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and the Bloomberg Business Opup. Will we get back to two percent yield? That'll be a great story. I believe that's price up and yield down if I get it right. Kathy Jones now gives perspective. She fixed income strategists in your kitchen this weekend of what to Do, she's with Charles Schwab. I am absolutely fascinated with an always open question to you and les Anne Saunders. What are people at Schwab doing with their fixed income money?
Yeah, so, what we see amongst sort of the majority of the clients is they've been staying very short in duration. They're starting to move out. They're starting to get some confidence that they can move a little bit further out the curve. They're staying at high quality treasuries, very very popular along the CDs, not really dipping their toes into
low quality. But you know, at these yields, Uni bonds, investment great corporates, treasuries are looking attractive and they're getting a little bit more confident about stretching out duration.
The pros are worried about liquidity, whatever that means in the bond market. Should our viewers and listeners be worried about liquidity and full faith and credit simple to buy duration bonds.
Yeah.
I don't think for the average investor the liquidity issue is going to be a big one. I think for traders, I think for people like us navigating the markets for our clients. It's an issue, but I also don't think it's a critical issue right.
Now in the market.
You are the one person who I was most looking forward to speaking to today. I really want to get your understanding of what happened with the failed auction yesterday and whether you give any credence whatsoever to this idea that the hack of ICBC, of the US unit of ICBC had something to do with how poor it went off.
You know, I don't really know for sure. It is an open question because we haven't had something like this happen before. It seemed like the win issued market was okay going into it. There were a lot of questions because we've had such a big rally at the long end. You know, who would show up after rates dropped so much? So are there some questions about that? And then you start to get the Powell comments, and then you get the hack whatever that may have had to do with it.
So I think it's kind of a constellation of things. But we've had such a big rally going into it, after the ten year went well and the three year went well. I think that had something to do with people stepping back.
What sort of signifies to you that we're actually getting stability in longer term bond yields enough to get some conviction to have some sort of trade that can last more than a couple of days.
Yeah, we don't have it yet, especially the further out the curve you go, you go beyond ten years, you really don't have it. Even the ten year I mean, look at the volatility we've had recently, up fifty basis points, down fifty basis points. I don't think we're there yet. I think the market needs conviction that the FED is really done and that you know, the hold has some sort of timeframe that you can anticipate, and then we
start to get that stability. We thought we had it, and then Paul spoken, we don't have it.
How much does this really have to do, though, with the FED and it's policy at a time when people are citing fiscal policy, where people are citing potential inflation, where people are citing just simply, where are the buyers going to come from at a time of changing policy overseas.
Yeah, we haven't. So I tend to think it really has to do with three things that always influence the trend and rates. What the FED is doing, because you have to discount that. There's no way you can get around the FED, no matter how hard you try. What inflation is doing, which is tending to recede, and then how the economy is performing, and then you get into these other things like supply and who's buying, you know, in China and Japan. But actually the foreign flows have
been pretty steady despite all this chatter. We've had the four and flows hold pretty steady. The reserves are pretty steady, So I'm less worried about that. Fiscal policy. Obviously it's a concern, But is it a concern today versus yesterday versus a week ago. That's a hard argument to me.
One year out, am I clipping coupons? Or can I actually invest for total return after a three year nightmare?
I think you can get some total return. It's not that hard when you've got a coupon this large to get a positive total return.
I'm going to clip the coupon and I'm going to get some capital gain out.
Twelve months I think twelve months from now. Yeah, we have fair value, say in tens, right around four to four and a quarter, and so if we get there, if we get even close to there, I'm going to have a positive return.
Going into next week when we get CPI. How volatile is the market and how potentially massive could some of the moves be on the heels of either an upside or downside surprise.
Yeah, we're I don't think we're done with the volatility, Lisa. I think it's here to stay for a while until we got either that you confidence about where the Fed is and where it's going, which I don't think the Fed really wants to give us too much confidence, right. I think they want to keep the market a little bit off off center, or we start to get those labor market numbers that are just so soft that the market says, oh okay, now the Fed really has to start.
Easing Kathy John Cholsh swap Washingsta Marie at the Baumann famous iph we'll.
