Surveillance: Bitcoin With Roubini

of you again. For Nora Rubini, there any number of topics to spend a long conversation when professor at Rubini n hyu Stern School, and of course in Oriel Today dot com. But his comments the last time he appeared with us on bitcoin, those comments worldwide we get an update? What ten thousand dollars higher on bitcoin? Noil, Let's just

start with the simple microeconomics to supply the demand. Why is bitcoins surging surge in because there is a massive amount of manipulation that are pumping damp schemes that is s fool thing. There's wash trading, there is front running, there's the issues by tether or a fiat currency not backed by much that's used to manipulate at the price of bitcoin. I think it's a bubble. Fundamentally, bitcoin is not a currency it's not a unit of account. It is not a scalable means of payment, is not a

stable store of value. Not even bitcoin conferences accepted as a means of payment because the price flativity implies your profit margin can be wiped out. And it's not even a single numera you know, the flintstones at the better monetary system that bitcoin, because that the shells instead of having a different token for different purchase of goods and services.

So these are not currencies. Calling them occurrencies them is nowhere, cannot even assets nor I want to get to the heart of it, and I'm gonna go to ruff Field hours path break breaking work with bead work correct the Bank of International Settlements. The transaction costs of big coin in retail transactions preclude its use. So do you look at Tesla is a one off and the bitcoin just simply will never be used in retail because the transaction

costs are so much higher than normal currency. Well, the transaction costs are huge, but the technology proof of work doesn't allow more than fact transaction per second. The Visa network allows you twenty four thousand transaction per second. So it's not the scalable means of payment leaving aside the fact that transaction costs are so high, is never going to be used for goods and services, just used for

speculation and buying other cryptocurrency. So it's a self serving system, but it's not something that's going to be used as scalable means of payment for goods and services. Ever. No, you mentioned the volume of transactions, What about just a small volume but in large size meaning what meaning if you could transact in large sums of money and move cash through bitcoin from one country to another in large numbers.

So not the volume of individual transactions, but let's say you could move a billion from point A to point day with bitcoin. Well, you know, even Steve me Nuchin said that we cannot have a cryptim bitcoin becoming the next Swiss bank account being used by human traffickers, terrorists, tax invaders as a way of sheltering their worth and moving across borders right now, across borders that are slow movements of transactions because there is a ky C, there's

a m a L, there's compliance. That's why it's hard to move money from one county. Now that that's why there are capital controls. So if you have a system is illegal that allows the transfer money instead dalleaging from accounting to another one without any control. Of course, that something is going to be used by crimin out or terrorists, or human traffickers or tax evaders, but no system, no

count is gonna allow that. There's been a crackdown of the G twenty on those types of offshore financial centers will be similar crackdown against the total lack of m E, L and KYC in anything script of so, professor, what you make of the increased institutional find that we've seen more recently, Well, you know, I think that you have to ask yourself, is this as an asset? It's not occurrency,

it's not even an asset. Usually stocks, bonds, loans, real estate give you some income, davidends, coupon interest or rent some other assets like residential real estate if you use housing services. Gold doesn't have any income, but there's a using industry as utility has jewelry and the past monitor use as a store of value. You look at bitcoin, it doesn't have any income, it doesn't have an use,

it doesn't have any utility. So it's a pure speculative, self fulfilling bubble on a price appreciation is like tulip mania, but in case of tulip bank, at least tulips had some utility even today people love flowers. In this case, you have an asset that is not an asset because it doesn't have any feature of an asset. It doesn't any feature of the currency. So it's just a self

fulfilling bubble. That's what it is. It's a in realistic values zero and actually, given it's hard so much energy for producing it, more than Argentina, if you had a pure carbon tax, the value will lead negative, not even zero. Well, some people would argue and neural that the idea of so much money flooding the financial system that there is value and being able to put it somewhere and not lose money. That basically not being charged to negative yield is value in and of itself in this nerve uh,

this negative indestry policy world that we're living in. If this is a bubble, can it burst? Given where we are with the liquidity spickets, without many other parts of financial markets also suffering big blows. Well, you know, if it's a hedge against inflation, the basement of your currencies are a collapse of the dollar, you would see a

