Weary Market Eager To Look Beyond Trump Chaos: Ritholtz

Bloomer Markets Podcast. I'm All Sweeney, along with my co host of Quiz. Every business day we bring you interviews from CEOs, market rows, and Bloomberg experts, along with essential marketing news. Kind the Bloomberg Markets Podcast on Apple podcast or wherever you on the podcast and on Bloomer dot com. The Democrats ruining both well. The tradeoff is we're likely to see much more fiscal stimulus, but we're also likely to see somewhat higher taxes and and that's quite a

that's quite a challenge. Um right now, the assumption seems to be that we're going to have some form of DIVI I did government and arguably that's not the worst situation under normal times for the markets. I will say in the midst of an emergency or a crisis like a pandemic. You do want to see cooperation across the all. You do want to see both parties try and working together.

I have said on the show before, I am shocked that we have not gotten a follow through to the stimulus from the first quarter heading into the election, and now we've been hearing noise that the Trump administration has no interest in pursuing it between now and and the formal inauguration on January, So the economy could get a

little dicey over the next two months. Right. In fact, the latest just out for Marcella Wilson saying that the Trump administration is actually stepping back, according to people familiar with the situation, and that's leaving it up to you know, Mitch McConnell and Nancy Pelosi, which really is not are you consoling at all? Nancy Pelosi wanting you know, something like two point four trillion dollars and Ms McConnell doesn't

even want a trillion. Really, that's a huge, huge difference. Barry, Yes, yeah, well a trillion dollars, go figure, it's a lot of money. And so it makes those two races in Georgia really really significant. I think while everybody is looking in the wrong direction, we're all looking at this this all the

silly litigation trying to fight the uh the results. I think the legal team of the Trump administration is now over twelve um or arguably one for thirteen if you count moving ten feet away to six ft away as a victory. But other than that, you know, courts don't fool around you when you're there as an officer of the court, as an attorney on either side, and there

are all sorts of rules. You can't what you could get away with on Fox News, you can't get away with in front of a judge and say there was fraud, and they ask you for evidence, and if you don't have any, you're putting your license in your career at risk. And so the track record has been pretty weak for for all these broad claims of nationwide fraud. So far there's no evidence, and the companies involved, some of the

law firms involved, to putting themselves at risk. Yeah, I mean I guess, um, I guess they're taking the business for now. Barry. When you talk to you know, your clients and also some of your wealthy investor friends, What are they saying to you about the situation. I presume that they're pretty happy with everything, and except obviously for the coronavirus still raging around the world. Well, those who have sort of stepped away from the markets are are

not exactly happy. And we've seen a number of hedge funds and others sort of take the let's wait until the dust clears, which is turns out not to be a great decision at least this time around. Generally speaking, the expectation is that markets are going to continue doing what they're doing regardless of what happens with the election.

We we've noticed this, you know, throughout history, whether it was Pearl Harbor or JFK assassination or you know, go go down the list of of earth shaking events, markets have a tendency to wobble for a little bit and then just go right back to what they were doing. So personally, I'm looking forward to the noise levels coming down. I was kind of rooting in after that election for Okay, now we're done with politics, can we get back to our normal life. The I think people are somewhat shocked

that post we really never returned to normal. It it it was like a continuous campaign for twenty four years. For four years, right, I would love to just put politics on the back burner and focus a little it on other things in life. It would be nice to see my Twitter feed just sort of calm down a bit. Yeah, those notifications were very definitely, very grueling, and we won't

have that from the Biden team, that's for sure. So very you know, now that the dust is settling a little bit, we still have everything else out there, right, lack of stimulus, coronavirus just going exponential in the United States and across the world, and markets still keep, you know, pumping away. I mean, what's going to burst the bubble in this market? I'm not suggesting it's it's a bubble in the traditional sense, but there's very definitely some exuberance

in there, isn't there. You know, things that are unsustainable eventually run out of steam, eventually stopped running. It's arguable that this market is uh is getting tired. There. There are some signs that the stock market has been pricey, but just look around at some of the earnings that have had to come out. We we may end up being surprised by how quickly the profit side of this recovers, and to me, that's what that's what is going to drive this That there are two factors that we look at.

