Latest / Bloomberg Intelligence / GameStop Is Rage Against the Financial Machine: John Authers

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GameStop Is Rage Against the Financial Machine: John Authers · Bloomberg Intelligence

0:01
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along
0:04
Speaker 1: with my co host of Bonnie Quinn. Every business day
0:06
Speaker 1: we bring you interviews from CEOs, market pros, and Bloomberg experts,
0:10
Speaker 1: along with essential market moving news. Trying the Bloomberg Markets
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Speaker 1: Podcast on Apple podcast or wherever you listen to podcasts,
0:17
Speaker 1: and on Bloomberg dot com. Looking at games doot, Bonnie,
0:20
Speaker 1: I know you wanted an update. It's up a hundred
0:23
Speaker 1: seventeen percent today, up sixtcent year to date, up seventy
0:29
Speaker 1: four hundred percent. As for the Bloomberg terminal on a
0:33
Speaker 1: trailing twelve month basis, let's trying to put some of
0:36
Speaker 1: that into context. We can do that with John Authors.
0:38
Speaker 1: He's a senior editor for Bloomberg Markets. He's seen a
0:41
Speaker 1: thing or two. John, thanks so much for joining us here.
0:45
Speaker 1: What do you make of the game stops? So the
0:47
Speaker 1: world and there's a lot more besides game stop and
0:49
Speaker 1: you take a look at some of the other names
0:50
Speaker 1: like tuts, your role in AMC entertainment and others. Well,
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Speaker 1: I guess my best take on this, which has provoked
1:00
Speaker 1: a lot of reaction, but that this is h This
1:03
Speaker 1: is obviously bubblished behavior, not necessarily a bubble for the
1:07
Speaker 1: entire market, but extremely frosty behavior at the margins and
1:12
Speaker 1: the very least, which is concerning. And what's really concerning
1:17
Speaker 1: is that it's not a classic bubble driven by greed.
1:23
Speaker 1: It seems to me to be driven by anger. People
1:27
Speaker 1: feel that the current situation is unfair and with all
1:34
Speaker 1: of those have got plenty of reasons to think that,
1:38
Speaker 1: and things like the attack on the shorts, the short
1:44
Speaker 1: squeezing GameStop are seen as a way. I've had feedback
1:48
Speaker 1: saying this is a way of earning back the money
1:50
Speaker 1: we paid for the top bailout twelve years ago. That
1:54
Speaker 1: this this is seen as writing a historical wrong, which
1:58
Speaker 1: is something that angle fueled by righteous anger rather than greed. Yeah,
2:04
Speaker 1: I mean, I find this a phenomenally interesting take, because
2:08
Speaker 1: you know, there are a lot of takes out there
2:09
Speaker 1: from the people who were shut themselves, to people like
2:12
Speaker 1: Anthony Scaramucci saying that this is positive for bitcoin if
2:15
Speaker 1: there's a lot of people just making hay from this phenomenon.
2:18
Speaker 1: But John, I think you've hit on something very interesting,
2:20
Speaker 1: which is, you know, are there now different strata of
2:24
Speaker 1: capitalists and are they partaking of the whole populism phenomenon
2:28
Speaker 1: only is sort of in a different world. Yes, that's
2:34
Speaker 1: the the kind of similarity to um what we saw
2:40
Speaker 1: at the Capital is quite concerning. Again, you're talking about
2:46
Speaker 1: social media coordinating angry people into making an attack on
2:52
Speaker 1: what they see as the establishments, and plainly the Capitol
2:56
Speaker 1: is the establishment with with a tradition and lead. The
3:00
Speaker 1: short sellers who have been attacking Game Stop are unpopular
3:04
Speaker 1: on Wall Street. They're seen as the good guys or
3:07
Speaker 1: the little guys trying to to keep all streets honest.
3:10
Speaker 1: But at this point they wear suits, and that means
3:13
Speaker 1: they're they're among the enemies. Now that there's obviously great
3:18
Speaker 1: differences in methods, but the motivations behind this are very
3:25
Speaker 1: similar to the motivations behind the various populist movements we
3:31
Speaker 1: know around the world. The the reasons for anger are
3:36
Speaker 1: very genuine. Again, as you might also say about, for example, Brexit.
3:41
Speaker 1: The question is whether this is a sensible way to
3:46
Speaker 1: channel that anger, whether this is a sensible response to
3:49
Speaker 1: the real unfairness that is out there. John, Is there
3:53
Speaker 1: a political element to this? I mean, is this occupy
3:56
Speaker 1: the stock market or is it something more akin to
3:59
Speaker 1: what we saw last week. As he said, I do
4:03
Speaker 1: think there's a political element to this, yes, um, whether
4:09
Speaker 1: it is um uh, I mean, it's not solely a
4:16
Speaker 1: political element. But in terms of when you're worried about
4:21
Speaker 1: a bubble, whether you're worried, when you're worried about the
4:24
Speaker 1: possibility of excess um, what matters then is sentiments, how
4:31
Speaker 1: what the psychology is that's driving people. Now. The problem
4:34
Speaker 1: with greed is that people will do a lot for
4:38
Speaker 1: greed naturally, and it needs to be balanced against fear.