spy king tips in the price of gold in inflation expectation. Yeah, eventually the monetary policy may lead us to those kind of outcomes, but the price of other assets will be sharply increasing. Gold went up fifty percent in the last two years, has now corrected a little bit. Why would the bigcoin go from five thousand earlier last year to something like fifty thou ten times higher just because there's a hedge against some tail risk of that sort. Other

ascids will be pricing in. So that's not the explanation of the rising bicom prices. This price manipulation of one sort of another and bacon, it's not even hedge against a risk. During the February March episode last year when you had a collapse in US and global equity of thirty becouse went done by fifty percent. Another keep occurrency when done by sixty percent. So when there is a risk of they're not even hedge against those tale risks.

So they don't have any hedging purpose of that sort either. You see this price manipulation. Who's doing the manipulation manipulating? I will get my words out manipulating. Well, there've been tons of articles showing that these pumping dump schemes that are all over telegram groups that essential pumping and dumping the price of it. We know that tail the issuance is literally a billion dollar every other day out of nowhere.

No one has been very fined account of tether and he's being used essentially to buy bitcoin, and he's not backed by anything. And there's a whole bunch of wash trading or spoofing exchange on the front, running their own clients. It's all over the map. I mean, stuff that he just should be investigated is being investigated. The whole bunch of investigation by the adjesc F. You see the New York Attorney General Office of TED and bats that are

undergoing right now. Nora. What should governments do? I mean, there's got to be a point where in the United Kingdom, the City, the chancel of the Exchequer or some FSA body steps in. Same in the United States and same in other nations as well. With your government experience with the Clinton administration, how can governments be constructive with the surgeon bitcoin? Well, you have to enforce antimony laundering and

know your customer KAC rules. That's the first thing there was a proposal by the Trump administration to make sure that an allset wallets have to reveal was behind them. That rule has not yet done into fact. That lots of things you can do that could be investigation of

why that there is a price manipulation. The investigation right now, but that phoenex those things have to continue because this is a bubble and eventually it's reaching now a market value crepto of one point for three dom dollar and when there's gonna be a blood bat like in two eighteen the price of bitcoin when initially from a thousand to twenty and then collapse from twenty down to three that at time. At that time the market body was very small. A couple hundred billion dollars right now is

a multiple of that. So the consequences and the losses of people are going to be so much severe for institutions and for retail sackers of one sort or another. Nourial comment please, and of course, and we thank all of you out on Twitter, in your emails, watching professor we're being here on television and radio is honorial. People are transfixed by this debate. Explain to it's not the thermodynamics but the proof of work of electricity and it's artificiality.

How do you see the electrical consumption to make this machine go well? Bitcot alone, it uses the energy of a medial size country like Argentina. Because instead of having, like in any legacy financial system, a few trusted individuals or institutions are validating transaction to make sure there is no double spend a bunch of banks. Now you have

literally hundreds of thousands of good miners. We have to do a stupid cryptographic exercise of that one of them wins the task of verifying those transactions and that are put on a ledger in hundreds of thousands of other computers. It's the most inefficient way of essentially verifying transaction. Doesn't

make any sense. And by the way, it's not the centralized either because sev of all the mining of cripto or bitcoin is being done by five or six Oligo police firms that are based where in Russia, Belarus and China that are is that no rule of law and we have the national security problem right now if we're relying on a bunch of miners in counties that are our strategic rivals, which there is no rule of law

to VERI find those transactions. So people talk about the centralization is not a the centralized system, your centralization of mining, the centralization of exchanges, where transaction occurring, the centralization of developers and centralization of wealth. The gene coefficient for bitcoin is worse than the one of North Korea, where Kimon Jude and his family and chronies on the entire country his point eighty six. Well, in Korea is point eighty four.

It's just a total light. This is that the centralized system is centralized where a bunch of insiders and whales and others are controlling the entire system, and they are manipulating it in space in which there is no rule of law. It's just pathetic, Professor healthy, Next time we come back, you can tell us what you really think about, professor. It's good to see here they are Raban, a professor of economics m y U Sterns called past right now.

