work with a lot of
38:09
Speaker 12: international families, and there's a lot of reason why people
38:12
Speaker 12: are starting to substitute crypto in some cases for their
38:15
Speaker 12: own currency or using crypto to move money around the world.
38:18
Speaker 12: So that's going to continue to happen. For people that
38:22
Speaker 12: are hoarding crypto, this is a great day. They can
38:24
Speaker 12: go out and buy some more and they all would
38:26
Speaker 12: project within two months it'll be back up into the sixties,
38:29
Speaker 12: maybe back to sixty five.
38:31
Speaker 3: All right, Carol, thank you so much for joining us.
38:33
Speaker 3: Always appreciate getting your thoughts. Kyle Pepper, founder and CEO
38:36
Speaker 3: of Pepper intern National.
38:39
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38:43
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38:53
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38:57
Speaker 6: So let's talk.
38:57
Speaker 4: Come on these here, let's get the latest. There's a
38:59
Speaker 4: lot going on. Miami.
39:01
Speaker 3: Mike mcgloan, Senior Commodity strategis from Bloomberg Intelligence. Droorte Is
39:04
Speaker 3: are on zoom from Miami, Florida. Mike, what's your commodity
39:09
Speaker 3: call today? When everybody's probably saying what is going on
39:11
Speaker 3: out there? In financial markets?
39:14
Speaker 14: We're seeing sell what you gotta and not what you
39:17
Speaker 14: wanna and that's really affecting. It's typically you've seen this
39:21
Speaker 14: happen in the past. When beta goes down in this velocity,
39:23
Speaker 14: you sell what you have to have. So that really
39:25
Speaker 14: started this weekend. Bitcoin broke blows sixty thousand. How were
39:28
Speaker 14: there on Saturday and then broke through there on Sundays?
39:30
Speaker 14: That was your indication. We'll start with the world's most
39:33
Speaker 14: significant leading indicator. And there's a lot of people who
39:35
Speaker 14: speculated it. So that was like people had to sell
39:38
Speaker 14: that because they need to raise capital.
39:39
Speaker 6: You're seeing in gold.
39:41
Speaker 14: That really started similar beginning of two thousand and eight
39:44
Speaker 14: when we had the financial crisis. The significance of things
39:47
Speaker 14: like gold and copper going down is they're perfect goddess sellers,
39:50
Speaker 14: but the gold will probably do better. The thing is
39:53
Speaker 14: manage money in that position. Speculators are way long gold
39:56
Speaker 14: for a reason because it's a bull market, so they're
39:58
Speaker 14: liquidating some of that, but I think it's more likely
40:00
Speaker 14: to cover.
40:01
Speaker 6: And the difference the is crude oil. Crudel's hanging in there.
40:04
Speaker 14: It's only down one percent on a day like today,
40:06
Speaker 14: it'd typically be down more than it has to be
40:08
Speaker 14: five hundred. But we know there's geopolitical tensions, you know, escalating,
40:13
Speaker 14: and a lot of the future's positions were way sold
40:16
Speaker 14: out about a month ago, so Crudel is not way
40:18
Speaker 14: overweight long like gold is. So that's where you've seen
40:21
Speaker 14: some of the greater I think pressure on goal at
40:23
Speaker 14: least for today, but in the long term as this
40:26
Speaker 14: resolves itself, we see that if beta is clearly making
40:29
Speaker 14: a little bit of a high, and volatil he's making
40:31
Speaker 14: a bit of a bottom.
40:32
Speaker 6: Gold would be one of the primary beneficiaries, and.
40:35
Speaker 5: Looking over at the crude oil market WTI for those
40:39
Speaker 5: US features falling to around seventy three dollars a barrel.
40:43
Speaker 5: As far as what it could be coming ahead here
40:46
Speaker 5: when you're talking about looking at the commodity space, what
40:49
Speaker 5: do you think this tells us more kind of broadly
40:51
Speaker 5: about the economy and the potential direction here for the
40:54
Speaker 5: US stock market.