4:43
Speaker 1: In this case, it is righteous anger. And if there
4:47
Speaker 1: is any emotion that will make us throw caution to
4:52
Speaker 1: the winds even more than greed will, I would say,
4:57
Speaker 1: it's anger. Um. And it's very hard. Since I wrote
5:03
Speaker 1: my column last night, I've had some people suggesting that
5:05
Speaker 1: the Mississippi bubble, the French current of the South Sea
5:08
Speaker 1: bubble might have had some elements of this, that that
5:12
Speaker 1: people were angry with with life in France and sort
5:16
Speaker 1: of investing in in rather illusory prospects in the New
5:21
Speaker 1: World as as a way of getting back at them.
5:23
Speaker 1: But that's the best that's the only example anybody has
5:27
Speaker 1: come up with. Something like this, where there is this
5:30
Speaker 1: kind of speculative action and it's driven by anger, not greed.
5:37
Speaker 1: So so it's whenever we have a lack of precedent
5:40
Speaker 1: that's concerning you don't know what's coming. John. If this
5:44
Speaker 1: is indeed a bubble, does this bubble? Is there any
5:46
Speaker 1: reason to believe that this bubble doesn't end like other
5:48
Speaker 1: bubbles do and people get hurt and it just kind
5:51
Speaker 1: of pops. No, there's no reason to believe that. There's
5:56
Speaker 1: certainly a reason to believe that that this bubble could
5:58
Speaker 1: be far far bigger than it currently is. And there's
6:02
Speaker 1: um we can we can go back over the there
6:06
Speaker 1: are two sides to the argument of Both of them
6:08
Speaker 1: are completely valid as far as they go. Stop stocks
6:10
Speaker 1: are very expensive judged against their own history, but they're
6:14
Speaker 1: not expensive compared to two bond yields. And then it
6:19
Speaker 1: becomes an argument about where the bond yields stayed this
6:21
Speaker 1: low um. But in terms of is there any reason
6:25
Speaker 1: to believe this kind of a bubble wouldn't burst compared
6:29
Speaker 1: to other bubbles, there's there's no reason to believe that.
6:31
Speaker 1: I assume that it would, and I assume that the
6:33
Speaker 1: last people in who will be the little guys just
6:37
Speaker 1: as they are now, will, as in previous bubbles, be
6:40
Speaker 1: the ones who get hurt the most. I mean, is
6:42
Speaker 1: this one area we're seeing actual unity? John? Are these
6:45
Speaker 1: people on the right and on the left with the
6:47
Speaker 1: same argument. There's a great argument out there about how
6:50
Speaker 1: we don't fully recognize that cultural expressions of politics, like
6:56
Speaker 1: protest songs, for example, are just as popular on the
6:59
Speaker 1: right as they are on the left, and that just
7:01
Speaker 1: haven't given enough, you know, attention to both sides of
7:06
Speaker 1: that coin. It just seems to be something associated with
7:08
Speaker 1: the left. But is that what you know? We're seeing
7:10
Speaker 1: that here? Yes, I think that's a very good point.
7:13
Speaker 1: I think that it's it's one of the points we've
7:15
Speaker 1: seen in politics for some years now and again, if
7:19
Speaker 1: you want to go back to Brexit and and Trump
7:22
Speaker 1: or order of protectionism, that the in Britain it was
7:25
Speaker 1: very much the traditional right, but a lot of people
7:28
Speaker 1: on the traditional left wanted to Brexit, and it was
7:33
Speaker 1: a a an elite from the center left to the
7:37
Speaker 1: center right that wanted to stay with Europe. That there
7:39
Speaker 1: was this unholy alliance in many ways. If we go
7:43
Speaker 1: back to the financial crisis, of twelve years ago. There
7:46
Speaker 1: there was a very strange alliance in the in the
7:51
Speaker 1: the the people who really shared an analysis of what
7:55
Speaker 1: has gone wrong and who really disliked moral hazard way
8:00
Speaker 1: the FED behaved were either libertarians on the rights you
8:05
Speaker 1: think of libtic on meses, or outright socialists on the
8:09
Speaker 1: left like Hyman Minsky, and they had very different ideas
8:15
Speaker 1: for how to solve the problem, but they actually had
8:19
Speaker 1: almost exactly the same prescription, the same definition of what
8:25
Speaker 1: has gone wrong. And similarly, if you're a libertarian or
8:29
Speaker 1: an equal egalitarian socialist, you have equally strong good reasons
8:34
Speaker 1: to be angry at the moment, and you get this
8:36
Speaker 1: strange alliance. John author is fabulous conversation and the latest
8:42
Speaker 1: Bloomer opinion article from John on this particular subject is
8:45
Speaker 1: game stop is rage against the machine? Anger is an energy.