One is multiple expansion, and that's certainly responsible for a big part of the games people wanting to pay more and more to own the same stock. But increasing profits is something we should not underestimate. And let me just remind everybody, over the course of the next year, all these companies are going to have really really easy comparables. Profits were way low and the market was looking past them.

And so when we're in Q two of of or Q three, we're looking back at an environment where profits were either tiny or non existent. And so maybe that's part of what the market is looking at and seeing over the next four quarters. But comps can doors, can they barry? I mean sure, there's a baseline of economic activity that the market needs in order to be you know, happy with particular stalks. Yeah, um, no doubt about it. And the I would you know, we all tend to

create these narratives after the fact. I'm wondering if some of the market enthusiasm is the thought that, hey, the new White House is gonna you know, nobody wants to do the difficult decisions up front, the painful decisions, so

that you can thrive in the future. I think the Biden administration is going to do all of the difficult COVID nineteen related things, a national mask mandate, a temporary lockdown um, some form of a CARES Act, to some form of a stimulus, maybe even invoking the Defense Authorization Act to get more PPE where it has to go. And so that had we done that a year ago,

the economy would be much better off. Had we done that in the beginning of we would probably not be dealing with as much of a spike as we're seeing. We're going to have to get through the next three or four months. It's not going to be easy, but the expectation is on the other side, will all be closer to getting back to normal under this administration, then the sort of lais ay fair, don't worry about the coronavirus will take care of itself. Approach of the current administration.

We're waiting FED Chair J Powell, ECB President Christine Lagarde, and BOE Governor Andrew Bailey to address the CBS Annual Forum that they'll be discussing central banks in a shifting world. While we wait for the start of that, we can ask Barry Riddles about central banks in a shifting world. Barry Riddles, of course, Master's in Business podcast host, among

other things. Barry, you know, the world shifted twelve years ago when we have the financial crisis and central banks got on board, and they sort of feel like they stretched that elastic band, right. Where can they go to from here? Well, I think if we learned anything from the first core or of it's it's time to pass the baton to the fiscal side of things, not the monetary side of things. When when you're at the zero bound um, what do we somewhere something like in of

um of sovereign bonds are now yielding negative rates. I mean that is a quite quite a statistic, and there are all sorts of problems with negative rates or potential problems. I don't know how much more we can ask of our central banks. Um. I don't want to say they're out of AMMO, but you're at a certain point you're you're just asking. You're using the wrong tool for the job. And I think we've been asking too much of our

of our central bankers around the world. Yeah, I mean I was speaking with distress to investor Whoose Richards yesterday, and you know, he talked about after month of the financial crisis and how it took a couple of years to get four trillion dollars you know, through the federals are system and into the economy. It happened in five weeks after the pandemic, after the FED went to action

this time around. I mean, that's some crazy acceleration right there. Berry, Well, keep in mind, it was it was the one to punch the combination of monetary policy and a three trillion dollar fiscal stimulus. You know, what the FED does has to work its way through a series of mechanisms typically associated with credit and borrowing, and that doesn't happen instantly,

especially in the midst of a pandemic. If you recall, lots and lots of small businesses and and households were complaining that in the middle of the pandemic, the credit market had tightened up so much and banks really weren't lending so so that really hamstrings the Fed's ability to affect a lot of the local economies. On the other hand, the fiscal stimulus, the direct lending to small business companies,

that promised not to uh layoff staff. Um uh, that that has an immediate impact, so too, uh, it does the proposal to use federal funds to steer money to states and municipalities that, unlike the federal government, are unable to deficit spend and so were there in a genuine danger of running out of money before the year ends. And that includes things like police and fire and and ambulance and teachers and hospitals. They're in a bad way.