40:56
Speaker 14: Well, it's deflationary forces. And I'm glad you went there,
41:00
Speaker 14: because I've been writing about this for a little too long,
41:02
Speaker 14: but particularly this year. Kimmani's basically predicted this with gold
41:05
Speaker 14: going up and all commodities go down, going down. The
41:09
Speaker 14: Bloomer COMMANDI INEX on a one year basis is down
41:11
Speaker 14: six percent, and the SMB five hundred on a one
41:14
Speaker 14: year basis is up about twenty one percent.
41:16
Speaker 6: That's one year. That's signs of deflation forces.
41:18
Speaker 14: And I think what's happening is those auto correlation forces
41:21
Speaker 14: and commodities they go down because they go up, are
41:24
Speaker 14: trickling down to other assets. So I don't see this
41:27
Speaker 14: as something as a one off. It looks like it's
41:29
Speaker 14: just getting started. And then you tilt over. Why, Well,
41:32
Speaker 14: here's one good indication the ten note yield in China's
41:35
Speaker 14: two point one five percent. That's compared to three point
41:38
Speaker 14: seventy nine in the US. So China's heading towards a
41:40
Speaker 14: pretty severe deflationary recession if you watch their bond yields.
41:44
Speaker 14: And I am and I think that's what's happening, and
41:47
Speaker 14: it's happening global leafs, so kmmandi's have basically been predicting this.
41:51
Speaker 14: I think we're just seeing a little bit of trickle
41:53
Speaker 14: down from the stock market that's way elevating. I'll end
41:56
Speaker 14: with this the Bloomberg the sorry, the two hundred day
41:59
Speaker 14: move in on WTI crew oil is about seventy eight.
42:03
Speaker 6: Dollars a bill a barrel, and that's tilted lower.
42:05
Speaker 14: We're right now about seventy three the two hundred day
42:08
Speaker 14: moving average on the S and P five hundred, it's
42:10
Speaker 14: five thousand, and the SMB five index is about five
42:13
Speaker 14: two hundred.
42:14
Speaker 6: We're just potentially going to revert there. And commodities were.
42:17
Speaker 14: Kind of a good indicator for that, and bitcoin was
42:19
Speaker 14: one of the quickest indicators I think for what's happening.
42:22
Speaker 3: So for WTI crude oil, let's just continue there. Mike,
42:26
Speaker 3: is it a supply issue driving this pullback here, or
42:29
Speaker 3: demand or maybe a little bit of both.
42:30
Speaker 6: All the above.
42:31
Speaker 14: The first thing I have to remember is the key
42:33
Speaker 14: force that pressured crude el since the peak in two
42:35
Speaker 14: thousand and eight is that the excess of supplying demand
42:38
Speaker 14: out of the US and Cana is accelerating. It's about
42:41
Speaker 14: six million barrels a day. In two thousand and eight,
42:43
Speaker 14: it was a deficit about ten million barrels a day.
42:45
Speaker 14: That's about what you see from that increasing excess of
42:48
Speaker 14: spare capacity out of Opex. So see the bad trend there,
42:51
Speaker 14: and prices remaining high because of geopolitical tensions are keeping
42:55
Speaker 14: that force intact.
42:56
Speaker 6: Meaning the cost of production in.
42:58
Speaker 14: US is around fifty five dollars a barrel and candidates
43:01
Speaker 14: around sixty dollars of barrel, So you keep prices above
43:03
Speaker 14: those levels, they'll just produce more and it's reducing demand.
43:06
Speaker 14: Diesel demand in this country is in a downward recessionary trajectory,
43:09
Speaker 14: and I hear it's the same in some of the
43:10
Speaker 14: other countries, most notably China, are just harder to measure.
43:14
Speaker 6: So that's the problems you.
43:15
Speaker 14: Political tensions are keeping in elevator, and then's just going
43:17
Speaker 14: to be pushing back towards its cost of production US
43:19
Speaker 14: if all the rules of economics apply.
43:21
Speaker 6: So I'll give you one example.
43:23
Speaker 14: The number one measure of heat, electricity and fertilizing this country.
43:26
Speaker 6: Natural gas has already done that.
43:27
Speaker 14: It dropped to and earlier in the year the levels
43:30
Speaker 14: that were first traded in nineteen ninety.
43:33
Speaker 6: Corn has already done it.
43:34
Speaker 14: Corn has dropped to a level of first traded in
43:36
Speaker 14: two thousand and I'm sorry, nineteen seventy four, back down
43:40
Speaker 14: to four hours of bushel.
43:41
Speaker 6: So this is just.
43:42
Speaker 14: Normal commodities, but it's deflationary because they went up too much.
43:46
Speaker 14: The question is how normal is for stock market baaltile
43:49
Speaker 14: at the bottom and stock marks go down, then that's
43:52
Speaker 14: what really precious crude aiut when it goes. When stocks
43:54
Speaker 14: go down like this, it'll bring down crude and copper.
43:57
Speaker 5: Another corner that you keep a close eye on is
44:00
Speaker 5: trollium futures. So you were talking about in a note
44:02
Speaker 5: recently how managed money, when you're looking at the hedge
44:05
Speaker 5: fund positions in particular, are set up for a bear market.
44:09
Speaker 5: And then obviously, when you were pointing out to how
44:11
Speaker 5: the stock market mean reversion might be a particular deciding factor.
44:15
Speaker 5: What does this mean now moving forward, now that you're
44:17
Speaker 5: seeing stocks under pressure here.
44:19
Speaker 6: Yeah, so I think that's part of the main reason.
44:21
Speaker 14: Despite the you know, the eminent attacks and more violence
44:25
Speaker 14: in the Middle East, which might curtail supply, despite that
44:29
Speaker 14: overhanging the market, Crudell's going down and despite the market
44:32
Speaker 14: has really sold out. You mentioned from futures, it's going
44:34
Speaker 14: down partly because beta is going down. It's the power
44:36
Speaker 14: of beta. When the stock market goes down like this,
44:38
Speaker 14: it's all that matters. So this is something that's really
44:41
Speaker 14: been a great indicator this year. If you watch these
44:43
Speaker 14: speculative speculative futures traders, when they get way too long,
44:47
Speaker 14: usually it's when the market peaks, and that's what happened
44:49
Speaker 14: this year.
44:49
Speaker 6: And when they sell out.
44:51
Speaker 14: They typically don't get short petroleum futures, but when they
44:54
Speaker 14: sell out the levels that are basically flat, it typically
44:56
Speaker 14: marks the bottom. That's what happened this year, and now
44:59
Speaker 14: we're kind of in that range. Just watch the next
45:00
Speaker 14: key level. So in our next key step to and
45:03
Speaker 14: WGI crewdel there's like a line of sand support around
45:06
Speaker 14: seventy thousand. I think it's a matter of time. It
45:09
Speaker 14: follows that it goes below that level. A natural gas
45:12
Speaker 14: has done it, Corn has done it, but right now
45:15
Speaker 14: it's keeping it elevated. His futures are basically sold out.
45:18
Speaker 14: We kind of have to reset those positions, and those
45:20
Speaker 14: geopolitical tensions are keeping things somewhat elevated.
45:23
Speaker 4: All right, Mike, Great Twitter force, Really appreciate it.
45:26
Speaker 3: Mike mcglow, Senior commodity strategist, Bloomberg Intelligence, zooming in from
45:31
Speaker 3: somehow he scammed this Miami, Florida.
45:33
Speaker 4: I don't get it. But he is a winner.
45:35
Speaker 3: He is a net winner during this whole global relocation,
45:38
Speaker 3: that is for sure.
45:40
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