August 11, 2023 • 44 mins
From the renewed and growing power of American organized labor to the case for minting a $1 trillion coin to end debt-ceiling brinkmanship once and for all, Bloomberg’s Odd Lots podcast has tried to tackle some of the most important topics related to the economy and financial markets. From Modern Monetary Theory to Bidenomics, the show hasn’t found a topic it can’t chew on.
Now, the podcast’s hosts get the chance to answer some questions instead of asking them. Tracy Alloway and Joe Weisenthal joined the What Goes Up podcast to give their takes on some of the hot-button issues of the day.
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Episode Transcript
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Speaker 1 (00:14):
Hello, and welcome to What Goes Up, a weekly markets podcast.
My name is Mike Reagan. I'm a senior editor at Bloomberg.
Speaker 2 (00:21):
And I'm Wildonna high Across asset reporter with Bloomberg.
Speaker 1 (00:24):
And this Weekvil Donna, a very special episode shows up.
You know, when I was a kid in the seventies
and eighties, the best TV was always the crossover events.
Speaker 2 (00:33):
Are you sure it was this the eighteen seven Yeah?
Speaker 1 (00:35):
I knew that was coming old shaming as usual, but
I had to google it to figure out what the
best crossover okay, TV episodes ever were. Do you know
what The first one? I think was No Superman on
I Love Lucy in nineteen fifty seven. How about that? Yeah?
I was not around for that, but I was around
for The Jetsons meet the Flintstones. That was a thing,
you remember that, the Jetsons meet. I don't know how the
(00:57):
Jetsons could have met the Flintstone. It doesn't seen logical.
Speaker 2 (01:01):
Yeah, because one is future one is past.
Speaker 1 (01:03):
Right. Yeah, so here's one of your generations, I think, Okay,
the Sweet Life of Hannah Montana. You remember that?
Speaker 2 (01:10):
Oh my god, I watched that when I was little. Yeah,
of course, Miley Cyrus.
Speaker 1 (01:14):
Miley Cyrus. He watched Hannah of course, and did you
remember them her on The Sweet Life?
Speaker 2 (01:19):
No, The Sweet Life with Zach and Cody? Is that right?
Speaker 1 (01:23):
Yeah? Yeah?
Speaker 2 (01:24):
Anyway, No, I don't remember that.
Speaker 1 (01:25):
The point is I love a good crossover episode.
Speaker 2 (01:28):
Yeah, we have one today, we do. We're really really
fortunate to have Joe Wisenthal and Tracy Alloway the co
hosts or hosts hosts co hosts, co host, co host
works of What goes Up Now I'm just kidding.
Speaker 1 (01:44):
The Jetsons. We have the Jetsons meeting.
Speaker 2 (01:46):
The Flintstoness meeting the flint Scents. There. They are the
hosts of the uber super popular Odd Lots podcast.
Speaker 3 (01:54):
Thank you, thank you. Really have very psyched to be here.
Speaker 2 (01:57):
But anyway, we want to actually start out by talking
about you guys a little bit cool. We are going
to put you on the spot, okay, but actually, Joe,
right before we started taping, you said you when you
were little, you lived in Malaysia.
Speaker 4 (02:08):
I did I live for I moved around a Fairmount
when I was a kid, and my dad was a
he's a physics professor and the Malaysian government in the
I don't know, maybe they still have the program. But
in the late eighties and early nineties, they had this
program where they imported American university professors to Malaysia for
a few years so that local like sort of like
(02:29):
promising students could train under like a sort of US
style university system for their first two years of college
and then complete their degrees in the US for their
final two years.
Speaker 3 (02:38):
So that was really fun. I want to go back
to Malaysia here.
Speaker 2 (02:41):
I thought you were from Texas.
Speaker 3 (02:42):
No, I'm a Fox Texans.
Speaker 1 (02:44):
I want to college secular misconception. I was from Texas.
Speaker 3 (02:47):
I'm glad I give off. I'm glad I pull it off.
Speaker 1 (02:49):
You've got the swagger the cowboys.
Speaker 2 (02:50):
Well, because you go to Texas on vacations.
Speaker 3 (02:53):
One of the college there and I go back there.
Speaker 2 (02:55):
Yeah you do that.
Speaker 1 (02:57):
Yeah, what's your backstory?
Speaker 3 (03:00):
Can you give us the actual chronology?
Speaker 5 (03:01):
Because no, I can't because I don't remember everything. So
I was born in Arkansas in a place that no
longer exists. It was a military base. My dad was
with the Air Force.
Speaker 6 (03:11):
And then I lived in.
Speaker 5 (03:12):
Chicago for a bit, Dallas for a bit, and then
I moved to I was in Tokyo for a part
of preschool, and then at some point I moved to
Tokyo first to fourth grade, and then I was in
Chicago from middle school, and then I was in Vienna
for two years, and then my last two years of
high school were in Tokyo.
Speaker 1 (03:30):
It's interesting you both have sort of this. You know,
grew up moving around a lot of will Don and
I think I barely left the Tri state area. But
let's get into sort of I want to talk about
what makes you two such good co hosts and what
makes you tick, because I feel like there's a bit
of a ying and yang thing going on. You know.
I look at Tracy and I the way you view
(03:52):
markets and correct me if I'm making too many leaps here.
But you're almost like a chief risk officer to me.
You look at the economy and markets from that angle,
whereas Joe is sort of like, I don't know, and
this is a compliment, but sort of perennial optimists, risk embracing.
I mean, is that a fair way to.
Speaker 5 (04:12):
Describe you to I think we skew in those respective directions.
I think I've spoken about this before, but a lot
of my career as a financial journalist was colored by
the two thousand and eight financial crisis. I actually left
Bloomberg En joined the ft Are in September of two
thousand and eight, and that was the first time I
(04:33):
covered hardcore finance, so banks and markets, and you can
imagine what that experience was like. And I think to
some degree that has shaped my approach to financial journalism,
which is you're always looking for the next risk over
the horizon. That's kind of where the big prizes for
a lot of financial journalists. But I have also come
(04:53):
to realize, thanks in part to Joe, that there is
a whole other discourse of financial journalism out there. You know,
people are interest in potential investments, obviously, people are interested
in how things actually work, and that has been very,
very fun to cover.
Speaker 3 (05:07):
I love the framework.
Speaker 4 (05:08):
Our old colleague Luke Kawa has said multiple times that
Tracy is value and I'm momentum, which is basically, like,
you know, Tracy captures the value factor. It's like eternal
and you know, like me, I am. You know, it's like, oh,
everyone's talking about crypto now, and it's not that like
I'm into crypto per se, or like that I'm into
AI or whatever. It's more just that like, oh, this
(05:31):
is the thing, and I want to figure it out,
and then Tracy is like the ballast maybe like you know,
Tracy is the bonds on the sixty forty portfolio and
I'm the stocks or something like that. I do think
that it balances out well, that completes the optimal portfolio
allocation between the two of us.
Speaker 1 (05:47):
Well, that's an interesting way to think of it, because
I think, you know, risk aversion is probably the biggest
mistake over too much risk version is the biggest mistake
an investor can make, I think totally.
Speaker 5 (05:58):
And this is something that I used to write a
lot about credit and corporate bonds, and I kept writing
about how, oh, when interest rates go up, this is
going to be a big, big issue.
Speaker 6 (06:07):
And I kind of.
Speaker 5 (06:08):
Had to get over that to some extent because in
twenty twenty, you know, what did we see. We saw
the Fed announce a corporate bond buying program. And after that,
I think the risk kind of shifts a little bit
and you start to realize that there are a lot
of problems out there in the world, but central banks
are also sort of endlessly creative at solving them, and
to some extent I stopped worrying so much about those
(06:31):
types of risks.
Speaker 3 (06:33):
I do think it's interesting.
Speaker 4 (06:34):
I mean, now we're actually talking literally about like sort
of financial assets, but it is interesting.
Speaker 3 (06:38):
I've always think, you.
Speaker 4 (06:39):
Know, if you're like into bonds, your payout is capped right,
like you know that you want to get paid back
at one hundred dollars on the dollar. It's the downside
that can you go all the way to zero. So
it's like an entirely a sort of worldview of like
downside avoidance, whereas with stocks, you know, the upside is
theoretically unlimited. So it's like you have one side that's
trying to like cut off the left tail, and you
(07:01):
have another side that's trying to like shoot for the
right tail. But I really do think, like in covering
markets too, you start to see these like personality types
like a merge where it's like, I don't know, stock
people seem.
Speaker 3 (07:12):
A little sunnier.
Speaker 4 (07:13):
Commity people are the most sociopathic because they're sort of
vetting against human ingenuity, and bond people are like the
most like sort of like yeah, like risk avoidant because
they already know what they're the best outcome is they're
just trying to cut off the worst outcomes.
Speaker 6 (07:27):
And then there are FX traders.
Speaker 3 (07:29):
What about crypto. It's like this like weird mix of
like optimism and like derange pessimism.
Speaker 6 (07:36):
I don't know, Like, no, you're absolutely right.
Speaker 5 (07:38):
It's like we're going to get a massive payout because
the world.
Speaker 1 (07:44):
Yeah, all right, well, Tracy, I'm going to point you
chief risk officer of Odd Lots.
Speaker 6 (07:50):
I like, thank you.
Speaker 1 (07:51):
But Joe has always been a big proponent of the
trillion dollar coin. For those who are unfamiliar, I don't
know how you could be after all the talk of it.
But the idea is that when the government, when Congress
reaches this impass on raising the debt ceiling, that there's
an obscure law that allows the Treasury to meant a
trillion dollar coin. It's such a Joe topic, and I
(08:12):
love that about it. It's like because it's quirky, it's weird,
but also it is like a potential real life solution
to a major problem that is worth discussing. And this
past episode of the debt ceiling talks, I feel like
it bubbled up to the highs.
Speaker 6 (08:30):
It it bubbles up every time. It never actually happens one day.
Speaker 1 (08:35):
He let's hear your take on the trillion dollar coin.
Speaker 5 (08:38):
So, first of all, let me say I admire Joe's
commitment to the trillion dollar coin, and in many ways
it is a exceedingly clever loophole that sort of gets
to the heart of the way the US monetary and
legal system actually works. However, my issue with it, I
think is optics matter, right, and I think pitching this
(09:01):
idea as like, we got a lot of really smart
people in a room to find a really esoteric loophole
that you know, is difficult to explain to a lot
of people, and then trying to explain that to a
general population of voters I think would be extremely difficult.
So that's number one. You can imagine the Fox News
headlines on Democrats minting the coin effectively. And then the
(09:25):
second thing that worries me about it is it is
a very clever loophole, but a loophole nonetheless, And we
might think it's worthwhile in the context of a debt
sealing argument, but what about the next president. What if
the next president decides, oh, actually I can do something
similar to I don't know, fund my like fascist army
or something like that.
Speaker 6 (09:46):
That worries me.
Speaker 5 (09:47):
And loopholes seem great when they're being used for things
that you agree with. They do not seem so great
when they're being used for things that are more nefarious.
Speaker 1 (09:56):
All right, I'll give you my one worry about it,
then we'll let Shoe respond all of it. My worry
is like it could create a Liz Trust type of
moment in the markets. You know, the UK leader who
introduced you know, big tax cuts.
Speaker 6 (10:10):
Joe has thoughts on liz Trust too, and the lettuce right.
Speaker 1 (10:15):
My fear would be that would be this immediate reaction
in the markets, Like that would cause you know whatever,
the dollar to saying, bond yields to go nuts.
Speaker 3 (10:24):
Everything you guys say is probably mostly right.
Speaker 4 (10:26):
I'll say two things is like, one is the worst
outcome I think of a debt ceiling fiasco would be
an actual miscredit payment or mistrageric payment. And there are
many things loopholes, gimmicks, potential market risk, credibility, things that
would probably be worth taking if the alternative is an
actual default on the debt. And the other thing is
I'll just say, look at my enthusiasm. It's like, in addition,
(10:49):
it to being a loophole like and Tracy sort of
hinted at this. I love the didactic potential of it
because you do learn a lot through like how our
monetary system is like and these inversational why wouldn't cons inflation?
And you learn a lot about constitutional origins, et cetera.
So it's almost like a thought experiment in the form
of a physical coin. It's like it's something it is,
(11:12):
this like physical thing that could exist, but there are
so many interesting legal and economic ideas embedded in this
coin that I can't help but resist want to see
it happen.
Speaker 1 (11:21):
One is there a little bit of mischievousness too on
your own?
Speaker 2 (11:25):
You know what?
Speaker 3 (11:25):
I just say, yes.
Speaker 4 (11:26):
But what I really do enjoy about it from a
sort of like mischief a standpoint, is that most arguments
against it, not saying traces are yours, but most arguments
end up being extremely bad and easily debunked and easily
argued against. And so what I sort of enjoy from
a you can call it trolling, is that you do
(11:48):
see these people like tilted windmills because it seems like, oh,
it's obviously dumb, and then like one by one, the
sort of like at their arguments fall apart, which is weird,
and so it's kind of you can have a lot of.
Speaker 1 (11:58):
Fun with it.
Speaker 2 (11:59):
This is great for me because we're creating a lot
of controversy with this this podcast. Okay, the other thing
about both of you, and I've worked with both of
you in different capacities over the last couple of years,
but also you guys have so many ideas about stories
that should be written about the market, like really good
ideas all the time. Like Tracy, remember one of your
(12:21):
mayonnaise story was so good, Oh thank you.
Speaker 5 (12:24):
Yeah, that was so toying with whether or not to
do a third edition of may I will just do it.
August is mayonnaise season for me, so maybe I will.
Speaker 2 (12:33):
Another topic you guys have been talking about a lot
is organized labor and you've had some episodes about this,
and I think Tracy you called it the hot union summer.
Speaker 5 (12:42):
I think Joe pointed out I was probably not the
first person to say that, but it does feel like
there is something in the air with more proactive labor
union movements. And we talked about this actually in one
of our really early pandemic episodes. We had on a
financial historian to talk about what happened to the labor
market are the plague in the Middle Ages, and he
made the point that because so many people died, there
(13:05):
was a lot of power that sort of swung to labor,
and so you did start to see some pushback against
I guess the sort of land barons of that time.
Speaker 6 (13:14):
Yeah, and maybe, you know, maybe that's what we're seeing now.
Speaker 4 (13:17):
The labor conversation, I feel like touches on so many
different dynamics that we like to like what happens when
labor markets just get really tight and work or bargaining power,
which is something we discussed for years before the pandemic,
and why was wage growth so mediocre and stuff, et cetera.
The role of like organized labor is like, there's all
this domestic investment in electric vehicles and electrifying, you know, decarbonization.
(13:40):
That's really interesting.
Speaker 5 (13:41):
Tension corporate profits as well, which is something we've been
talking a lot about.
Speaker 4 (13:45):
Yeah, So I just feel yeah, and also, you know,
like so much of the seventies inflation story is like
caught up in this thing of like this the sort
of wage price spiral and the unions being able to
claim higher wages than the work. The company is trying
to pass that on, and so like the labor dimension,
it just seems like like this big through line across
so many of our different themes.
Speaker 1 (14:04):
Yeah, there's a headline out this week the ups the
new contract. At the end of the drivers will be
making like one seven hundred and seventy.
Speaker 2 (14:12):
Dollars with benefits.
Speaker 1 (14:13):
Which, hey, it's a hard job and yeah, you know
they deserve it, but.
Speaker 2 (14:16):
But it is. It is part of so many other
stories too, like the Yellow Core bankruptcy that partly was
also triggered by I think union talks.
Speaker 4 (14:25):
Right, that company was like in deep distress for years,
but that was that did seem to be distray that Finally.
Speaker 6 (14:30):
They definitely blamed it on the union.
Speaker 3 (14:31):
They definitely planned it on the.
Speaker 1 (14:33):
Yeah, all right, another hot button topic. Were you ready?
Speaker 2 (14:43):
What is it?
Speaker 1 (14:43):
Take a deep breath MMT. I want to talk a
little bit about it.
Speaker 4 (14:47):
Can I just say Tracy is like, even though she
would claimed to like or disclaim MMT, the MMT ers
all love many of Tracy's formulations.
Speaker 3 (14:58):
God, Tracy really nailed it.
Speaker 6 (14:59):
Well my okay, here here's my on the record stance
on MMT.
Speaker 1 (15:05):
First, can you you'll explain it better than I can.
Speaker 6 (15:08):
Let's show explain it a brief.
Speaker 4 (15:10):
I would describe MMT as the simple characterization that a government.
That a government's constraint is not the same as a
household constraint where it's like, oh, you're not going to
have enough income to pay your debts. That a government's
constraint is the flip, which is that the constraint on
spending is real resources in the economy, and if you
spend too much then you get inflation, and that that
(15:31):
composes some sort of limit on what you can spend.
But they're trying to gauge a government's spending capacity by
just looking at things like deficits. The gap between revenue
and income won't get you very far.
Speaker 6 (15:41):
And I actually I agree with all of that. However,
my I guess.
Speaker 1 (15:48):
It's like a therapy session for you to hear.
Speaker 6 (15:50):
This is a lot Joe and not yelling at each other. No,
I agree with that.
Speaker 5 (15:55):
My problem with it is I don't find it that
useful because in practice it already seems to exist. I mean,
we've watched the US deficit go up.
Speaker 6 (16:05):
And up and up.
Speaker 5 (16:06):
It wasn't really a problem until we had inflation, and
MMT has a lot to say about that, and I agree,
but in practice, viewing it through that framework, I don't
think leads to different actions. And then the other thing
I would say is I question its usefulness even more
for emerging markets. And we've talked about this on our podcast.
Speaker 1 (16:25):
Well, the one thing I'm wondering in this current environment,
MMT would sort of suggest that the way to beat
inflation is raised taxes. Right, we're cut spending, I guess,
but probably raised taxes. And I feel like that's its
achilles heel in that when could you ever get a politician.
Speaker 6 (16:43):
This is exactly it.
Speaker 5 (16:44):
So it's like, Okay, we're going to shift the conversation
among politicians from like, oh, we have to worry about
the deficit, so we can't spend this, or we can't
enact tax cuts or whatever, and you're supposed to shift
the conversation to inflation. But talking about inflation and why
it's happening and the sources of inflation is even more
difficult in some respects than talking about things from a
(17:06):
pure budget perspective. And I think we've really seen that
over the past couple of years. So again I question
the utility.
Speaker 1 (17:12):
So if you put an automatic trigger in the law
saying inflations above three percent, taxes go up.
Speaker 5 (17:17):
It's bad enough when politicians argue over, oh this is
going to cost you know, one billion dollars. It will
be even worse when they start talking about, oh, this
is going to cause a you know, zero point two
percent increase in inflation.
Speaker 4 (17:28):
I do think also, I mean to the point, you know,
you see the fight over even the pause over student
debt payments and how fraud that is. So I think
like it is a pretty good critique of MT as
a sort of like working political theory, the idea that
like that there are theoretically times in which it makes
(17:49):
sense to have fiscal constraints and that is difficult. And
that's arguably like one of the reasons that the FED
exists because Paul, you know that or why this is
sort of the current ocean of what FED independence actually
is was sort of built on this idea that, like, well,
politicians can't be assumed to do what's right. And I
would say, the one thing, you know, the one other
(18:09):
thing is like Tracy came up with the formulation that,
like any problem that you can solve with money isn't
really a problem, which all the m M tiers love,
So even though they've always love Tracy's lying about and
you probably can solved with money isn't like really a problem.
Speaker 5 (18:25):
So one other thing I would say, just you know,
out of mutual respect for the m M tiers is
I am a huge fan of any iconic plastic economist
who is actually thinking up new ideas for the way
the world works. So massive respect for Stephaniekelton. I think
she's done some phenomenal work. I do have questions about it,
(18:46):
but kudos to her for looking at things in a
slightly different way and.
Speaker 1 (18:49):
As a description of the current situation m mts it's right.
Speaker 3 (18:55):
Yeah, you know, I leave it there.
Speaker 1 (18:58):
That's good.
Speaker 3 (18:58):
That's good. That's good.
Speaker 2 (19:01):
I will say for a lot of these topics, the
first time I learn of them, or like really start
looking into them or become interested in them is because
you guys are talking about it on Twitter, on x
on x okay another one, and you guys also did
a recent episode about this. It's a company most Americans
don't know anything about.
Speaker 6 (19:21):
Bid the Chinese EV maker.
Speaker 2 (19:23):
Yes, and so EV's in general. Because Tracy, I'm going
to quote you again, you said, there's this ongoing tension
between wanting to create a vibrant and competitive EV industry
and battery making in the US, which BID is in China,
but also attaching better work conditions for workers. So this
all sort of ties some of these themes together.
Speaker 1 (19:43):
Yeah.
Speaker 5 (19:44):
Absolutely, And I think we've spoken to some senior officials
from the Biden administration about this tension. There is a
desire to create specific industry within the US, like batteries
like EV's solar panels, maybe at scale and in an
efficient way, but at the same time, you want to
create good working conditions. You want to make sure that
(20:07):
this is a valuable industry for the US, and I
think there's there's a real tension there between creating an efficient,
presumably affordable product that Americans can buy and competing with
other places in the world.
Speaker 4 (20:20):
I mean, I do think this is just this huge
story how cheap the end, you know, the improving quality
of Chinese electric vehicles and their competitive price points. It
seems to be creating all kinds of stress in Europe
right now or the beginning, more so than the US.
But I do think it'll be It's interesting. I do
think like there are some very exciting things happening domestically
(20:40):
in the US with like our battery investments and the
Inflation Reduction Act, et cetera. Like every other day there's
some new announcement of a new plant, and it's just
like unreal the growth that we're seeing in spending on
manufacturing facilities. And I'm not convinced necessarily that like the
level of US wages is going to be a problem,
(21:02):
but I do think it's highly tbd whether all of
these facilities end up producing competitive products on a global scale.
Speaker 1 (21:12):
Joe, this reminds me of a tweet I think you
had this week sometime, and I know you guys have
had a few guests on talking about the notion of Bidenomics.
But to me, what's fascinating is this perception of the economy.
And you tweeted out one of the consumer confidence surveys
where or maybe it's the National Federation of Small Businesses,
but one of those surveys where it's like Democrats think
(21:34):
the economy is great, you know, empirically you look at
the numbers, it's all great, Republican, but Republicans think we're
just going to hell, Like what how to explain that that.
Speaker 3 (21:47):
I mean, it does seem.
Speaker 4 (21:48):
Like so many people in the US right now are
almost in case, and I, you know, the the data suggests.
I think it is a little bit more extreme for Republicans,
but I actually think quote on both sides, there is
extreme level of inability to sort of view the economy
outside of the partisan lens. And if the president is
(22:08):
not your party, it is pretty dramatic how much that
will swigh your view on what is going on.
Speaker 3 (22:15):
And it's sort of like, do you think I tell
you what.
Speaker 1 (22:17):
It's a partly media consumption. Do you think if you're.
Speaker 4 (22:20):
Sure media or the sort of that would not be
surprise me at all? You know, I feel sorry for
people like that. I actually like do I like the
inability of we all know them too in real life
right the inability of people to like think clearly and
critically outside of the lens of is this a Democrat
thing or Republican thing?
Speaker 5 (22:39):
Like?
Speaker 4 (22:39):
Of course it's sort of annoying, but I actually like
feel sorry for people whose minds are caught in that trap.
Speaker 5 (22:44):
I think partisanship is a huge aspect of this, and
there's a lot of noise in the surveys right now,
and some of it is due to media consumption. And
we're not the only ones who have said this. Paul
Donovan over at UBS has talked about this. The other
thing I would say is, I do think there is
a real segmentation in the economy now between people who
(23:05):
earn less and people who earn more. And for people
who earn more, you know, higher inflation is probably something
that they can deal with. For people who earn less,
it might actually be that they're not seeing the benefits
of a lot of the things that we're talking about,
the things that are showing up in the hard numbers.
I think both those things can be simultaneously true.
Speaker 2 (23:25):
You're very humbly name dropped talking to a White House official,
But you guys did talk to Jared Bernstein recently, and
I think the topic was bidens right, And it does
seem like the White House is trying to.
Speaker 1 (23:41):
Wait, let me name drop something like that. You know,
Joe Biden guest lectured my college economics class.
Speaker 2 (23:47):
I thought you were about to say, well done. I
booked Joe Biden for US.
Speaker 1 (23:53):
I can't remember. If I would have known he was
to be president, I would have taken.
Speaker 6 (23:56):
You have the inside scoop on Biden.
Speaker 1 (23:58):
I think we're all like, are we going to be
tested on this? And they said no, and we all
just kind of tuned out.
Speaker 2 (24:03):
Did you miss that class?
Speaker 5 (24:05):
No?
Speaker 2 (24:05):
I was. But anyway, well, maybe talk about some of
the highlights from that Jared Bernstein conversation.
Speaker 4 (24:11):
What's really interesting to me is that they've chosen this
moment to say like, actually, we're happy with the economy,
We're proud of this economy. And I think that's really
telling because like the economy in you know, summer twenty
twenty three, inflation has come down a bit, but like
you know, it's not it's still high, right or it
still seems to be high core inflation. I guess it's
(24:32):
cooling a fair amount, it's still high, and I think
there and consumer sentiment numbers are not great. They some
of them have bounced back a little bit, but what's
in the unemployment rate's very low, but it's not that
different than the economy several months ago. So it is
sort of notable to me that at some point this
summer the Biden administration was like, you know what, we're
gonna pivot and rather than sort of like sort of
(24:54):
distract from the economy. We're actually gonna like claim ownership
of this economy, which I think in itself is pretty interesting.
And I think, like, you know, I do think that
there is like a feeling among the staffers to the
Biden administration that they've done a better job of coming
out of disaster than the Obama administration did, because like
(25:14):
both Biden and Obama came out of like kind of
like economic disasters of one sort or another. And I
think that there is like a feeling I was like, yeah,
this was the better way.
Speaker 3 (25:24):
Maybe there was an.
Speaker 4 (25:25):
Overshoot of spending or stimulus or something, but or there's
a lot being done, there's a lot of domestic investment,
and it's actually like has some teeth.
Speaker 6 (25:33):
I agree with that.
Speaker 5 (25:34):
The one other thing I would say is it's going
to be really interesting to see whether this sort of
more interventionist style of economic policy sticks around and for
how long, because I remember, I think in twenty twenty,
I wrote an article called the Choke Point Economy, basically
about how the pandemic had revealed all.
Speaker 6 (25:53):
These choke points within the global economy.
Speaker 5 (25:55):
You know, we discovered that we couldn't get enough semiconductors
or goods being shipped from China took a lot longer,
and infrastructure at the ports was lacking things like that,
and the governments were becoming more attuned to these issues
and more willing to invest in them. And I think
that's certainly a thesis that's been born out by the
(26:15):
past couple of years, however, with the ensuing inflation, with
the fact that despite a lot of the hard numbers
showing the economy is still going well, but some of
the messaging not necessarily sticking with voters. Is that attitude
going to be around the next time, you know, five
or ten years, let's say. And I think to Joe's point,
(26:36):
there is a lot of agreement that the more active
fiscal intervention in twenty twenty was massively helpful. But I'm
kind of interested in seeing whether or not that conclusion
sticks in say, a decade. Are people going to remember
it for that or are they going to learn the
wrong lessons that inflation was really high and it was
still a struggle to convince people that we had successfully
(26:57):
managed one of the worst global pandemics in one hundred years.
Speaker 1 (27:01):
Yeah, I think, Well, in addition to having a podcast,
you too have a very well edited. I would say newsletter.
Speaker 3 (27:11):
He does it excellent.
Speaker 1 (27:13):
People are saying it's very very well.
Speaker 6 (27:16):
You're the one reader we can always count.
Speaker 3 (27:19):
Are saying it's the best I've heard that.
Speaker 1 (27:22):
Yeah, tears in their eyes. But you've gotten into some
very interesting topics, and I recommend everyone to subscribe if
they haven't already. But it's a great way to sort
of get your undistilled thoughts on these things. Tracy. You
had one recently, a Brave New World Built on bonds,
basically talking about, well, here we go. We had another
credit rating cut on the US sovereign rating. Does it
(27:44):
matter that? Has the bond market moved away from credit ratings?
This week we saw Moodies come out and just sort
of dump all over all the bank banks, plant slam
all all the banks. And you had another one talking
about the extended pretend idea, you know, a throwback to
the financial crisis where there's a lot of commercial real
estate loan workouts being done right now, I'll try to
(28:05):
sort of do whatever you can to adjust the terms
to avoid companies going bankrupt. I feel like people here
extend and pretend and think of it as in a
derogatory Yeah, yeah, is it.
Speaker 5 (28:17):
I mean, it's only bad if it fails. But seriously,
I think this is one of the things, you know,
when we talk about at the beginning of this conversation
the big risks from two thousand and eight, there was
a lot of extend and pretend. Post two thousand and eight,
the economy recovered, albeit slowly and gradually. A lot of
those workouts did, in fact, you know, reach their intended goal.
(28:42):
We saw mark to market accounting suspended on bank balance sheets,
and a lot of those assets ended up recovering.
Speaker 6 (28:48):
And so I think we've.
Speaker 5 (28:49):
Actually written about this together that the big plank of
financial stability is in fact economic growth. And so if
you see people extend and ten for the foreseeable future,
but the economy remains strong, maybe some of those office
buildings get transformed into something else, maybe more people are
called back into work, then it's a strategy that could
(29:11):
be perfectly tenable.
Speaker 3 (29:13):
Yeah. Yeah, I've come at some point.
Speaker 4 (29:15):
I came to the realization, like I don't know, in
the early twenty ten, it's just all it's can kicking
for forever. You just keep kicking that can, And people
say it is a pejorative. It's like No, we're going
to be can kicking till it works. And then my
kids are going to be kicking the can because it's
like it's kicking the can. No, you just keep kicking it,
and then the kids, our kids and grandchildren, they'll just
(29:37):
be keep kicking that can. And I sort of think
that like that sort of you know, taking our lumps
now has this like good feeling. We're going to like,
you know, solve our problems. We're gonna like take the pain.
And I just sort of think like, now you just
keep finding a way to muddle through, and that that
actually is how sort of the economy and humanity just
sort of keeps keeps going through.
Speaker 2 (30:12):
Okay, Joe, I have a new question. Okay, shot this
is super interesting to me, and I think actually Matt
Lewen ended up writing about this this idea of yours
as well. You said betting on downturns has been really
costly for companies. So for instance, right now, maybe we're
not seeing as many companies letting people go because you know,
they think the downturn is coming.
Speaker 5 (30:33):
Yeah.
Speaker 4 (30:34):
I mean I think, like, you know, the twenty twenties
in many ways feel like the very reverse of the
twenty ten. So in the twenty tens, the it's like
double dipper sessions when they're coming, it didn't come. But
like companies were so scared to invest and they're so
scared to hire.
Speaker 3 (30:47):
But for the first.
Speaker 4 (30:48):
Time ever in like twenty twenty one, in twenty twenty two,
or maybe not the first time ever, but for the
first time in decades, really, I think companies suddenly are like, oh,
we do not have an unlimited supply of workers, which
is I don't think that many managers of corporations ever
contemplated that idea, even in boom time's late nineties whatever,
that like what if we just can't open our store
(31:10):
because we can't hire? And I think that really had
like a deep like scarring effect on a lot of
managers and management teams at companies. And I think that's
a good potentially portend's good news like down the road,
which is that okay, that like they don't want to
ever be back there again, and so they'll be slower
to fire going forward, even if they see some signs
(31:32):
of softness. And what's interesting is I always love one
of my favorite things every month is when the Dallas
Fed Manufacturing report comes out once a month. I always
jumped to the anecdotal section because like Texas, like business managers,
you know, they're super swaggery and cocky and all that stuff,
and so they always have very colorful things. But there's
in recent months some of them have been talking about
(31:53):
how I'm looking forward to the next recession because I'm
going to expand my investment and take market share for
my opponents. But what's interesting about that is if everyone
goes into the recession with that attitude, you're not going
to get a recession, because recession, you know.
Speaker 1 (32:07):
You're waiting to buy the dip.
Speaker 4 (32:08):
So this is like the psychology you want to engender,
I think for the long boom, which is that if
everyone yeah, it's right, if everyone wants is excited to
buy the dip, and we saw this in the twenty tens,
you don't get the dip. If everyone is excited about
the downturn because they're going to steal employees from the
other company or steal market share, you can sustain an
expansion for a long time.
Speaker 5 (32:27):
I agree with this, and I would also just add
that we've seen some FED officials start to talk about
that recently, including Tom Barkin, at the Richmond FED recently.
The one thing I would say, with my sort of
like risk officer hat on is a really really bad
thing for the economy would be something that causes everyone
to wake up and go, oh, actually, I have massively
(32:48):
overinflated my labor force for like business activity. A sort
of Minski moment in employment would be very, very bad.
But I don't see anything.
Speaker 1 (33:00):
Margins go down, and they yeah.
Speaker 6 (33:01):
Something along those lines.
Speaker 5 (33:03):
But I think I think you shouldn't underestimate the sort
of psychological effects here. And I do think it's true
that people have been more scarred by not being able
to ramp up capacity than by having too much capacity
in the previous crisis.
Speaker 1 (33:18):
But so Joe, while you know, Tracy and I are
looking at the economy in markets wondering what could go wrong.
As I said, I like how you're always looking for
the next big thing, the next big opportunity. You were
the first one I think that I heard the words
room temperature.
Speaker 3 (33:36):
Apparently it's not happening.
Speaker 1 (33:38):
Well, explain it and explain why it's important and what
we need to know about you.
Speaker 4 (33:44):
First of all, as of an hour ago, some university
put out there's like this is there's no room temperature.
Speaker 6 (33:50):
It's actually just floating rocks.
Speaker 3 (33:52):
It's just a floating rock so hot.
Speaker 4 (33:53):
My dad, by the way, is a physicist, and I
saw him this past weekend and I was like, will
you come on, people will love it so cool? I haven't,
and he's like, no, I'm not. But he did explain that,
like you know, super conductivity, obviously, this idea that you
could like transmit energy across two things or across distances
with no loss would be really powerful, and it exists currently.
Speaker 3 (34:14):
The problem is you.
Speaker 4 (34:15):
Need such high pressure or such cold temperatures to do
it that there are very few actual like applications of it,
like apparently MRI technology is one. But he said that,
like were the holy grail to be found of where
you didn't that it would create all kinds of like
new consumer gadgets and certain like energy things. And I
get you know, I'm literally just repeating what my my
(34:37):
dad said. Hit all these stuff about like bosons and
things like that that I was getting get too much.
Speaker 3 (34:41):
I didn't. It would have been a great episode.
Speaker 2 (34:43):
I'm really annoyed that.
Speaker 3 (34:48):
What goes up. But you know, actually the the the
thing that.
Speaker 4 (34:50):
Was sort of interesting to me about it is like
the idea of energy loss over some distance is very
intuitive because there's no free lunches in the world, right, Like,
if you get something, it's like, okay, it's like you're
going to transmit energy, but you're gonna have some laws,
or you can have no energy laws, but then it
has to be a negative five hundred cells. It's like
it wasn't like pay the price somehow. So I asked him, like,
(35:12):
why do scientists even think room temperature super conductivity is
theoretically possible if we know that there's no like sort
of like free lunch in the universe. And what he
suspected was that were there ever to be a substance
that was found that had this property of room temperature superconductivity,
his guess is that it would be very costly to synthesize,
(35:33):
to make, and so you would pay the price not
in the application layer, but in the creation of the
material layer. So you'd still like have this, there'd be
no free lunch. Nonetheless, he does think were it to
be found, which he's not totally dismissive of the possibility
that one day it would be that it would open
up new things, but it would still be like difficult
to synthesize in large.
Speaker 5 (35:53):
Back interesting because this was one of the things about
the LK ninety nine formulation, which was like, actually, it
wasn't that difficult to do. So people were simultaneously excited
about the potential for a room temperature superconductor, but also
that it wasn't that difficult to make.
Speaker 4 (36:08):
I guess, I guess it turns out it's easy to make.
It's just it's just very magnetic.
Speaker 1 (36:12):
I was sure that tungsten cubes would be involved some
one day.
Speaker 3 (36:16):
This one day, the tungsten cube that I have.
Speaker 2 (36:19):
In the bin, but I remember you brought it in
and then everybody was like, if you want to go
see it, you got to go to Joe's.
Speaker 3 (36:24):
Yeah, yeah, community community cube.
Speaker 1 (36:27):
Anyway, it's that time, bil Donna. It is for the
craziest things we saw in markets this week. I hope
you too came prepared. This is this is a big reveal.
Speaker 5 (36:36):
Wait wait, I'm going to go first, just on the
chance that we chose the same one. But mine is
connected to the superconductor stuff, which is last week when
there was all this excitement over the potential LK ninety
nine breakthrough, in South Korea, we saw shares of a
company called American Superconductor shoot to the proverbial moon, a
(36:59):
company that, as far as I could tell, had absolutely
nothing to do with the South Korean researchers. It just
had a superconductor in its name. And fast forward to
this week and it is down a lot.
Speaker 4 (37:13):
The thing that still weirds me out, or this thing
that I still don't get, is like why US investors
got really weirded out, freaked out by like the Bank
of Japan ending your oield curve controllers. It's like, who
cares suddenly, Like I'm going to like sell my like
portfolio of US equities because like the Bank of Japan did,
like their million of tweak to like the shape of
(37:34):
the old curve. Like I'm sorry, I I mean, maybe
I'm missing something. And like if like the stock market
crashes from here, then this will be embarrassing. It's just
hard for me to get excited about that one. So
the fact that some people manage to get excited about
that I can consider.
Speaker 3 (37:48):
To be impressive.
Speaker 1 (37:49):
The only thought I had is maybe the carry trade.
But I don't think you buy equities with the carry
trade really, maybe do I don't.
Speaker 4 (37:55):
Know if you're if you want to sell your stock
to me because of the carry trade or something I'll
pick about.
Speaker 5 (37:59):
It wasn't the argument that it was going to take
it like a big chunk of bond buyers like move
them away, and that bonds are the underpinning for equities
and a lot of other things.
Speaker 1 (38:10):
It did seem like an overreaction though.
Speaker 4 (38:12):
I agree it's going to be really embarrassing in a
week when where market.
Speaker 2 (38:17):
I can't wait to point it out by soon. Yeah,
I'm going to say, listen to this episode where Joe
embarrasses himself. Okay, mine is about Zoom, the company we
all use to zoom.
Speaker 6 (38:27):
You know, I think I know what this one is,
and if it is this, it's a good one.
Speaker 2 (38:31):
It is good because they're asking their employees to come
work from the office.
Speaker 1 (38:37):
I don't do you think they still zoom each other
in the office though.
Speaker 2 (38:42):
So they go to the office and then also zoom
each other.
Speaker 6 (38:45):
That wouldn't be unheard of.
Speaker 2 (38:48):
But it's just it's funny because they're Zoom, but they're
asking you to be in person.
Speaker 1 (38:54):
You would think they'd be like everyone stay at home.
You know, you never another pandemic could be coming.
Speaker 4 (38:59):
You is read the last Zoom conference call about you
should read it. It's from about a month and a
half ago, and it's like the ultimate like flavor of them.
Every question was about their AI strategy. I don't know,
it's like they make a video thing, right they had
They did have good answer, but talk about like the
degree to which like analysts all like sort of school
(39:21):
of fish.
Speaker 3 (39:22):
Yeah, they're swimming. It's a very funny ring.
Speaker 5 (39:24):
Next call it'll be what Superconductor is doing with energy transfer.
Speaker 2 (39:29):
But there is there's a meme on the former Twitter
on X where it's just a picture of like a
Zoom office of like a Zoom skyscraper and then somebody
being like they have offices. Why would they have offices
their Zoom?
Speaker 1 (39:44):
All right, I got I got Mine. Mine is a
game show. Actually, I'm so excited to actually have three
contestants on it. It makes me feel like a real
game show host when there's three. Because it's sort of
a price is right, we call it the prices precise.
Speaker 2 (39:57):
We can't call it prices right, Ye, So all right.
Speaker 1 (40:02):
This is occur to see the Wall Street Journal. I'm
saddened we did not have this story. Silicon Valley Bank
went out of business. We all know that went into
FDIC receivership. So what happens in that process is the
FDIC sells off all the assets of the bank. One
of the more interesting assets they're selling off is SVB
had a huge wine collection. They had nineteen hundred bottles
(40:27):
of wine one nine hundred boles. Well I was runnering
the same thing, and there's an old Wall Street Journal
story that explains it. Being in Silicon Valley. They do
a lot of business with the wine growers in northern California.
This guy, there's some guy who actually pitched them on
starting a wine business. Wine lend, you know, lending money.
(40:48):
I'm dying to know if any of these were actual
collateral on some of these loans, but it was something
like four percent of their loan book was to wine
makers in northern California. So let me give you a
little bit more details here before we play the prices
precise nineteen hundred bottles of fine wine, four hundred bottles
in the Santa Clara branch, three hundred in the Menlo
(41:10):
Park branch where they were quote meticulously racked and kept
in climate controlled environment. The rest were in a private
wine vault in domain NAPA. Now I'll give you one hint.
They were auctioned off at a sixty percent discount in
the appraised value. So time to play prices precise?
Speaker 6 (41:31):
How many bottles in total?
Speaker 1 (41:32):
Nineteen hundred bottles?
Speaker 5 (41:33):
Okay, at a sixty percent discount?
Speaker 1 (41:37):
Sixty percent? Oh, you're right, forty percent discount. They sold
at sixty percent of the appraised value. So it's California wine.
So it's tricky. You know, it's not known for superintensive wine.
Speaker 2 (41:48):
And they've had lots of wildfires.
Speaker 1 (41:50):
That's true.
Speaker 3 (41:51):
Well I didn't think nineteen hundred.
Speaker 6 (41:53):
I mean I drink one for me.
Speaker 1 (41:57):
Well, well, you got a.
Speaker 2 (41:58):
Gosh, usually I have like idea. Okay, two hundred thousand,
two hundred and fifty thousand dollars.
Speaker 1 (42:05):
That's a quick answer, Like how quick that a sor? Right,
I'm gonna write these down. Okay, data bids two hundred
fifty thousand. Now the rules of that other game show
are in place, so you could bid one dollar.
Speaker 5 (42:16):
Oh, I think I'm going to go higher. I'm going
to say one point six million.
Speaker 1 (42:23):
One point six millions. Now we don't kind of wind
Tracy drinks.
Speaker 2 (42:27):
Are we talking about nineteen.
Speaker 1 (42:28):
Hundred nineteen California wine? Remember soon, remember the rules. Now,
don't give him head lower.
Speaker 3 (42:38):
I'm going to go one hundred and twenty thousand.
Speaker 1 (42:41):
My god, it's pretty close. One hundred and thirty thousand.
Speaker 2 (42:44):
Oh, come on, this is bad, Joe.
Speaker 1 (42:46):
When's the well you figure? I mean, one hundred dollars
a bottle will get you to one hundred and ninety thousand.
Speaker 4 (42:52):
So that's basically this is bad collateral collateral and maybe
I should have liquidity.
Speaker 3 (42:59):
So we recently did an.
Speaker 4 (43:00):
Episode of the podcast with the CFO of core Weave,
which is building a GPU cloud. A week later, there's
a really good story. They borrowed two and a half
billion and they put up in video chips. Yeah, so
it came out after the episode. But chips is the
new collateral.
Speaker 1 (43:15):
So you can just pull those chips out of the server,
I guess apparently.
Speaker 3 (43:19):
Yeah, it's still work.
Speaker 1 (43:20):
That's crazy. Well, Tru and Tracy, what a great.
Speaker 3 (43:23):
Thank you so much.
Speaker 1 (43:23):
We thank you. It was very fun.
Speaker 3 (43:28):
I know that's just a lot of.
Speaker 2 (43:38):
What goes up. We'll be back next week. Until then,
you can find us on the Bloomberg terminal website and app,
or wherever you get your podcasts. We'd love it if
you took the time to rate and review the show
so more listeners can find us. You can find us
on Twitter, follow me at Wildona Hiring. Mike Reagan is
at read Anonymous. You can also follow Bloomer Podcasts at podcasts.
(44:03):
What Goes Up is produced by Stacey Long and our
head of podcasts is Sage Pauman. Thanks for listening. We'll
see you next week.
Hello, and welcome to What Goes Up, a weekly markets podcast.
My name is Mike Reagan. I'm a senior editor at Bloomberg.
Speaker 2 (00:21):
And I'm Wildonna high Across asset reporter with Bloomberg.
Speaker 1 (00:24):
And this Weekvil Donna, a very special episode shows up.
You know, when I was a kid in the seventies
and eighties, the best TV was always the crossover events.
Speaker 2 (00:33):
Are you sure it was this the eighteen seven Yeah?
Speaker 1 (00:35):
I knew that was coming old shaming as usual, but
I had to google it to figure out what the
best crossover okay, TV episodes ever were. Do you know
what The first one? I think was No Superman on
I Love Lucy in nineteen fifty seven. How about that? Yeah?
I was not around for that, but I was around
for The Jetsons meet the Flintstones. That was a thing,
you remember that, the Jetsons meet. I don't know how the
(00:57):
Jetsons could have met the Flintstone. It doesn't seen logical.
Speaker 2 (01:01):
Yeah, because one is future one is past.
Speaker 1 (01:03):
Right. Yeah, so here's one of your generations, I think, Okay,
the Sweet Life of Hannah Montana. You remember that?
Speaker 2 (01:10):
Oh my god, I watched that when I was little. Yeah,
of course, Miley Cyrus.
Speaker 1 (01:14):
Miley Cyrus. He watched Hannah of course, and did you
remember them her on The Sweet Life?
Speaker 2 (01:19):
No, The Sweet Life with Zach and Cody? Is that right?
Speaker 1 (01:23):
Yeah? Yeah?
Speaker 2 (01:24):
Anyway, No, I don't remember that.
Speaker 1 (01:25):
The point is I love a good crossover episode.
Speaker 2 (01:28):
Yeah, we have one today, we do. We're really really
fortunate to have Joe Wisenthal and Tracy Alloway the co
hosts or hosts hosts co hosts, co host, co host
works of What goes Up Now I'm just kidding.
Speaker 1 (01:44):
The Jetsons. We have the Jetsons meeting.
Speaker 2 (01:46):
The Flintstoness meeting the flint Scents. There. They are the
hosts of the uber super popular Odd Lots podcast.
Speaker 3 (01:54):
Thank you, thank you. Really have very psyched to be here.
Speaker 2 (01:57):
But anyway, we want to actually start out by talking
about you guys a little bit cool. We are going
to put you on the spot, okay, but actually, Joe,
right before we started taping, you said you when you
were little, you lived in Malaysia.
Speaker 4 (02:08):
I did I live for I moved around a Fairmount
when I was a kid, and my dad was a
he's a physics professor and the Malaysian government in the
I don't know, maybe they still have the program. But
in the late eighties and early nineties, they had this
program where they imported American university professors to Malaysia for
a few years so that local like sort of like
(02:29):
promising students could train under like a sort of US
style university system for their first two years of college
and then complete their degrees in the US for their
final two years.
Speaker 3 (02:38):
So that was really fun. I want to go back
to Malaysia here.
Speaker 2 (02:41):
I thought you were from Texas.
Speaker 3 (02:42):
No, I'm a Fox Texans.
Speaker 1 (02:44):
I want to college secular misconception. I was from Texas.
Speaker 3 (02:47):
I'm glad I give off. I'm glad I pull it off.
Speaker 1 (02:49):
You've got the swagger the cowboys.
Speaker 2 (02:50):
Well, because you go to Texas on vacations.
Speaker 3 (02:53):
One of the college there and I go back there.
Speaker 2 (02:55):
Yeah you do that.
Speaker 1 (02:57):
Yeah, what's your backstory?
Speaker 3 (03:00):
Can you give us the actual chronology?
Speaker 5 (03:01):
Because no, I can't because I don't remember everything. So
I was born in Arkansas in a place that no
longer exists. It was a military base. My dad was
with the Air Force.
Speaker 6 (03:11):
And then I lived in.
Speaker 5 (03:12):
Chicago for a bit, Dallas for a bit, and then
I moved to I was in Tokyo for a part
of preschool, and then at some point I moved to
Tokyo first to fourth grade, and then I was in
Chicago from middle school, and then I was in Vienna
for two years, and then my last two years of
high school were in Tokyo.
Speaker 1 (03:30):
It's interesting you both have sort of this. You know,
grew up moving around a lot of will Don and
I think I barely left the Tri state area. But
let's get into sort of I want to talk about
what makes you two such good co hosts and what
makes you tick, because I feel like there's a bit
of a ying and yang thing going on. You know.
I look at Tracy and I the way you view
(03:52):
markets and correct me if I'm making too many leaps here.
But you're almost like a chief risk officer to me.
You look at the economy and markets from that angle,
whereas Joe is sort of like, I don't know, and
this is a compliment, but sort of perennial optimists, risk embracing.
I mean, is that a fair way to.
Speaker 5 (04:12):
Describe you to I think we skew in those respective directions.
I think I've spoken about this before, but a lot
of my career as a financial journalist was colored by
the two thousand and eight financial crisis. I actually left
Bloomberg En joined the ft Are in September of two
thousand and eight, and that was the first time I
(04:33):
covered hardcore finance, so banks and markets, and you can
imagine what that experience was like. And I think to
some degree that has shaped my approach to financial journalism,
which is you're always looking for the next risk over
the horizon. That's kind of where the big prizes for
a lot of financial journalists. But I have also come
(04:53):
to realize, thanks in part to Joe, that there is
a whole other discourse of financial journalism out there. You know,
people are interest in potential investments, obviously, people are interested
in how things actually work, and that has been very,
very fun to cover.
Speaker 3 (05:07):
I love the framework.
Speaker 4 (05:08):
Our old colleague Luke Kawa has said multiple times that
Tracy is value and I'm momentum, which is basically, like,
you know, Tracy captures the value factor. It's like eternal
and you know, like me, I am. You know, it's like, oh,
everyone's talking about crypto now, and it's not that like
I'm into crypto per se, or like that I'm into
AI or whatever. It's more just that like, oh, this
(05:31):
is the thing, and I want to figure it out,
and then Tracy is like the ballast maybe like you know,
Tracy is the bonds on the sixty forty portfolio and
I'm the stocks or something like that. I do think
that it balances out well, that completes the optimal portfolio
allocation between the two of us.
Speaker 1 (05:47):
Well, that's an interesting way to think of it, because
I think, you know, risk aversion is probably the biggest
mistake over too much risk version is the biggest mistake
an investor can make, I think totally.
Speaker 5 (05:58):
And this is something that I used to write a
lot about credit and corporate bonds, and I kept writing
about how, oh, when interest rates go up, this is
going to be a big, big issue.
Speaker 6 (06:07):
And I kind of.
Speaker 5 (06:08):
Had to get over that to some extent because in
twenty twenty, you know, what did we see. We saw
the Fed announce a corporate bond buying program. And after that,
I think the risk kind of shifts a little bit
and you start to realize that there are a lot
of problems out there in the world, but central banks
are also sort of endlessly creative at solving them, and
to some extent I stopped worrying so much about those
(06:31):
types of risks.
Speaker 3 (06:33):
I do think it's interesting.
Speaker 4 (06:34):
I mean, now we're actually talking literally about like sort
of financial assets, but it is interesting.
Speaker 3 (06:38):
I've always think, you.
Speaker 4 (06:39):
Know, if you're like into bonds, your payout is capped right,
like you know that you want to get paid back
at one hundred dollars on the dollar. It's the downside
that can you go all the way to zero. So
it's like an entirely a sort of worldview of like
downside avoidance, whereas with stocks, you know, the upside is
theoretically unlimited. So it's like you have one side that's
trying to like cut off the left tail, and you
(07:01):
have another side that's trying to like shoot for the
right tail. But I really do think, like in covering
markets too, you start to see these like personality types
like a merge where it's like, I don't know, stock
people seem.
Speaker 3 (07:12):
A little sunnier.
Speaker 4 (07:13):
Commity people are the most sociopathic because they're sort of
vetting against human ingenuity, and bond people are like the
most like sort of like yeah, like risk avoidant because
they already know what they're the best outcome is they're
just trying to cut off the worst outcomes.
Speaker 6 (07:27):
And then there are FX traders.
Speaker 3 (07:29):
What about crypto. It's like this like weird mix of
like optimism and like derange pessimism.
Speaker 6 (07:36):
I don't know, Like, no, you're absolutely right.
Speaker 5 (07:38):
It's like we're going to get a massive payout because
the world.
Speaker 1 (07:44):
Yeah, all right, well, Tracy, I'm going to point you
chief risk officer of Odd Lots.
Speaker 6 (07:50):
I like, thank you.
Speaker 1 (07:51):
But Joe has always been a big proponent of the
trillion dollar coin. For those who are unfamiliar, I don't
know how you could be after all the talk of it.
But the idea is that when the government, when Congress
reaches this impass on raising the debt ceiling, that there's
an obscure law that allows the Treasury to meant a
trillion dollar coin. It's such a Joe topic, and I
(08:12):
love that about it. It's like because it's quirky, it's weird,
but also it is like a potential real life solution
to a major problem that is worth discussing. And this
past episode of the debt ceiling talks, I feel like
it bubbled up to the highs.
Speaker 6 (08:30):
It it bubbles up every time. It never actually happens one day.
Speaker 1 (08:35):
He let's hear your take on the trillion dollar coin.
Speaker 5 (08:38):
So, first of all, let me say I admire Joe's
commitment to the trillion dollar coin, and in many ways
it is a exceedingly clever loophole that sort of gets
to the heart of the way the US monetary and
legal system actually works. However, my issue with it, I
think is optics matter, right, and I think pitching this
(09:01):
idea as like, we got a lot of really smart
people in a room to find a really esoteric loophole
that you know, is difficult to explain to a lot
of people, and then trying to explain that to a
general population of voters I think would be extremely difficult.
So that's number one. You can imagine the Fox News
headlines on Democrats minting the coin effectively. And then the
(09:25):
second thing that worries me about it is it is
a very clever loophole, but a loophole nonetheless, And we
might think it's worthwhile in the context of a debt
sealing argument, but what about the next president. What if
the next president decides, oh, actually I can do something
similar to I don't know, fund my like fascist army
or something like that.
Speaker 6 (09:46):
That worries me.
Speaker 5 (09:47):
And loopholes seem great when they're being used for things
that you agree with. They do not seem so great
when they're being used for things that are more nefarious.
Speaker 1 (09:56):
All right, I'll give you my one worry about it,
then we'll let Shoe respond all of it. My worry
is like it could create a Liz Trust type of
moment in the markets. You know, the UK leader who
introduced you know, big tax cuts.
Speaker 6 (10:10):
Joe has thoughts on liz Trust too, and the lettuce right.
Speaker 1 (10:15):
My fear would be that would be this immediate reaction
in the markets, Like that would cause you know whatever,
the dollar to saying, bond yields to go nuts.
Speaker 3 (10:24):
Everything you guys say is probably mostly right.
Speaker 4 (10:26):
I'll say two things is like, one is the worst
outcome I think of a debt ceiling fiasco would be
an actual miscredit payment or mistrageric payment. And there are
many things loopholes, gimmicks, potential market risk, credibility, things that
would probably be worth taking if the alternative is an
actual default on the debt. And the other thing is
I'll just say, look at my enthusiasm. It's like, in addition,
(10:49):
it to being a loophole like and Tracy sort of
hinted at this. I love the didactic potential of it
because you do learn a lot through like how our
monetary system is like and these inversational why wouldn't cons inflation?
And you learn a lot about constitutional origins, et cetera.
So it's almost like a thought experiment in the form
of a physical coin. It's like it's something it is,
(11:12):
this like physical thing that could exist, but there are
so many interesting legal and economic ideas embedded in this
coin that I can't help but resist want to see
it happen.
Speaker 1 (11:21):
One is there a little bit of mischievousness too on
your own?
Speaker 2 (11:25):
You know what?
Speaker 3 (11:25):
I just say, yes.
Speaker 4 (11:26):
But what I really do enjoy about it from a
sort of like mischief a standpoint, is that most arguments
against it, not saying traces are yours, but most arguments
end up being extremely bad and easily debunked and easily
argued against. And so what I sort of enjoy from
a you can call it trolling, is that you do
(11:48):
see these people like tilted windmills because it seems like, oh,
it's obviously dumb, and then like one by one, the
sort of like at their arguments fall apart, which is weird,
and so it's kind of you can have a lot of.
Speaker 1 (11:58):
Fun with it.
Speaker 2 (11:59):
This is great for me because we're creating a lot
of controversy with this this podcast. Okay, the other thing
about both of you, and I've worked with both of
you in different capacities over the last couple of years,
but also you guys have so many ideas about stories
that should be written about the market, like really good
ideas all the time. Like Tracy, remember one of your
(12:21):
mayonnaise story was so good, Oh thank you.
Speaker 5 (12:24):
Yeah, that was so toying with whether or not to
do a third edition of may I will just do it.
August is mayonnaise season for me, so maybe I will.
Speaker 2 (12:33):
Another topic you guys have been talking about a lot
is organized labor and you've had some episodes about this,
and I think Tracy you called it the hot union summer.
Speaker 5 (12:42):
I think Joe pointed out I was probably not the
first person to say that, but it does feel like
there is something in the air with more proactive labor
union movements. And we talked about this actually in one
of our really early pandemic episodes. We had on a
financial historian to talk about what happened to the labor
market are the plague in the Middle Ages, and he
made the point that because so many people died, there
(13:05):
was a lot of power that sort of swung to labor,
and so you did start to see some pushback against
I guess the sort of land barons of that time.
Speaker 6 (13:14):
Yeah, and maybe, you know, maybe that's what we're seeing now.
Speaker 4 (13:17):
The labor conversation, I feel like touches on so many
different dynamics that we like to like what happens when
labor markets just get really tight and work or bargaining power,
which is something we discussed for years before the pandemic,
and why was wage growth so mediocre and stuff, et cetera.
The role of like organized labor is like, there's all
this domestic investment in electric vehicles and electrifying, you know, decarbonization.
(13:40):
That's really interesting.
Speaker 5 (13:41):
Tension corporate profits as well, which is something we've been
talking a lot about.
Speaker 4 (13:45):
Yeah, So I just feel yeah, and also, you know,
like so much of the seventies inflation story is like
caught up in this thing of like this the sort
of wage price spiral and the unions being able to
claim higher wages than the work. The company is trying
to pass that on, and so like the labor dimension,
it just seems like like this big through line across
so many of our different themes.
Speaker 1 (14:04):
Yeah, there's a headline out this week the ups the
new contract. At the end of the drivers will be
making like one seven hundred and seventy.
Speaker 2 (14:12):
Dollars with benefits.
Speaker 1 (14:13):
Which, hey, it's a hard job and yeah, you know
they deserve it, but.
Speaker 2 (14:16):
But it is. It is part of so many other
stories too, like the Yellow Core bankruptcy that partly was
also triggered by I think union talks.
Speaker 4 (14:25):
Right, that company was like in deep distress for years,
but that was that did seem to be distray that Finally.
Speaker 6 (14:30):
They definitely blamed it on the union.
Speaker 3 (14:31):
They definitely planned it on the.
Speaker 1 (14:33):
Yeah, all right, another hot button topic. Were you ready?
Speaker 2 (14:43):
What is it?
Speaker 1 (14:43):
Take a deep breath MMT. I want to talk a
little bit about it.
Speaker 4 (14:47):
Can I just say Tracy is like, even though she
would claimed to like or disclaim MMT, the MMT ers
all love many of Tracy's formulations.
Speaker 3 (14:58):
God, Tracy really nailed it.
Speaker 6 (14:59):
Well my okay, here here's my on the record stance
on MMT.
Speaker 1 (15:05):
First, can you you'll explain it better than I can.
Speaker 6 (15:08):
Let's show explain it a brief.
Speaker 4 (15:10):
I would describe MMT as the simple characterization that a government.
That a government's constraint is not the same as a
household constraint where it's like, oh, you're not going to
have enough income to pay your debts. That a government's
constraint is the flip, which is that the constraint on
spending is real resources in the economy, and if you
spend too much then you get inflation, and that that
(15:31):
composes some sort of limit on what you can spend.
But they're trying to gauge a government's spending capacity by
just looking at things like deficits. The gap between revenue
and income won't get you very far.
Speaker 6 (15:41):
And I actually I agree with all of that. However,
my I guess.
Speaker 1 (15:48):
It's like a therapy session for you to hear.
Speaker 6 (15:50):
This is a lot Joe and not yelling at each other. No,
I agree with that.
Speaker 5 (15:55):
My problem with it is I don't find it that
useful because in practice it already seems to exist. I mean,
we've watched the US deficit go up.
Speaker 6 (16:05):
And up and up.
Speaker 5 (16:06):
It wasn't really a problem until we had inflation, and
MMT has a lot to say about that, and I agree,
but in practice, viewing it through that framework, I don't
think leads to different actions. And then the other thing
I would say is I question its usefulness even more
for emerging markets. And we've talked about this on our podcast.
Speaker 1 (16:25):
Well, the one thing I'm wondering in this current environment,
MMT would sort of suggest that the way to beat
inflation is raised taxes. Right, we're cut spending, I guess,
but probably raised taxes. And I feel like that's its
achilles heel in that when could you ever get a politician.
Speaker 6 (16:43):
This is exactly it.
Speaker 5 (16:44):
So it's like, Okay, we're going to shift the conversation
among politicians from like, oh, we have to worry about
the deficit, so we can't spend this, or we can't
enact tax cuts or whatever, and you're supposed to shift
the conversation to inflation. But talking about inflation and why
it's happening and the sources of inflation is even more
difficult in some respects than talking about things from a
(17:06):
pure budget perspective. And I think we've really seen that
over the past couple of years. So again I question
the utility.
Speaker 1 (17:12):
So if you put an automatic trigger in the law
saying inflations above three percent, taxes go up.
Speaker 5 (17:17):
It's bad enough when politicians argue over, oh this is
going to cost you know, one billion dollars. It will
be even worse when they start talking about, oh, this
is going to cause a you know, zero point two
percent increase in inflation.
Speaker 4 (17:28):
I do think also, I mean to the point, you know,
you see the fight over even the pause over student
debt payments and how fraud that is. So I think
like it is a pretty good critique of MT as
a sort of like working political theory, the idea that
like that there are theoretically times in which it makes
(17:49):
sense to have fiscal constraints and that is difficult. And
that's arguably like one of the reasons that the FED
exists because Paul, you know that or why this is
sort of the current ocean of what FED independence actually
is was sort of built on this idea that, like, well,
politicians can't be assumed to do what's right. And I
would say, the one thing, you know, the one other
(18:09):
thing is like Tracy came up with the formulation that,
like any problem that you can solve with money isn't
really a problem, which all the m M tiers love,
So even though they've always love Tracy's lying about and
you probably can solved with money isn't like really a problem.
Speaker 5 (18:25):
So one other thing I would say, just you know,
out of mutual respect for the m M tiers is
I am a huge fan of any iconic plastic economist
who is actually thinking up new ideas for the way
the world works. So massive respect for Stephaniekelton. I think
she's done some phenomenal work. I do have questions about it,
(18:46):
but kudos to her for looking at things in a
slightly different way and.
Speaker 1 (18:49):
As a description of the current situation m mts it's right.
Speaker 3 (18:55):
Yeah, you know, I leave it there.
Speaker 1 (18:58):
That's good.
Speaker 3 (18:58):
That's good. That's good.
Speaker 2 (19:01):
I will say for a lot of these topics, the
first time I learn of them, or like really start
looking into them or become interested in them is because
you guys are talking about it on Twitter, on x
on x okay another one, and you guys also did
a recent episode about this. It's a company most Americans
don't know anything about.
Speaker 6 (19:21):
Bid the Chinese EV maker.
Speaker 2 (19:23):
Yes, and so EV's in general. Because Tracy, I'm going
to quote you again, you said, there's this ongoing tension
between wanting to create a vibrant and competitive EV industry
and battery making in the US, which BID is in China,
but also attaching better work conditions for workers. So this
all sort of ties some of these themes together.
Speaker 1 (19:43):
Yeah.
Speaker 5 (19:44):
Absolutely, And I think we've spoken to some senior officials
from the Biden administration about this tension. There is a
desire to create specific industry within the US, like batteries
like EV's solar panels, maybe at scale and in an
efficient way, but at the same time, you want to
create good working conditions. You want to make sure that
(20:07):
this is a valuable industry for the US, and I
think there's there's a real tension there between creating an efficient,
presumably affordable product that Americans can buy and competing with
other places in the world.
Speaker 4 (20:20):
I mean, I do think this is just this huge
story how cheap the end, you know, the improving quality
of Chinese electric vehicles and their competitive price points. It
seems to be creating all kinds of stress in Europe
right now or the beginning, more so than the US.
But I do think it'll be It's interesting. I do
think like there are some very exciting things happening domestically
(20:40):
in the US with like our battery investments and the
Inflation Reduction Act, et cetera. Like every other day there's
some new announcement of a new plant, and it's just
like unreal the growth that we're seeing in spending on
manufacturing facilities. And I'm not convinced necessarily that like the
level of US wages is going to be a problem,
(21:02):
but I do think it's highly tbd whether all of
these facilities end up producing competitive products on a global scale.
Speaker 1 (21:12):
Joe, this reminds me of a tweet I think you
had this week sometime, and I know you guys have
had a few guests on talking about the notion of Bidenomics.
But to me, what's fascinating is this perception of the economy.
And you tweeted out one of the consumer confidence surveys
where or maybe it's the National Federation of Small Businesses,
but one of those surveys where it's like Democrats think
(21:34):
the economy is great, you know, empirically you look at
the numbers, it's all great, Republican, but Republicans think we're
just going to hell, Like what how to explain that that.
Speaker 3 (21:47):
I mean, it does seem.
Speaker 4 (21:48):
Like so many people in the US right now are
almost in case, and I, you know, the the data suggests.
I think it is a little bit more extreme for Republicans,
but I actually think quote on both sides, there is
extreme level of inability to sort of view the economy
outside of the partisan lens. And if the president is
(22:08):
not your party, it is pretty dramatic how much that
will swigh your view on what is going on.
Speaker 3 (22:15):
And it's sort of like, do you think I tell
you what.
Speaker 1 (22:17):
It's a partly media consumption. Do you think if you're.
Speaker 4 (22:20):
Sure media or the sort of that would not be
surprise me at all? You know, I feel sorry for
people like that. I actually like do I like the
inability of we all know them too in real life
right the inability of people to like think clearly and
critically outside of the lens of is this a Democrat
thing or Republican thing?
Speaker 5 (22:39):
Like?
Speaker 4 (22:39):
Of course it's sort of annoying, but I actually like
feel sorry for people whose minds are caught in that trap.
Speaker 5 (22:44):
I think partisanship is a huge aspect of this, and
there's a lot of noise in the surveys right now,
and some of it is due to media consumption. And
we're not the only ones who have said this. Paul
Donovan over at UBS has talked about this. The other
thing I would say is, I do think there is
a real segmentation in the economy now between people who
(23:05):
earn less and people who earn more. And for people
who earn more, you know, higher inflation is probably something
that they can deal with. For people who earn less,
it might actually be that they're not seeing the benefits
of a lot of the things that we're talking about,
the things that are showing up in the hard numbers.
I think both those things can be simultaneously true.
Speaker 2 (23:25):
You're very humbly name dropped talking to a White House official,
But you guys did talk to Jared Bernstein recently, and
I think the topic was bidens right, And it does
seem like the White House is trying to.
Speaker 1 (23:41):
Wait, let me name drop something like that. You know,
Joe Biden guest lectured my college economics class.
Speaker 2 (23:47):
I thought you were about to say, well done. I
booked Joe Biden for US.
Speaker 1 (23:53):
I can't remember. If I would have known he was
to be president, I would have taken.
Speaker 6 (23:56):
You have the inside scoop on Biden.
Speaker 1 (23:58):
I think we're all like, are we going to be
tested on this? And they said no, and we all
just kind of tuned out.
Speaker 2 (24:03):
Did you miss that class?
Speaker 5 (24:05):
No?
Speaker 2 (24:05):
I was. But anyway, well, maybe talk about some of
the highlights from that Jared Bernstein conversation.
Speaker 4 (24:11):
What's really interesting to me is that they've chosen this
moment to say like, actually, we're happy with the economy,
We're proud of this economy. And I think that's really
telling because like the economy in you know, summer twenty
twenty three, inflation has come down a bit, but like
you know, it's not it's still high, right or it
still seems to be high core inflation. I guess it's
(24:32):
cooling a fair amount, it's still high, and I think
there and consumer sentiment numbers are not great. They some
of them have bounced back a little bit, but what's
in the unemployment rate's very low, but it's not that
different than the economy several months ago. So it is
sort of notable to me that at some point this
summer the Biden administration was like, you know what, we're
gonna pivot and rather than sort of like sort of
(24:54):
distract from the economy. We're actually gonna like claim ownership
of this economy, which I think in itself is pretty interesting.
And I think, like, you know, I do think that
there is like a feeling among the staffers to the
Biden administration that they've done a better job of coming
out of disaster than the Obama administration did, because like
(25:14):
both Biden and Obama came out of like kind of
like economic disasters of one sort or another. And I
think that there is like a feeling I was like, yeah,
this was the better way.
Speaker 3 (25:24):
Maybe there was an.
Speaker 4 (25:25):
Overshoot of spending or stimulus or something, but or there's
a lot being done, there's a lot of domestic investment,
and it's actually like has some teeth.
Speaker 6 (25:33):
I agree with that.
Speaker 5 (25:34):
The one other thing I would say is it's going
to be really interesting to see whether this sort of
more interventionist style of economic policy sticks around and for
how long, because I remember, I think in twenty twenty,
I wrote an article called the Choke Point Economy, basically
about how the pandemic had revealed all.
Speaker 6 (25:53):
These choke points within the global economy.
Speaker 5 (25:55):
You know, we discovered that we couldn't get enough semiconductors
or goods being shipped from China took a lot longer,
and infrastructure at the ports was lacking things like that,
and the governments were becoming more attuned to these issues
and more willing to invest in them. And I think
that's certainly a thesis that's been born out by the
(26:15):
past couple of years, however, with the ensuing inflation, with
the fact that despite a lot of the hard numbers
showing the economy is still going well, but some of
the messaging not necessarily sticking with voters. Is that attitude
going to be around the next time, you know, five
or ten years, let's say. And I think to Joe's point,
(26:36):
there is a lot of agreement that the more active
fiscal intervention in twenty twenty was massively helpful. But I'm
kind of interested in seeing whether or not that conclusion
sticks in say, a decade. Are people going to remember
it for that or are they going to learn the
wrong lessons that inflation was really high and it was
still a struggle to convince people that we had successfully
(26:57):
managed one of the worst global pandemics in one hundred years.
Speaker 1 (27:01):
Yeah, I think, Well, in addition to having a podcast,
you too have a very well edited. I would say newsletter.
Speaker 3 (27:11):
He does it excellent.
Speaker 1 (27:13):
People are saying it's very very well.
Speaker 6 (27:16):
You're the one reader we can always count.
Speaker 3 (27:19):
Are saying it's the best I've heard that.
Speaker 1 (27:22):
Yeah, tears in their eyes. But you've gotten into some
very interesting topics, and I recommend everyone to subscribe if
they haven't already. But it's a great way to sort
of get your undistilled thoughts on these things. Tracy. You
had one recently, a Brave New World Built on bonds,
basically talking about, well, here we go. We had another
credit rating cut on the US sovereign rating. Does it
(27:44):
matter that? Has the bond market moved away from credit ratings?
This week we saw Moodies come out and just sort
of dump all over all the bank banks, plant slam
all all the banks. And you had another one talking
about the extended pretend idea, you know, a throwback to
the financial crisis where there's a lot of commercial real
estate loan workouts being done right now, I'll try to
(28:05):
sort of do whatever you can to adjust the terms
to avoid companies going bankrupt. I feel like people here
extend and pretend and think of it as in a
derogatory Yeah, yeah, is it.
Speaker 5 (28:17):
I mean, it's only bad if it fails. But seriously,
I think this is one of the things, you know,
when we talk about at the beginning of this conversation
the big risks from two thousand and eight, there was
a lot of extend and pretend. Post two thousand and eight,
the economy recovered, albeit slowly and gradually. A lot of
those workouts did, in fact, you know, reach their intended goal.
(28:42):
We saw mark to market accounting suspended on bank balance sheets,
and a lot of those assets ended up recovering.
Speaker 6 (28:48):
And so I think we've.
Speaker 5 (28:49):
Actually written about this together that the big plank of
financial stability is in fact economic growth. And so if
you see people extend and ten for the foreseeable future,
but the economy remains strong, maybe some of those office
buildings get transformed into something else, maybe more people are
called back into work, then it's a strategy that could
(29:11):
be perfectly tenable.
Speaker 3 (29:13):
Yeah. Yeah, I've come at some point.
Speaker 4 (29:15):
I came to the realization, like I don't know, in
the early twenty ten, it's just all it's can kicking
for forever. You just keep kicking that can, And people
say it is a pejorative. It's like No, we're going
to be can kicking till it works. And then my
kids are going to be kicking the can because it's
like it's kicking the can. No, you just keep kicking it,
and then the kids, our kids and grandchildren, they'll just
(29:37):
be keep kicking that can. And I sort of think
that like that sort of you know, taking our lumps
now has this like good feeling. We're going to like,
you know, solve our problems. We're gonna like take the pain.
And I just sort of think like, now you just
keep finding a way to muddle through, and that that
actually is how sort of the economy and humanity just
sort of keeps keeps going through.
Speaker 2 (30:12):
Okay, Joe, I have a new question. Okay, shot this
is super interesting to me, and I think actually Matt
Lewen ended up writing about this this idea of yours
as well. You said betting on downturns has been really
costly for companies. So for instance, right now, maybe we're
not seeing as many companies letting people go because you know,
they think the downturn is coming.
Speaker 5 (30:33):
Yeah.
Speaker 4 (30:34):
I mean I think, like, you know, the twenty twenties
in many ways feel like the very reverse of the
twenty ten. So in the twenty tens, the it's like
double dipper sessions when they're coming, it didn't come. But
like companies were so scared to invest and they're so
scared to hire.
Speaker 3 (30:47):
But for the first.
Speaker 4 (30:48):
Time ever in like twenty twenty one, in twenty twenty two,
or maybe not the first time ever, but for the
first time in decades, really, I think companies suddenly are like, oh,
we do not have an unlimited supply of workers, which
is I don't think that many managers of corporations ever
contemplated that idea, even in boom time's late nineties whatever,
that like what if we just can't open our store
(31:10):
because we can't hire? And I think that really had
like a deep like scarring effect on a lot of
managers and management teams at companies. And I think that's
a good potentially portend's good news like down the road,
which is that okay, that like they don't want to
ever be back there again, and so they'll be slower
to fire going forward, even if they see some signs
(31:32):
of softness. And what's interesting is I always love one
of my favorite things every month is when the Dallas
Fed Manufacturing report comes out once a month. I always
jumped to the anecdotal section because like Texas, like business managers,
you know, they're super swaggery and cocky and all that stuff,
and so they always have very colorful things. But there's
in recent months some of them have been talking about
(31:53):
how I'm looking forward to the next recession because I'm
going to expand my investment and take market share for
my opponents. But what's interesting about that is if everyone
goes into the recession with that attitude, you're not going
to get a recession, because recession, you know.
Speaker 1 (32:07):
You're waiting to buy the dip.
Speaker 4 (32:08):
So this is like the psychology you want to engender,
I think for the long boom, which is that if
everyone yeah, it's right, if everyone wants is excited to
buy the dip, and we saw this in the twenty tens,
you don't get the dip. If everyone is excited about
the downturn because they're going to steal employees from the
other company or steal market share, you can sustain an
expansion for a long time.
Speaker 5 (32:27):
I agree with this, and I would also just add
that we've seen some FED officials start to talk about
that recently, including Tom Barkin, at the Richmond FED recently.
The one thing I would say, with my sort of
like risk officer hat on is a really really bad
thing for the economy would be something that causes everyone
to wake up and go, oh, actually, I have massively
(32:48):
overinflated my labor force for like business activity. A sort
of Minski moment in employment would be very, very bad.
But I don't see anything.
Speaker 1 (33:00):
Margins go down, and they yeah.
Speaker 6 (33:01):
Something along those lines.
Speaker 5 (33:03):
But I think I think you shouldn't underestimate the sort
of psychological effects here. And I do think it's true
that people have been more scarred by not being able
to ramp up capacity than by having too much capacity
in the previous crisis.
Speaker 1 (33:18):
But so Joe, while you know, Tracy and I are
looking at the economy in markets wondering what could go wrong.
As I said, I like how you're always looking for
the next big thing, the next big opportunity. You were
the first one I think that I heard the words
room temperature.
Speaker 3 (33:36):
Apparently it's not happening.
Speaker 1 (33:38):
Well, explain it and explain why it's important and what
we need to know about you.
Speaker 4 (33:44):
First of all, as of an hour ago, some university
put out there's like this is there's no room temperature.
Speaker 6 (33:50):
It's actually just floating rocks.
Speaker 3 (33:52):
It's just a floating rock so hot.
Speaker 4 (33:53):
My dad, by the way, is a physicist, and I
saw him this past weekend and I was like, will
you come on, people will love it so cool? I haven't,
and he's like, no, I'm not. But he did explain that,
like you know, super conductivity, obviously, this idea that you
could like transmit energy across two things or across distances
with no loss would be really powerful, and it exists currently.
Speaker 3 (34:14):
The problem is you.
Speaker 4 (34:15):
Need such high pressure or such cold temperatures to do
it that there are very few actual like applications of it,
like apparently MRI technology is one. But he said that,
like were the holy grail to be found of where
you didn't that it would create all kinds of like
new consumer gadgets and certain like energy things. And I
get you know, I'm literally just repeating what my my
(34:37):
dad said. Hit all these stuff about like bosons and
things like that that I was getting get too much.
Speaker 3 (34:41):
I didn't. It would have been a great episode.
Speaker 2 (34:43):
I'm really annoyed that.
Speaker 3 (34:48):
What goes up. But you know, actually the the the
thing that.
Speaker 4 (34:50):
Was sort of interesting to me about it is like
the idea of energy loss over some distance is very
intuitive because there's no free lunches in the world, right, Like,
if you get something, it's like, okay, it's like you're
going to transmit energy, but you're gonna have some laws,
or you can have no energy laws, but then it
has to be a negative five hundred cells. It's like
it wasn't like pay the price somehow. So I asked him, like,
(35:12):
why do scientists even think room temperature super conductivity is
theoretically possible if we know that there's no like sort
of like free lunch in the universe. And what he
suspected was that were there ever to be a substance
that was found that had this property of room temperature superconductivity,
his guess is that it would be very costly to synthesize,
(35:33):
to make, and so you would pay the price not
in the application layer, but in the creation of the
material layer. So you'd still like have this, there'd be
no free lunch. Nonetheless, he does think were it to
be found, which he's not totally dismissive of the possibility
that one day it would be that it would open
up new things, but it would still be like difficult
to synthesize in large.
Speaker 5 (35:53):
Back interesting because this was one of the things about
the LK ninety nine formulation, which was like, actually, it
wasn't that difficult to do. So people were simultaneously excited
about the potential for a room temperature superconductor, but also
that it wasn't that difficult to make.
Speaker 4 (36:08):
I guess, I guess it turns out it's easy to make.
It's just it's just very magnetic.
Speaker 1 (36:12):
I was sure that tungsten cubes would be involved some
one day.
Speaker 3 (36:16):
This one day, the tungsten cube that I have.
Speaker 2 (36:19):
In the bin, but I remember you brought it in
and then everybody was like, if you want to go
see it, you got to go to Joe's.
Speaker 3 (36:24):
Yeah, yeah, community community cube.
Speaker 1 (36:27):
Anyway, it's that time, bil Donna. It is for the
craziest things we saw in markets this week. I hope
you too came prepared. This is this is a big reveal.
Speaker 5 (36:36):
Wait wait, I'm going to go first, just on the
chance that we chose the same one. But mine is
connected to the superconductor stuff, which is last week when
there was all this excitement over the potential LK ninety
nine breakthrough, in South Korea, we saw shares of a
company called American Superconductor shoot to the proverbial moon, a
(36:59):
company that, as far as I could tell, had absolutely
nothing to do with the South Korean researchers. It just
had a superconductor in its name. And fast forward to
this week and it is down a lot.
Speaker 4 (37:13):
The thing that still weirds me out, or this thing
that I still don't get, is like why US investors
got really weirded out, freaked out by like the Bank
of Japan ending your oield curve controllers. It's like, who
cares suddenly, Like I'm going to like sell my like
portfolio of US equities because like the Bank of Japan did,
like their million of tweak to like the shape of
(37:34):
the old curve. Like I'm sorry, I I mean, maybe
I'm missing something. And like if like the stock market
crashes from here, then this will be embarrassing. It's just
hard for me to get excited about that one. So
the fact that some people manage to get excited about
that I can consider.
Speaker 3 (37:48):
To be impressive.
Speaker 1 (37:49):
The only thought I had is maybe the carry trade.
But I don't think you buy equities with the carry
trade really, maybe do I don't.
Speaker 4 (37:55):
Know if you're if you want to sell your stock
to me because of the carry trade or something I'll
pick about.
Speaker 5 (37:59):
It wasn't the argument that it was going to take
it like a big chunk of bond buyers like move
them away, and that bonds are the underpinning for equities
and a lot of other things.
Speaker 1 (38:10):
It did seem like an overreaction though.
Speaker 4 (38:12):
I agree it's going to be really embarrassing in a
week when where market.
Speaker 2 (38:17):
I can't wait to point it out by soon. Yeah,
I'm going to say, listen to this episode where Joe
embarrasses himself. Okay, mine is about Zoom, the company we
all use to zoom.
Speaker 6 (38:27):
You know, I think I know what this one is,
and if it is this, it's a good one.
Speaker 2 (38:31):
It is good because they're asking their employees to come
work from the office.
Speaker 1 (38:37):
I don't do you think they still zoom each other
in the office though.
Speaker 2 (38:42):
So they go to the office and then also zoom
each other.
Speaker 6 (38:45):
That wouldn't be unheard of.
Speaker 2 (38:48):
But it's just it's funny because they're Zoom, but they're
asking you to be in person.
Speaker 1 (38:54):
You would think they'd be like everyone stay at home.
You know, you never another pandemic could be coming.
Speaker 4 (38:59):
You is read the last Zoom conference call about you
should read it. It's from about a month and a
half ago, and it's like the ultimate like flavor of them.
Every question was about their AI strategy. I don't know,
it's like they make a video thing, right they had
They did have good answer, but talk about like the
degree to which like analysts all like sort of school
(39:21):
of fish.
Speaker 3 (39:22):
Yeah, they're swimming. It's a very funny ring.
Speaker 5 (39:24):
Next call it'll be what Superconductor is doing with energy transfer.
Speaker 2 (39:29):
But there is there's a meme on the former Twitter
on X where it's just a picture of like a
Zoom office of like a Zoom skyscraper and then somebody
being like they have offices. Why would they have offices
their Zoom?
Speaker 1 (39:44):
All right, I got I got Mine. Mine is a
game show. Actually, I'm so excited to actually have three
contestants on it. It makes me feel like a real
game show host when there's three. Because it's sort of
a price is right, we call it the prices precise.
Speaker 2 (39:57):
We can't call it prices right, Ye, So all right.
Speaker 1 (40:02):
This is occur to see the Wall Street Journal. I'm
saddened we did not have this story. Silicon Valley Bank
went out of business. We all know that went into
FDIC receivership. So what happens in that process is the
FDIC sells off all the assets of the bank. One
of the more interesting assets they're selling off is SVB
had a huge wine collection. They had nineteen hundred bottles
(40:27):
of wine one nine hundred boles. Well I was runnering
the same thing, and there's an old Wall Street Journal
story that explains it. Being in Silicon Valley. They do
a lot of business with the wine growers in northern California.
This guy, there's some guy who actually pitched them on
starting a wine business. Wine lend, you know, lending money.
(40:48):
I'm dying to know if any of these were actual
collateral on some of these loans, but it was something
like four percent of their loan book was to wine
makers in northern California. So let me give you a
little bit more details here before we play the prices
precise nineteen hundred bottles of fine wine, four hundred bottles
in the Santa Clara branch, three hundred in the Menlo
(41:10):
Park branch where they were quote meticulously racked and kept
in climate controlled environment. The rest were in a private
wine vault in domain NAPA. Now I'll give you one hint.
They were auctioned off at a sixty percent discount in
the appraised value. So time to play prices precise?
Speaker 6 (41:31):
How many bottles in total?
Speaker 1 (41:32):
Nineteen hundred bottles?
Speaker 5 (41:33):
Okay, at a sixty percent discount?
Speaker 1 (41:37):
Sixty percent? Oh, you're right, forty percent discount. They sold
at sixty percent of the appraised value. So it's California wine.
So it's tricky. You know, it's not known for superintensive wine.
Speaker 2 (41:48):
And they've had lots of wildfires.
Speaker 1 (41:50):
That's true.
Speaker 3 (41:51):
Well I didn't think nineteen hundred.
Speaker 6 (41:53):
I mean I drink one for me.
Speaker 1 (41:57):
Well, well, you got a.
Speaker 2 (41:58):
Gosh, usually I have like idea. Okay, two hundred thousand,
two hundred and fifty thousand dollars.
Speaker 1 (42:05):
That's a quick answer, Like how quick that a sor? Right,
I'm gonna write these down. Okay, data bids two hundred
fifty thousand. Now the rules of that other game show
are in place, so you could bid one dollar.
Speaker 5 (42:16):
Oh, I think I'm going to go higher. I'm going
to say one point six million.
Speaker 1 (42:23):
One point six millions. Now we don't kind of wind
Tracy drinks.
Speaker 2 (42:27):
Are we talking about nineteen.
Speaker 1 (42:28):
Hundred nineteen California wine? Remember soon, remember the rules. Now,
don't give him head lower.
Speaker 3 (42:38):
I'm going to go one hundred and twenty thousand.
Speaker 1 (42:41):
My god, it's pretty close. One hundred and thirty thousand.
Speaker 2 (42:44):
Oh, come on, this is bad, Joe.
Speaker 1 (42:46):
When's the well you figure? I mean, one hundred dollars
a bottle will get you to one hundred and ninety thousand.
Speaker 4 (42:52):
So that's basically this is bad collateral collateral and maybe
I should have liquidity.
Speaker 3 (42:59):
So we recently did an.
Speaker 4 (43:00):
Episode of the podcast with the CFO of core Weave,
which is building a GPU cloud. A week later, there's
a really good story. They borrowed two and a half
billion and they put up in video chips. Yeah, so
it came out after the episode. But chips is the
new collateral.
Speaker 1 (43:15):
So you can just pull those chips out of the server,
I guess apparently.
Speaker 3 (43:19):
Yeah, it's still work.
Speaker 1 (43:20):
That's crazy. Well, Tru and Tracy, what a great.
Speaker 3 (43:23):
Thank you so much.
Speaker 1 (43:23):
We thank you. It was very fun.
Speaker 3 (43:28):
I know that's just a lot of.
Speaker 2 (43:38):
What goes up. We'll be back next week. Until then,
you can find us on the Bloomberg terminal website and app,
or wherever you get your podcasts. We'd love it if
you took the time to rate and review the show
so more listeners can find us. You can find us
on Twitter, follow me at Wildona Hiring. Mike Reagan is
at read Anonymous. You can also follow Bloomer Podcasts at podcasts.
(44:03):
What Goes Up is produced by Stacey Long and our
head of podcasts is Sage Pauman. Thanks for listening. We'll
see you next week.
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