And the hope was that the new fiscal stimulus would steer a trillion dollars or so to local states and cities. Um Uh. There was some back and forth that this was a blue state phenomena, and therefore the Trump administration was very much against it. But when you look at where the pandemic is now running amuck, it's as many red states, if not more, than blue states. And I wouldn't be surprised if as this gets worse and worse, the tone amongst whoever is running the Senate starts to

soften because some of the projections are pretty horrific. Over the next three or four months, Yeah, for sure, Barry, you're about to go to the panel. But who is your guest for Master's in Business next Oh, this week Penny Pennington one of the highest ranking women in finance. She's they call it managing partner, but she's really the CEO of ed Jones. With Edward Jones, they manage one point three trillion dollars. Yes, indeed, Barry, how do you always get to my guests before I do? I'll be

tuning in. Thanks for that, Barry. You at alls time to bring in Ty Lopez now executive chairman of retail e commerce Ventures and Tight deals with basically distressed retailed brands. So Ty, what what exactly do you do and and sort of how much choice do you have these days? Hey, thanks for having me on. Yeah, there's a lot of choice choices growing here. You know, we've got to interesting

environment with COVID. We started buying before covid. We bought Dress Barn last year in November nineteen, so the opportunity has been there, but it's certainly there's more choice and more attractive valuations that we can purchase at. You now tell us exactly what you're buying, because so some of the brands that you bought our Dress Barn as you said, also U Pure One Models, also Linens and things. So these were bankruptcies that we sort of watched happen in

front of our very eyes. Did you just buy the names, did you buy the assets, did you buy the intellectual property? And how much for? Yeah? So each deal has been different. Some of the brands were off market, like Franklin Men and Linens and things. Those weren't bankruptcies when we bought them. They have been, you know, in the past. Franklin Mint was never bankrupt, so everyone was different. Pure One we bought it an auction in July for thirty one million.

We bought the I P, the intellectual property. I mean pretty much, you get the whole brand and you get the all that that includes. But we've chosen, because we're e commerce specialists, to let the stores for the most part closed. The stores are already closing. We still have the option to open back brick and mortar, but obviously we want to see how COVID shakes out before we start, you know, opening a whole bunch of stores. These stores

are kind of worked out. These brands in trouble not just because of COVID, but because they signed leases assuming a certain amount of people were would visit brick and mortar, but every day Amazon and e cooms take a stronger place exactly, So what is your plan? Why even but I mean thirty one million dollars doesn't sound like a lot for pure one, let's put it that way. But why even spend that if you know the business? It just doesn't work anymore. Yeah, So it takes Pier one

or dress Bar, and these brands are beloved. Um if you watch the social media, you know, and when Pierre one was going out, people were sad and people have been shopping there. It's a sixty year old brand. So we don't actually think that the brands are broken. We think that the trust uh is there as strong as ever with the brand. People have a white pier One and it's hard if you try to you know, a lot of entrepreneurs try to build businesses from scratch. I've

done that before. My business partner and I have done that before. But it takes a long time to build um what we call branded awareness. So if you look at Pier one has over branded awareness out of ten Americans. If you say do you know pier One, nine say yes. And it's really hard to do that. If you start

a brand from scratch, it's almost impossible. I mean Google did it obviously, But for the most part, I think that piggybacking off the trust that's already there and bringing the brands into the new e commerce world is a very viable and it's going very well with dress More and in the brands we've been doing so far. Are you trying to put everything you buy in in one retail marketplace or what will be the future for for

these brands? Me my business part, we're just talking about that. Certainly, there's an option to create, you know, and you have all the brands there right now. Each brand has its own website, but we are switching more to a marketplace model, which was Amazon Jeff Bezos kind of thesis. So, for example, on Pier one, we're not only selling Pier one branded products. If you look at Wayfair, which has gone from a nine billion valuation earlier this year to they allow other people,