Ask it right now. Let's do this. Let's say we're going to conflate two stories together here this morning, we have a wonderful Bloomberg poll, some real acuity about where we are twelve months out from an election, and also, of course mister Manchin's comments from West Virginia joining us now Emory Horn and Bloomberg luxury correspondent in Washington. Let's get that out of the way. Emory right now is luxury so yesterday is it over in Washington.
I don't know if it was ever alive in Washington him, but there is a sale at the moment, private sale if you know who to know at bal Maa.
So you can go check that out.
There we go. You're stalking you your weekend shopping with Amory hard and Emory I want to conflate these two together. I've got Joe Manchin, who has lived fifty percent votes in West Virginia from the special election of Robert Byrd fifty three percent eight years ago. Just to cut to the chase before the poll chat, did he make this decision because he really thought he couldn't win.
I think that's part of it.
If you look at a recent Emerson poll and you have him against Republican Governor Jim Justice, he's trailing by about thirteen points. So this was going to be an incredibly challenging race for him, and he's already flirted with the fact that this was going to be the end
of his time in the Senate. He talked about the fact that he does think there needs to be a conversation about the middle, but also you have to look at the reality of what he's facing in West Virginia and that was likely going to be a defeat.
Gregory Courtney and Marlow writing up our poll piece, it'll be talked about, I know across all of your world today. Is there a middle in our Bloomberg poll or does it show this mass polarity. Is the Joe Manchin middle out there in the Bloomberg poll?
Well, there absolutely is because there's one key finding when it comes to RFK, and that's that he is taking from both When you look at twenty twenty voters, he's definitely taking from Biden.
But when you look at how voters feel.
Right now, he is attracting Democrats because of his name Cachet, right he's a Kennedy, But he is also attracting Trump voters, and that has a lot to do with the fact that he has a lot of a dialogue over the past two years when it comes to when it comes to COVID nineteen.
And this anti vax movement.
So he has ten percent, he has obviously a ton of name, idea and recognition, but there is this idea of what we're calling quote double haters, and that's about nineteen percent we're seeing in our poll, and that's people who don't like the current president Joe Biden, and definitely don't like the former president dot or Trump.
Double haters.
I love that. I think we're going to have to use that.
There is this question as I look through some of the pole results about how President Biden could turn this around.
We have a year left.
Is there some material policy projection that you can hear about from the Democrats coalescing around the border, some sort of bipartisan agreement to try to deal with some of the problems that people are highlighting.
So I think there's two things that stand down here.
One is that overwhelmingly in this poll of swing state voters, they want to see more being done at the southern border. It's sixty eight percent to twenty percent in terms of twenty percent disapprove of what's being done. When you look at the disapproval across things like Israel, Ukraine, that that number is more.
So what you're seeing here is that.
Not a lot of people, a lot of people really want.
To see more work being done on the southern border.
But Biden has put this all together in one big bill, and potentially because people are less concerned about, say, what's going on in Ukraine or China at the moment, that they are fine with having separate bills.
What we see Republicans are trying to do.
I'd also note that this is a hard line for the president to walk right now because still in our poll, like our poll showed.
Last month, the economy rates number one.
More than forty percent of respondents say that is their top priority.
When you look at the.
Foreign policy concerns, one percent care about China, three percent care about what's going on in Israel. So immigration, the economy, abortion, those are ranking much higher in this poll.
And can I just ask a stupid question, is it when we talk about economy, are we just talking about inflation?
Well, that's what people are feeling, because the data shows that there's a lot of other optimism happening in the economy.
This administration continues to use.
The superlative that for twenty one months the unemployment rate has been below four percent.
That is a huge achievement, and that shows that we do have a very strong labor market.
But time and time again, what people are concerned with is price of gasoline, price of groceries, their price of rental insurance that spiked over the summer. Mark Zandi in September came out and talked about the fact that before the pandemic, where prices are now, an average family that is making medium income is paying seven hundred and thirty four dollars more. And that's the problem with what the President is saying. The economy is doing better and people are just not feeling it.
Amichat frustrated? Is this White House with these pulls.
Very frustrated?