An oil definitive is Paul Sanki long ago and far away at Deutsche Bank there was absolute definitive sell side research like a bible. You read is Saminsky and Sanky on the global supply, the global demand of oil. We're thrilled at Paul Sanky could join us from Sanky Research U this morning. Paul, with the gyrations that we see in the midwest of the United States, in Texas, Permian basin, et cetera, can we get out of the assumption of range bound oil? Well, these are these are not gyrations.

I mean this situation to me is is very reminiscent of Park in Katrina, where if you recall, on the Monday after Katrina, there was sort of an attitude that, uh, this hasn't been that big a deal, and then over the course of the following week, it's suddenly you emerged as a as a horrendous disaster. So gyrations in this I've observed this morning, Tom, people don't realize how about

this situation is. I mean, you've got, like, as you mentioned, your previous guests mentioned, you've got basically full scale blackouts in Mexico, but you've also lost here the biggest outage in the history of US oil and gas. I mean, this thing is we have never seen a loss of this scale at a time when you know you're in midwinter. So basically we think you've lost about three million barrels a day of oil. We think you've lost about ten BCP of gas at least, and we're down at least

three million barrels a day. And the finding you know, all of these for example, in the finding of the base of about sixteen million barrels a day with inventory is not that high. So this is an energy crisis. And you know, yeah, gyerations, you know you're seeing Brent at sixty four here the obvious price reaction would be. Firstly, obviously, if you lose US Texas oil, you're expecting Brent to go up, and it is and yeah, what is your price target? I mean, you give us visibility and price

right now. Well, we've been talking a lot about the dollar, so we think you can get to eight this year based on the dollar. Now that obviously if the dollar strengthens a lot, that that calls it dad. But essentially oil should be around sixty five seventy just on the dollar at ninety on the d X Y. You know, if we break down to eight in below, then you

can you could easy see oil at eight um. And you know, therefore there's quite a bit of upside at this point, which has been that was prior to the outage, So you know, we'll see how this thing plays out, but I think it's going to take a long time to sort this problem out. Well, Paul, can you talk

about the way forward? In other words, how much federal interference has to be waged here given the fact that to upgrade texas Is infrastructure to be more weather proof would cost trillions of dollars and we're looking at a state that doesn't ensure against potential outages the way that places in the Northeast do. How do you see the federal government getting involved? Well, so far, the only comments

been from AOC. You know, we haven't really seen much from the President for example, I mean Ergans following a post Trump you know, no Twitter kind of approach. But yeah, it's a major problem for the Texans and they're going to have to completely rethink this is this is really existential in terms of how much wind and how much solar you can have in a system. Given that you know, you were caught really badly shut what happens if you

lose natural gas? And you know, to be honest, people haven't really thought what happens if there's a major matt gas outage at the time when there's no wind and solar? And the answer probably is, well, where are your nukes? Well,

where's your cod file? Old one, get Paul. But this is really important because yesterday we had a Texas regulator come on and say that the default really was prioritizing green energy, that the wind turbines and some of the other natural resources that went offline were part of the

big culprits behind this outage. If we look at data as reported by Bloomberg, it's not really the case that actually it's very much across the board, and that accounts for a much smaller proportion of the total energy output. So can you give us some perspective on how much this sort of shift to green energy really is behind this versus something much broader and more existential. As you say, yeah, I mean, look it's broader. That's exactly my point. Thank

you for making that. No, I mean, you've you've had a failure of the natural gas system, You've had a nuclear power very large one two hundred bank or nuclear power plant has gone down. And obviously this is somewhat unprecedented weather. I think it's a sixties sixty year event

since we've seen something like this in Texas. So all of the all of the above absolutely, and for one side, you know, exactly as you highlight for one side to say it's wind spot, for the other side to sort of say, you know, this shows you that even invest in nothing the grid is the kind of idiocy that we see around, you know, the whole energy transition debate. The thing that bugs me the most is people who

are trying to get us of natural gas. You know, the idea that natural gas and the enemy because it's a fossil fuel. It's really flawed. And you know, ultimately all of us agree that basically we should be building nuclear if we really want to be emissions creed, because that's by far the best emission this pretty option pull. A couple of different conversations happen here, and I'm trying

to reconcile them. You've got this eighty dollar price target, at least an eighty dollar call that you're looking for oil prices to gravitate towards. Then we're talking about a problem right now that could be fixed in a couple of weeks as we get into springs. So Paul, can you reconcile the two things for me? Yeah, I mean, the demand growth that we expect to see is going

to be about three million barrels a day. In the summer, you're about five million barrels a day versus last year in OPEC with another million coming off from Saudi, So that's that leaves you about three million. At the same time. We've been drawing inventories before this crisis, that about two million a day globally. So basically the market is pretty

much tight by summer. And that gets you. And that's by the way, I mean, I'm sure you guys, you know, are pretty jazzed up about the potential for a major pent up demand situations to emerge here. I think all of us, you know, desperate apply in a plane and whatever Tom does in the summer vacations. But I'm sure it involves travel and um, you know. So the point to count me out pull The point is that you're going to see a significant up searching demand. It's almost guaranteed.

This is always you know, energy wise, this is a very strong point. Obviously the windsor fuels, obviously natural gas, heating oil. Propane by the way, is pretty much approaching crisis levels as well. The line that we've had before this crisis was there's no propane less than the Mississippi. So my point is that you're in an energy crisis, and I don't even see it as the top headline, you know, in the various media outlets like followed, including

blue Bug. Blue Bug always does a great job, by the way, on thanks basically just to jump in forward just quickly. The more one of the more populist outlets don't seem to realize that you've got an energy crisis. Some laquetrina. Final question from me, sir, there's a difference between a rebound and crude crisis and the start of a commodity super psychole. I think that's been the big conversation amongst many people in this industry in the last

couple of weeks. This was Andy Hall, of course, fain oil trader of the previous cycle, the last supercycle, he said the following in the ft, the oil and gas industry is in terminal decline. Perhaps this dead cat can bant a few more times, but would that be a super cycle. What's your take on that? Pot? Well, yeah, I used to I used to meet and the in a bar up on the upper rest side player and he's obviously a brilliant mad or is bullish actually I'm

very interested to hear him not so bullish. Yeah, my concern. It's obviously it's a it's a consensus call. There's going to be a super cycle, you know, the world. And his wife is saying, yeah, you know everything, hands up, it's a super cycle. Having said that, we are bullish on our demand over the next five years, you know, the whole impact of the VS, which is so heavily discanted by the market, overvalued by the market, is going to take a lot longer to really have an impact.

And it really comes down to still being at ninety five nineties six million bars in the wild demand with effectively no jet fuel demand in the US, you know, the discretionary basis, so you can easily get three to four million barrels today of extra jet field demand here, which takes you way back up to the hundred million barrel a day market, And then you're really questioning can

the supplice I meet that? As you know, the key questions, one of them is going to be is the USC and P industry going to actually show capital discipline and generate returns this time? That's what's relating to me. I think they will. And yesterday we had Devon announced a variable dividend very early in its announcement of that policy. So essentially now Devon Energy is paying a standard dividend and then a variable dividend depending on the old price.

And they came in with the nineteen cent boost that their dividend just based on fortify or and que Corps. That's that's a very good leadership role from from Devon to what this industry should be doing, which is paying out heavily cash to shareholders to pay them to the E s G. Pain of earning oil. I'm far more interested in how drinks went with Andy on the Upper West Side was the two thousand and seven just as

like Steve Jobs right, So it's a mysterious figure. I don't know if you've ever seen the naked painting of him and his wife, but I've seen him make really interesting catch up folder at a time. Folking to see him a folk, thank you, thank you, thank you. Michael Gabon joined some Barclays right now. Michael, does this kind of data solidify a Barclay's call for buoyant economic growth?

It certainly does help. At least we're looking for growth to be very solid this year and I think what this tells you is when fiscal stimulus or fiscal aid I think it's the better word arrives to household balance sheets is it does get turned around fairly quickly and materializes in economic activities. So this is largely, we think attributable to the nine plus billion aid package that was

passed at the end of last year. We suspect we will be getting around to one point four one point five trillion dollar aid package by the middle to the end of March. So I think this means we should see a pretty rapid acceleration in demand and household spending as we move into the into the second quarter, which could be continued if vaccinations continue apace and mobility gradually

recovers over time. So yes, Tom, it does I think confirm our expectations about growth for this year, at least initially. Obviously there's eleven more months to go. Well, Michael, can you connect retail sales and sort of a one month pop after passing this stimulus plan to longer term growth?