any vendor to sell. So we're kind of hybridizing the old Pier One with the newer business model like Amazon and Wayfair. Yeah, that's fascinating. Now, will you continue to sort of buy willy nilly sort of? So you know, clothes, furniture, sports, Linen's or will you try to specialize in one area. I don't mean that, no, No, it's there's a little method to our madness. But I think we like the thought of going into different verticals, different industries. So we've

done that on purpose. So for example, instead of buying five clothing brands, we'd like to buy one strong one and then buy one home goods, and then we bought models as Sportings and Franklin men Is collectibles, and so we like, we like branching out. You know, there's last I counted, there's about thirteen trilli thirteen industries that do that. I have over a trillion of revenue. We'd like to be an all thirteen of those. My kind of mentor that I've never met is Warren Buffett In. I like

his approach to building a real diversified holding company. We're holding company, We're not a fund, so we actually own the majority of the assets, you know, so we like the diversity. So ty we're out of time, But what what will be next? I mean, where do you go to look for these auctions? How do they pop up for you? We're looking more at off market deals. The auction space is getting more crowded and more competitive. We have a new acquisition that I'll be able to announce

in a week. So it's a bigger it's the biggest brand we've ever bought. And oh my gosh, we have to do a competition for our listeners to write in and whoever gets it right gets chanced to Alright, well it's out there now you know how to reach us. Ty, thanks for joining Ti Lopez, Executive Chairman of Retail e Commerce Venture. Is a fascinating conversation and it is time to bring in Sarah Pons, like now class a reporter here at Bloomberg. So we were looking at equities with

Dave Wilson earlier, Sarah. What we didn't really talk about is the Domar Index, for example, which is been very, very volatile. We're down below again. Some of this of course on euro and Sterling, because that's they're the two biggest components for the d X Y. But what else is going on? There was some discussion that we would see the safe haven trade of the dollar return, but

like you said, we have seen fluctuations lately, volatility. If I look at the Bloomberg Dollar Spot Index for example, higher on Monday, lower on Tuesday, higher yesterday, and today we are just about flat. It's really difficult to disseminate

any direct trend here. It is notable, though, to point out the fact that if you zoom out and you look at a more historical perspective, we're still hovering just around this lowest level since eighteen so still dealing with a depressed dollar, not seeing too much reaction or change that would change the trend any which way. But also very notable today is just the bond market. Yes, tenure treasury yield still above ninety basis points. I look at

my screen right now point three percent. However, that is down from above ninety seven basis points just yesterday and this morning as well earlier overnight. So we are seeing this change take hold, albeit a relatively small one, but still down six basis points or so on the day this after that cp I print came in lighter than expected. Some economists are now starting to wonder if it's true that, yes, we had seen inflation start to pick up after those

immediate initial lockdowns. Well, are we going to get to a point now where it's going to start fading? We might see the trend even trend downwards if we start to see worries restrictions over rising COVID nineteen case take hold as well, and at that point we have restrictions coming through from governments. Being here in New York City, we know what we are about to phase starting tomorrow with relatively light restrictions, but we don't know what's going

to be coming down the pipeline. At the same time, you have to wonder if people are going to self govern and self restricts, self police, get worried themselves and start pulling back on economic activity, and then the impact that has inflation and the expectations for the reflation trade going forwards. I mean, that's what the FED would say, right The FED doesn't see any inflation anywhere in the future, absolutely not. We know the FED would like to be

on hold for the next couple of years. They have baked it into their forecast. They don't expect inflation to get above two percent. Even if inflation does get above two percent, we know that they have now changed their outlook their ways of governing to fate the flexible average inflation targeting methods, so they're likely not to increase interest rates even if we are just above two percent for some time now, we have not seen how this is

going to work. Actually, in practice, we're not entirely sure, and we're going to have to pay attention to the Fed's words going forwards. But the feds promise and wall Streets take of the Fed's promise is that we are not going to see interest rates rise for some time. So that begs the question, even if we are seeing nominal rates rise, how high can nominal rates go if we know that the FED is not going to step off the old curve. Oil today is a big story.

We're seeing the barrel of w t iBOT two dollars of borrow, which you know, in the face of it doesn't sound like much, but it's been a long time since we've seen forty two dollars plus this because OPEC is sort of trying to face reality as opposed to what it would like the world look like. Right, it's all reality, all relative when you when you talk about oil prices, we were stuck around forty dollars for so long when it comes to W t I crude oil. The fact that we are now nearing it on forty

two dollars a barrel. Well, it seems like maybe you're getting a little bit of a breakout. This is the highest in September. Back then prices were forty two seventy six a barrel, So we do see prices trending higher. It does help with OPEC on the supply side of the equation. You also just have to factor in the positive news that we got from Fiser on the vaccine front. That certainly helps oil prices as well, because if you think about if we do get a vaccine sooner rather

than later, what is that going to help. What is that going to inspire. Well, maybe it will reintroduce airline travel, will reintroduce cruise line travel. People maybe getting in their cars more often. Well, that means we need more gasoline, we need more oil. So therefore we could see oil prices rise off of the ack of not just supply but also the demand picture too. That also just filtering

into energy prices pretty unbelievable. If you look through the closes yesterday, the SMP five hundred energy sector the best performing sector up. That's on track for the best week on record ever for the energy sector. Interestingly, gold which did gain when we were waiting for the five years old, is way down now at below an eighteen hundred and

eighty dollars and ounce right there. Right. So I was speaking with a strategist over at Manned Solutions yesterday who works in their multi asset solutions group, and I was asking him about gold because it has been a little bit wonky lately, considering the fact that earlier in the year the story was that gold was acting as a

hedge against inflation. Well, what happened earlier this week? It was that we got the positive vaccine news, the reflation trade took hold, We saw yields rise, we saw inflation expectations rise, yet gold moved lower, So it wasn't necessarily acting as that inflation hedge. It was acting as the opposite. And he said, gold has an interesting one, and it's been really difficult when you look at cross asset correlations this year, gold has been correlated to both bonds and

stocks in different ways and at different times. So really nailing down the gold trade, uh is a hard one over the short term because it still acts as a short term hedge against inflation, but also it's a safe haven asset, so those are two different stories. The inflation bed is a positive one, one of growth, one of reflation, Whereas if you are looking for a safe haven and gold,

that's not necessarily the same story. So interesting takes on gold there and investors are saying it's it's kind of been a difficult one to play as of light real quick. What will you be working on today? Sarah working on today? So I'm actually working on a story about retail investors. It will be for the weekend, so keep an eye on it. Basically, the moral of the story is have retail investor has been lucky this year? Or are they skillful? Wow?

Are a great story account? Wait to read your conclusions and the conclusions of those who speak to that is Sarah Ponza, chief costs asset reporter here at Bloomberg, and she's chief cause as a reporter in the studio anyway, and she'll be acted us later on what are you supposed to do with these markets? One day of one day down, vaccine news sending markets higher, and then market sort of getting a dose of reality the next day. Hans Olsen is chief investment officer for Fiduciary Trust in

Boston and joins US now with hopefully some advice. Hans thanks for joining. What are we supposed to make of these markets and whether they're correctly priced and what exactly is priced in Yeah, yeah, good morning, Vanni. I think we're what we're seeing is sort of the the inevitable churn after a very nice move over the last month, and I think you have to step back in and first look at the path of the economy, and then

from there then you can adjust your portfolio accordingly. From that perspective, our base case continue used to be that we're going to see a W shaped type of recovery. So we've seen the first V and that was pretty pronounced, and we are in the beginning stages of I think what the second V. And the question is whether it

will be severe or not. I don't tend to think so, but it was certainly is going to be impacted by the winter wave of COVID infections and then of course that next round of stimulus that we've all been waiting for. Uh and and once we start to see that, I think markets can stage a more convincing rally. From here, without a doubt, markets appear to be pricing a recovery. You're seeing it in the broadening and the deepening of stocks.

You're seeing it in the shape of the yield curve and indeed even in the in the price action or the yield of the yield on the ten year treasury. UM. All are very encouraging signs, UM. But it's still a bit early. How can you have a recovery with the six point unemployment rate? Well, you know, that's that's the thing, right, I mean, it's where it's coming down from, and we would hopefully continue to see unemployment fall. The numbers that

we had this morning are encouraging, UM. But we're not there yet, and you know, by all accounts, we're probably another year away from um, you know, getting to where we would really like to be in all of this. And again it's all going to be depended upon do we get a vaccine, is it distributed at scale and its effectiveness? Um so. And of course the companion to that is, do we get another round of stimulus to help the economy along until we get to resolution of

the pandemic? Does that come up payback time haunts for all the stimulus? Well, that's the problem, right. So we have spent in an enormous amount of money in the service of supporting the economy during the pandemic. The budget deficits has exploded. We're going to have to finance uh, somewhere between another what two to three trillion dollars this year,

depending upon what the stimulus looks like supporting. Remember, even before this happened, Vonnie, the pandemic broke out, we were running a trillion dollar deficit, which is pretty unusual at that point in the at the point that we were in the economic cycle, when things were really quite good. Um. So that does have to get financed, and the price

at which that gets financed remains an open question. How much the Fed is going to have to buy versus the price at which um, you know, the private investor will buy treasury debt will will have to be seen at this point. So, Hans, you know, if you have been a retail investor and you decided you didn't know what was going on, so we're just going to sort of leave everything where it was, you probably wouldn't have done too badly, right, But is that continuing to be

the advice from from somebody like you? Well, I think I think the notion of not trying to trade an election is a very good notion. Indeed, and we saw that the exactly the case in this election, given all the sturm and drawing around uh, the election and the run up to it. Um, you know, from some clients I've heard I heard from you know, one would have thought that it was the end of the world, and clearly it wasn't. Right. Everything is going to work out fine.

I think the larger question is is the market ready to rotate um from the covid led stocks of the last nine months or so into a broader market participation. And I think the answer there is yes, We're starting to see efforts at that. It's never linear, right, It never happens overnight. It takes time for that that that

that sort of rotation wave to form. But I think that's going to play out over the next four to six months that we should start to see some of the out of favorite names start to participate, and indeed we might even see some of the you know, the terrible laggards in the international markets finally begin to perk up. So I'm cautiously optimistic on that is still the way to go. Yeah, that's that's going to be the sixty four million dollar question, right, Um, I think it is

of evolving. Yes for for the most part, but I think in order to maintain um uh, you're spending power, you're going to have to spend total return, which is going to force fawnie, I think higher portfolio turnover than it has in the past, which is which is going to be a bit of a mindset on the part of some investors. So yes for now, but um with the qualifications that you're going to have to realize some of your capital appreciation in order to maintain your spending power.

So if you are going to stay sixty forty, be a little bit more active than you might normally be exactly, and with the way you get that forty and how you invest that forty is going to be very different than the way you've done in the past. So you know, whether it's mortgages, credit, different types of credit and the like. It can no longer be simply sovereign debt or munies. Finally, Hans,

and briefly, are you invested or would you? I mean your finishing we trust, So you're invested everywhere, I guess, But how much outside the US would you be looking? Yeah, well, we've been underweight the US of our equity expos're we're probably about thirty of that right now outside the US. I would love an opportunity to to bring some of that money abroad again, um, but not quite yet. That is fascinating. That is a good chunk of the portfolio. Hans.

We'll have to get you back soon to talk about what exactly is in their Hans Olsen is chief investment officer for Fiduciary Trust in Boston, and we appreciate his time today. Some sage advice there, and of course everybody doing their best to try to figure out what is exactly going on in the world and how long it's going to continue on for Thanks for listening to Bloomberg Markets podcast. You can subscribe and listen to interviews at

Apple Podcasts or whatever podcast platform you prefer. I'm Bonnie Quinn. I'm on Twitter at Bonnie Quinn, and I'm Paul Sweeney. I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio.