The Markets, The Cloud, The Merge, And A Rail Strike

at Bloomberg dot com slash podcast. A little bit of a calm feel to some of this early morning and trading after yesterday's rampant sell off, and I want to get some perspective here from someone who actually has been trading markets for decades. We can do that with Vince Signarella, Global Macro Strategies for Bloomberg News. Vince, what's your takeaway from yesterday? They weren't playing around yesterday, were they? No? No, not at all? That was that was quite a round. Um.

I think it was some. I think what we saw yesterday was some really weak long positions which have been built up for about a week and a half after some week short positions. And I think that's what we're seeing a lot of going on, a lot of day trading, a lot of algo trading. We went through four thousand on the SMP yesterday was major capitulation, uh with with the sell off, al goes, driving stops lower, and we're seeing some of this going on today in this morning.

It almost feels like the day is over and we should go home. Already of the trading is very very quiet. It's very modest. As I'm looking over at the tape right now, the average is giving back all of the morning games just about with the SMP cash up just about six. So Vince, you know you've been out there. I think with a call that says, you know, the Fed can really pause if at once to I mean, inflation in a lot of parts of the economy is

has peaked, is rolling over. They don't need to be over the aggressive the market yesterday kind of said maybe that CPI print changes that a little bit. How do you how do you think you know the federal view all this stuff. I think the Fed is going to look past that one number, um and I would caution people to look past that one number as well. I know what. It obviously took a lot out of the street yesterday and wiped a lot of the market out,

but it's potentially actually a good opportunity. I mean, the consumer inflation expectations, and you know, just as a reminder, inflation is an expect ation phenomenon. It's it's it's what people think is going to happen, and that kind of manifests itself into reality in the future. Inflation expectations on a euro of the year basis of continuing to drop, and we've basically been seeing producer prices drop as well.

And you know, the trend in CPI on a month over month basis is lower also with the exception obviously off Tuesday's number. So I think what we really need to do is, like you know, as CPI, CPI which was Tuesday's trash, could be Thursday's fortune if retail sales comes in lower than expected, because what I expect to see as we go into the end of the year is slower growth. The set is definitely I think going to push us close to if not into whatever session

um and prices and consumer expectations will fall. How about I mean again, just thinking about yesterday's action, was it a sense of the market overreacted yesterday, or as you may be suggested, there were just some week longs out there. I think it's actually a little boatful. I think there was something of an overreaction. UM. I mean, let's face it, it really is just one number of all things being equal. Um. But at the same time, there's not a lot of confidence.

I think either side of this market, you have a lot of people still in cash, not feeling good about equities. We got a little bit jammed up over the last week and a half after a major sell off, and

I think those positions were wiped out. Remember going into the CPI number that that was up almost two fifty And I was talking to traders shows before the data and we were kind of like, what the heck are these people thinking that's pretty optimal, that's pretty optimistic going into a data print like this, And and I think that was a big part of it. To people would just so like worked up going into that number, and

they absolutely got crushed. Vince, the traders you talked to, do they believe a soft landing is possible or are they just saying, you know what, it's either we're in or we're going into recession. It's just a question how deep where do you think the trader sentiment is these days? I don't I don't think there's a good feel about a soft landing, and I commented about a month ago the only soft landing we've seen the list twenty five

years was slowly on the Hudson Um. Most most of the traders, most of the traders, if not all, of the traders I talked to, think that we're going to hit a wall, that the FED is going to push us into a recession. Of sorts, they buy and large sea equity is lower at the end of the year. I disagree with that notion, but I think I'm a little bit in a min already there. But by and

large they see us going into a recession. They see the FED overreacting, if you will, um and pushing a little bit too hard on at and and things are going to be softer as we head into next year. So when we hear from the Fed next week, Vince, I mean, do you think we'll get any kind of body language as to we're gonna wait and see how We're gonna wait here and see how the past you know, rate hikes impact this economy, or do you think we might get some body language about Nope, we're still focused

on inflation and we're signaling some more rate ikes. I think the latter it would be very surprising for me, uh to see them to see Powell shift from the jackson Hole speech just just a few weeks ago to a more modest, sort of neutral lean, if you will. I think he's going to stay where he was quite hawkish, which is what the market expects. UH. If he should lean to like we're waiting and seeing, we're probably see a massive rally, because that would be very very dubbish

of him. But more likely than that, he's going to stay on the theme that he painted for jackson Hole. I would hope that the next set of months for soul of Data UH will be some moderation because let's face it, it does take six to twelve months for the monetary policy to get through the economy, and they're not really giving any they're not giving anything they've done

any time. Yet there seems to be a panic on the part of the FLMC, and I think it has a lot to do with them totally missing the boat with their transient philosophy, and and now they're worried they're gonna lose credibility once again by not moving too quickly. And it's very possible they'll lose credibility by moving too quickly. Yeah, interesting to see. It feels like they're kind of playing catch up here and that might impact their decision making

going forward. We shall see Vincenerella, Global macro Strategists for Bloomberg News giving us his thoughts. And it's just kind of had the call here that he thought that maybe we would get a pause here in the rates after this rate increase coming up next week, and that would be enough for risk assets. We'll have to see how that plays out. The consensus seems to be, you know, on the other side of that trade. Let's switch gears

of technology again. We welcome to the Bloomberg Interactive Broker Studio. Amit Walia. He's the CEO of Informatica. Informatical is a public traded company on the New York Stock Exchange. I n f A is a ticker to put into your Bloomberg terminal. It's got a market cap of six billion dollars. Went public just last October. I p O a bunch of underraters there at twenty nine stock to twenty one and change. I mean, thanks so much for joining us

here in our Bloomberg Interactive Broker Studio. Give us the story. The informatica story. Give us the thirty seconds what we need to know about your company and what you guys are doing in that big technology stack. First of all, thanks great to be here. Uh, you know, lots happening right now. If you think about us, you know we're in this next game years of digital transformation that will happen. By the way, last Dame it was all about digital modernization.

So it's all going to be about transforming a business with the help of tech, and it's all about cloud data any I. What we do is we sit in the middle called data management, this whole fragmentation of data, many types of data. How do you basically help companies understand the data, figuring out customer child supply chain, figuring out the data governance and privacy problems, figuring out what if analysis to run their businesses with analytics. That's what

we do in the middle. Were the only platform company at scale running with a billion dollars subscription there are and a cloud platform. That's what we do. How do you say it too? I mean Paul gets this because he ran basically a data business um when he put together Bloomberg Intelligence. Right, you're bringing in all the data feeds to your analysts at a Princeton and spreading around the world. Somebody at a dinner party maybe says, I, you know, I don't understand the word you just said.

I heard data, and I get what data is. I know what the cloud is kind of platform. You're sort of losing me. What what do you do? They take two examples. Take take something uniliver ninety six countries running the supply chain. They want to understand they make Hellman's mayonnaise. But how do I bring the suppliers to bring the products to my customers as fast as I can? That's

a data problem. That's what we help. On the other side, rover, how do I bring the right products on the right shelf at the right time so I can save costs by not losing money by wasted product, as well as good customers side by getting the right project. That's the kind of data problems we solve on a daily basis. Or Twitch a gaming company, how do I make sure the gamers get real time understanding of what the games are doing. That's the kind of problems we solve. So

how are you making money then out of that? Or uh, you know, do you plan to be making money out of that soon. Oh well, So the thing is that we have a profitable company running twenty plus points of operating margin and cash flow. And so that's We've been a profitable company throughout. We went private, we came out of the privatization, we run eighty points of gross margin.

We never lost sight of we run a profitable company, and you've never I'm just looking for I was looking for a pe ratio, right, and I don't see that because the E is still minus if you look forward. I'm looking at the f A function. We've got the twentys forecast for this year, um, and ninety cents next yeah, and ninety cents next year. So we've seen that whole text space. Really this year get hammered. Your stock is not immune to that. Tell us about your business today.

What are your customers telling you. We've got rising interest rates, we've got the threat of a recession. What are your customers telling you? I think, look, no doubt there's uncertainty out there, but customers are also figuring out that if they don't focus on the long term mission critical transformasion, they won't get out of this. A great example, by the ways in the COVID times in April, American airlines bet on our platform and I spoke to them like

airlines were grounded, why are not? And the goal was if I don't understand my customers churned during this time, when I come out on the other side, I'll be left holding the bag. They won the innovation awarded a customer conference, so large customers are thinking like that. Yes, there's absolute you know, elongated sales cycles across the board, but transformation of that scale is not going to slow down.

So what happened? I mean, your stock was fine high after the I p O. You got up to almost forty share and with everyone else at the beginning of this year, UM investors started to sell and now your train eating for half that? So what what happened? Do you think, not just to you, but to the entire market. But look, there is needless to say, a huge amount of multiple correction you guys were talking about right, there was obviously an all time high for across the board tech.

I think we got caught up from our side in the growth at all stock kind of story. We're not a growth at all or growth at all cost kind of company. I do think that there is an element of that going on. But as long as you keep growing at our scale a billion dollars of subscriptions in our mid thirties, and you keep printing cash flow and operating margin, you will get to that. Now. Of course, we're all sitting in this middle seeing markets change. You've

got to keep your eye on solving customer problems. We're all going to come out on the other side with things correct itself. For sure. I'm looking at my PGeo functional Bloomer Traumil just shows from geography where you get your revenue most of its outside the the U s for you guys. Is that right? No, that's not true. That's not true about US US. Okay, So how is your non US business doing? Because I think about Europe, I think about Asia with the lockdowns and all companies

that have to deal with those types of markets. What are you saying there? Actually, Europe in Asia did pretty fine for US so far. I think barrying FX that's obviously surprising all of us. You can't control how strong the dollar is right now in terms of road demand. Europe actually helped pretty well for US even last quarter. And even so, I mean, actually, I'm flying up to London as we speak over at the by the end of this week, we haven't seen demand for the funeral.

I'm going to figure out if I can drive into the city of London. But it's gonna be it's gonna be busy. It's gonna be busy. So demand hasn't slowed down there. FX definitely a big headwind for all of us. F X has been amazing to watch and we thought it was going to turn around a little bit on Monday, but now the king dollar is back with a vengeance. Does that make it easier for you or more difficult, because the volatility actually makes up both top line obviously harder,

no doubt. But we are also a very well heaped company. We have our presence across the globe. We have a lot of opics sitting outside the U s U S as well. We have a big development center in India as an example. So the strong dollar helps us there. So what we have, the headwind on the top in on effex becomes actually a dab on the glass side for us. All right, I mean, thank you so much,

we appreciate it. I met Walia, CEO of Informatica, joining us here on a Bloomberg interactor broker student getting the update on his company. Informatica Again, I n F A H is the symbol into that software space, which has been, uh, you know, such a source of growth for investors for

such a long time. A lot of these stocks, these technology stocks, in addition to the market in general taking on the on the gin, but certainly the technology socks are really bearing the brunt here on this rising interest rate environment. But what you've got to think about the long term growth trends associated with tech spending a lot there. It's gotta Robert Teter, he's head of Investment Policy and

Strategy group at Silvercrest Asset Management. Boy, Robert, yesterday, if you're an head of investment policy and strategy group, everybody's looking to you at the four oh one yesterday, what would you tell your team? Yeah, it's a great question, and it was a you know, did one of the

wildest days to the downside in a long time. I think one of the themes that we've focused on has been something we've focused on really from the beginning of this pandemic era, which is patients and taking some context and I think, as many others have noted, yesterday's move was really only a reversal of about one week's worth of gains in the prior week, and so that's something that we really focused in on of saying, yes, there's been a change here. Yes, the inflation number was worse

than expected. Our work shows that inflation versus expectations is a really critical reading for forward returns in that month window between uh CPI readings. But overall, it really took us back just about a week in terms of where the S and P had been, And so that says that there was a lot of optimism built into that report didn't come through quite as planned, But I think the CPI print wasn't quite as bad as yesterday's numbers in isolation would have made it out to be really

more reversal of the prior week. So again this concept of patients and sort of looking through the numbers a little bit, things are going to take some time to settle down. Do you think there was do you think there were opportunities created yesterday? Or do we still need to Harry Shilling, who normally is very conservative, He's very reserved. Um, he's a he's a very polite man. I've known him for forty eight years now. Yeah, I grew up with him. But yesterday or no, on Monday, he said, we haven't

seen the market puke yet. And until that kind of regurgitation happens, until um, your average investor sells his last stock and says I'm never gonna buy one again. Um, then you then you're not gonna see this. Um these drops can um stop? What do you think? I think yesterday was a pretty good indication of that. You certainly had very high readings in terms of stocks trading down versus up near you know, near record levels in my view, to really firmly get into that campus feeling that we're

out of the woods. Um, it will take another two to three solid prints on cp I. Again, I don't think yesterday was quite as bad as it seemed, but it sort of resets the clock a little bit in terms of expectations. And I think CPI inflation really is the mos critical indicator on the on the short term outlook. UM. I think as we think ahead to two next year and things like that, earnings are a bit more important. But in the short term it's all about inflation here

and all about that process of forward rates. We think there's a really strong relationship between the forward rate curve and expectations on the terminal rate versus how the market has been trading in the short term, and that's something that we've got a very close eye on as as we look at these these interim periods in between CPI readings, which really have become the most important metric in the markets in the short term. How about valuation, I'm an

old equities analyst. How do you guys think about valuation in this market right here, particularly after yesterday's sell off. I know a lot of people still have earnings concerns, uh, you know, the back half of this year going into early next year. What's the valuation call for you guys? And do you do you care more about price book or price sales than price earnings? What are the metrics

that you care about? Yes, so I focus mostly on price earnings and thinking about forward earnings at this point. Starting to think about earnings for next year, I think consensus is a round plus seven or eight percent or so.

We're probably more in the camp of about five percent up on earnings, just thinking that there's still some lingering problems here that the markets are fighting through and there's still certainly some downward pressure to come on the economy because of the rate cycle, but purely in terms of of pees, peas have come down quite a bit, so uh, in terms of next year's earnings on consensus forecast s andps, it's just a little bit over sixteen times, which is

pretty compelling, even with rates headed a bit higher. So you know, we and others have done a lot of work on historical rates versus p s, and if you take the FED at their words, take the forward curve, it it's in its word, and say that the terminal rate will settle in somewhere maybe four in a quarter or something like that. Um that implies a PE of

around eighteen. So we think a little bit of progress on earnings in the next year, a little bit of recovery evaluation as you get some stabilization, and c p I sort of sets the backdrop for again this patient, longer term outlook of some decent returns to be had over the next year or two. All right, Robert, thank you so much. We appreciate it as always. Robert Teeter, head of Investment Policy and Strategy about Silver Crest Asset Management,

got his undergraduate economic Stree from Bucknell. Do you know the mascot for Bucknell. M this is a bear. It is Bucky the Bison. Oh it's a bison. Yes, well that's pretty pretty close. Pretty close. Yes, so it's not the University of Richmond spiders, but the bison is pretty cool. Spiders are unique. My favorite has to be the banana slug, which I think Santa Barbara or Santa Cruz, Santa Cruz, Santa Santa CRUs. Banana slugs just awesome. Apparently there is

a thing bananas. Sure, sure, I guess you can't find it and they can live through a lot. Just don't put any salt on them. No, okay, good stuff. That would so emerge. Thing the kids were talking about the merge emerged for me is doing a deal and acquisitions. But that's what I'm talking about, is it? Well, it is a deal if you're wealthy crypto person who's going

to be staking and taking this network. So basically Ethereum, which is kind of the all so ran cryptocurrency after Bitcoin obviously, which is the o G, is going to move from proof of work mining, which the kids are very unhappy about how much energy it uses to proof of steak mining, and then the energy uses just going

to drop point nine percent. I've been told UM to verify a transaction so that means each transaction, instead of taking instead of using the energy it takes to run a house for a week, it will use the energy it takes to boil a kettle of tea. Katie Gretfeld joins us in our Bloomberg Interactive Broker studio. She's a cross asset reporter. Is what Matt said remotely accurate? No, he got it right that he got all the headlines

in there. Moving from proof of work to proof of steak miners kind of become obsolete and the big number there drop in energy usage. That's what people are very excited about. Of course, Bitcoin has come under so much scrutiny from lawmakers and regulator to about how much energy mining takes up those very powerful computers. So the merge has been in work, in the works. It's been talked about for seven years, and Uh, it could actually been

happy be happening tonight. Uh it's been deleted several times because I thought it happened a couple of days ago. No, we have an actual time, right, it's gonna be it's like ten hours from now or something. Countdown clock. We needed emerge countdown below the countdown to the clothes. Okay, exactly. So I mean does that make Ethereum in theory the

preferred cryptocurrency over Bitcoin. Well, they have different uses, is what people would say, people who aren't Bitcoin maximalists, of which there are a few, So bitcoin like mat just look at the market. The market. You know, money talks, right, Oh, I heard that? Okay, bitcoine, follow the money there. There is something like four billion dollars worth of bitcoin out there, but the hope is at least half that. And if you're in ether, boll the flippening is going to come

and Ether will replace the flippening. What the flippening? You've got to add that to your don't you read coins and cat cats, cats and coins. That's my secret weekend distribution list I can addue to. But so, but if you also follow the money and look at where money has been moving since mid June, Ether is up about bitcoin is remember when it was going to four thousand the actual price per coin. But Ether has been rallying much more than put bitcoin in anticipation of this merge,

thinking that developer. Developers will flock here. It's going to be a faster, cheaper network than Bitcoin, which, as Matt

Riley points out, is the biggest cryptocurrency out there right now. So, I mean, I've just been watching over the last few so the merge is something, Paul that keeps happening, or it's gonna happen and it's delayed, it's gonna happen, and it's now we're there, it's act really going to happen, and so I've been watching the price of Ether like, oh, if it's really going to happen, now, it's going to take off because you want to get in before, right theoretically,

So the price of Ether just keeps going down. Well, my friend in colleague, Vildonna Hirik, had a great story. I think it was last week or earlier this week, or at least this month. So if you look at what the derivatives market is pricing, most crypto traders are actually shorting Ether right now the derivative So it could turn into a sell the news event to your point, because markets ever forward looking, and this has been anticipated

for a long time. Sure it's been delayed over and over again, but now that we're finally now you say traders have been shorting either, Are these just lonely guys in their mother's basements. It's not the trading desk of JP Morgan shorting. It's not Petch funds. It's that kk R. I mean, you know point seventy two shorting it? Well,

it's it's it's almost at that level. About the brilliant traders that worked Jane Street and now are billionaires in f t X, right, I mean Sam Bankman Freed started out that way, and there's a great story on the terminal about his other operation as well. I think it's called Alan Meta. Is how you pronounce this his market making firm? True? That this is just this is how

they make money. So there are a lot of I mean, he may, honestly, Sam Bankman Freed maybe in his parents basement, but he's a genius who has billions of dollars worth of wealth. So all right, that talks to me. In any case, It'll be interesting to see how ETHER reacts to this. It will be interesting to see how there are a number of UH spinoffs or original ether you know that that are gonna continue on proof of work. There um people who don't buy into They think proof

of stake is a POS. And it'll be interesting to see if those make more money than ether now and to see what happens to the o G to bitcoin. I know it will be interesting and something I need to look into, Matt is there's a bunch of ether extiane treated products in Europe that actually hold ether. I need to look into how they're handling the merge because we do also have an ef We have an e t Can you do an e t F on ether?

You can't in the US. Many would like to, but the sec that allowed physically back right, And the e t F on bitcoin is only the futures of bitcoin, only on future, not on the underlying in America, and there are bitcoin e t fs in Canada and uh yeah, perspective as we do as we do at Bloomberg. Yes, I just saw a hundred and sixty four offices and seventy four countries. I was just walking on a floor that had that up on the terminal. You're a widespread everywhere,

I mean, just out of control there. I was telling some kids from Duke this morning. There's no more global company that I've ever worked for. And that's including JP Morgan and City more global than Bloomberg Just incredible. Craty Greifeld talking about global cross asset reporter for Bloomberg News, joining us here in our Bloomberg Interactive Broker studio. We have a looming railroad strike. Um, and I think it's a big issue because it affects so much of the

economy in the US. I mean, you think about it. I mean we're just kind of seeing some light at the end of the tunnel from the supply chain issues associated with the pandemic and now potentially have a rail strike on the freight and that could be a big issue across a number of verticals there. So let's bring Kim Chipment. She's reporter. She covers agricultural, food, water and

fuel for Bloomberg News. Can just give us the update on kind of where we are with this potential strike and and what are the insiders saying how it might play out? Um? Sure, well we know, um, you know at this point President Biden's gotten personally involved. There was uh meeting this morning try you know that. Of course, you know, everyone's point out all the stubs, you know, trying to make sure that it doesn't happen. Uh. But but right now, we really don't have an indication of

which way it's it's likely to go. Um. You already have the railroads. Uh you know it's now it's been a couple of days since we've heard that long distance distance passenger route UM in some cases are being cut and rail railroads. UM. Starting today, we'll stop picking up UM items like brain. This is a big I mean, Kim, this is the big issue. I mean, I think you know. One of the issues agriculture. I was I wasn't really aware of how much agricultural stuff actually travels by rail.

So what's the farmers to do? This is harvesting. Also, let's just back up a second, because my understanding is that there are many different railroads, many different kinds of train system ums, with many different purposes. Um. You've got Amtrak, for example, which people take to go back and forth from Boston to Washington, d C. And maybe stop in New York, right, and then you've got um, you know, grain shipments out of the Midwest. You've got freight moving

trucks around for GM and Toyota. Are these are all of these railroads using workers from one union or what's the deal can can one strike derail so to speak, all of these businesses, well for what you brought up Amtrak and the and the issue for passenger rail and also and then for some commuter rail um like out

of like like the Metro North or Long Island Railroad. Right, although it is important to say that there's no indication that those would be affected those particular ones, although outside of Washington, d C. In Virginia and Maryland there are two that definitely would be affected. Los Angeles Chicago commuter line definitely would be affected. And the reason for that, and also in the reason for some of these Amtrak passenger rail cuts is uh, for the long distance throughout

I will probably see more announcements on that today. Um. That's because they either share a line with the freight um say, their share lines with with the freight railroads or there or there's some kind of other overlaps where they wouldn't have access anymore. So it's not that that's not really a worker issue, that's a that's a real line issue. Is there is there an indication that this is going to go down to the wire to Friday in terms of negotiating this or is there sense that

maybe you know, the president will step in. We've seen it in the past with other whether it's the airlines and kind of really pushed the two parties together. I mean, it's Wednesday here, So what's the inside thinking there? Well, I do think, uh, there's a decent chance it's going to go right down to the wire. I mean some people think, you know, we could even have you know, a strike uh that lasts you know, half a day,

a couple of days. Uh. At this point, it's you know, most people with the mid term elections coming up and uh, and just the hit that it would take to the to the US economy. I mean that the estimate is over two billion a day. Uh. You know, the likelihood of the prospect of a prolonged strike is hard hard to imagine. But it's we are you know it could

happen because we don't really know. I mean I'll say, you know, like, um, you know you brought up agriculture, uh wheat farmers for example, Um, and you have spring wheat. That's just you know, finishing up harvest. Um. You know that that'sn't that's they have very few options other than rails, and that's the that's the case where most of that the bulk of that UM for the biggest market is Mexico.

Most of goes um by rail, So that's where you can't get all right, you just can't get the grains there, all right, Kim, we'll stay on top of this story. We appreciate your reporting. Kim Chipman reporters Whip Covers, agg Food, water, Fuel, based out of the Chicago office for Bloomberg News. 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. Put on false Sweeney I'm on Twitter at pt Sweeney. Before the podcast. You can always catch us worldwide at Bloomberg Radio.