No End In Sight For Latest Meme Stock Frenzy

It was a lot of smaller cab mid cap stocks, high short interest, uh and easy for these Reddit traders to kind of force a short squeeze, if you will. And it was really exacerbated by social media. But it seems still broadened out a little bit from that limited kind of scope. Barry Billy Lipscholtz, equities reporter for Bloomberg News, joins us on the phone here. Bailey, thanks so much for joining us here. The meme stock craze, it was there, it kind of went away. I'm thinking game stop and

things like that, but it's come back. What's what's going on these days? Well, the biggest difference we're seeing now compared to where it was back in early January or into late January. Really has been kind of this incessant desire to find the next hot stock, and we're seeing that with hedge funds dipping their toe into it. Obviously, people on Reddit or stock twits or especially Twitter these

days UM are pumping up their newest bets um. It's it's been really interesting just because it's we're seeing one stock really pop off for a day or a week, and then very quickly the scope tends to shift, which is obviously, again very different than what we saw in late January, where game stop AMC costs express. We're all kind of mimicking each other. By the way, is that the order now is Twitter um the king of locations for the meme stock mafia, and then stock twits and

then read it. I mean, how should we follow this best? I think it's still probably goes Reddit Twitter than stock twits. Twitter, though Death really has become more and more popular simply because of the way the platforms laid out in the ability to follow um individual accounts that may have more insider perceived insight than others. Read it still kind of is a wild wild West where there's a mega thread and a lot of game stop being pushed um and then I would say stock to it's probably his third

in line. But we're definitely seeing more of a more of a focus on Twitter um over the last you know, month or so, just because again, I think that the layout kind of amends itself more toward a average gambler or an average investor excuse me, or average gambler attention. I think the average gambler is fine. Yeah, that's fine.

I think even the apes would defined with that Billy talk to us about like, I'm starting to see some more reporting that it's not just the retail investors or you know, the Dave portnoise of the world from Barstool Sports, who's got a big social media following, but it might actually be some professional investors, hedge funds getting in it. Do we have evidence, said, Golden Sound algorithm? What's that

Goldman's got an album? An algorithm? Right? So, I mean, what's the role of the professional investor in here, Bailey? I think they're kind of picking off where they can make money. Obviously, if you just look at Alane, some of the trading volume in these stocks, it's kind of hard to sit back and argue that a retail crowd is able, you know, to have trade hundreds of millions of shares of AMC while also investing in Wendy's and

other parts of the market. So I do think, and we have been hearing more and more that hedge funds have to be playing some part in this, especially when you look at kind of some of the call option trading and the underlying stock trades. It can't really be in the consensus that I've been hearing more and more um from my sources is that it can't really be

just a coordinated retail attack. It has to be folks on Wall Street, your professional traders who are kind of jumping in on these trades, and whether they're getting in earlier or later continuing to help ride some of the momentum, are definitely playing apart. I'm waiting for a hedge fund

to embed people on Wall Street beats, you know. I saw the other day somebody posted a screenshot of his td A Meritorie account with a one million dollar investment in a meme stock, and I thought, this has got to be a hedge fund dude who just wants to to pretend he's among the masses and try and speak as insensitively as he can to to stir up some drama around his stock. Also, they don't want to call it a meme stock. A lot. I know a lot of people on Wall Street Best Now are saying, hey,

of course there's not a meme stock. That's not fair. Do you hear that a lot too? Yeah? No, I think you're seeing a divide. I remember I wrote something we mentioned Bill the Bear in the meme stock basket back in January. The amount of people who emailed me saying Bill the Bear is not a meme stock and has a solid core business and we're fundamentally long it.

I think the term memes stock gets thrown around a bit, and depending on who's investing in the company or what the company is, definitely does trigger push back um because they don't want to group you know, some of these other companies with the likes of you know, an AMC creating at the market capital is at now or something like Express. It is definitely fascinating. Bailey, thanks so much for joining us. Bailey lip Schultz, equities reporter for Bloomberg News.