How neat is that line? I wouldn't say it's it's entirely neat, but so there are certainly a list of things that have to happen, including vaccinations and getting on top of the pandemic and perhaps turning to an economic recovery package later this year. But but I think it does show you that when households have resources to spend,

they ultimately will. So I think this does also address the question of excess saving our household balance sheets and what's going to happen to that excess saving if we can gradually normalize activity. There's one school of thought that says its wealth it's it's not really going to support consumption all that much. The wealth effective diminished. Our view is that we think a lot of it is is pent up demand or at least deferred consumption that's likely

to come back and support activity. Just give you an update briefly on this price action. The move didn't hold, it didn't stick. We find just a little bit one on tens pushed one thirty three about five ten minutes ago on the dollar index, just off the highs of the session of ninety. Michael, we're talking about retail selves here, but maybe we should pay a little bit more attention to p p I facial gate prices are standard push um. We're starting to see this in China as well, and

I'm trying to understand. You've got this commodity boom, you've got the supply chain issues, PPI standard to bleed higher. How do you take the read on PPI at two c p I? Michael cow consistent? Is that read across? I think first of all, we we should note this is not just a US phenomenon. You mentioned China. Across the globe. The p m I data in January said prices paid the input prices are moving are moving higher.

Now this we think on net, this affects the emerging market, say central bank policy position much more because they're much more export oriented. They have a heavier focus on goods production in the in the US and in Europe and most of the developed world where still more of a services oriented economy. So how does it pass through to c p I Probably further buoyancy in in goods prices.

Now services really take the weight off of that. And and so we think buoyant good goods prices are still offset by disinflation and shelter in services at least for much of this year. So I think there will be a pass through. I don't think it's going to affects, say the fed's view on on how policy should be set.

But it is kind of moving the needle of bit on central banks, like in Brazil and South Africa, thinking about maybe we need to delay, or maybe we delay further cuts, or maybe we need to to move to tighter policy stands. So it's a global phenomenon right now. We don't think it affects the developed market world as much as the emerging market. Is it more than just spise effects though my code, yes, I think it's it's I think it's clearly supply constraints. Its lack of availability

of labor. Uh, it's lack of inputs. It's the lack of containers. We're not moving as much cargo via air we need them versus containers. We know what's happened on shipping prices there. I just think that the cost of getting goods where they're needed globally has has risen. So I think it's more than base effects, presumably, or we expect it will diminish over the course of the year if the composition of activity shifts back in the direction

of services. But in the meantime, I think it's going to be with us for at least the first half of this year getting increasingly complex. To get a read on this, Mikel's tried to catch up, so thank Michael gayfan Bacles. Right now the conversation of the day Ina Pandemic Lawrence Our with John Hopp because I know Lisa and John got a bunch of questions. We welcome all of you across this nation on radio, in television. Lawrence sour estimate for us the amount of your public that

doesn't want to get the vaccine? Is it inconsequential? Is it tangible? I think it's definitely tangible. Um. We're rolling out to healthcare workers and elderly and vulnerable populations right now. You know, I think around the tenth of the population, maybe even less, has been vaccinated so far. Um. But what we know is that we're already seeing hesitancy from

these vulnerable, marginalized populations. And that's within our healthcare cohorts and more broadly, as we're starting to roll out vaccine education campaigns and access campaigns. And so we don't have great numbers on the perscent of the popular Asian saying no, because there's so many people who are willing to get it right now just because they want life to go back to normal and they're not scared of the vaccine

or they're not hesitant to get it. But as soon as we get to the point where the where there's a significant amount of supply increase, and we've gone through our frontline healthcare workers, we've gone through our um elderly populations that have been able to get it through things like long term care facilities, a lot of us think that we're going to see a sort of a cliff where there's this drop off of people who are willing

to get it and we're gonna just be sitting on supply. Lauren, As you talk, it just strikes me that this process has been really messy. I mean, we're dealing with both the education campaigns in addition to trying to figure out the rollout campaigns because it's changing in real time, with the CDC recommending possibly delaying the second shot now to get the first shot as many people's arms. To John's point following the UK model, Lauren, is this a mess?

Is there a plan? Do you think that we're moving ahead as expeditiously, expeditiously and as organized, Lee as pos

of all, I will get my words out. Yeah, I mean I think there's there's a plan being built, right, but it's being built, you know, as it's going and and that's really problematic for something like this, where you potentially have multiple vaccines with multiple different uh distribution strategies, multiple different cold chain processes, and multiple different dozing approaches, and so how this has been rolled out has been

left to local planners. And those are the same people who have had to plan testing campaigns, who have had to plan uh PPE access projects, who have had to do all of the case counting in their region, and and there's just not enough local resources to do that. The national strategy is being fixed UM and by fixed I mean built, I think because we didn't have a

strong national strategy for vaccine rollout. It's been incredibly impressive how fast we've gotten to vaccine, but that is just one piece of the picture, you know, the actual products, and then all of these other pieces I think have been neglected while all of the focus was on getting

vaccine UM that actually works. And so now it's time to really focus on UM a strategy that takes all of the responsibility out of the local health departments and local health systems hands so that they can go back to providing strong patient care and planning for all of the other day to day emergencies that they have in the meantime. President Biden last night at a town hall meeting, said that he expected things to be back to normal by Christmas. Uh, next year. What's the earliest that you

see as plausible. I think that the first thing we have to do is readjust our our sense of what back to normal looks like. I mean, this is the virus that's going to be with us for a long time. Uh, We're not going to get rid of it. We are going to manage it, but probably the same way we manage flu. But um, there are some distinct different inces. And so as vaccine ruled out and more people get it and we do focus on these education campaigns, we're

still going to have to maintain our masking strategies. Maintain our strategies probably well into the new year, I would say, and possibly more if we don't spend a lot of time talking to these communities who are hesitant about vaccine right now. Long we keep hearing from several sources, including yourself, just then that the national strategy to run out this vaccine needed to be fixed, just looking at the numbers right now, the average daily rate of one point six

seven million. It's good and better compared to where it was when Joe Biden took the presidency and walked into the White House, but it was approaching one million then. What was wrong with the strategy then? And how has he fixed it? What's he changed? I think there's a couple of things that are happening. I think the more vaccines are coming online. Uh, people are getting messaging from their highest level public health leaders, which is absolutely critical.

We were in a sort of trusted messenger gap, and and that is a problem when people want information. It's okay to say what we know has changed, It's okay to say we have more information than we did a week ago. But fundamentally, if you're not hearing from a consistent, trusted voice, um, you can't build any of these strategies to to sort of fix what's happening in this pandemic. Lauren, we appreciate your time and thank you for jointing us.

Laurence Sander of Johns Hopkins on the more coherent message in the last month or so around the vaccine roll out. Charles Canton, Newberger, Berman Long short funds senior portfolio manager, Charles, let's just start here on treasuries. He was pushing her, and I think everyone in the equity market asking the same question. When does it start to buy? Not one thirty, when does it start to buy? How do you frame that for clients? For you yourself investing? Charles, what's your view? Thanks?

Good money, Jonathan and Tom Okay. I think at the core of a high yield are predicting foster growth and UM and a little inflation, a little pricing power generally is good for equities. I think the speed of the move matters as much as where rates ultimately settled out UM. For the last twenty decades, we've lived in a world with rates went in one direction, and that was from

from the top left to the bottom right. I think look two two and a half, two and three quarters becomes somewhat problematic, But to me, that feels like creating a long way away. I looked Charles, where we are, and I see a great adjustment in what corporations will do. You are experts at the dynamics of corporations. What are they doing right now to shape up their income statements, to shape up the need for revenue. Are they activist corporations?

Are they gliding into the rest of two thousand twenty one. Look, I think corporations are feeling fantastic having stayed into the abyss and water about the survivability of their businesses and their health of their employees and and and and and their supply chains. I think they they've survived this in this roague way that that almost wiped them out, and and now feel emboldened and confident to to to invest both inside there in their businesses in terms of people

and technology and and and new products and services. And I think they're thinking a lot strategically as well about how do they take advantage of this dramatic rise in in their stock crisis. On top of that, many of them have showed up their balance sheets by taking advantage of incredibly low yields. As Jonathan mentioned earlier, the yield on high yield, for example, doesn't start with the fire

handle anymore. So there's been shoring up of balance sheets, lots of confidence um and many I think are thinking through at what pace they start bringing folks back to the office. And this definitely has been behind some of the moves that we've seen in equity prices, and certainly it's been helped by a very accommodative how to reserve. Is short selling dead in this environment? No, I don't

think short setting is dead at all. I think we're finally in environment where security selection, stock clicking, and risk management matters again. And that played out across all of twenty and continues to play out in one. Yes, there was a moment in January where bad companies went down and sorry, bad companies went up and um, good companies went down as everyone try to bring down gross exposures by covering heavily short at stocks and funding those those

those purchases by setting down really good companies. But that seems to have worked its way through the system. Now short setting is a massive opportunity to to to to create value and by understanding where companies positioned within its sector, with in its balance sheet, within its customers, within the global supply chain has never mattered more and and and the shorting opportunity is as large today I've seen it in my career. How nervous do you feel about being sure?

How comfortable are your child? Surely, under the last three months you feel a little bit more nervous putting that trade on. Look, it's all about how you position the short um and it's all about understanding where others are within regard to to to to to betting against, betting against the company. We manage our short positions very cautiously.

We're fully aware of of levels of short interest. But we're not betting that that a that a company goes away, and we're not betting our business that that company goes away. And when you combine those two things, I think you see pretty well at night. The shorting opportunity is the biggest in my career. I mean, child, you have got to put some numbers on that. Where in energy we've seen again of almost twenty percent year today, you've seen a similar move in small caps on a rustle as well,

where you're seeing these massive opportunities. Look, we see a market that continues to be very bifurcated between value and growth and different sectors and how companies opposition our stencies. Those companies that that that are still behind in terms of digitizing their business, taking their businesses to the cloud, engaging in their customers in a very different way, UM are going to find it very difficult there are a bunch of companies out there whose stories are so fanciful

they can't be validated or refuted. And and those are the companies that that I prefer not to mention, but those are the companies where a little the time um truth will get revealed. And if you can manage those positions within cautiously and and and and and small, I think at some point you get paid. Charles Character give a lesson to all of global Wall Street watching this morning. How much short interest is too much short interest? I mean, Game Stop was out well over. You've gotta be nuts

to go against that. Do you have a limit in your head where you say, if it's thirty short interest, that the thirty percent of the shares out I'm betting against that they're gonna go down. Is that too much? Do you have a number? I think you've got to think about short interest and position sizing together. So the larger the short interests, the smaller of the position should be for as within the context of what what is reasonable.

I think once you get north of um short beware, but that doesn't mean you don't you don't short that company. But but once you get north of twenty percent, I think there's a rule of um, um, you want to you want to start thinking critically about how he did you are, But then you want to think of actual position within the context of of of the entire short interest. How much of the short interest is you versus someone else?

I mean part of the challenges. Um. You know, so many folks are on the same side of the trade at the same time, and then they'll all do the same thing at exactly the same time. I always found it curious that the retail investors got accused of group think, but the institutional short setter was also part of the group think because they were all in it at the same time, and then all do exactly the same thing to manage down their gross exposures at the same time,

which creates this enormous opportunity to to to to make money. Charls, I can't believe you run down the clock without actually telling us where to find these shorts. He said, he didn't want to comment. He said, the companies are so does it rhyme with Westler Charles? It may not, but it's it's where the businesses are pursuing a total addressable market that seems massive evaluations are fanciful. Revenue doesn't seem to be very great today, but enormous five years from now.

There are a lot of those businesses out there, and that piece of the market, Kennedy feels very n I mean, the market doesn't feel ninety nine at all. We need a private conversation chouse. This is the Bloomberg Surveillance Podcast. Thanks for listening. Join us live weekdays from seven to ten am Eastern on Bloomberg Radio and on Bloomberg Television each day from six to nine am for insight from

the best in economics, finance, investment, and international relations. And subscribe to the Surveillance podcast on Apple podcast, SoundCloud, Bloomberg dot com, and of course on the terminal. I'm Tom Keene, and this is Bloomberg