Latest / Bloomberg Intelligence / Argentina Has ’Passed The EM Test’ While Turkey Fails

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Argentina Has ’Passed The EM Test’ While Turkey Fails · Bloomberg Intelligence

0:05
Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox.
0:08
Speaker 1: Along with my co host Lisa Bramowitz. Each day we
0:11
Speaker 1: bring you the most important, noteworthy and useful interviews for
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Speaker 1: you and your money, whether you're at the grocery store
0:17
Speaker 1: or the trading floor. Find the Bloomberg p m L
0:20
Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. When
0:33
Speaker 1: will the pain in developing markets stop? Right now, we're
0:37
Speaker 1: looking at the ms c I Emerging Markets Currency Index
0:41
Speaker 1: dropping to a new low since two thousand seventeen in May,
0:47
Speaker 1: as people start to think what's next. We've got India,
0:50
Speaker 1: We've got Indonesia. Well, China go joining us now? Eric Fine,
0:54
Speaker 1: very pleased to say portfolio manager focusing on emerging markets,
0:59
Speaker 1: particularly fixed didn't come dear to my heart at Vaneck
1:02
Speaker 1: Global here with us in our eleven three oh studios. Eric,
1:05
Speaker 1: thank you so much for being here in your quarter
1:08
Speaker 1: century of experience with developing markets from Morgan Stanley and
1:12
Speaker 1: at Vanak. What period are we in right now? What
1:16
Speaker 1: period is analogous to it in history? Sure? Well, first
1:19
Speaker 1: of all, we're in an experimental period, right so quantitative
1:22
Speaker 1: easing is an experiment UM and so uh. Referring back
1:26
Speaker 1: to history is tricky, but UM my short answer is
1:28
Speaker 1: it feels like a lot like UM that there was
1:32
Speaker 1: a period of leverage that um um an unwanted or
1:36
Speaker 1: a tightening and policy began with the FED. It began
1:38
Speaker 1: to have repercussions around the world. Some of them didn't
1:41
Speaker 1: seem major, didn't seem that important at the time, Mexico
1:45
Speaker 1: or UH. In the case of ninety seven Thailand, Thailand's
1:49
Speaker 1: really not that important a place, and yet it cascaded
1:52
Speaker 1: and didn't stop until the FED back down. So if
1:55
Speaker 1: you see a cascading pain, I mean, are we a
1:58
Speaker 1: quarter of the way through here? Or are we three
2:01
Speaker 1: quarters of the way through? What do you think? Yeah?
2:03
Speaker 1: Quarters are not? You know, I think right now is
2:07
Speaker 1: observing and storytelling time, right. I mean, I was a
2:09
Speaker 1: south side economist, so I can get into numbers if
2:11
Speaker 1: you want to. So I'm more comfortable saying we're still
2:13
Speaker 1: in the first half of this UM. And So, for example,
2:16
Speaker 1: in Turkey, UM after the big it was about a
2:19
Speaker 1: month ago, the big eight percent ten percent sell off
2:21
Speaker 1: in the lira. Positioning into that was unchanged, right, so
2:26
Speaker 1: people hadn't really reacted to that and there and still
2:29
Speaker 1: to this day, I don't think a lot of volume
2:30
Speaker 1: has gone through the numbers on the screen on a
2:32
Speaker 1: name like Turkey. Maybe spot effects, but there's a lot
2:35
Speaker 1: of those interest rate levels you see, not a lot
2:37
Speaker 1: of transacting, so it looks like a thing, but um,
2:40
Speaker 1: it's a we're in a we're in a different world.
2:42
Speaker 1: So not a lot of people sold despite this, which
2:45
Speaker 1: is why I think the pressures are still there. You
2:47
Speaker 1: owned no Turkey, correct we You know, I'm an old
2:51
Speaker 1: style guy. If I don't if we don't like something,
2:54
Speaker 1: if our process tells us not to own it, we don't.
2:56
Speaker 1: We don't own it um because we think the losses
2:59
Speaker 1: can be significantly around research more Sandy Argentina was of
3:04
Speaker 1: the hard Currency Index, and that sounds crazy from today's perspective,
3:07
Speaker 1: but that was a fact. That's what you know. The
3:08
Speaker 1: industries were small, ast and new. We we thought that
3:11
Speaker 1: they were default. That was interesting, but not a really
3:14
Speaker 1: unique view. A few other people thought, but we zero
3:16
Speaker 1: weighted it. That was very formative to me. If you
3:18
Speaker 1: think if we if we don't like something, and there
3:21
Speaker 1: you're really faced with capital losses. We think the buyer
3:23
Speaker 1: should be to really avoid it and not worry that
3:25
Speaker 1: it's a big part of an index. Okay, so if
3:28
Speaker 1: that is the case, I mean the way you're talking
3:29
Speaker 1: about I'm old school that way. The one reason perhaps
3:33
Speaker 1: that you're saying that is because indexing has absolutely exploded
3:37
Speaker 1: and a lot of people have gotten into emerging markets,
3:39
Speaker 1: have done so through E t F and other index strategies,
3:42
Speaker 1: and they own a lot of things that they may
3:44
Speaker 1: not believe in. How will that change the dynamic in
3:47
Speaker 1: this emerging markets sell off? Yes, well, indexing his First
3:51
Speaker 1: of all, it's given investors access to things two products
3:54
Speaker 1: that they haven't had, and in general average US pension
3:56
Speaker 1: fund has three percent allocating emerging markets bonds. If you
3:59
Speaker 1: look back where it's just the dollar index, you're supposed
4:02
Speaker 1: to have a lot more. So it's served a real purpose.
4:05
Speaker 1: But I think in terms of market structure, what it
4:07
Speaker 1: will mean for specific countries like a Turkey, is when
4:11
Speaker 1: things seem as if they've gone bad, but you look
4:14
Speaker 1: on the screen and it doesn't look that bad, don't
4:17
Speaker 1: think it's over. That's my main message. It's not that
4:20
Speaker 1: they're bad, it's just that for specific countries it can
4:23
Speaker 1: create an appearance that things have stabilized when they really haven't.
4:27
Speaker 1: And so in a country like Turkey, I think there's
4:28
Speaker 1: a real chance that we get to capital controls. If
4:31
Speaker 1: you get to capital controls, the numbers on the screens
4:33
Speaker 1: right now, which I'm saying should be a doubted um um,
4:37
Speaker 1: all of a sudden become undoubted because there's essentially nothing
4:40
Speaker 1: on there and you have to So that's the real concern.
4:43
Speaker 1: It's not an overall process. They're providing real opportunities for
4:46
Speaker 1: people wouldn't access great things like in general emerging market
4:49
Speaker 1: bonds have done well. Um, it's that for specific countries
4:52
Speaker 1: that can create complacency, uh when when it's unwarranted. I
4:56
Speaker 1: think it's very much the case in Turkey. Interesting, so
5:00
Speaker 1: do invest in emerging markets? So it sounds like you
5:02
Speaker 1: do have a somewhat negative view of the asset class
5:06
Speaker 1: that you focus on. Where are you positive? Sure? Well,
5:09
Speaker 1: So when I say that it's well for a big
5:12
Speaker 1: part of the reason why I'm cautious right now is
5:14
Speaker 1: the names that I see adversity where I'm expecting adversity
5:17
Speaker 1: happen to be big names. So when people ask about
5:19
Speaker 1: quote unquote emerging markets, they're not asking me about my
5:22
Speaker 1: view of Mongolia or Armenia or b l a Ruse
5:25
Speaker 1: or Argentina, and sometimes on Argentina, they're asking me about
5:28
Speaker 1: big names like Mexico. Well they had an election. We
5:31
Speaker 1: think Omlo needs to be tested as new president. Um
5:34
Speaker 1: uh does that mean you're I don't have a lot
5:38
Speaker 1: of explosion and I'm looking to get exposure there um
5:41
Speaker 1: Um Russia economic policy is great, but sanctions risk is there?
5:44
Speaker 1: Um A Turkey. I've already explained our view on Turkey.
5:47
Speaker 1: Those are big names, so to be. So that's once
5:50
Speaker 1: the spirit in which I'm answering it. So what are
5:52
Speaker 1: we what are we excited about? Um? Argentina, Argentina government, Argentina.
5:58
Speaker 1: You could describe what's happening to merging markets as a test.
6:01
Speaker 1: Some countries are passing, some countries are failing. Now the
6:04
Speaker 1: test is not just one test. You take a few
6:06
Speaker 1: of them, but every single test, in my opinion, that
6:08
Speaker 1: Turkey has taken in this they failed. They are not
6:11
Speaker 1: looking like their their prospects are not looking good. Argentina,
6:14
Speaker 1: in our opinion, has passed all these tests. They floated
6:17
Speaker 1: the exchange right, not enough, But you know what, I
6:19
Speaker 1: just don't invest too much in the exchange rate if
6:21
Speaker 1: that's your concern, if you think it needs to go more.
6:23
Speaker 1: But they've tried to quasi float the exchange. They've hiked
6:26
Speaker 1: interest rates to double the inflation rate, Turkeys contemplating hiking
6:29
Speaker 1: interest rates to the inflation rate. Um. And they've invited
6:33
Speaker 1: the i m F, which means dollar funding is really
6:36
Speaker 1: just not the risk. So I'm not at I'm not
6:37
Speaker 1: saying Argentina currency is out of the woods. And but
6:40
Speaker 1: when you're under an i m F program and you're
6:42
Speaker 1: committed and you're reacting the right way, yields for government
6:45
Speaker 1: bonds and dollars is too high, and higher for provinces
6:49
Speaker 1: that haven't had a head track record of defaulting is
6:51
Speaker 1: too high. So Argentina, we're very excited about year Argentina
6:54
Speaker 1: and funds too much spread duration. You're not trading Argentina
6:57
Speaker 1: there So as bullish as I am on Argentina, when
6:59
Speaker 1: you get into spread duration, you're trading a whole bunch
7:01
Speaker 1: of other things that are not the original thing. Um um.
7:04
Speaker 1: I'd also say Chinese property right people are worried. You know,
7:07
Speaker 1: it's not this general e m thing we have been
7:09
Speaker 1: We have not avoided China because we thought there was
7:12
Speaker 1: going to be a disaster that we avoided China. We
7:14
Speaker 1: didn't see value there Now due to these pressures, some
7:16
Speaker 1: of their property names corporates have are very yielding now
7:20
Speaker 1: and a lot of them have high cash to short
7:22
Speaker 1: term liabilities. So that's an attractive sector where you might
7:25
Speaker 1: see negative news about, but we're excited by because they're
7:29
Speaker 1: responding positively, the government's responding positively, and the companies have
7:32
Speaker 1: buffers these high cash So we're not afraid of risk.
7:34
Speaker 1: We're we're We're just saying that a lot of things
7:37
Speaker 1: that get associated with quote unquote emerging markets UM happen
7:41
Speaker 1: to be vulnerable. And the fact that in the old
7:44
Speaker 1: days under not liking something meant not owning. In these
7:47
Speaker 1: days not liking it ment, well, I have to have
7:49
Speaker 1: some because it's yield. We're in a quee environment UM
7:52
Speaker 1: means that there can be some complacency in certain names.
7:55
Speaker 1: So don't get comforted by O. G. Turkey look stable.
7:57
Speaker 1: I wouldn't get comforted by that. Eric Fine, you'll have
8:00
Speaker 1: to come back a pleasure speaking with you. Eric Fine,
8:03
Speaker 1: portfolio manager focusing on emerging markets fixed income strategy for
8:07
Speaker 1: Van Eck Global here in our eleven three oh studios,
8:10
Speaker 1: fantastic inside at a time when a lot of people
8:13
Speaker 1: are trying to figure out just where we are in
8:15
Speaker 1: this emerging markets sell off, how pervasive will be? How
8:18
Speaker 1: tied is it to the Federal Reserve. CBS shares down
8:37
Speaker 1: more than three percent today after less Moonvest, the longtime
8:42
Speaker 1: chief executive officer and kingpin of the media industry, was
8:46
Speaker 1: ousted after sexual harassment claims. What will be the future
8:50
Speaker 1: of this company? Who will be the leader to really
8:53
Speaker 1: take the place of less Moon Vest? Joining us now?
8:55
Speaker 1: Porter bib managing partner at Media Tech Capital Partners, also
8:59
Speaker 1: the first publisher of Rolling Stone magazine in New York. Porter,
9:03
Speaker 1: thank you so much for being with us. So how
9:06
Speaker 1: big of a blow is this to CBS. Well, it's
9:11
Speaker 1: a very big blow to less Moon Viz. But it's
9:14
Speaker 1: very little to CBS in the bigger picture of things,
9:18
Speaker 1: because Uh National Amusement and the Redstone Interest control both
9:23
Speaker 1: Vehicom and CBS and have indicated for several years that
9:27
Speaker 1: they want to sell both companies. Sherry Rhodes Spreadstone obviously
9:32
Speaker 1: tried to put them together. Less Moon Viz fought that
9:35
Speaker 1: because she would not commit to have him run the
9:38
Speaker 1: combined companies, which interestingly as as a single entity put
9:44
Speaker 1: back together the way they were before Sumner Redstone split
9:48
Speaker 1: them up eight years ago. Um, they would be worth
9:52
Speaker 1: twenty to more than they are worth individually a standalone.
9:57
Speaker 1: So really he was on the right trail. Becau is
10:00
Speaker 1: there's so much redundancy, duplication of efforts and initiatives and
10:04
Speaker 1: organizational structures. And what the CBS doesn't have Vehacom does,
10:11
Speaker 1: what Vehcom doesn't have CBS does. CBS has no real
10:16
Speaker 1: international presence, It has no real movie studio or very
10:21
Speaker 1: significant motion picture library that Paramount Pictures of in Vehcom offers. UH.
10:28
Speaker 1: CBS has the broadcast networks, the broadcast content and archives
10:33
Speaker 1: and less moons has been very effective. Moving the company
10:37
Speaker 1: into over the top and streaming and CBS All Access
10:42
Speaker 1: CBS News UH has been quite successful. Well, what I
10:46
Speaker 1: guess that that I'm wondering. I'm looking at Viacom shares
10:49
Speaker 1: and they're little change today after being down for the
10:51
Speaker 1: two sessions prior, and CBS shares, as we said, are
10:55
Speaker 1: down more than three What is the market missing that
10:58
Speaker 1: you're seeing with respect to the added value that these
11:01
Speaker 1: combined companies will have. Well, I I think what what
11:05
Speaker 1: is happening today in the market is shareholders are are saying,
11:09
Speaker 1: we're losing one of the best, uh and most effective
11:13
Speaker 1: managers in the media business. Ever, less Moonvous has done
11:18
Speaker 1: an incredible job in the fifteen years since he's been
11:21
Speaker 1: the senior executive at at CBS. He's really uh fought
11:26
Speaker 1: the transition and landscape earthquakes that have been going on
11:31
Speaker 1: in legacy media companies. He's kept CBS on top of
11:36
Speaker 1: all the broadcast networks for a long time. And they're
11:40
Speaker 1: saying without less Uh, they don't know Joe Ianello, who's
11:44
Speaker 1: been less his right hand man for almost a decade. UM,
11:48
Speaker 1: they don't know what's going to happen to the company,
11:50
Speaker 1: and they're they're not looking at it as a takeover target.
11:55
Speaker 1: That's what Sherry Redstone has had that in her mind
11:58
Speaker 1: for the last several years, cleaned house at AT with
12:02
Speaker 1: Phil Domont and others who left UM, put Bob Pacissions
12:07
Speaker 1: in charge, and prepared for a takeover of the combined companies.
12:12
Speaker 1: Nobody's focusing on that right now because curiously, one of
12:17
Speaker 1: the board decisions that came out last night when they
12:21
Speaker 1: decided made the announcement about less Moon Voo's departure. They
12:26
Speaker 1: announced that Sherry Redstone has agreed to a two year
12:29
Speaker 1: hiatus and won't push combining vih Com and CBS. I
12:34
Speaker 1: don't know if that's enforceable. The bottom line, the asterisk
12:39
Speaker 1: on that whole announcement was, but if anybody else wants
12:43
Speaker 1: to promote a combine vehicle CBS, you do, there will
12:47
Speaker 1: need still be no objection by the board. Um almost
12:51
Speaker 1: trying to say, please come in here and rescue me
12:53
Speaker 1: so that I can stay out of it, right, instead
12:54
Speaker 1: of avoid the political fallout, I guess that I'm wondering
12:57
Speaker 1: when you talk about the vision of lesser moonvest is
13:00
Speaker 1: the vision that is required from your perspective for CBS
13:04
Speaker 1: over the upcoming decade or so during a nearly unprecedented
13:09
Speaker 1: shift transformation of the entire media industry. Right. Well, there's
13:13
Speaker 1: one word that answers your question. It's called scale. CBS
13:17
Speaker 1: and Viacom, neither of them, individually or collectively combined, has
13:23
Speaker 1: the scale to compete with the the tech giants, with Amazon,
13:27
Speaker 1: with Google, with Facebook, with Microsoft, um or or with
13:31
Speaker 1: Disney now, which is with with their acquisition of twenty
13:35
Speaker 1: one century Foxes entertainment assets, They're they're going after Sky
13:40
Speaker 1: and they will end up getting Sky in the UK.
13:43
Speaker 1: UM they're going to be a major streaming factor along
13:48
Speaker 1: with the tech giants, and CBS and Viacom individually or
13:51
Speaker 1: collectively cannot compete in that market. Who is going to
13:54
Speaker 1: be in a position to take up Sherry Redstone's suggestion
13:57
Speaker 1: and try to push for this merger sooner than later. Well,
14:00
Speaker 1: it's curious Verizon has already articulated an interest in CBS.
14:07
Speaker 1: One of the board members right now, Bruce Gordon, is
14:10
Speaker 1: a former senior Verizon executive, and I'm sure they are.
14:14
Speaker 1: He's talking to Verizon assiduously and figuring out whether or
14:19
Speaker 1: not this is the right time. Verizon claims that they're
14:23
Speaker 1: focused on developing five G, the new um streaming service
14:28
Speaker 1: that's going to revolutionize wireless communications and the Internet, but
14:33
Speaker 1: they don't have any content, and their competition at over
14:37
Speaker 1: at A T and T bought Time Warner and does
14:40
Speaker 1: have content. So I think that Verizon is in first
14:43
Speaker 1: position to combine with CBS and or Vehicom Porter BIB,
14:48
Speaker 1: thank you so much for being with us today, definitely
14:50
Speaker 1: important to follow what's happening with this media saga that
14:54
Speaker 1: has entered a new phase without Blessed Moon. Vest Apple
15:14
Speaker 1: shares down today for a fourth straight day, the biggest
15:17
Speaker 1: four day slump since April. This comes after the company
15:21
Speaker 1: said that it would have to raise prices on certain
15:24
Speaker 1: products in response to the additional tariffs at President Trump
15:28
Speaker 1: has proposed on Chinese goods joining us now. David Garty,
15:32
Speaker 1: I'm very pleased to say, Chief executive officer of g
15:34
Speaker 1: v A Research, David, what do you take away from
15:38
Speaker 1: Apple's announcement about having to raise prices on certain products?
15:42
Speaker 1: Most is that Apple did not in those list of
15:46
Speaker 1: products include the iPhone, which says, I mean, here's the company,
15:49
Speaker 1: the product the iPhone provides the bulk of the company's
15:52
Speaker 1: revenues and profits. They said it wasn't going to be
15:54
Speaker 1: impacted by tariffs, which to me, I read that as
15:57
Speaker 1: saying that they're going to eat the higher costs that
15:59
Speaker 1: the tariffs would impact. The tariff effect would have on
16:03
Speaker 1: Apple in terms of its manufacturing. As you know, Apples,
16:06
Speaker 1: a global company, has substantial operations in China. The Trump
16:10
Speaker 1: administration coming out and levying tariffs on almost all the
16:14
Speaker 1: imports that are coming into the US from China. This
16:17
Speaker 1: is an effect that you know, manufacturers that use global
16:20
Speaker 1: supply chains like Apple can't offset overnight. And as a result,
16:25
Speaker 1: Apple is saying that with respect to the iPhone and
16:27
Speaker 1: the higher tariffs, they're going to eat the costs, which
16:30
Speaker 1: means that they won't pass through these costs to their consumers. However,
16:35
Speaker 1: in other cases where the company is said in the
16:37
Speaker 1: case of iPods, in the case of accessories, prices will
16:41
Speaker 1: be going up. So but here's what I'm struggling with.
16:44
Speaker 1: I mean iPods. Who has an iPod these days? Right?
16:46
Speaker 1: These are all sort of the peripheral products of Apples.
16:49
Speaker 1: What does it say about their confidence levels that they
16:55
Speaker 1: is it perhaps that they don't have the pricing power
16:57
Speaker 1: to to do that with the iPhone, or that that they,
17:00
Speaker 1: uh say, are feeling more vulnerable in a time of
17:03
Speaker 1: increasing competition with smartphones that they don't want to touch that. Well,
17:07
Speaker 1: you are in a situation where in the smartphone market
17:09
Speaker 1: growth has essentially plateaued. Uh, there is a battle for
17:12
Speaker 1: market share. Don't forget Samsung is out there. Uh, Samsung
17:16
Speaker 1: itself with very large operations in Korea, not necessarily in China.
17:20
Speaker 1: Apple has to consider what's its competitive positioning, and obviously
17:24
Speaker 1: iPhone sales drive the sales of many other products for Apple.
17:28
Speaker 1: So for Apple to say essentially, look, we're going to
17:31
Speaker 1: eat the costs on this so we can hold onto
17:33
Speaker 1: our market share, this is what they're doing. I think
17:36
Speaker 1: the bigger picture, though, that we have to take away
17:39
Speaker 1: from looking at what Apple is saying and what Ford
17:41
Speaker 1: Motor Company are saying, is that they have optimized their
17:45
Speaker 1: operations to operate in a global market. Imposing tariffs um
17:50
Speaker 1: requires changes in supply chains that can't be made overnight.
17:53
Speaker 1: These require substantial capital investments, which are done over years.
17:57
Speaker 1: What it really means at the end of the day
17:59
Speaker 1: is that if probably are going up so much, these
18:02
Speaker 1: companies are going to limit what consumer choices. Look at
18:04
Speaker 1: what Ford Motor Company did in terms of saying, we're
18:07
Speaker 1: not selling passenger cars in the US anymore. The costs
18:10
Speaker 1: are too high. Tariffs are making it worse Oracle and
18:13
Speaker 1: Hewlett Packard enterprises in the common period. President Trump about
18:17
Speaker 1: some of these tariffs, said that if they go through,
18:21
Speaker 1: it would impede America's leadership when it comes to creating
18:25
Speaker 1: a five GEN network. Do you think that's true. I
18:28
Speaker 1: would argue that again, global supply chains matter, and in
18:31
Speaker 1: this case, we have components that are important for the
18:34
Speaker 1: adoption of things like five G. Five G as a
18:37
Speaker 1: wireless broadband protocol arguably is going to usher in a
18:41
Speaker 1: new generation of services. If the US wishes to fall
18:45
Speaker 1: further behind in terms of being technologically competitive, fine go ahead.
18:50
Speaker 1: Delay the implementation of five G will only all suffer
18:53
Speaker 1: as a result. So you don't think this is just
18:55
Speaker 1: an issue of the company is throwing threats out there
18:58
Speaker 1: in order to get their wish, which is to get
19:00
Speaker 1: these tariffs taken off the table. I don't believe the
19:03
Speaker 1: companies make idle threats. I mean, companies are talking about
19:06
Speaker 1: capital planning processes that again take years to implement, and
19:11
Speaker 1: for an administration to come out and expect that companies
19:14
Speaker 1: at the not the drop of a hat, are going
19:17
Speaker 1: to be able to turn around and reconfigure themselves. That's
19:21
Speaker 1: just blatantly unrealistic. So how much do you think that
19:24
Speaker 1: big tech in the U s would sell off if
19:26
Speaker 1: these tariffs go through as promised? Well, I mean we're
19:29
Speaker 1: already looking in a situation where people are saying that
19:31
Speaker 1: Apple probably from about two seventeen a share right now
19:34
Speaker 1: probably pulls back maybe below two hundred dollars a share. UM,
19:38
Speaker 1: so you're probably looking at something in the order of
19:40
Speaker 1: maybe about a ten to fifteen percent correction, potentially depending
19:44
Speaker 1: upon the company and depending upon how exposed they are
19:46
Speaker 1: relative to their supply chains in China. I have to
19:48
Speaker 1: wonder how people are gonna start talking about peak tech,
19:51
Speaker 1: especially now. If you look at for example, Snap, one
19:53
Speaker 1: of the hottest I p O s of last year,
19:56
Speaker 1: declining shares reaching a low. You smile a little bit
19:59
Speaker 1: because putting Apple ins Snap in the same sentence as
20:01
Speaker 1: sort of a little bit ridiculous. But their chief strategy
20:03
Speaker 1: officers leaving, who really helped, you know, create this company.
20:09
Speaker 1: Do you think that's significant or do you think this
20:11
Speaker 1: is just a company that's sort of out there? And
20:13
Speaker 1: I mean Snap is a company that obviously Facebook wanted
20:15
Speaker 1: to emulate all their features, uh, and I would argue
20:18
Speaker 1: that there is greater competition taking place there. But in
20:20
Speaker 1: terms of talking about peak tech, I mean the fact
20:23
Speaker 1: that the stock market, now ten years after the collapse
20:25
Speaker 1: of Lehman Brothers, is up off it's two thousand seven highs.
20:29
Speaker 1: A big portion of that has been due to tech.
20:31
Speaker 1: And to the extent if we're calling peak tech, are
20:34
Speaker 1: we really calling peak stock market? Well, what's the answer.
20:38
Speaker 1: It's something that we're going to have to contend with.
20:40
Speaker 1: And the extent that the administration decides to take on
20:43
Speaker 1: China and put the tech industry in the crosshairs certainly
20:47
Speaker 1: puts the stock market at risk. And lord knows, the
20:49
Speaker 1: President is someone who likes to trumpet the fact that
20:53
Speaker 1: there are a new stock market high intended as your
20:56
Speaker 1: eyes told me so. In other words, you do think
20:58
Speaker 1: that should these tariffs go through, if I'm reading through
21:00
Speaker 1: the through the lines, if these tariffs go through, there's
21:03
Speaker 1: a good chance that tech will sell off in a
21:06
Speaker 1: meaningful way and lead to sort the end of this
21:09
Speaker 1: equity rally. I mean, there are other data data points
21:11
Speaker 1: that are out there. Golden Sacks last week come out
21:13
Speaker 1: and said that their bear market warning indicator is at
21:16
Speaker 1: the highest level we've seen since nineteen. They said it
21:19
Speaker 1: may not necessarily lead to an immediate crash, but expect
21:21
Speaker 1: a flattening of returns from equities. Certainly, these tariffs are
21:25
Speaker 1: going to contribute to that, David Garretty, always a pleasure
21:28
Speaker 1: having you on. Thank you so much for being with me.