I tell you can lose time. I went on Wall Street Bets the other day and I looked up and all of a sudden hour had passed. It was like

I was playing Red Dead, Redemption two or something. When Chairman pal does speak this afternoon in two thirty Wall Street time, which Bloomberg will bring to you live, investors will be focusing uh many topics, but clearly inflation is top of the list, as the Fed chairman continue to believe that the inflation we are seeing in this economy is transitory or is it perhaps something more that will certainly be key. Let's check in with Marcus Schomer. He's

a chief economist for pine Bridge Investments. Marcus, I'll love to get your thoughts here on inflation, um, and how you're viewing it and maybe what we might hear from Chairman Powell on this issue. Well, I it's not to be back on the show, um, And you know those are the themes that I talked a lot of our clients about as well. UM. I don't think we're going to hear much from from the feeding from Power today. I think they they still have enough time to hide

behind the transitory sense that they've built around this issue. UM. I've sort of been quite critical of this because we're seeing inflation everywhere, right, and we shouldn't forget what the Fed is doing is they're choosing the smallest, narrowest and slowest inflation measure that we have where everywhere else outside of the PC to fate that which they prefer as the inflation measure in CPI and PPI, in financial markets and the housing market everywhere else, inflation is wanting much

much higher than what they measure. Um but we kind of know that they're hiding behind this this CPS, this PC into a corner, Marcus. I mean a lot of people are starting to say, you know, they can't get out now without royally markets. I don't think it's a corner that they don't see it that way. They want to be there. I mean, I think what they're telling

us is actually honest. They think running the economy hot is a good idea, Whereas if you look at the economy, I'm not so sure that it is such a good idea because I start to see more and more science that rising inflation, rising prices are now slowing growth. Because that's also the answer to this question, is inflation transitory, And in my view, inflation is always transitory if it doesn't also translate into higher wages, because if prices go up,

purchase and tall goes down, and consumption will slow. And I think that's what start, that's what starting to see. I'm getting more nervous about the growth outlook in the US in the second half because of the surgeon prices that you've seen and the lack of follow up in wages. So Marcus, but as you were suggesting here, wage inflation,

we haven't generally seen it. And even before the pandemic, when we're running in you know, effectively, you know, full employment, wage inflation was only you know, three and a half percent. I mean that that didn't seem too terrible. Do you think wage inflation is a material risk for this U S economy? Um? No, I think it's it's the opposite, right. If we were to get wage inflation, then this growth

story can continue. We would have a different narrative. Then we would have we we have to talk about too much inflation and too much growth potentially, and that would be a problem for the FED. But I think what we're seeing right now is prices are going up because we have supplied issues and we have to stimulants fuel demand surge. At the same time, but wages are not

keeping up to consumer purchasing powers going down. Real incomes are declining, and that would slow growth in the second half, and that I think feeds very well into that position to FED is in they don't care about the inflation. They want interest rate to stay low. And if the economy actually slows a little bit in the second half, that plays perfectly into their narrative. And they're going to be sitting there doing nothing, nothing for the rest of

the year. So Muhammad Arian writes a piece for US today. He basically says what the FED should be doing is start now reducing exposure to a more risky posture by moving forward with a partial pivot I'm quoting directly from his op ed in light of the change circumstances, thereby keeping their options open and better balancing risk um and and but that's not what they're going to do, and he says that really they risk both an economic recession

and financial market instability, especially the latter. Marcus, the concern that financial market instability is one of the big risks is something we're hearing echoed across global Wall Street, because you know, with rates this low, everybody gets such cheap money. You know, junk bonds are trading at their tightest spreads in all time, and um, it just seems like, you know, uh, ratings agencies are coming out upgrading everybody because they don't

have to pay very much the service this debt. But meanwhile leverage is growing and growing and growing. Isn't it a worry? I think it should be a worry on the Fat's radio screen. That's true, But I think, well, hammaga Aaron still looking at the old world. Right, Remember a couple of years ago when when Jannet Yellen was raising raids, the argument was, well, we need to raise rights so we can custom again, right, we need to refill the arsenal so we can do something in the

next crisis. The Power Fat doesn't think that way at all. They think, right now, we're fine. We're only going to do something if there really is a problem on the rise, and then we will change. So where we are today is normal, is neutral. This is where we're gonna stay until something changes. There's no idea that, oh, if things are not so bad anymore, we need to go back to something as neutral. That's not the way power the

power FET looks at it. So I think we will get nothing from the feed for the foreseeable future marks just real quick thirty seconds here, Um do you is? I mean, how do you view GDP for the remainder this year and next year? What's your forecast? Well? I actually think we're we're gonna That's why I was seeing earlier. I think there's a bit of a downside risk emerging here for g d p UM. But you know, the numbers are so high, so much above what what's normal.