The President was asked about it yesterday and he says, you're just looking at CNN, You're just looking at New York Times. Well, this is our second Bloomberg News Morning Consult poll that focuses on the states that matter. These are the states that win elections. I think what the White House feels right now, or the campaign feels right now, is that Tuesday they had a great night, But Tuesday was all about abortion And is that going to be top of mine of voters come November of next year?
These are very interesting races. In Virginia.
Glennyunkin made it about a fifteen week limit in Kentucky.
It was kind of a unicorn.
Governor race in Ohio is specifically about abortion, and when you have roe Vivaid being struck down by the Supreme Court, it means that the states are looking at abortion.
So these are very state specific issues.
I look, Amory, and I thoughd you're dead out on the Zandi point. To me, the inflation's not the statistics we talk about on Bloomberg surveillance. It's the level from twenty nineteen. I think everyone out there, including me, is looking at every single item back to late twenty nineteen, very early at twenty and that's how you get to that seven hundred dollars paychecks.
It's great, that's the issue. Take and just to me, it's that part of the matter. IMH, thank you. I'm Marie down in Washington day say.
Let's do this right now, and this is going to be fascinating a first time in Las Vegas. And what you need to know is in the vicinity of Tuesday it will be seventy three degrees in Las Vegas. It doesn't matter if you run a race at ten pm at night Pacific time, one am Eastern time, six am in the morning in Bambury, England and the rest of it. Christian Horner's team principal and CEO of Oracle Red Bull Racing and John I'm sorry, it's about tires.
That's what the experts Christian. It could well be about tires. Good morning to you, sir, and thank you for being with us. I think we have to start by saying congratulations on an absolutely dominant season for you and the team. We've spent some time talking about that. In just a moment. Let's go where Tom went. Just approaching a new track you haven't had time with, you haven't raced on before,
and we track temperatures that could be very very low. Christian, what's the approach for you and the team going into an event like that one take a jacket? Is it that simple?
Oh yeah, I was watching Max on the simulator yesterday driving around the circuit.
It looks a great track.
I mean it's going to be super fast, there's going to be a lot of overtaking opportunities and a tire as it could be like driving on ice, you know, which just adds another dimension. So, particularly on a road course, on a street circuit that can test the drivers and the team to the absolute maximum, Christian.
When it comes to stuff like qualifying, then how do you prepare to put that fast lap in that you try to do to get that quality in? How do you do that? What do you do set up with three laps before you go for the qualifying lap, what do you do?
Well, that's all going to come out of where we run on Friday for the first time, sorry, on Thursday for the first time. We're going to be learning, you know, what it takes to get these paradi tires up to temperature and is it going to be multiple laps in qualifying rather than a single lap. So it could be really interesting to see how that's how that's going to
play out. There's going to be a lot of data to look at, and yeah, the simulators are going to be working flat out on certainly Thursday evening.
Christian. Any worries that this could just be a bit of a disaster, could end up in chaos.
Well, look, street races are always dramatic, you know, we've seen that Singapore with sin in Azerbaijan and of course Monte Carlo, and this one promises to be a big one.
I think it's going to be one of the biggest viewed events in the.
Sporting calendar this year, and so you know, I'm confident it's going to be a you know, a great success.
Christian Owner. I was appalled by the accident very early in the Brazil race. Your Perez was very much involved in that. How do you make the start of the races safer?
I don't think you can.
I mean, you've got cars that will accelerate from not to one hundred miles an hour in less than two seconds, and you've got twenty very competitive drivers all going, you know, to try and make position into that first turn.
So inevitably sometimes there is going to be contact.
But the safety of the cars, the safety of the circuits has increased dramatically, and you know, thankfully we're seeing, you know, drivers walking away from what sometimes looked like very nasty accidents.
Christian, you said, twenty competitive drivers, arguably this nineteen and then this one guy on his own out in the front. I want to talk about that. The domination of Max Versteppan. He's still so young, Christian, He's taken over Alan Prost, He's basically on course to take over Vettel, maybe even in the next couple of races. In terms of race wins.
When you go back over the legends of this sport that you've been so close to over the years, fanjo Senna, Schumacher, even more recently Hamilton, Where does Max rank for you? What separates him from the rest?
Well, of course, it's.
Always incredibly difficult to compare drivers from different generations, but what I think is safe to say with what Max has achieved in a short period of time, with now three World Championships, fifty or fifty two conpret victories.
Is an incredible, incredible record.
And I think that he can now be spoken about in the same sentence in category as some of the greatest drivers that the sports has ever seen.
How far do you think he can go, Christian, Well, I think.
You know, he's still so young, he's still evolving as a driver, and particularly as he gains more experience, so and a lot depends on the equipment that we can give him, but I think he can achieve a lot more. He's motivated, he's hungry, and yeah, he's he just loves his racing. You can see that he's not interesting anything else other than just going racing.
He's been dominant. Your whole team has been absolutely dominant. I remember Ferrari being accused of making a spot boring in the Schumacher years. Do you take it as a compliment when you hear those kind of act sections thrown at your team.
Well, it means that we're doing our job and that we're winning. But one thing that's guaranteed in this spart is that nothing stands still. And I think with stable regulations, we can already see teams improving behind us, and I think the next year it's going to converge.
And we're roo for a much more tight championship next year.
And also, you know twenty five before another reset with new regulations for twenty twenty six. So yeah, I'm expecting a much much tougher year in twenty twenty four.
Christian to that point, And you know, I have my autosport at home. John Ferrell made me get it. I try to read it. I try to understand it. A lot of your brethren are really trying to fix their cars now for next year. What do you do when you're as strong as you've been about tweaking the platform into the next season? Do you leave it alone? Do you leave the car the same as we're stapping is known this year, or do you actually try to make improvements.
Well, you're always looking to improve because you can guarantee our competitors are going to be going to be improving. They will be copying some of the philosophy, you know, of our Chihove. That's undoubted. We're already seeing that starting to happen, and we just got to keep trying to move the goalpost. I try, you know, to try and keep developing and improving ourselves. And so, of course, you know, for the last few months the facts, you've been very,
very focused on that. But of course you start to get into diminishing returns and you know it's going to be tough to improve the RB twenty next year significantly from where RB nineteen has.
Been this year.
Take us into the pit because to some of us, you know, I watch Netflix and I think I'm an expert. I'm not, Christian Horner. Take us into the pit stop or you're you know, your two point three seconds two point eight steconds. How do you train for that excellence versus the other teams?
Well, it's the same same as in any discipline.
It's all about practice, it's about analysis, it's about the small incremental things, just where the driver stops. You know, if he's two inches too long, then that will affect the timing of the stop. So it's rehearsal, is practice, is positioning the right people in the right roles, is having the right attitude and the determination to continually to continually improve and of.
Course be consistent.
Christian, let's talk about next year. You've got two drivers, both under contract. There is a question mark over one of them. Check out the driver you have in the cars in the coming weekends. Are they going to be the same two next year?
The only people will keep put in the pre the question marker you guys, I mean people pleasing the Checko's going to be our driver, you know, next year. And you know he's had a tough, a tough six weeks, but he started to rEFInd his form. I thought the race that he drove in in Sat Paolo was very strong, his race in Austin was strong, and you know he's finding his form again. He's second in the World Championship.
He's over thirty points ahead of Lewis Hamilton with two races to go, so you know, let's see what he can do over these next couple of races, but he will be our driver alongside Max in twenty twenty four.
As a team. Are you expecting Max to help him secure that second position or does he have to do this on his own?
No, I don't think.
I don't think he'll need the help from Max, to be honest with you, I think he just needs to finish either ahead or just.
Behind Lewis this weekend to secure that that second position.
I think you know, we're treating these from any races as cup finals, and that's that's how we've operated since winning the championship a few races agoing Katar, and each race holds huge importance to us and to race in Vegas. Yeah, it's going to be a phenomenal thing and we're going to be chasing our twentieth victory of the year there for sure. And it's just very nice of them to put a race on to celebrate my fiftieth birthday, particularly.
