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The Fed, Interest Rates, And Pandemic Darlings (Podcast) · Bloomberg Intelligence

0:00
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
0:04
Speaker 1: my co host Matt Miller. Every business day we bring
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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
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Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
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Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
0:18
Speaker 1: at Bloomberg dot com slash podcast. Let's bring in daniel
0:22
Speaker 1: d Martino Booth, CEO and chief strategist for Quill Intelligence,
0:26
Speaker 1: one of the leading voices of my opinion on the FED,
0:28
Speaker 1: on and on this economy. She's a former advisor to
0:31
Speaker 1: Fedo Reserve Bank of Dallas, so she knows FED speak
0:33
Speaker 1: when she hears it. Danielle, thank you for being in
0:35
Speaker 1: our studio. I think it's been more than two years
0:37
Speaker 1: on my show at least than you've been in the studio. Um.
0:40
Speaker 1: Now to me, we're back. When Danielle D Martino Booth
0:43
Speaker 1: flies up from Dallas comes in studio, we're back. Well,
0:46
Speaker 1: I'm not the only one this place is buzzing. Let's
0:49
Speaker 1: see if humanity it's getting getting better, getting better every time?
0:52
Speaker 1: All right, what would surprise you from the FED this afternoon?
0:55
Speaker 1: What would spook the markets from the Fed serve, you know,
0:59
Speaker 1: as confident as we're seeing market pricing. I think that
1:01
Speaker 1: if if Powell was to allude to kind of the
1:04
Speaker 1: Bullard bomb of seventy basis points, I don't think markets
1:07
Speaker 1: would take that very easily. I think they want for
1:10
Speaker 1: him to stick to If it's going to be fifty
1:12
Speaker 1: basis points, let's be consistent going forward and plan on
1:15
Speaker 1: that in June and July. And by the way, caveat
1:17
Speaker 1: that chair pal by saying we're going to remain dated dependent.
1:20
Speaker 1: And the market is expected, the market was expecting in
1:23
Speaker 1: March a little bit more detail on the launch of
1:26
Speaker 1: quantitative easing and how they're going to ramp up to
1:28
Speaker 1: this dollars a month. I think the market is going
1:30
Speaker 1: to demand details today on that also starting off this month.
1:36
Speaker 1: I think it's the balance sheet that's caught most of
1:39
Speaker 1: my attention, right, I think as as as I would
1:42
Speaker 1: say the entire investor community has, because we've never really
1:46
Speaker 1: been able to successfully execute q T. Right, We've only
1:49
Speaker 1: ever done this once before, and we had to kind
1:51
Speaker 1: of backtrack. And when I say we, I mean the
1:53
Speaker 1: Federal Reserve. I had no hand in it, but I
1:55
Speaker 1: used to use. We we we the people um but
1:59
Speaker 1: talked to us about what is the likelihood of not
2:01
Speaker 1: necessarily the rate high side of it, but the balance
2:04
Speaker 1: sheet being executed correctly. Well, I think we have to
2:07
Speaker 1: bear in mind that there was this there was this
2:08
Speaker 1: quirky third quarter corporate tax payment that was due that
2:11
Speaker 1: kind of launched the not QE illiquidity era in two
2:15
Speaker 1: thousand nineteen that so spooked the markets. Right now we're
2:18
Speaker 1: seeing reserves already declined because tax receipts are up so
2:20
Speaker 1: much and Americans are about to pay their property taxes.
2:23
Speaker 1: So as this is with with this as a backdrop,
2:26
Speaker 1: the FEDS about to launch QT, so there's already liquidity
2:29
Speaker 1: coming out of the market, reserves coming down as the
2:32
Speaker 1: FEDS getting ready to launch. So not everything is in
2:34
Speaker 1: their control with Quante Dave tightening, and certainly out of
2:36
Speaker 1: the magnitude and scale that they're contemplating, and most of
2:39
Speaker 1: their mortgage backed securities are at such low cubans that
2:42
Speaker 1: the Fed would effectively had to book a loss. It
2:44
Speaker 1: wouldn't look like that, but there would be certainly some
2:46
Speaker 1: progressives on the Hill who would view it as a
2:48
Speaker 1: loss if they actually had to go as far as
2:50
Speaker 1: the nuclear option. I call it the nuclear option. That's
2:53
Speaker 1: selling mortgage backed securities off that balance sheet to hit
2:56
Speaker 1: that bogie that they've got. The FED, you know, in
2:59
Speaker 1: the past, has reacted to market volatility um and maybe
3:02
Speaker 1: being a little bit more cautious, and we have I
3:04
Speaker 1: would argue, we have a volable marketplace so far here
3:06
Speaker 1: in two get the SMP down or so. Do you
3:10
Speaker 1: think that might impact their actions here? They might be
3:13
Speaker 1: even maybe a little bit more cautious and what markets
3:15
Speaker 1: pricing in No. I think that that. I think that
3:17
Speaker 1: the strike price of the foot of the FED puts
3:20
Speaker 1: has changed dramatically. I think that he realizes. I think
3:23
Speaker 1: that Powell and others realized that speculations become rife in
3:26
Speaker 1: the stock market. I think they want to cool housing down,
3:28
Speaker 1: and I'm I'm being polite and diplomatic on that. I
3:31
Speaker 1: don't think they'll go so far, however, as to break credit.
3:33
Speaker 1: So I think that what they're paying attention to is
3:36
Speaker 1: the fact that we've seen a doubling and triple see
3:37
Speaker 1: high yields. You know it's north of ten percent. How
3:40
Speaker 1: yield is actually high, and so you don't want, you know,
3:43
Speaker 1: Bloomberg's bankruptcy tracker bc y go. It's a great thing
3:47
Speaker 1: to follow and even know about it. It's ticked up.
3:50
Speaker 1: It's ticked up after hitting an all time low in February,
3:53
Speaker 1: so you're starting to see some insolvency issues creep in.
3:56
Speaker 1: There's a trillion dollars of non financial debt to be
3:58
Speaker 1: refinanced in two thousand twenty two alone globally, Danielle, So
4:03
Speaker 1: we have the FED today. Are you in the camp
4:05
Speaker 1: that says the FED is behind the curve, ears behind
4:09
Speaker 1: the market? Um? And if you are in that camp,
4:13
Speaker 1: can they do anything about it? I don't think there's
4:15
Speaker 1: any way to make up for lost time. And I
4:17
Speaker 1: clearly I'm in Randy Coral's camp as well, because he
4:20
Speaker 1: came out and said flat out, we would have been
4:22
Speaker 1: acting sooner had there not been a crisis of leadership
4:24
Speaker 1: inside the FED, and so I think that it has
4:27
Speaker 1: been widely acknowledged. I think that the FED is in
4:29
Speaker 1: a pickle when it comes to continuing to ease credit
4:32
Speaker 1: by virtue of having such a massive footprint in the
4:34
Speaker 1: mortgage back securities market. And I don't think there's an easy,
4:38
Speaker 1: elegant way out. I don't think that there's a reasonable
4:41
Speaker 1: path that anybody can paint of a soft landing. Really wow. Alright,
4:44
Speaker 1: So let we're also talking off air about China Germany
4:48
Speaker 1: recession risks there and how that may drag the US
4:52
Speaker 1: into a recession. How do you think about those dynamics.
4:54
Speaker 1: In fact, there was some great math that Bloomberg Economics
4:57
Speaker 1: did that they published yesterday that shows that if there's
4:59
Speaker 1: one thing that's going turn US inflation around, it's if
5:01
Speaker 1: China stays in a funk. And we fully anticipate that
5:04
Speaker 1: to be the case. And so if this carries out
5:06
Speaker 1: in Beijing, and I'm watching Bloomberg Asia every night when
5:10
Speaker 1: it comes on the air, If this carries out from
5:11
Speaker 1: Shanghai into Beijing and we carry this through may that
5:14
Speaker 1: means that China is effectively in recession, that Germany, that
5:17
Speaker 1: the world's third largest exporter is in recession. So you
5:20
Speaker 1: tell me how the United States, stuck in the middle,
5:22
Speaker 1: is the world's second largest exporter, How how do they
5:25
Speaker 1: resist that gravitational pull of the two other largest exporting
5:28
Speaker 1: nations being in recession. If we were to enter into recession,
5:31
Speaker 1: do you have any sense of how deep, how long
5:34
Speaker 1: it may be. You know, that's also a secondary question.
5:38
Speaker 1: So it was interesting. UM an interview from Milkin yesterday
5:40
Speaker 1: and Bloomberg talked about, you know, the hopes this was
5:43
Speaker 1: the President Coke from Goldman Sachs, the hope it would
5:45
Speaker 1: be a shallow recession. I just can't say, there's so
5:49
Speaker 1: many If you look at trend, we should have six
5:51
Speaker 1: million more Americans in the workforce right now. They want
5:53
Speaker 1: to do where are they had we stayed on pre
5:55
Speaker 1: pentemic trend, So there's already that initial drag. And again
5:59
Speaker 1: then I I'll reiterate what Amazon said was really important.
6:02
Speaker 1: They said we're not going to stop at attrition with
6:04
Speaker 1: our warehouses. We built too many warehouses, we hired too
6:07
Speaker 1: many people. They effectively said, we're gonna we're gonna fire
6:09
Speaker 1: a hundred thousand people, and that's going to reduce our headcount.
6:12
Speaker 1: This is kind of the first this is kind of
6:13
Speaker 1: the first volley, if you will. And if you look
6:15
Speaker 1: at indeed dot com job postings, they decisively turned in
6:18
Speaker 1: very early February because I thought that labor market was
6:22
Speaker 1: just rock solid, and I guess we'll get some more data. Well,
6:25
Speaker 1: this is something that was a point of pride for
6:27
Speaker 1: a while. I remember in early twenty you had ground
6:30
Speaker 1: Powell coming out and saying we have a great labor market.
6:32
Speaker 1: It's really tight, and now that's kind of become a
6:35
Speaker 1: negative almost he says that we have an extremely tight
6:37
Speaker 1: labor market. This is something we have to address. Do
6:40
Speaker 1: we have to address it? I think the market is
6:42
Speaker 1: going to take care of addressing it on its own.
6:44
Speaker 1: I mean, you don't have goods consumption step back to
6:47
Speaker 1: the extent that Amazon told us that goods consumption was
6:50
Speaker 1: stepping back. You don't have good consumption stepping back and
6:53
Speaker 1: inflation running where it is for essentials uh and and
6:56
Speaker 1: landlords trying to make up on what they lost during
6:58
Speaker 1: the rental ediction moratorium. So you've got your three essential energy, gas,
7:01
Speaker 1: and housing. You don't have inflation running amok and and
7:05
Speaker 1: and try and say services are going to make up
7:07
Speaker 1: for it. But is there. Sorry I was gonna say,
7:10
Speaker 1: I gotta, I gotta get in here, but there not
7:13
Speaker 1: to make it too simplistic of an approach, but if
7:15
Speaker 1: we're looking at declining demand, a slowing demand from the
7:19
Speaker 1: American consumer specifically, and you're also seeing slower supply chains
7:23
Speaker 1: MSS or slower exports. You mentioned China, you mentioned Germany
7:26
Speaker 1: in terms of net exports. Does that in some way
7:29
Speaker 1: cancel out a little bit. Well, the one thing that
7:32
Speaker 1: we don't have to worry about as much, and bless
7:34
Speaker 1: j Pal's heart, is the supply change in structure, because
7:37
Speaker 1: what we're seeing is this magnificent build. If you look
7:39
Speaker 1: at if you look at the company earnings conference calls,
7:42
Speaker 1: there are so many companies that are saying, we've got
7:44
Speaker 1: enough inventory on hand, it's no longer a crisis. But
7:47
Speaker 1: now we have to consider the fact that warehouse expenses
7:49
Speaker 1: are higher than they've ever been, and they have an
7:51
Speaker 1: expense to carry this inventory that not a single operations
7:54
Speaker 1: manager in the current generations accustomed to because their entire
7:57
Speaker 1: career has been just in time as opposed to just
7:59
Speaker 1: in case. I learned just in time back in business
8:02
Speaker 1: school in the late eighties early nineties. Is that a
8:04
Speaker 1: thing of the past. Do you think is that taken
8:06
Speaker 1: a big blow? The stockpiling that we've seen suggests as much.
8:09
Speaker 1: I mean, they were so burned by not being able
8:11
Speaker 1: to get the product on hand to keep the production
8:14
Speaker 1: lines up and running that they do have inventory on
8:16
Speaker 1: hand now. So it's there's not the same crisis because
8:19
Speaker 1: of what's happening in China, because there's not the same
8:21
Speaker 1: demand pull from our ports, because because supplies have been replenished.
8:25
Speaker 1: So as it relates to what we're here from the
8:27
Speaker 1: FED today, um like I kind of felt like the
8:32
Speaker 1: inflation we're experiencing today isn't so much a result of
8:34
Speaker 1: the FED, because the FED has been easy for a
8:36
Speaker 1: long time. It was a pandemic, it was a supply chain,
8:39
Speaker 1: and once that stuff plays out, inflation will play out.
8:41
Speaker 1: So I'm surprised that people are depending so much on
8:44
Speaker 1: this Federal Reserve detain inflation. It's it's it's wrong headed,
8:48
Speaker 1: and a lot of it was all that. You know,
8:50
Speaker 1: when you pump forty of US GDP via fiscal stimulus
8:53
Speaker 1: into the economy, you're gonna generate a heck of a
8:55
Speaker 1: lot of inflation. And that, in my opinion, is why
8:58
Speaker 1: President might have initially scheduled his press conference for two
9:00
Speaker 1: o'clock thinking he could compete with the FED statement being released,
9:03
Speaker 1: which obviously he moved that back to eleven am, figuring
9:06
Speaker 1: out that he couldn't. But it was I mean, I
9:08
Speaker 1: think initially it was literally an attempt to distract from
9:11
Speaker 1: a fifty basis point right hip, And I don't know
9:14
Speaker 1: if you've already hit this, but we also are expecting
9:16
Speaker 1: comments from President Biden today at two o'clock as well. No, no,
9:20
Speaker 1: he moved it to eleven. Oh to eleven. I'm so sorry,
9:23
Speaker 1: but what did at one point? And the topic of
9:26
Speaker 1: this conversation even at eleven is going to be about
9:30
Speaker 1: economic growth? How much of a concern is this fifty
9:34
Speaker 1: basis point hike? Is this going to scare the consumer
9:38
Speaker 1: or scare the American public when they see Chairman Powell
9:41
Speaker 1: today if he does indeed deliver what the market's expecting
9:44
Speaker 1: very well? Could I mean sixteenth two thousand, that's the
9:46
Speaker 1: last time that they launched a fifty basis point hike.
9:49
Speaker 1: That was one month almost to the day from from
9:51
Speaker 1: the day the dynastic peaked before it completely imploded. And
9:54
Speaker 1: people are beginning to draw parallels, maybe because they follow
9:57
Speaker 1: me on Twitter. Daniel d Martino Booth follow you on Twitter.
10:00
Speaker 1: Daniel DeMartino Booth, CEO and chief strategist for Quill Intelligence,
10:05
Speaker 1: former advisor at the Federal Reserve Bank of Dallas. When
10:07
Speaker 1: we talked to FED, we'd like to talk to smart
10:09
Speaker 1: people who have experience with this stuff, and Daniel is
10:11
Speaker 1: certainly not camp here. Let's get back to these markets here,
10:18
Speaker 1: because it's going to be a busy day, a busy afternoon,
10:21
Speaker 1: and probably into tomorrow. Market's gonna be digesting a lot
10:24
Speaker 1: of commentary coming from the US Federal Reserve. Let's bring
10:27
Speaker 1: an Anders person, chief investment Officer of Global fixed Income
10:30
Speaker 1: for Nuvine Anders thanks so much for joining us here.
10:33
Speaker 1: You know, we kind of we pay a lot of
10:35
Speaker 1: attention here at Bloomberg News and Bloomberg Radio on TV
10:38
Speaker 1: on the Federal Reserve, and when we do have these
10:40
Speaker 1: press conferences with the chairman, this one today seems to
10:44
Speaker 1: be even more so because we're gonna have a FED
10:47
Speaker 1: that's gonna go really into hawkish mode here. What are
10:49
Speaker 1: you looking for this afternoon from your Federal Reserve chairman? Sure, yeah,
10:54
Speaker 1: we we we do believe that that they're going to
10:57
Speaker 1: be announcing it's if two basis point tied today we're
11:00
Speaker 1: in our mind it's been well telegraphed a Powell and
11:04
Speaker 1: very much in line with that market expectation. So so, certainly,
11:07
Speaker 1: as you said, it's gonna be a lot of focus
11:09
Speaker 1: on this today, um certainly more so on the press conference, um,
11:13
Speaker 1: you know, trying to read between the lines, what kind
11:15
Speaker 1: of signals and inside the power of passing along. That
11:19
Speaker 1: being said, I'm not so sure that we're going to
11:21
Speaker 1: get a whole lot of tangible new news here. It's
11:25
Speaker 1: probably not going to be much of fireworks where frankly,
11:28
Speaker 1: we're not going to get an updated dot plot or
11:30
Speaker 1: any new forecast at this meeting. So it's going to
11:33
Speaker 1: be again more kind of reading between the lines, kind
11:36
Speaker 1: of figuring out if we can read anything into any
11:39
Speaker 1: kind of signals one way or another. So while we're
11:42
Speaker 1: hoping for a little more clarity, I have I have
11:44
Speaker 1: a strong suspicion it's going to be a little bit
11:47
Speaker 1: more of a vague message from Powell, more noncommittal, certainly
11:51
Speaker 1: probably not going to be commenting all that much and
11:53
Speaker 1: what kind of size hikes we can expect here going forward,
11:57
Speaker 1: probably reiterating that he's going to be it a dependent
12:01
Speaker 1: um uh here going forward as well. So certainly key
12:04
Speaker 1: focus here, but I think today probably not a lot
12:07
Speaker 1: of details and maybe more interesting to hear where some
12:10
Speaker 1: of the committee members kind of speak about here in
12:12
Speaker 1: the coming days and weeks, well at least there'll be
12:15
Speaker 1: an in person press conference there, so perhaps we can
12:18
Speaker 1: get a little fireworks going there about the balance sheet
12:21
Speaker 1: run off here, This is something that I think the
12:22
Speaker 1: market's trying to, you know, just you know, learn a
12:24
Speaker 1: little bit more about what do you think we'll here
12:26
Speaker 1: fed Sherman j pal about how this Federal Reserve will
12:29
Speaker 1: actually you know, affect a balance sheet run off? Yeah,
12:34
Speaker 1: that is that is the area that will hopefully get
12:37
Speaker 1: a little bit more clarity around and let's go a
12:40
Speaker 1: little bit more new news. Um, you know, expectations is
12:43
Speaker 1: on our end, and I think the market is that. Um,
12:46
Speaker 1: they'll they'll talk about a June kind of kick off.
12:49
Speaker 1: They talked about these cap sizes around sixty billion for treasuries,
12:52
Speaker 1: thirty five billion for mbs, most likely a three month
12:56
Speaker 1: ramp up, So you know, all in all, I would
12:58
Speaker 1: call it probably going to be in line with market expectations.
13:01
Speaker 1: Maybe a little bit more clarity around that, but I
13:05
Speaker 1: think Powell and team have done a pretty good job
13:08
Speaker 1: communicating sort of where they're heading, and I'm guessing it's
13:12
Speaker 1: mostly going to be radiating what they've been signaling here
13:15
Speaker 1: for a bit I have to ask about negative yielding
13:19
Speaker 1: debt because we are looking at a tenure yield that
13:22
Speaker 1: has bounced off three twice now, once today and once
13:27
Speaker 1: I believe a couple of days ago as well. You're
13:29
Speaker 1: also looking at a German boond that has crossed one
13:32
Speaker 1: percent several times as well. But negative yielding debt is
13:35
Speaker 1: kind of almost going into extinction. What would reverse that trend? Yeah, No,
13:42
Speaker 1: I think it's it's certainly it's I would call it,
13:45
Speaker 1: first of all healthy to see these changes and things
13:48
Speaker 1: from moving into a more normal kind of state all
13:51
Speaker 1: in all, because I think we can all agree that
13:54
Speaker 1: negative yielding debt is not you know, sort of what
13:56
Speaker 1: we would like to see in a in a fully
13:59
Speaker 1: functioning econ mean what have you. So I would say,
14:02
Speaker 1: we're you know, setting a new range here, and we
14:05
Speaker 1: would expect more of a range bound both from the
14:08
Speaker 1: treasury side and from the boons and more broadly in Europe.
14:11
Speaker 1: So I think, um, you know, if if if we
14:14
Speaker 1: were to turn over, um, perhaps if if there is
14:18
Speaker 1: a central bank policy era or FED era going forward
14:23
Speaker 1: where you know they go to aggressively and in fighting
14:26
Speaker 1: the inflation, uh, and we end up you know, kind
14:30
Speaker 1: of dipping into a recession most likely next year either
14:34
Speaker 1: here in the US, so maybe more likely in Europe.
14:36
Speaker 1: Then you know, we we have to assume that those
14:40
Speaker 1: deals will come down again. It could be slipping down
14:43
Speaker 1: into the negative territory again. We're hoping that's not to
14:46
Speaker 1: get base case certainly. Um, it seems like we're making
14:50
Speaker 1: the right steps here going forward, but at the end
14:53
Speaker 1: of the day, we have to, you know, take a
14:55
Speaker 1: step back and acknowledge that there's still a lot of
14:58
Speaker 1: uncertainties out there in terms of deal, political kind of
15:02
Speaker 1: top situation, the Chinese lockdowns, some of these cross currents
15:07
Speaker 1: around economic economic growth and inflation, and and the soft
15:11
Speaker 1: lending kind of type approach to all central banks are
15:15
Speaker 1: are trying to achieve. It's not going to be easy,
15:18
Speaker 1: so I wouldn't rule it out. Um, we're hoping for
15:21
Speaker 1: the best here, but but that's not a base case
15:23
Speaker 1: at this point, and there's a lot of folks are
15:25
Speaker 1: really looking to this for the reserve too bring down inflation.
15:29
Speaker 1: I don't even think they caused inflation. I kind of
15:31
Speaker 1: feel like it was a byproduct of a reopening global economy,
15:34
Speaker 1: supply chain issues. Uh, that those types of things that
15:38
Speaker 1: and that's just gonna take time to play out. How
15:41
Speaker 1: do you envision or how do you think about this
15:43
Speaker 1: Federal Reserve in its ability to fight inflation? Yeah, I mean,
15:49
Speaker 1: certainly it is unprecedented times, and I think we have
15:52
Speaker 1: to again remind ourselves that we're dealing with with something
15:57
Speaker 1: that we really don't have a playbook around, given of
16:00
Speaker 1: the COVID shutdown and supply chain related issues as you mentioned.
16:04
Speaker 1: That being said, I think our view is that inflation
16:07
Speaker 1: likely did peak, most likely in the last month or so.
16:12
Speaker 1: When we look at some of the core durable goods numbers,
16:15
Speaker 1: for instance, you know, new cars have been kind of
16:17
Speaker 1: rolling over. We're seeing energy prices moderating at this point.
16:21
Speaker 1: We are seeing the signs that inflation at least is moving,
16:26
Speaker 1: you know, lower and in the right direction. We're we're
16:28
Speaker 1: expecting core inflation kind of at four and a half
16:30
Speaker 1: percent at here and uh and and continue to go
16:33
Speaker 1: lower next year. But um, to your point, I mean,
16:37
Speaker 1: the FEDS job now is to to really kind of
16:40
Speaker 1: tighten financial conditions. So we see that psychology shifting from
16:46
Speaker 1: consumers from companies and what have you, so we can
16:49
Speaker 1: see that trend continuing here in the coming months. So
16:52
Speaker 1: I think they're on the right path. My you know,
16:54
Speaker 1: the concern I guess we'll have is that they're going
16:56
Speaker 1: to be a little bit too slow in their actions.
16:58
Speaker 1: All right, And this person, thank you so much for
17:00
Speaker 1: joining us. Really appreciate it. Ander's person, chief Investment Officer
17:04
Speaker 1: of Global Fixing, come for Nouvene giving us his thoughts
17:07
Speaker 1: on kind of how he thinks his Phoederal Reserve is
17:09
Speaker 1: gonna navigate this high level of inflation that we're all
17:13
Speaker 1: experiencing right now. All right, it has been a rocky
17:19
Speaker 1: tech earning season, I would say here for the first quarter.
17:22
Speaker 1: Some positive surprises, but probably more negative surprises. Cap off
17:26
Speaker 1: just recently, most recently with the lift and Uber lifts down,
17:30
Speaker 1: Uber off ten percent here, So some real challenges for
17:33
Speaker 1: some of these tech investors. So we talked tech. We
17:36
Speaker 1: talked to Dan Ives. He is one of our leading
17:38
Speaker 1: voices on all things technologies. He's an equity research and
17:41
Speaker 1: also would Bush Securities and managing director over there. Um, Dan,
17:45
Speaker 1: thanks so much for joining us here. Let's start with boy.
17:48
Speaker 1: I go back to last Friday, we had Amazon. What
17:51
Speaker 1: happened there in a big sell off in that stock
17:53
Speaker 1: and then we had lifted Uber. Today as you step
17:55
Speaker 1: back down, I know you have this lens and think
17:57
Speaker 1: about tech. What's the market telling us here? Well, I
18:00
Speaker 1: think it's to have and have not in tech. I
18:03
Speaker 1: mean you look at a m D, Microsoft, cyber Security, Apple,
18:08
Speaker 1: outside the supply chain Strong, you look at some of
18:12
Speaker 1: the e commerce work from home beneficiaries that's been a disaster.
18:16
Speaker 1: And when we look at with I mean they're spending
18:19
Speaker 1: money like rock stars, and ultimately that's something in this environment,
18:25
Speaker 1: even though for good in terms of a demand rebound
18:28
Speaker 1: to get drivers back on street, any sort of issue,
18:31
Speaker 1: the stocks will get crushed. So I think what we're seeing, Paul,
18:34
Speaker 1: is it's a bifurcation within tech, enterprise, Cloud, cyber semis, Strong,
18:41
Speaker 1: everything else. You know, we're seeing weakness, but I think
18:45
Speaker 1: the there is kind of an extremity, almost to the
18:48
Speaker 1: extent that some of these stocks are getting punished. I mean,
18:51
Speaker 1: off Amazon earningclin right off the bat. That isn't a
18:55
Speaker 1: normal move, even off of an earnings disappointment. A similar
18:59
Speaker 1: story when you're looking Lift, for example, we're looking at
19:01
Speaker 1: those shares down thirty almost Uber down eight point eight
19:05
Speaker 1: percent as well. These are really extreme moves, and I
19:08
Speaker 1: don't necessarily think you can blame the rates picture. So
19:12
Speaker 1: why these particular stocks, Why such an outsize move. Look,
19:17
Speaker 1: I think it is as nervous of an environment. I mean,
19:20
Speaker 1: forget Mark two twenty, but it's just nervous as I've
19:24
Speaker 1: seen talking attach investors institutionally, I'd seen eight nine years
19:30
Speaker 1: because of the Rubik's cube macro fed raising rates and
19:35
Speaker 1: what we're seeing on valuations, and I think any crack
19:39
Speaker 1: in the armor, any softness you're seeing what I've use
19:42
Speaker 1: overreaction and a lot of these tech prints, and I
19:45
Speaker 1: think it just speaks to what I view is an
19:48
Speaker 1: over souled tech tape in a complex macro. But I
19:51
Speaker 1: believe it sets up for what over the next quote
19:56
Speaker 1: three six nine months is going to be a significant
19:58
Speaker 1: rebound tech for the high quality tech games and obviously
20:02
Speaker 1: just this massive white knucle panics. I feel like it
20:06
Speaker 1: also matters who's doing the selling right. I love to
20:08
Speaker 1: quote Vanda Trakh, who has really made a name for
20:10
Speaker 1: themselves in terms of retail flows, and they said, every
20:13
Speaker 1: time they're selling, the selling is coming from institutional players.
20:16
Speaker 1: The buying is coming from retail players. What does that
20:19
Speaker 1: tell you about the significance of tech and portfolios right now? Well,
20:24
Speaker 1: I think it just shows it's a massive risk off
20:26
Speaker 1: at the same time. So we could say everyone owned
20:30
Speaker 1: the same names from an institutional perspective, and all of
20:33
Speaker 1: a sudden you head for the elevator at the same time.
20:35
Speaker 1: And it's just from a volume perspective. That's why we're
20:38
Speaker 1: seeing some of these moves, whether it's Netflix, Amazon or
20:41
Speaker 1: Lift today. But again during this you know, twenty two years,
20:45
Speaker 1: like I've seen the cycle before, and that's what happens,
20:49
Speaker 1: just in a panic macro where everyone kind of becomes
20:53
Speaker 1: an economist and they're trying to win up each other
20:55
Speaker 1: on rate hikes. All right, Dan, I am a Peloton user,
20:58
Speaker 1: not as much as I should, but a big Gen
21:00
Speaker 1: Sherman fan over here. Is there any future or what
21:04
Speaker 1: is the future for some of those classic pandemic stocks
21:08
Speaker 1: like Zoom, like Pelican, Pelton, like Docu signed. How do
21:13
Speaker 1: you think about those? You just have to wait till
21:14
Speaker 1: they wash out. Yeah, Imhamman Corp. But I will go
21:22
Speaker 1: every every vot, like every stock has a price, it
21:26
Speaker 1: goes know that anyone that's sold the house I mean,
21:28
Speaker 1: if you are about five percent one, that will about
21:30
Speaker 1: twenty you're gonna have. So I do believe it's getting
21:34
Speaker 1: washed out. In terms of what we're seeing. You will
21:36
Speaker 1: have M and A and ultimately, some of these business
21:39
Speaker 1: models are not going away. They're just going to go
21:42
Speaker 1: through a massive transformation. You're seeing a wash out in
21:46
Speaker 1: terms of the stock. You know, there's names like a
21:48
Speaker 1: Doctus Time, which we downgrade this week. I think that's
21:50
Speaker 1: one that's a work from home poster child evaluation still
21:54
Speaker 1: rich in our opinion, What's why we went to a
21:55
Speaker 1: cell So you're you're still gonna have price discovery here.
21:59
Speaker 1: But that's what you're seeing right now is that a
22:01
Speaker 1: lot of these names of basically just become institutional. Even
22:05
Speaker 1: some retail investors won't touch him. And that's why they've
22:08
Speaker 1: gone from the Golden child to ultimately ones that you know,
22:12
Speaker 1: no one will touch with a ten foot pole. But ultimately,
22:15
Speaker 1: as that price discovery takes effect, you'll see M and
22:18
Speaker 1: A and ultimately I think you'll see some of the
22:20
Speaker 1: evaluations get over extended on the sell off. All right, Dan,
22:25
Speaker 1: good stuff as always again kind of kind of kind
22:27
Speaker 1: of a little bit of a recap there on some
22:29
Speaker 1: of the big moves we've seen from these tech companies
22:31
Speaker 1: that we always like to check in with. Dan Eyes.