8:50
Speaker 1: Do have a read of it. It's a take that
8:52
Speaker 1: we haven't heard enough about, to be honest, out there
8:55
Speaker 1: and just really fascinating. Do stay tuned. We're going to
8:59
Speaker 1: get a COVID nine teen White House Task Force briefing
9:02
Speaker 1: at eleven am. We're going to dip into that and
9:04
Speaker 1: see what exactly is going on. This is New York
9:06
Speaker 1: City is to get seventeen thousand more doses next week.
9:13
Speaker 1: Another treat for us. Now we get to talk FED
9:16
Speaker 1: with Alan Blinder, Princeton University professor and of course, former
9:20
Speaker 1: Federal Reserve Vice chair. He served with Janet Yellen on
9:23
Speaker 1: the Fed's board in you know, recent decades, and is
9:28
Speaker 1: also a co author of a book with Janet Yellen
9:31
Speaker 1: called The Fabulous Decade Macroeconomic Lessons from the nineteen Nineties
9:35
Speaker 1: that was published in two thousand one. Alan, thank you
9:38
Speaker 1: so much for joining First your reaction to Joannet Yellen
9:42
Speaker 1: as now Treasury Secretary, the first woman Treasury Secretary of
9:45
Speaker 1: the United States of America, Well, I'm pleased as punch
9:48
Speaker 1: as you can, well regarded, well understand. It is a
9:53
Speaker 1: landmark to have the first woman sitting in the Secretary
9:58
Speaker 1: of the Treasuries off us. She comes very well prepared.
10:03
Speaker 1: Not all Secretaries of the Treasury do, you may recall
10:06
Speaker 1: without naming names. Uh, some do, some don't. She comes
10:10
Speaker 1: very well prepared, both understanding markets and understanding Washington, and
10:16
Speaker 1: understanding the Treasuries business, and especially obviously understanding the Federal Reserve.
10:23
Speaker 1: When you're in a crisis, situation such as we've been
10:26
Speaker 1: in for a while. The Treasury and the Fed, regardless
10:30
Speaker 1: of who's sitting in those two chairs, have got to
10:33
Speaker 1: be in close collaboration early and often. And this is
10:37
Speaker 1: just going to be so easy with a Janet Yellen
10:40
Speaker 1: and J Powell. So, professor, how do you expect or
10:44
Speaker 1: what would you like to see in terms of fiscal
10:47
Speaker 1: policy and monetary policy? Here? Just where we are right now?
10:50
Speaker 1: It seems like we're gonna we can look to the
10:52
Speaker 1: other side of this pandemic, but there's still a long
10:54
Speaker 1: road ahead. What would you like to see? Yeah, I
10:57
Speaker 1: think monetary policy should be sitting right where it is,
11:00
Speaker 1: and that's of course what the Federal Reserve thinks. This
11:03
Speaker 1: is no news. And then but I just might say
11:06
Speaker 1: that's in a hyper expansionary stance. So it's not like
11:11
Speaker 1: they're sitting in neutral or something like that. Fig got
11:13
Speaker 1: the interest rate to the floor. They're buying securities may
11:18
Speaker 1: uh to increase the side of the balance sheet and
11:22
Speaker 1: so on. They should stay that way for a while. Uh.
11:26
Speaker 1: It's regretful and I'm not sure the legal status of
11:29
Speaker 1: some of these. Uh that Secretary minution saw fit in
11:35
Speaker 1: its closing days to cut cut them out the Fed's
11:38
Speaker 1: emergency UH lending facilities. I'd like to see Janet Yellen
11:44
Speaker 1: put them back to the extent that she can. Some
11:47
Speaker 1: that may need Congressional action, which is harder. Whatever can
11:51
Speaker 1: be done by Treasury action, I think should be done
11:54
Speaker 1: just because you want them. There is a backstop. The
11:57
Speaker 1: argument that minution made the row and not using let's
12:00
Speaker 1: throw them away is exactly the same as saying I
12:04
Speaker 1: haven't made a claim of my fire insurance policy from
12:07
Speaker 1: my home, so let me just cancel it. Yeah, for sure,
12:11
Speaker 1: if and when it does come up again, I imagine
12:14
Speaker 1: there'll be a different type of approach from the Treasury.
12:17
Speaker 1: So curious, Allen. You know, Jerome Powell has been a
12:21
Speaker 1: FED board member since two thousand twelve. He became the
12:24
Speaker 1: chair of the FMC in two eighteen. What happens next
12:29
Speaker 1: with the FED chair position? Presumably Chair Powell stays as
12:33
Speaker 1: long as he's welcome to stay, which presumably is the
12:36
Speaker 1: rest of his term. And then does President Biden appoint
12:39
Speaker 1: somebody else who might it be? Well, I think it's
12:43
Speaker 1: very early to speculate on that, But look, I don't
12:46
Speaker 1: think you should eliminate Jerome Powell. Prior to Donald Trump,
12:52
Speaker 1: there were many instances of a new president coming in
12:57
Speaker 1: with a FED chair appointed by president of the other
13:01
Speaker 1: party and then um giving that person another term because
13:07
Speaker 1: they were all he's then one of them was Janet Yellen.
13:10
Speaker 1: She was the exception. Trump did not do that, but
13:13
Speaker 1: many previous presidents looked at the FED chair said well,
13:16
Speaker 1: he did a very good job. Let's keep him in position.
13:20
Speaker 1: So you'd be fine with Ron Paul having a second
13:23
Speaker 1: term as FED chair. I would be. Now, of course,
13:25
Speaker 1: it's up to Joe Biden, not to me. All I'm
13:28
Speaker 1: saying is that I wouldn't write him out. There's definitely
13:32
Speaker 1: a live possibility that he could become get a second term.
13:38
Speaker 1: Now if if that's not the case, an obvious kennidate
13:41
Speaker 1: is Lele Brainerd, who's the Democrat sitting on the board
13:47
Speaker 1: right now. And there may be other uh Biden appointments
13:53
Speaker 1: before Powell's term ends to the board and those will
13:57
Speaker 1: be live. Candidate said, then there are plenty of people
14:01
Speaker 1: I don't want to thought speculating on names in the
14:04
Speaker 1: financial world, UH, who are Democrats who could be attractive
14:10
Speaker 1: to Biden as a replacement for power But the logic
14:15
Speaker 1: here is going to be question A is for Biden
14:19
Speaker 1: is do I keep power or replace him? That's question one.
14:23
Speaker 1: Then if you answer that in the negative, then a
14:26
Speaker 1: whole host of names UH start should start coming to
14:30
Speaker 1: your desk, Professor. Given what we know about fiscal policy,
14:35
Speaker 1: given what we know about UH fiscal stimulus and monetary policy,
14:40
Speaker 1: what is your economic outlook here? I mean, I think
14:43
Speaker 1: there's concern here that the improvement in the economy, the
14:47
Speaker 1: opening up of the economy, if you will, maybe take
14:49
Speaker 1: a little bit longer than people had initially thought. Yeah, Well,
14:52
Speaker 1: it depends on many things, in which two are completely obvious.
14:56
Speaker 1: One is the speed or or lack of speed with
15:02
Speaker 1: which we get this wave of the virus under control.
15:07
Speaker 1: That depends a lot on the vaccination rollout, which, as
15:11
Speaker 1: you know, has been disappointingly slow, in which President Biden
15:15
Speaker 1: has promised to accelerate, its taping steps to accelerate. And
15:21
Speaker 1: the other is the passage or non passage of another
15:25
Speaker 1: COVID relief package. So we did one in December. That
15:29
Speaker 1: was good. It's now to January. It is soon going
15:33
Speaker 1: to be February. In March, for example, things start running
15:38
Speaker 1: out such as the extra unemployment benefits. I be pleased
15:45
Speaker 1: but surprised if the economy is looking really healthy in March,
15:52
Speaker 1: that is to say, not no longer needing extra emergency support.
15:58
Speaker 1: So I hope the kind this is going to pass
16:00
Speaker 1: a bill. We don't need it this week, but we
16:04
Speaker 1: do need it, and the health of the economy in March, April, May, June,
16:11
Speaker 1: etcetera depends, among other things on that. Alan, what do
16:16
Speaker 1: you make of the data that actually shows improvement these days?
16:20
Speaker 1: I mean, yesterday we got the confidence data would showed
16:22
Speaker 1: that perhaps know in the future, but right now people
16:24
Speaker 1: are a little more confident. What's giving them that confidence
16:27
Speaker 1: if many of them have been out of work for
16:29
Speaker 1: nearly that's great. I'm glad you asked that. I was
16:32
Speaker 1: surprised at that, and I noted that the sentiment about
16:36
Speaker 1: the current economy had not improved, had deteriorated a little bit.
16:41
Speaker 1: But people are looking forward, and I think the answer
16:44
Speaker 1: is the light at the end of the tunnel. The
16:45
Speaker 1: vaccine um. It's not like this secret. Everybody in the
16:51
Speaker 1: country knows that vaccines. To hear people are starting to
16:54
Speaker 1: get vaccinated, and there's a lot of talk now, especially
16:58
Speaker 1: now about have everybody who wants a vaccine vaccinated by summer.
17:05
Speaker 1: That's a big change from the way the world looked
17:08
Speaker 1: three six months ago. So when we think about that,
17:11
Speaker 1: to let at the end of the tunnel, professor, the
17:14
Speaker 1: number of folks that are out of work and out
17:16
Speaker 1: of work for a long period of time is increasingly troubling.
17:20
Speaker 1: I think to a lot of folks here, how do
17:23
Speaker 1: you think the the labor economy is going to recover?
17:26
Speaker 1: You know again at the other side of this, well,
17:29
Speaker 1: I'm gonna sound like a broken record, but it depends
17:31
Speaker 1: on those two things as we get rid of the
17:35
Speaker 1: scourge of the coronavirus. Let me back up a step.
17:40
Speaker 1: A lot of those jobs you're talking about are in
17:42
Speaker 1: the service industries, restaurants, theaters, entertainment venues of all uh sorts.
17:49
Speaker 1: It's not people like me and people like you who
17:52
Speaker 1: are working electronically. And those jobs will come back, at
17:57
Speaker 1: least most of them, I think will come back as
18:00
Speaker 1: and when the virus fades into insignificance. You know, I
18:06
Speaker 1: should emphasize we have seasonal flu every year. It kills
18:10
Speaker 1: ten thirty thou people every year. But that's a long
18:14
Speaker 1: way from four hundred, five hundred thousand. You know, the
18:19
Speaker 1: thought we should have is to get the coronavirus down
18:23
Speaker 1: to the level of the flu or something like that,
18:27
Speaker 1: and then the country can go back to normal. So
18:31
Speaker 1: there's that, and then the second thing is the COVID
18:35
Speaker 1: relief package, which has benefits for unemployed. So if you
18:39
Speaker 1: if you don't have your job back, you can continue
18:42
Speaker 1: on on unemployment benefit. It will probably have relief checks
18:47
Speaker 1: which I hope are better targeted than they've been uh
18:51
Speaker 1: in the past, and those things will help the labor market.
18:56
Speaker 1: Alan Blinder, thank you so much for joining us. We
18:59
Speaker 1: always appreciate get your thoughts on the economy here. Alan Blinder,
19:02
Speaker 1: he's professor of economics at Princeton University and former FED
19:06
Speaker 1: vice chairman. We appreciate his thoughts and now we want
19:10
Speaker 1: to get to our next guest, Brian Whyle and his
19:12
Speaker 1: group Managing director for ctc w's fixed income group. Brian,
19:16
Speaker 1: the obvious question, were below one percent once again on
19:19
Speaker 1: the ten year. We waited a long time to get
19:21
Speaker 1: back above the one percent, and actually in the in
19:24
Speaker 1: the immediate moment we're back above it, but we did
19:26
Speaker 1: get below it. What took us there and what happens
19:29
Speaker 1: post f O mc sure, um Funnie, thanks for having me. Um.
19:34
Speaker 1: You know, I think the run from the ten year
19:36
Speaker 1: up about basis points on the year when it got
19:39
Speaker 1: up as close to about one was a lot about
19:42
Speaker 1: the blue wave and um, the you know, the hope
19:44
Speaker 1: that there would be, you know, a tremendous amount of
19:46
Speaker 1: fiscal stimulus. And I think that you know, the run
19:48
Speaker 1: back towards one percent or maybe dipping right below it
19:50
Speaker 1: is is kind of maybe a recognition that you know,
19:54
Speaker 1: the the administration, while they may have these these goals
19:57
Speaker 1: and they'll put out these stimulus packages, it may not
19:59
Speaker 1: be as easy to implement uh as originally thought. Uh
20:02
Speaker 1: and it certainly might take a little bit longer than
20:04
Speaker 1: originally thought. So, Brian, where do you think just we'll
20:07
Speaker 1: focus on the tenure here? How do you what's your
20:09
Speaker 1: outlook here for rates? Because you know, we had been
20:12
Speaker 1: in that trading range stream we're still in there obviously
20:15
Speaker 1: kind of rates smack in the middle of some type
20:16
Speaker 1: of training range here. But what's your outlook? Yeah, you
20:20
Speaker 1: know it's um. First, I think we talk about out look,
20:22
Speaker 1: you gotta kind of forget, you know, what you'll what
20:24
Speaker 1: you learned back in school, and you know how the
20:27
Speaker 1: nominal rates should move relative to growth, because you know,
20:30
Speaker 1: we're in this world where you know, rates are clearly
20:32
Speaker 1: controlled by by the Fed, you know, and what they
20:34
Speaker 1: do with their balance sheet. Uh. And so I think
20:36
Speaker 1: you just gotta you gotta take them out their word,
20:38
Speaker 1: you know, which is that you know they're going to
20:39
Speaker 1: continue with this policy. You know they're not gonna you know,
20:42
Speaker 1: lift off the zero bounds not going to happen until
20:44
Speaker 1: at least three um. You know, a reduction in the
20:48
Speaker 1: pace of the growth of the balance sheet that's not
20:50
Speaker 1: going to happen until next year. UM. So it's hard
20:53
Speaker 1: to see rates going much, you know, significantly higher from
20:56
Speaker 1: where they are now because you know, also in addition,
21:00
Speaker 1: not only the economy fragile, but I think you know,
21:02
Speaker 1: the markets would react negatively to to attend your rates
21:05
Speaker 1: significantly higher. So you know, we hate to put you know,
21:08
Speaker 1: numbers and bands on rates because you know, you never know.
21:10
Speaker 1: But you know, it's kind of hard to see the
21:12
Speaker 1: ten year certainly not getting to a you know, a
21:14
Speaker 1: two point something yield this year. And personally, I think
21:18
Speaker 1: we'd be surprised if you know, we've got much above
21:20
Speaker 1: a one point five. So what do you do? Because
21:24
Speaker 1: we were just talking yesterday about the record amount of
21:26
Speaker 1: junk issuance, there's also huge you know, investment grade issuance.
21:31
Speaker 1: There's there's lots to buy out there. But none of
21:34
Speaker 1: it is all that attractive, is it. It's a it's
21:37
Speaker 1: a bond party. Um. You know, I think that the
21:40
Speaker 1: Fed has uh successfully repressed everyone. Um. And you know
21:45
Speaker 1: we're I mean just you know, for for your for
21:47
Speaker 1: your your listeners. I mean, you know, we are while
21:49
Speaker 1: we're much lower in interest rates you know, um today
21:53
Speaker 1: than we were a year ago, when you look at
21:55
Speaker 1: other things like credit spreads and where high old bonds
21:57
Speaker 1: are trading, and leverage loans and of the securitized market,
22:01
Speaker 1: the mortgage backed securities, when you talk about like the
22:05
Speaker 1: spread of how they trade relative to the treasuries, we're
22:08
Speaker 1: right back where we were last year. So, you know,
22:09
Speaker 1: from just from a kind of the narrow world of
22:13
Speaker 1: the bond world, at least on on the credit side,
22:15
Speaker 1: everything non treasury related, you know, it looks exactly like
22:18
Speaker 1: it did before the pandemic. So we've unwound, um, you know,
22:22
Speaker 1: the entire pandemic period, even though you know, we're clearly
22:26
Speaker 1: not out of the pandemic. So so the markets that
22:28
Speaker 1: I've heard some of, you know, Alan Blinder said, you know,
22:30
Speaker 1: the markets are definitely forward looking, um, and I think
22:33
Speaker 1: they're they're priced not necessarily for even like the middle
22:35
Speaker 1: of markets, particularly on the credit side, are priced for
22:40
Speaker 1: you know, the end of one, if not two. Alright,
22:45
Speaker 1: So Brian, let's talk about credit quality. How are you
22:49
Speaker 1: viewing it? What are you seeing in your portfolio in
22:51
Speaker 1: terms of credit quality? Here we're, you know, almost twelve
22:53
Speaker 1: months into this pandemic and economic disruption. Yeah, I think
22:56
Speaker 1: I think that the theme we you know, we're running
22:59
Speaker 1: with here is that let's just let's try to justify
23:03
Speaker 1: today's prices and today spreads from a credit perspective, like, uh,
23:06
Speaker 1: clearly the market is looking towards, like I said, the
23:09
Speaker 1: end of the year, and let's just say and this
23:11
Speaker 1: kind of consensus that by the end of this year,
23:14
Speaker 1: the economy is the same size as it was, you know,
23:17
Speaker 1: in let's say February, so before the pandemic. So so
23:20
Speaker 1: we've kind of we've kind of gone we've gone through
23:23
Speaker 1: the dark ravine of the the economic contraction and we've
23:26
Speaker 1: got the same size economy. The point we like to
23:28
Speaker 1: emphasize is that while the size of the economy may
23:31
Speaker 1: be the same, by the end of the year, it's
23:32
Speaker 1: going to have a different shape. And when an economy
23:35
Speaker 1: has a different shape, and that may be a good
23:38
Speaker 1: thing long term, but when an economy has a different shape,
23:41
Speaker 1: there's gonna be winners and losers. So we're gonna kind
23:43
Speaker 1: of fall outside of of of of the economy and
23:46
Speaker 1: maybe not relevant anymore. So our thoughts, particularly when when
23:50
Speaker 1: spreads are tight and there's not a lot of value.
23:52
Speaker 1: Is Vanni indicated, You're gonna have have and have nots,
23:56
Speaker 1: And so as an investor, you want to think. You
23:58
Speaker 1: can't just think from a macro perspective. You know, the
24:01
Speaker 1: economy back where it was by the end of the year.
24:03
Speaker 1: No, no no, no, You've got to think about what the
24:05
Speaker 1: economy gonna look like. You know, how do we eat,
24:08
Speaker 1: how do we entertain ourselves, how do how do we work?
24:10
Speaker 1: Where do we work, how do we travel? All these
24:12
Speaker 1: things and who are going to be the winners and
24:14
Speaker 1: who are going to be the losers? And then kind
24:17
Speaker 1: of reconstruct your bond or even your equity portfolio to
24:20
Speaker 1: succeed in that new world, don't you know again, not
24:24
Speaker 1: not just focusing on on on the size or the
24:27
Speaker 1: growth of that new world, but what does it look like?
24:31
Speaker 1: Brian Willen, thank you so much for joining us. We
24:33
Speaker 1: appreciate that. Brian Whaling, he's a group managing director for
24:36
Speaker 1: TCWS Fixed Income Group. They're based out on the West Coast.
24:40
Speaker 1: They have a couple of dollars under management, so we
24:42
Speaker 1: always pay attention to what they're saying on the fixed
24:45
Speaker 1: income side. Game stop a MC entertainment. What are these
24:53
Speaker 1: three names all have in common besides trading higher high
24:57
Speaker 1: short interest and they are getting moved higher in a
25:01
Speaker 1: significant short squeeze that we haven't seen in some time.
25:04
Speaker 1: Somebody's gotta been losing the money on the other end
25:06
Speaker 1: of that trade. And turns out some of the big
25:07
Speaker 1: hedge funds on Wall Street are in that camp. To
25:10
Speaker 1: bring us a story, Kathy Burton, hedge fund reporter for
25:13
Speaker 1: Bloomberg News, joins us here. Kathy, who is Melvin Capital?
25:17
Speaker 1: What is Melvin Capital and what's their role and what's
25:20
Speaker 1: happening in some of these names? Uh So, Melvin Capital
25:24
Speaker 1: is a firm run by Gabe Plotkin, He was a
25:28
Speaker 1: very very successful trader who came out of I worked
25:31
Speaker 1: with Steve Cohen for almost a decade, and he has
25:37
Speaker 1: been sort of the center of, uh, the whole battle
25:41
Speaker 1: between what we call the reddit bros and the professionals.
25:45
Speaker 1: For some reason, about a few months ago, they started
25:48
Speaker 1: targeting gabe portfolio and they were short. They were going
25:53
Speaker 1: along a lot of the stocks he was shorting, including uh,
25:56
Speaker 1: game Chop. Yeah, I mean, Cathy, Why Gabe in particular,
26:00
Speaker 1: You know, he's he's a he's a young guy. He's
26:02
Speaker 1: very successful. There are many people out there that have
26:05
Speaker 1: had a lot more attention in the media and other
26:08
Speaker 1: places that might have drawn the ire of Redder Bros
26:11
Speaker 1: sort of more obviously, and yet didn't. They might have
26:14
Speaker 1: drawne the ire of other market participants, but not the
26:17
Speaker 1: redder Bros. What gives with Gabe? I mean, he was
26:20
Speaker 1: very successful and he had the backing of as you say,
26:24
Speaker 1: as I see capital. He even got people to help
26:27
Speaker 1: shore up the hedge fund most recently when it was
26:30
Speaker 1: under attack. Yes, so no one really knows for sure,
26:35
Speaker 1: but it seems that, unlike a lot of hedge funds,
26:39
Speaker 1: Gabe didn't use over the counter puts when he was
26:43
Speaker 1: shorting some stocks, and so if you looked in his
26:46
Speaker 1: regulatory filings, you could see that he had put on
26:49
Speaker 1: certain companies and so it was in the republic what
26:54
Speaker 1: he was doing. And so that's the only explanation that
26:57
Speaker 1: anyone can really come up with for why he became target.
27:00
Speaker 1: And also because he's pretty known to be a pretty
27:03
Speaker 1: aggressive short seller. So um, he had some pretty chunky positions.
27:08
Speaker 1: What's the status of Melvin Capital right now, Kathy, Um.
27:13
Speaker 1: I think that the infusion of capital from UM Steve
27:16
Speaker 1: Cohen's point co two and from Ken Griffin's citadel has
27:21
Speaker 1: helped the firm. Uh has really shorted up. It seems
27:24
Speaker 1: that they've covered we know they've covered M Game Shop,
27:28
Speaker 1: and they've rejigged the portfolio a bunch. So uh, it
27:34
Speaker 1: seems like they're they're in an okay position, although we
27:37
Speaker 1: did here that through yesterday they had their losses had
27:40
Speaker 1: increased that we reported. Yeah, I mean three Friday, difficult
27:46
Speaker 1: couple of quarters for Melvin Capital. Any idea what his
27:49
Speaker 1: other positions are, what as lungs might be. Um, No,
27:54
Speaker 1: we don't really have a lot of insight fo the
27:58
Speaker 1: last filing Hunt Um, it's from the third quarter, so
28:03
Speaker 1: that's quite a little while ago, and these guys tend
28:06
Speaker 1: to change around. Their portfolio is pretty spificantly. Canty, any
28:10
Speaker 1: other hedge funds that have been kind of targeted or
28:14
Speaker 1: do we know that maybe have had some you know,
28:17
Speaker 1: poor performance as a result of kind of what we're
28:19
Speaker 1: seeing in some of these names. Uh No, We're were
28:24
Speaker 1: hunting around from that right now. UM, we haven't heard
28:27
Speaker 1: um a lot of names, although we suspect that they
28:31
Speaker 1: will definitely be people that at the end of the
28:33
Speaker 1: month got got hurt. Any I mean, I'm just throwing
28:39
Speaker 1: out this, and you know, I don't want to be
28:42
Speaker 1: wild in my theorizing, but is there any um, anyone
28:47
Speaker 1: out there is saying that perhaps there's an army of
28:49
Speaker 1: redditors that are actually sort of market participants, that are
28:54
Speaker 1: regular market participants, but that are sort of stoking the
28:57
Speaker 1: fires and the flames in Reddit itself. Um, No one
29:02
Speaker 1: knows for sure, although it does sort of make sense
29:05
Speaker 1: that there could people out there who are who are
29:08
Speaker 1: doing that. UM. I think it's something that the regulators
29:12
Speaker 1: will definitely be looking into. So, Kathy, when you talk
29:17
Speaker 1: to the hedge funds, did they feel like this is
29:19
Speaker 1: just a short term phenomena in the market, or is
29:21
Speaker 1: this perhaps something larger and it might be a part
29:25
Speaker 1: of markets going forward. UM. I think that that people
29:30
Speaker 1: are they don't really know for sure, but they're certainly
29:32
Speaker 1: afraid that it could be and we're we are definitely
29:36
Speaker 1: trying to figure out if people are changing the way
29:41
Speaker 1: that they're short or do different things to to mitigate
29:45
Speaker 1: this if it really does become more of a phenomenon
29:48
Speaker 1: going forward. Cathy, have one more question to ask you,
29:50
Speaker 1: because I noticed this a couple of months ago in December,
29:55
Speaker 1: that Plankin was revealed, as they say, to be the
29:57
Speaker 1: buyer of a forty four million dollar property own in Florida,
30:01
Speaker 1: and it sort of reminded me of the Billions plotline
30:04
Speaker 1: about how you know, the guy is advised not to
30:07
Speaker 1: be very ostentatious and he goes ahead with it anyway. UM.
30:12
Speaker 1: Is this something that maybe you know, brought gay plot
30:15
Speaker 1: into the attention of people who wouldn't have liked that.
30:19
Speaker 1: I mean, it could, but I really don't think so.
30:22
Speaker 1: It really seems that, UM, because the first message that
30:28
Speaker 1: was on this reddit um for him was maybe three
30:33
Speaker 1: months and I think that UM, even the moderator of
30:37
Speaker 1: the message board says that people don't really know anything.
30:41
Speaker 1: They just kind of follow a momentum. So someone picked
30:45
Speaker 1: up and then someone else. We're all pretty much obsessed
30:50
Speaker 1: with game shop. Um, it just had a life of
30:53
Speaker 1: its own. So I don't really think that they were
30:55
Speaker 1: targeting him because he was gay, but I think it
30:58
Speaker 1: was just because they found someone he does actually short
31:02
Speaker 1: they went out, Kathy, thank you. It's a it's a
31:04
Speaker 1: phenomenal story. Kathie always does phenomenal stories on hedge funders
31:07
Speaker 1: and hedge funds. She has our hedge fund reporter and
31:10
Speaker 1: her one today is redit Trator's Bloodgeon. Melvin Capital in
31:13
Speaker 1: warning to Wall Street and I don't know when the
31:17
Speaker 1: last time I walked into a game stop was, but
31:19
Speaker 1: I know it's a long time ago. They're still out
31:21
Speaker 1: there though. Thanks for listening to Bloomberg Markets podcast. You
31:25
Speaker 1: can subscribe and listen to interviews at Apple Podcasts or
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Speaker 1: whatever a podcast platform you prefer. I'm Bonnie Quinn, I'm
31:32
Speaker 1: on Twitter at Bonnie Quinn. And Paul Sweeney I'm on
31:34
Speaker 1: Twitter at pt Sweeney. Before the podcast, you can always
31:37
Speaker 1: catch us worldwide at Bloomberg Radio