21:30
Speaker 1: Thank you, David Garretty, chief executive of g v A Research.
21:50
Speaker 1: Depending on how you measure the world of cryptocurrencies, they
21:54
Speaker 1: have lost hundreds of billions of dollars of market value
21:58
Speaker 1: over the past six seven eight months. Joining us now
22:02
Speaker 1: to talk about this is Aaron Brown, columnist with Bloomberg Opinion,
22:05
Speaker 1: also former managing director and head of Financial market Research
22:09
Speaker 1: at a q R Capital Management. Aaron, I'm so pleased
22:12
Speaker 1: you could join us today. I would love to get
22:15
Speaker 1: your take on the sell off that we've been seeing
22:17
Speaker 1: in cryptocurrencies. Do you think that this is sort of
22:21
Speaker 1: marking the end of the fad of bitcoin and other
22:24
Speaker 1: cryptocurrencies or it's just another hiccup that it will that
22:28
Speaker 1: that will see in the rear view mirror in a
22:30
Speaker 1: couple of years. Um. What's really puzzling about this sell
22:34
Speaker 1: off is why it's a big news story, why we're
22:36
Speaker 1: even having this interview. UH crypto fail from an intra
22:40
Speaker 1: day high to an inter day low six last week,
22:44
Speaker 1: and the average it does in an average week is
22:46
Speaker 1: fourteen percent. This is a security with a six percent
22:50
Speaker 1: daily standard deviation. So it's roughly six times as volatile
22:53
Speaker 1: as the spire and we wouldn't be talking about the
22:56
Speaker 1: SMP five Hendred going down two or three percent in
22:58
Speaker 1: a week as a falling off a cliff for its
23:01
Speaker 1: testing new loads. We're not testing new loads. For the
23:03
Speaker 1: year we had bigger selloffs and lower prices every single month.
23:08
Speaker 1: I'm sorry, we've had bigger selloffs every single month this year,
23:11
Speaker 1: and we've had lower prices every year, every every month
23:13
Speaker 1: since April um. I think this is a non story.
23:16
Speaker 1: I think somehow people who were paying a lot of
23:19
Speaker 1: attention to bitcoin and cryptocurrencies took a look and said,
23:23
Speaker 1: my gosh, this is volatile. It's a lot more volatable
23:25
Speaker 1: in the stock market. That's true. That's been truson as
23:28
Speaker 1: they were introduced in two thousand nine. You know, I
23:31
Speaker 1: think that you raise an interesting point, which is these
23:33
Speaker 1: are volatile. They will continue to be volatile. Uh So
23:36
Speaker 1: why do we talk about the volatility? And I think
23:38
Speaker 1: that it comes as the Securities and Exchange Commission in
23:41
Speaker 1: particular goes after an increasing number of crypto companies. I
23:47
Speaker 1: want to just use a pretty broad term here, the
23:49
Speaker 1: latest being that they temporarily suspended treading in the Bitcoin
23:54
Speaker 1: Tracker one and ether Tracker one, these two cryptocurrencies on yesterday.
23:59
Speaker 1: This was so this I think people are looking at
24:02
Speaker 1: perhaps regulators taking a stronger stance with this. Mean, what
24:07
Speaker 1: do you say about that? Yeah? I think, um, there
24:11
Speaker 1: were two So there was that SEC. There was also
24:14
Speaker 1: an SEC shutting down the Frost Penny stock pump and dump.
24:19
Speaker 1: Neither of these actions have anything to do with cryptocurrencies
24:22
Speaker 1: other than or anything essential. The penny stock was a
24:26
Speaker 1: classic penny stock pump and dump. It just happened that
24:29
Speaker 1: it was run by some people who were strong bitcoin bowls.
24:33
Speaker 1: And the two funds that were shut down or suspended,
24:35
Speaker 1: they weren't shut down had nothing to do with the
24:38
Speaker 1: fact they had crypto h It had everything to do
24:40
Speaker 1: with the fact that their legal documentation conflicted with their
24:44
Speaker 1: offering documents, and the offering documents and legal documentation conflicted
24:47
Speaker 1: with what the brokers were representing them as. This was
24:51
Speaker 1: pure legal sloppiness on the part of the issuers hopefully
24:54
Speaker 1: won't turn out to have been criminality, just sloppiness, and
24:57
Speaker 1: it would have been shut down if they had been
24:59
Speaker 1: olding goal their stocks or anything else. It was doing
25:02
Speaker 1: was pure infect What's amazing about pet story is that
25:06
Speaker 1: these things created since two thousands fifteen and got up
25:08
Speaker 1: an as deck uh without somebody actually reading and noticing
25:12
Speaker 1: these major discrepancies in the documentation. I guess that the
25:16
Speaker 1: other thing that sort of got my attention this morning
25:19
Speaker 1: and why I did sort of pay a little bit
25:21
Speaker 1: more notice to the sell off was that the founder
25:25
Speaker 1: co founder of Ethereum of Metallic Boudin, was speaking with
25:29
Speaker 1: Bloomberg and said, you know, we may have seen the
25:33
Speaker 1: days of explosive growth in the blockchain industry. We may
25:36
Speaker 1: have seen those already, and going forward, this is going
25:39
Speaker 1: to be a much slower grind with a lot less hype.
25:43
Speaker 1: And you know, how does that affect an industry that
25:46
Speaker 1: has been driven by hype? Um, Okay, the industry is
25:50
Speaker 1: not driven by hypes. I want to correct that the
25:53
Speaker 1: actual code base and UH and and UH data that
25:58
Speaker 1: are driving the blockchain that has been grown going steadily
26:00
Speaker 1: and quality and quantity by developers who are not looking
26:04
Speaker 1: at the daily price charts. It's true, two thousands seventeen
26:08
Speaker 1: was a year of hype, and we've had we had
26:10
Speaker 1: them before. Also in two thousand twelve and two thousand thirteen. UM.
26:13
Speaker 1: And the hype was driven, in my opinion, primarily by
26:16
Speaker 1: the idea that institutional investors and retail investors were just
26:20
Speaker 1: waiting for some regulatory and infrastructure changes and they would
26:23
Speaker 1: pour billions and billions, hundreds of billions of dollars into crypto.
26:27
Speaker 1: And I turned on to be true. The legal barriers
26:30
Speaker 1: were uh fixed, and the infrastructures built, and nobody came
26:35
Speaker 1: to put in any anywhere near that kind of money.
26:38
Speaker 1: But that has nothing to do with the long term
26:40
Speaker 1: economic case for bitcoin, the five ten year idea that
26:43
Speaker 1: cryptocurrencies are going to be a very important part of
26:46
Speaker 1: the economy to come. UM. The ethereum comments that that
26:51
Speaker 1: we're not going to see another thousand percent increase. Uh,
26:55
Speaker 1: that's you know, not too unreasonable giving the size of
26:58
Speaker 1: the crypto market. UM. I think that's what if you're
27:01
Speaker 1: a bull, you're saying, okay, we got another thousand percent tog,
27:03
Speaker 1: we got another ten time increase, and that would bring
27:06
Speaker 1: crypto to sort of what seems like a reasonable part
27:10
Speaker 1: of the economy on fundamental grounds. UM. So if you're
27:12
Speaker 1: hoping for ten thousand or a hundred thousand percent return
27:15
Speaker 1: and that's probably out of the question, but it always
27:18
Speaker 1: likes Aaron Brown. Love having your real speak. Thank you
27:23
Speaker 1: so much for joining me today. Aaron Brown is a
27:25
Speaker 1: columnist for Bloomberg Opinion. He's also a former managing director
27:28
Speaker 1: and head of Financial market Research at a q R
27:31
Speaker 1: Capital Management. Helping to put the bitcoin sell off into
27:35
Speaker 1: some perspective, also bringing down a whole bunch of other
27:39
Speaker 1: crypto assets with it. Definitely a volatile asset class that
27:43
Speaker 1: continues to see a lot of volatility. Thanks for listening
27:50
Speaker 1: to the Bloomberg P and L podcast. You can subscribe
27:53
Speaker 1: and listen to interviews at Apple Podcasts, SoundCloud, or whatever
27:57
Speaker 1: podcast platform you prefer. I'm pim Fox. I'm on Twitter
28:01
Speaker 1: at pim Fox. I'm on Twitter at Lisa Abramo. It's
28:04
Speaker 1: one before the podcast. You can always catch us worldwide
28:07
Speaker 1: on Bloomberg Radio.