22:33
Speaker 1: He can give us the thirty foot few as well
22:35
Speaker 1: as deep dig, dive down deep into some of the numbers.
22:38
Speaker 1: Dan ives he's an equity research channel's managing director at
22:41
Speaker 1: web Bush Securities. All Right, it is FED day, um
22:48
Speaker 1: Bloomberg will have full coverage beginning at one pm Wall
22:50
Speaker 1: Street time. Tom Keen surveillance team will take you through it.
22:54
Speaker 1: Our next guest here as it relates to the FED, says,
22:56
Speaker 1: a good scenario for the FED is beginning to look
22:59
Speaker 1: as for called as bringing a jet liner down safely
23:02
Speaker 1: on the Hudson River. John Arthur's senior editor for Bloomberg Opinion,
23:08
Speaker 1: sullid got it done? Can our FED sherman get it done?
23:12
Speaker 1: I mean if he does, then he deserves to be
23:14
Speaker 1: played by Tom hankson uh And it could happen, but
23:18
Speaker 1: it is not very easy. I don't play you in
23:21
Speaker 1: the movie. John Arthur's sorry, who's going to play you
23:24
Speaker 1: in the movie? That would be that? That would be that,
23:29
Speaker 1: that would be Abert Robert Redford or or or Dustin
23:32
Speaker 1: Hoffman who at this age look a bit more like
23:35
Speaker 1: me than they did when they were in All the
23:36
Speaker 1: President's men anyway, I think them a soft landing is
23:42
Speaker 1: getting harder to achieve because inflation has lasted longer than expected,
23:49
Speaker 1: and because um, the labor market, as we saw from
23:53
Speaker 1: the Jolts numbers yesterday, really is very tight, and because
23:58
Speaker 1: the first quarter GDP numbers of very strange. But if
24:01
Speaker 1: the economy is already slowing down and the Fed still
24:05
Speaker 1: has to do a lot to bring in inflation, that
24:08
Speaker 1: doesn't all go well for engineering a soft landing. There
24:11
Speaker 1: hasn't been one, if you define a soft landing as
24:15
Speaker 1: being one with the FED gets through an entire hiking
24:18
Speaker 1: campaign without prompting a recession. Hasn't been one since ninety four,
24:21
Speaker 1: and that was the Avon Green spent hiking campaign that
24:24
Speaker 1: triggered the entire emerging market crisis the nineties. So you know,
24:28
Speaker 1: it's difficult. But you could say from inflation, I'm equity, guys,
24:33
Speaker 1: I'm always glass hair, for we've kind of peeked already
24:36
Speaker 1: from an inflation perspective, maybe last month. There's arguing in
24:38
Speaker 1: Maiden there when you look at use cars or whatever
24:40
Speaker 1: you want to look at there's there's certainly a very
24:44
Speaker 1: good argument that last month may well turn out to
24:48
Speaker 1: be the highest year on year headline number. UM. The
24:53
Speaker 1: mere fact that oil didn't continue to go up in
24:57
Speaker 1: the exponential, perfect straight line up it's last month compared
25:01
Speaker 1: to the month before improves the chance to that. The
25:04
Speaker 1: fact that April, May and June of last year were
25:07
Speaker 1: pretty bad months for inflation and those months drop off
25:10
Speaker 1: the base. Yes, it's it's reasonable to hope that the
25:14
Speaker 1: peak is in. That said, it's not a slam dunk.
25:17
Speaker 1: And if the if the numbers are slightly higher when
25:21
Speaker 1: they come out for for for April than they were
25:25
Speaker 1: for March, that's not going to be good. That's going
25:27
Speaker 1: to freak people out. More importantly, UM, at this point
25:33
Speaker 1: the peak is less important than this gets back to
25:37
Speaker 1: the landing analogy than the glide path down. Um. How
25:43
Speaker 1: quickly can inflation be brought down to a reasonable level.
25:48
Speaker 1: If it's three at the end of this year or
25:50
Speaker 1: three and a half, then befit has done a fantastic job,
25:53
Speaker 1: providing there hasn't been some awful crisis and things are
25:58
Speaker 1: on course even if this guilty high. If it's five
26:01
Speaker 1: and a half percent at the end of this year,
26:03
Speaker 1: we really have a problem. They're going to have to
26:07
Speaker 1: keep hiking to to to squelch inflation, and a recession
26:11
Speaker 1: at that point would be a certainty in the pothectical
26:15
Speaker 1: case that inflation is still five and a half for
26:17
Speaker 1: the end of this year. Well, inflation is one issue.
26:19
Speaker 1: Growth is the other. And we hear this all about
26:22
Speaker 1: all the time when it comes to the China context.
26:25
Speaker 1: But I'm curious about what reverses the Federal Reserve into easy.
26:31
Speaker 1: I mean, I know we're talking about an aggressive rate
26:33
Speaker 1: high crigion here. We're talking about first fifty basis point
26:35
Speaker 1: hikes six or basic team two thousand if my date right. Um,
26:42
Speaker 1: But but they will also have calls of a cut
26:45
Speaker 1: as soon as three How quickly will the Federal Reserve
26:50
Speaker 1: have to reverse course in light of these growth cons
26:52
Speaker 1: I can imagine the model here might be that you
26:56
Speaker 1: could get calls for cut in a matter of months.
27:00
Speaker 1: Radio audience. By the way, you know, I used to
27:02
Speaker 1: sit next to John Arthur's in the office and he
27:06
Speaker 1: taught me you have to look at historical precedents, which
27:08
Speaker 1: is why he's bringing up a historical precedent yes, from
27:12
Speaker 1: when Greety wasn't as old as as I am, I was, Yes,
27:16
Speaker 1: So so the long term capital management crisis. The fed's
27:20
Speaker 1: most recent move had been up. It wasn't in rates,
27:24
Speaker 1: it hadn't been in an aggressive hiking cycle, but it
27:28
Speaker 1: certainly didn't intend to cut. The long term capital managements debacle,
27:34
Speaker 1: in which the corporate credit market more or less frozen,
27:36
Speaker 1: completely prompted it into making a series of cuts, with
27:42
Speaker 1: all the consequences, I would argue is still living with today,
27:45
Speaker 1: that the Nastak went from a really hot bullmarket into
27:49
Speaker 1: a total historic bubble, largely as a result of of
27:52
Speaker 1: what happened then, and all of the monetary policy that
27:56
Speaker 1: led to two thousand and eight probably wouldn't have happened
27:59
Speaker 1: without that. So I can imagine pressure for cuts earlier
28:03
Speaker 1: than you know. When we started this whole pivot thing
28:06
Speaker 1: to our more hawkers FED, I think the market was saying, alright,
28:11
Speaker 1: three rate hikes probably in two. Now. I look at
28:14
Speaker 1: my w I r P function world interest rate probability,
28:18
Speaker 1: it's got eleven in the world called to work. It
28:21
Speaker 1: not only that, but that's the one we've already had
28:24
Speaker 1: that adds on to that the one that's already covered
28:28
Speaker 1: UH inflation. First of all, you did get some alarmingly
28:32
Speaker 1: hot inflation numbers at the end of last year, after
28:35
Speaker 1: during the summer it appeared that things had cooled off
28:37
Speaker 1: a bit. Then you had the FED minutes for December.
28:44
Speaker 1: At this point, if you if you look at a
28:46
Speaker 1: chart one of the you you are trying to explain
28:50
Speaker 1: why do things move like this? The FED minutes from
28:53
Speaker 1: the incredibly boring thing that comes out in a Wednesday
28:56
Speaker 1: afternoon in a miserable week in early January was probably
28:59
Speaker 1: the single most important one, because at that point nobody
29:03
Speaker 1: thought QT was in play really this year. And the
29:08
Speaker 1: fact that it announced that they were discussing when it
29:11
Speaker 1: would be relevant to start QUT and said that in
29:13
Speaker 1: as many words in the in the minutes, and that
29:16
Speaker 1: this has been a sort of little land mine that
29:18
Speaker 1: they laid earlier they wanted people to be hit with
29:21
Speaker 1: this in January, that that had an immense effect on
29:26
Speaker 1: on sentiment correctly, and then we've had heaven knows how
29:30
Speaker 1: many hot inflation numbers and hot employment numbers to increase that,
29:33
Speaker 1: to increase that, John, we have about thirty seconds. I'm
29:37
Speaker 1: gonna put you on the spot here negative yielding debt.
29:39
Speaker 1: There are only a hundred bonds left that have a
29:42
Speaker 1: negative yield, a lot of that coming out of Europe.
29:45
Speaker 1: A lot of this is also a result of the
29:47
Speaker 1: inflationary policy. Thirty seconds does that continue? Do those negative
29:51
Speaker 1: yielding bonds go extinct? I think they probably do fairly soon,
29:57
Speaker 1: and if they don't, we have a problem. If you're
29:59
Speaker 1: looking Europe. In many ways, that has been much more
30:03
Speaker 1: dramatic and much much further out of left field than
30:06
Speaker 1: what we've had in there in the US. German in
30:10
Speaker 1: expected inflation, inflation, brisk heavens from the bondmarket down now
30:13
Speaker 1: actually higher than they were than they are here in
30:16
Speaker 1: the States, the first time that's been true and well
30:19
Speaker 1: over a decade um. So that's where most of the
30:22
Speaker 1: negative yielding debties and I don't see how it can
30:25
Speaker 1: stay negative yielding must longer, all right, John Author's good
30:28
Speaker 1: stuff as always, John Author, Senior Editor, Bloomberg Opinion Racing,
30:31
Speaker 1: and I mean literally running into this Bloomberg Interactor Broker
30:34
Speaker 1: studio to get here to give us his thoughts. We
30:36
Speaker 1: always appreciate that. Thanks for listening to the Bloomberg Markets Podcast.
30:42
Speaker 1: You can subscribe and listen to interviews with Apple Podcasts
30:45
Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm
30:49
Speaker 1: on Twitter at Matt Miller three. Put on bos Sweeney
30:53
Speaker 1: I'm on Twitter at pt sweeney Before the podcast. You
30:56
Speaker 1: can always catch us worldwide at Bloomberg Radio