Christian, you asked for it. Happy Birthday. It's fantastic catch over these Congratulations on an absolutely dominant season. It's just been phenomenal to see play out all year. And thank you also, Christian, to you and the team for being a fantastic partner with this program over the last few months as well. Christian Horner their team Prince Sports, CEO of Oracle Red Bull Racing, joined US now Chief market strategistic FS Investments, Troy. Wonderful to have you with us
on a program. Let's start with fixed income. Did we confuse a bond market rally for bond market stability?
Yeah?
So, I mean, first of all, humility is an order for any forecaster right now. But so much of this cycle, whether it's rates or equities, is there's market price action, and then there's narratives that follow that price action. And you know, if you think of the way yields have gone higher this cycle, We've got to three and a quarter for a pico second rally back, then we got to four and a quarter for a.
Nanosecond, and Tom really like this one.
We got to five for a femto second and then rally back hard because positioning was so arish, and so we came back down hard, and then the narrative builds that you know, we've reached the peak and yields and then of course you either have a bad auction or you have Powell pushing back, and you know you have a twenty base point gap higher.
The geek from MIT is ten to the minus nine this morning, Troy Geyski, let's go to the reality. Get out the calendar. Everybody's got to catch up. I saw. I'm going to give credit to gold and Sacks a chart out out hedge funds were out of the market before eight day rally. You talk about the edge. You own the word alpha. How do we create alpha? Not the year in? How do I create alpha out to the summer of twenty four Well, so I.
Think in time like this, most of your positioning should be and what we refer to as Northwest Prodernce strategies of the Fisher Frontier.
We have lower vall.
You're maturely accepting consistent returns. So you know there's a few areas we've been focused on heavily. You know, one would be prepayment sensitive rmbs because given where yields are today, there's going to be incredibly low refi activity really as far as I can see, So that's one area you're getting attractive.
Carry spreads are relatively wide.
We're not counting on spreads to tighten anytime soon until at least the FED stops QT, which won't happen until recession. But if there is a harder landing and they do QE, then obviously spreads are going to come in significantly, So get income plus price appreciation. Another area Tom, non speculative on the direction rates has been yield curve steepeners. You know, whether we get a bowl steepener like we had earlier this year or a bear steepner more recently, we're fairly agnostic.
And then for those that can tolerate less liquidity. You know, when you think of this environment as a private lender, you have the bank stepping back, you have higher for longer and these are all floating rate loans. So what we refer to as a dare to dream scenario where we keep rates high and we can avoid recession, you're going to have very attractive income and you're not going to have the hangover of a recession. So those are three areas Tom.
To translate the jargon frenzy. You just heard Gayesky's trying to capture the coupon right now, Troy, tell me about the equity markets and technology stocks. They have been on fire recently. Does the fire continue?
Well, you know, when you look at an asset allocation.
There's certainly no reason not to own growth, right, I mean, I never understand these arguments why you shouldn't own growth. You should own International, you should own Japan, you should own them. I mean, this is a winner take all economy, both in the US and globally, and unfortunately or fortunately depending upon how you look at it, that's really concentrated in the top five ten names in the SMP.
So.
The the issue we've had with big cap tech, particularly over the last several weeks or megacap tech, is, you know, are the valuations reasonable given realistic earnings going forward? Obviously earnings are not going to be nearly as strong as you were the past five seven years, and we look at those multiples. In the event of another round of multiple compression driven by FED QTT and money supply contraction, you're more than likely going to have some price declines.
But as far as a secular holding, we don't know why you want to have some of your portfolio and then you look for other things to complement that in a very vall to mark environment.
Can you give us a window, Troy into the debates that you have at FS Investments about your year ahead outlook?
For twenty twenty four.
Oh yeah, So the debates are obviously a lot of fun.
But you know, when you think of the economy, you know, we've always been in the higher for longer camp. That being said, even more surprised at how resilient the economy's been. What we're trying to find tune and we don't claim to have a crystal wall for versus. What's the probability recession in the next twelve to eighteen months? Is it fifty percent, sixty percent? It's alreably higher than forty probably no higher than sixty. And what's the environment where the
FED can thread the needle? What's the probability of that, whether it's forty percent or thirty or even fifty because of the increased business fixed investment, construction spending, because state and local governments can spend, because the housing market at least isn't a dramatic drag on GDP, And then in turn,
what does that mean for inflation forecast? So you know, from a macro standpoint, it's trying, with again humility, to understand in which scenarios through certain trade expressions generate attracting returns and in which other scenarios, do you get better upside or better convexity, A phrase that I know Tom loves well, Troy.
Given the range of potential outcomes, our longer term treasuries virtually uninvestable unless yields are so high to compensate for all of those scenarios.
So that gets back to the scenario analysis.
We have cautioned everyone fixed income that again, every time market fields are popped up, just be aware before it's said and done, before we have that next recession, you could really get hammered with a bear steepener. And that's obviously what happened up until recently. You clearly have better risk reward and fixed income today than a year ago
or two years ago. But until we have that recessionary outcome, or until at least market's truly priced it in, not fictitiously price it in, but truly price it in, you know, all you're going to earn it is your yield, and you're gonna have tremendous amounts of volatility. So we don't think it's time yet.
To extend duration cavil nearly, but.
You more than likely want to think about that and understand that in a recessionary scenario, you don't have as much upside as you've had historically because you know, like where's the ten you're going to go?
Front end goes to three ten, youre goes to three and a quarter three and a half.
So you have upside, but not like the GFC or the Eurozone crisis or the pandemic or two thousand and oh two. But if we stay in the stair to dream scenario and the FED can thread the needle, you're gonna get no price upside. You're going to have still a relatively blow yield compared to when we had inflation this high in the past, and you could get some adverse market price action again like we did yesterday.
A repeat yesterday. Isn't that what many people want right now? Troy? Thank you sir. It's going to catch on, buddy, as O whis troguscae of FS investments following a state day of losses on the S and P five hundred, I.
Have not spoken about Byron Weed, what a joy it was for me sliding in here at Bloomberg and the privileged Steve Roach at Morgan Stanley, Barton Biggs. I have the clearest memories of talking to Barton he died tragically too young, and Byron Ween with a full life dying recently, Byron Ween with a wisdom and what he did, and his annual guestimates of the future, and Doug cast joining now who knew Byron better than me? And I think what Doug cast to me the ultimate thing I could
say about Byron Ween. He was so good that when he got something wrong, you studied why he got it wrong.
It was just that good.
It's like what Yogi Berra said about my cousin Sandy when he went twenty five and five. I know why he won twenty five games, but I don't know how he lost five ell.
It's like that. I mean, Byron came out with X number of calls and he was right, and everybody was that, but the humility met him.
I met him back in nineteen eighty we formed something called the First Tuesday of the Month Club with Julian Robertson, with Lee Cooperman, who was at Goldman Sachs at the time, Susan Byrne, who was a JP Morgan and not yet form Westwood Management, Lou Margoliz, who ran Solomon's institutional business, David Rocker from Rocker Partners, and of course someone who Barton Biggs called in his Hedgehoging book the bearded prophet of the Apocalypse, Tony Salupo, who was the head trader
of Michael Steinhardt and we dueled. Look he we quickly became friends. He became an important mentor to me. We dueled in our annual surprise lists. Since two thousand and two, I so anxiously awaited his constructive criticism and his responses to my list on TheStreet dot com. I still write it. But the most important thing to me is someone with a short selling bias concerning the multiple economic tragedies and
the market swoons over the last several decades. It was also easy to get barished at the bottoms when things were obvious, but Byron taught me something in an immortal phrase, he said, disasters have a way of not happening, and that dictum embolded me in March of two thousand and nine, in May of twenty twenty and over at twenty twenty two to buy stocks. And the second favorite quote I have from Byron is something that he wrote about in the Jewish Journal when he hit eighty years of age.
He said quote, I still ski, I play tennis, I sail, and make love, although my skills at all of these have slightly deteriorated.
Well, that's a perfect security and.
First time long.
Time Tom, really, I will say, Doug trying to shift gears a little bit. When you're talking about catastrophes don't happen, How then do you get bearish at a time where the catastrophe is what hasn't happened, and everyone has been surprised by that.
Well, as we discussed in my last bloomber Of interview about two or three weeks ago, we've had fourteen years of absurdly loose monetary policy, when coupled with aggressive fiscal largess in large measure of reaction from the COVID epidemic. It's distorted our economy, Bramo and our markets. It's resulted in an economy that for up till now, has been immunized and has contributed to a much longer lag for the tightening and monetary policy to take home any other
cycle in history. But this is going to change, and the best distortion is in the housing market. The existing home turnover is frozen for obvious reasons. That said, affordability has been so extended that the price will shortly be paid. Alan Abelson at Baron's used to say, as night follows day, and as a night follows day, the legged impact and the economicdownturn is going to soon be upon us through a by gloom.
Here I got Bramo and Cass digging a hole. But the fact is, and this goes to Byron Wien and Barton Biggs, Doug Cass, we came out of seventy four with that shock bullmarket. Then we paused, and then I'm going to guess in seventy seven somewhere we got a second leg of a bullmarket. Is this a second leg off the October low that we saw in twenty two.
I don't think so. I think the question is not whether one should be short. I should be short, but how should I should be I think the mistake that many are making, and you've discussed this in the last forty eight hours, is that everyone's looking at the slight improvement in the rate of inflation over the last couple of months, thanks in large measure obviously to the lower price of oil. But the real concern to me, and the real reason, there's growing evidence that the consumers starting
to roll over, and roll over badly. Is that stacked inflation. The cumulative rise over the last three years is debilitating and you're seeing that in all sorts of industries. You see the Agios shares down, it's the largest liquor distributor in the world, it's down fifteen percent. There's weakness, the extermination, the bug extermination. Companies are suffering because it's a discretionary
expenditure that is being pulled down. As we mentioned before, pet companies are suffering because the discretionary items like play toys and Chewy's are reduced. But the real big story in this market is that it hasn't been a bull market. It's it's been a market that that is so bifurcated.
Never in history has it been so bifurcated. And I look back into stuff that Byron that Bob Farrell used to say in his Lessons to invest In, and he used to say that markets are the strongest when they brought and weakest when they're narrow to a handful of blue chip names. And that's exactly what's occurring.
But it's been apparing for a long time.
At DOUG and just well, the market has made no progress November twenty one. There's been a lot of action. There's a lot of opportunity trading opportunities. Remember Bramo, let's look at the twenty twenty one top, which was an important top, and we're not far off from it. The yield today on the one year is five point four percent on treasuries. It was thirty pieces points then as
important two years ago the economy was progressing well. Today we're on the customer recession, and that helps to explain that we have a paper thin equity risk premiums or tens lower returns.
There's a question around how to be short.
If you are short, can you go short a.
Whole index or are you taking a look at the losses and say small caps and leaning into that and saying that if we're going to get a recession, that's the surest bet.
Sure. I think the best bet today is an odd pairs bet, which you are talking about. If you look at the ratio of equal weighted SMP relative to the capitalization weighted SMP, it's fallen to the lowest level since September twenty twenty. If you look at the chart, that indicates that the Nasdaq has outperformed the Russell Index. It's the largest margin in twenty seven years. And finally, technology stocks have hid an all time high relative to the
SMP index. So my pair trade and by the way, oh also short interest in the magnetums and seven is that an all time loss? And my pay trade is long Russell Index and short cues short the NATAE.
Quick question here, My trade is long KOFE and long Otani. Is Otani the new Sandy kofex boy.
I guess sort he gave out sixty thousand gloves to kids in elementary school in Japan. He's a great guy.
What it seems he gonna play for Cut to the chase. You know everybody down there. He's in Florida. Doug's like dining with all the owners. Who's in Orlando.
TOWNI now he'll end up with the Yankees.
There we go, Dougcast. Thank you so much for Seabury's there for our New York City audience. Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify and anywhere else you get your podcasts. Listen live every weekday starting at seven am Eastern. I'm Bloomberg dot Com. The iHeartRadio app tune In and the Bloomberg Business app. You can watch us live on Bloomberg Television and always I'm the Bloomberg Terminal. Thanks for listening. I'm Tom Keen, and this is Bloomberg.
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