What we all think is sort of the underlying potential growth with whether it's gonna be five percent or six percent or seven that's of the range of all the forecasts. Our number is five point nine, but I don't have a lot of confidence in that number. Next year's number will also be significantly about potential. I think that's all that matters, all right, Marcus, thanks very much for joining us. Marcus Schomer, their chief economist at pine Bridge Investments, talking

to us about the FED. We're all going to be watching the special coverage starting today at one thirty pm Wall Street Time with Tom Keene and Lisa Obramo. It's this is Bloomberg. I want to bring in Daniel d Martino Booth. We've been waiting to hear from her all days. Cee On, director of intelligence at Quill Intelligence, a former advisor of the Dallas Fed, also a Bloomberg Opinion contributor, and she's got a lot to say about what we

should expect today. Danielle Um. There has been a brewing I guess, uh brewing opinion um anti to the Fed, to the Fed's outcome based framework, coming from Peter Hooper at Deutsche Bank, Andy hal Dane at the Bank of England, now from Muhammad al Arian as well, that he's been writing about this for a while, saying that they're they're really taking a huge risk and really getting into danger by sticking to um this policy of of watching and waiting for inflation transitory. So they say to to to

go back away. What do you think, well, Um, I think you have to look at the fact that the Fed is taking comfort from certain silos, if you will, of inflation. If you look at the c RBND, for example, it's down on the week, and we've we've seen the number of commodities that are rising come down appreciably, So the Fed's going to take comfort in that pocket. On the other hand, we're seeing the kind of inflayation that

becomes sticky, becomes very problematic. Zillo reported that rents are up two plus percent uh in in May over April in the in the largest cities largest the top eight cities of the in the United States that were fift So if this starts to percolate through, it's the largest input to inflation, that Fed's gonna have a serious problem on its hand, especially because it's playing chicken with the millions of people who are slowly flowing back into the

labor pool. That that process won't end, if you will, until after schools is fully reopened and the supplemental unemployment benefits have fully expired nationwide. So Danielle, before I ask this next question, I have to prefaces by saying you are the author of a book entitled fed Up and Insiders take on why the Federal Reserve is bad for America. So my question is has to FED. I mean, are they basically done? Should they just step away here and say, Okay,

we did our job here. Now we're gonna let this economy kind of go on its own. I think that if the FED was to do a full rip off the band Aid approach that the harm that would be created given stocks remain of the nine percentile historically would be would would would do more damage than they're acknowledging that inflation has become problematic. They have a very elegant solution, however, and that is that they can pull back from their

mortgage backed security. Uh, I'm very damning optically the housing market. Nobody doubts that housing has run off the rails, and they could say, you know what, we and and in fact, yesterday the New York Fed released a statement saying that they were gonna be test driving. They're gonna be testing out selling, outright selling mortgage backed securities starting next week. Um, will that do anything to help the housing market? Well, if the housing market has overheated, right, too much stimulus

or too little stimulus can break housing. And that's what we've learned in the current episode, that too much stimulus can actually break housing. So it's the objective is to take some of the heat out of the market. You would certainly do that by reducing the mortgage back securities market and getting the FED out of the mortgage market. Danielle,

how do you view the labor market here? You know, we're the jobs that have been edit have been over the last couple of months have been less than expected, and uh, you know, I presumably that gives the FED some more leeway to kind of stay on the sidelines here. The risk of wage inflation, presumably is is is not necessarily front and center. How do you view the labor market? So again, I think that it is a wait and see.

We are seeing, uh, the unemployment rate in these states that are pulling out for four states last Saturday, eight states is coming Saturday total between now and in July nineteen. We are seeing activity and movement move up in these states in the as these labor pools are replenished. We're also seeing teenagers poor into the labor market at the fastest pace. Since I think you have an eight I mean,

it's a magnificent number, and that's great for teams. You're gonna make a ton of money this summer making My seventeen year old was offered eighteen dollars an hour just yesterday hopefully doing nothing. Um So, because it's it's the low skilled work that needs to be fulfilled, and people aren't factoring in the fact that it's not just people going from state an average of six d and thirty to three d and thirty a week in unemployment benefits

if they're on extended state. The gig workers, the contractors. If these states are pulled in the plug earlier they they run, their safety net goes away completely. And you have rental eviction moratoriums that are expiring also at the end of June. So you know, I think the FEDS wait and see on wage inflation is appropriate for a little while longer until we know what the labor pool really, what the population of the labor pool truly is here

in the coming twelve weeks. I think you're underestimating the skills of your seventeen year old. I just want to quickly ask you if you can fly a plane, Oh, that's all right, airlines need pilots. Uh, then he should be getting paid more. I just want to quickly ask you, we only got about thirty seconds here, but I've been watching the reverse repo facility with wide eyes. Is it really that big of a deal or on what's happening there?

So you know it would be that big of a deal had we not had yesterday dot dot dot and one data point does not make for a trend. But the fact that we came down from five four to five oh nine as the Treasury is checking account, that tells us the FED, if you will, is depleted as we as we head into the end of July when they want to get that balance down to five billion dollars.

I think that as long as we see these numbers continue to come down, they might pop back up by the way going into quarter, and they always do window dressing purposes. But as long as we see that it's been coming back down, then the Fed can claim it's purely mechanical in nature. If it keeps going up, that starts to flash credit risk. All right, daniel thank you so much for joining us to really appreciate getting your

thoughts on this FED day. Danielle di Martino bou the CEO and director of Intelligence at Quill Intelligence and a former advisor at the Federal Reserve of Dallas and a Bloomberg opinion contributor. Well more coming up this is Bloomberg. Well the metrics as it relates to vaccines, they remained positive. Here in the US. The reopening is continues to accelerate. We saw the state of California fully reopened new York

yesterday fully reopened, joining a number of other states. So the question is how do you play that in the stock market. Scott Rent, Senior global market strategist for the Wells Fargo Investment Institute Joints is Scott, thanks so much for joining us here. You know, love to get your thoughts on kind of your positioning in the equity markets. Here.

We've you know, had this rotation trade into uh let's call it, some cyclical names, some smaller cap names, some names that might benefit from, you know, a reopening economy. They performed so well and perhaps even out warmed, you know, some of the tried and true growth stocks, the Amazon's Apples of the world, that have been such good performers

really since the financial crisis of twelve years ago. How do you kind of think about, you know, your portfolio construction talking to your clients, Well, Paul, I think you have to you have to say to yourself, is this recovery in the early stages, which we think it is. Do we think it's going to be a global recovery? We do, um, So we've been leaning toward these more cyclical areas, these more cyclical sectors like you know, financials, industrials, materials.

As a matter of fact, just about a month ago or so, we downgraded UH tech, we downgraded consumer discretionary, and we had been overweight those two sectors for a long long time. So we want, you know, growth is going to have to participate here if the market is going to do what we think it's going to do

over the next six months or eighteen months. So we have a full allocation to tech, which is about of the market cavity s P. Five hundred, But we have been been basically leaning towards those sectors energies included in that communication services, UM materials that we think are going to to participate. So that's what we've been talking to

our clients about. Is that in the US, Scott or is that are you talking about globally because we've run up there, Yeah, right, you know when we have and we've we've stuck with them, and I think we're going to and we're gonna have some back and forth here, especially whether it's around a FED meeting or are we going to have a lot of inflation or not, which is is obviously a quick key question. But you know, we like emerging markets as well as an asset class.

And if you look at China, South Korea, Taiwan, you know they're going to make up whatever e M index you're looking at. They're making up the bulk of the market cap. And you know, if those if those countries are doing well, which we think they are, dollars a little lower, commodity prices are up, we think emerging markets is a good place to be. Scott, what do you expect to hear from FED Chairman Pal today? Well, I

think it's going to be largely status quo. And what what I believe that means is that acknowledging that you know, growth has really come back quickly, that we're seeing some higher inflation, that the FED believes it's transitory, and we certainly believe that inflation is going to decelerate in um. I think it's key. You know, the market is going to be hanging on is the FED talking about potential tapering?

And I believe it was a Bloomberg interview I saw with the Loretta Mester and she said, you know, we've been talking about the exit strategy since we had the plan together, So you know, I think it's naive to think that the FED is not talking about what you know, what the end plan is to to remove some of this accommodation. But you know, for us, we think it's likely not today. We think it could be at Jackson Hole,

or it could be in September something like that. But I think for now, you know, the FED was all in on these easy policies, you know, just really the last meeting. So I don't think they're gonna, you know, make a big turn here in just one one meeting, and it's likely to start to be an easy turn probably a couple of meetings from now. So what do you think about rates? Does it make sense to you to see the tenure at one nine? Um? Since you know, if the FED steps out of line at all, it

has to be to the hawkish side. It's not like they can get any more devish. And if they do that, um, don't you see a sell off in treasuries? Well, I'll tell you, Matt. You know, as an old foreign exchange guy and as an equity strategy guy, it's it's you know, when I think about the growth we expect seven this year in the US, five next year, is it hard for me to rationalize a sub one tenure? It absolutely is now we know there's a lot of demand out

there for yield um negative and that's part of it. Yeah, yeah, well yeah, and and the negative real yield actually obviously as you said, but it is a bit of a mystery. We think it's going to back up a bit, maybe two and a quarter by the end of this year, two and a half by the end of twenty two, so we you know, we certainly do expect rates to better reflect the type of economic environment that we think we're in and headed toward. Totally good to get some

time with you, Scott. Always love getting insight from you. Scott Ran, Senior Global market strategist at Wells Fargo Investment Institute. Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews with Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller three, pt on Fall Sweeney I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio.