Surveillance: GameStop with Cooperman

the CEO. What he really is is a kid out of Hunter College who got a job at Xerox a million years ago and stumbled through Colombia into Golden Sacks where he uh found acclaim fame and fortune. He was a regular and institutional Investors Awards ceremonies for years and years and years. Mr Cooperman joins us this morning, Leon, why is this short squeeze different than the forty two others you've known since you joined Golden Sachs. Well, the

market is very different because things were happening much more quickly. Uh, there's just no stabilizers. When I came to Wall Street fifty five years ago, the brokers firms traded stock fifty cents to share. The vocal rule didn't exist. They had a center to stabilize and go against the trend that doesn't exist anymore. Uh. You know the vibue used to be New York Stock Exchange. Any presented the volumes well board,

the specialists don't play a role for someone unexplained reason. Uh, the SEC eliminated the uptick rule with two thousand and seven or something. Very well, okay, and I don't want to interrupt, but that's right where I wanted to go. Okay. Arthur Levitt and others full disclosure. Mr Levitt's a Bloomberg board member. Arthur Levitt others took us from quarter point responsibility down to the rush of the decimalization, and then

we had the uptick rule changed. Explain why the uptick rule was so important, Well, he had, it's the village of the market. You need an uptiket just couldn't not. I think the elimination of the up to group gave rise to these high frequency you know, out instators, and they know nothing about value, they know everything about price,

so they basically they exacerbate the trend. When the market's going up, they accelerate the up and moves going down the accelerated down mood and I think the SEC should be They've been very mindful of the course of trading, but they have not looked at the lowering the course of trading, what impact has had in the market. And I think that we should try to slow things down

a little and reinstate the up to group. Charles Cancer of New Berger Berman was on the other day and made very clear his break is a responsible short interest. Leon Cooperman is one path here to restrict the size of the short interest, to not only protect investors, but just just to put a break on all that high speed market. No, I would say that we should just

follow the rules that existence. I mean, if you're short something you have to secure, you're a ball, okay, if you if you if you can't have a barrow, you shouldn't be short. So the extent that somebody shouldn't one that represented the market capital company, it is because the rules have not been followed. Liam was anything to a maya from the events of several weeks ago, anything to admire, Uh, well, the system has survived. But you know, no, I would

say it's not. Look, the Wall Street ethics has been in a decline for quite some time, many many years ago. I confronted the then head of the New York Stock Exchange. I asked why they allowed these algorithmic guys to co locate their computers next to New York Stocker Change, to give them a split second advance over the public. Just doesn't seem to be right. And his response was, well, we don't do it, somebody else will. Okay. The sale of order flow raises questions in terms of whether the

public's orders are being abused. But I think that there there's a lot of things yet she could be doing. And the last thing we need is Elizabeth Warren or Bernie Sands or AOC getting involved setting policy. You know, the rules and the regulations exist there in place, just follow them. Well. Actually, know, Leon, a lot of people have characterized this as the wealthy versus the poor, David versus Goliath. How and healthful do you think that is?

Right now? I think that's all blowning, you know, uh, this persistent attack of the wealthy. I mean, Melvin lost a lot of money. I suspect that he's a very wealthy guy, the fellow that runs Melbourne Capital, So so I don't think he's a battling against the wealthy and the poor. I think in America as a country became great because poor people want to inspire to become wealthy, not because they basically had a negative view of the wealthy. And uh, you know, how do you become wealthy in America?

You become wealthy in America you should develop a practice service and somebody needs when you get richly rewarded and the people who had to have their head screwed oncorrectly then shared that success others less fortunate. Is the world better off and worse off because of Bill Gauge, Jeff Bezos and host of other people. You know, I've said on your program other programs, ken Lyn Bell, who go

in the finest human beings I've ever met? Okay Well, Ken State, Bernie Marcus, Uh you know, I think he raised him something like h fifty families put up two billion dollars East they raised ten million dollars, and I don't know. The enterprise today is probably two d and seventy billion dollars. They have several thousand employees and a millionaires. Bernie and Kendon given back billions of dollars to society.

That's the American dream. Well, how does the FED factor into the American dream, because the American dream increasingly has been people with assets have continued to see their wealth grow dramatically under the Fed's regime, versus those who don't have assets, which have missed out. Look, this goes back. We have had some you know, I'm not a big

bull in the market presently. I understand exactly what's going on basically, but we've had the government for warming some type of providing some type of life support to the economy and the markets. There's two thousand and eight, two thousand eight Mr Rnanke figured out that common was going down the toilet. He had to reverse that. He said, the best way to reverse that is to create wealth. You know, the so called forate Goo effect. Five percent

of wealth changes workers with the consumption. And the best way to get wealth that we get the stock market up. The trouble with it is of stocks how much wanting to set the people? Uh, not that they did the wrong thing. They did the right thing, okay, and then they spent the next ten years taking away the wealth that was created from the wealthy by creating an environment

where there's no returnment savings. So if you were letter proved in life in two thousand and eight, and you didn't get caught in a big way and you had savings. If you tax adjust and inflation adjust, you returned savings negative. Okay, And now they want to get another bite of the apple. We are following. It's very clear what's going on in the country right now. Unemployment pre COVID was like five point seven million people on the poor in that balloon

over twenty three million. That's now down to about a bit over ten million. And they're conducting monetary and fiscal policy, not saying it wrong, but there's a pricey page for this long term. They're conducting policy with the idea of getting the unemployment back to where it was pre COVID. Okay, and everything they're doing so just look at the world. We've injected one trillion dollars more in stimulus in the way of transfer payments. Is the economy incoming has been lost?

Plus we're talking about another trillion nine Okay. We took two and fourty five years from this country to go from zero national debt to twenty one or two trillion. That's going up three trillion dollars a year. That's not a sustainable situation. It's a price repeat for that, Leon, What is the consequence? Is it runaway inflation? Is it markets that are going to get overheated. I don't know the answer because the inflation and inflation. I just know

it's not gonna be a good end. And I don't know what it ends, but it's not gonna be a good end to the game. It's not gonna be a good end. Just think about this way. If you speak to a hundred economists, and Mr Keane is a damn good economists of his own, you speak to a hundred columnists today Ust and what is the trend? Real growth

in the economy? Trend real growth? Then we said, tis potention to grow in real terms about two percent one episcent proactivity fifty basis boys from labor force growth, that's two percent, and let pe sent for inflation, that's four percent nominal GDP growth. Okay, this year the economy is expected to grow six percent. It's growing three in real terms. It's growing a three times trend. Yet we have zero interest rates. Doesn't make any sense. It's being the policy.

And I resent Mr Powell in one respect, let him okay, Leon, Look, I want Leon, I want to get back just as the running out of time. I want to get back to what we're talking about here. Michael Lewis wrote a book about the flash boys. We've got to do something to get us away from the cult of high speed trading.

What is your policy prescription for Mr Gensler to get us somewhere back to where Vailue is worshiped like Price the files a letter I sent to j Clinton in December recommending reinstating the uptick rule that was slow the process down. I see no downside risk to doing that, and it can control. It would basically add some stability to the system. There's no stabilizers up or down, and that's not a good thing for the markets. Who is

lobbying for those people? I mean, who is representing them against people of the high speed industry, And I'm gonna say including Mr Griffin. I honestly don't know. You know, I'm nearly an old fashioned investor. I buy stocks one at a time. I'm a value guy. I buy things. What's your single bust buy right now? Farrell's gotta make some money. What's your single best buy? Complicated? But my single best idea, which should be my largest position right

is a company called Legato. Legato owns somewhere between and forty megaherts and spectrum i G spectrum which got caught up at some controversy with the Department of Friends very bously objected to their spectrum used because they said interfere with the d needs complete PLODI. The FCC did a fabulous job by the chairman Pie studied this for over five years and by a five to zero by personal vote. There you go to tell you Leon, thank you. We've

got to leave it there. Leon cooperm in there and make a family office Chairman and see Leon get to catch up. Got to see you again. Thank you. It would be nice John to speak to someone truly expert in the span of commodities. Young Gartman ages ago. John Farrell actually was in the pits enjoying losing money. Well, let's talk to Dennis now, not about losing money, maybe even making it. Dennis Gartman, Chairman of the University of

Akrons and Downment Committee. Dennis grit to catch up with you, sir. You've heard the same conversation we've heard. Let's contribute to it and common it's he super psychile. Your thoughts now, Dennis, I think There's something going on that is very, very serious in the commodity markets. Take a look at almost any commodity that you want to look at. Look at tin, it's up dramatically. Look at copper, it's up dramatically. Look at cotton, it's up dramatically. Look at wheat, corn, soybeans

up dramatically. Look at livestock prices up dramatically. Look at the cost of shipping goods up dramatically. There's something more going on than just a mere bounce from the lows. I think that the bear market that had existed for a more than a decade has ended. I think a bowl market that will probably last for a long period of time has begun. The monetary authorities around the world are sponsoring this is to become extremely expansionary. This is

starting and it's not going to go away anytime soon. Dennis, I gotta rip up the script. You are absolutely definitive in the way that you stop losing money in commodities, which is a habit. It's sort of like game stop. To be honest, what is your best practice for our listeners and viewers to not lose money investing in commodities. What's the single best guardment tip. Add to winning trades and avoid doing and avoid adding to losing trades. Whatever you do. An old rule of mine, and it's a

very good rule. Do more of that which is working and less of that which is not. If something is going from the lower left to the upper right and it's been working for you, add to it. If something's been going from the lower left to the upper right and you're short of it, stop doing that. So that's the simplest methodology. It's the best methodology. It's good in life, and it's good in trading. Do more of that which

is working and less of that which is not. Evidently over leverage, it was about to say, evidently triple every cash is working really well for a Tom Keene. There raises a question though, this idea of the goods inflation, this idea of commodity is gaining at a time when people can't go out and have experiences in the same way because of the pandemic, and there's been a shift

from spending in services to spending on goods. Is that going to last and enough of a way to keep this supercycle going as people are predicting, or could this be skewing some of what seeing currently, Dennis, as long as the monetary authorities continue to be expansionary, and it's not just a FED that is that way. It's the Bank of Candidates, the Bank of England, it's the e c B, It's the People's Bank of China, it's the people It's a Reserve Bank of Russia, the reserve banks

of Australia and New Zealand. All of them are all expansionary. All of them are expanding reserves at a pace far past any reasonable expectation of GDP and population growth. So it is inflationary around the world. And this is not going to go away anytime soon. As I've said many times before and I'll continue to say in the future. This is something sponsored by the central banks and it's

not going to stop. And I just want to mention folks, but Mr Gartman just mentioned there in trading strategy is called an anti Martingale strategy. This is from the Bibles of years ago when people used to lose money. Maybe with a more informed view, Dennis Garman, John Farro demands I go to the real yield. You know, the focuses on treasury, the money they have at the FED. It's gonna flood the system. Do we go to negative interest rates and money market fund and do we go to

I'll call it a volatile real yield. I think what's going to happen, or what has been happening and what's going to continue to happen, is the yield curve is going to continue to widen. The back end of the curve, which is the which is the area that the Fed has very little control over, is going to continue to see higher and higher interest rates. The long bond went above two percent just this past week. It's going to go to three or four percent over the course of

the next several years. But the Fed is going to continue to keep the overnight Fed funds right. They've told us this. I believe them. They're gonna keep the overnight Fed funds rate at or near zero. Can they take it to negative numbers. It's possible, I doubt it. But the important thing is to notice that the spread between the overnight Fed funds rate and the long end of the curve is going to continue to wide. And this will help the banking system and more than anybody else.

But it's this is something that's predicated upon inflation continuing for a long period of time. So the Fed is not going to tighten monetary policy at the short end, but the market itself is tightening monetary policy at the long end. And that's what people have to get have to understand, and they'd be plugging that into the funance of sect of the banks have been flying. Dennis is

great to catch up, Sir Dennis Galman, Chairman. I think University of akrons in down and fun James Bianco with this Bianco research, UH this morning, Jim Bianco, real simple does the carnage of the Midwest deep freeze? Does that adjust national economics? You know, you normally think it would, but given that we're already in the mode of working from home, the impact is far less than it would

have been in a pre pandemic era. So a lot of people like me are hit home working and while it's snowing outside, as I talked to you, not a whole lot it's going to change with my work habits just because of the pandemic. Many people missed they recovery last year and how quickly, more specifically, how quickly the u S would recover. Are we doing that all over again? Uh? As far as missing it no, because I think a

lot of people are expecting a booming recovery. If there's any thing we might be missing, the return of inflation. I've heard that, you know, Wall Street has been upping their forecast for real GDP growth, And I would just put a little finer tune on that and say, maybe it turns out to be nominal GDP growth that's gonna go up, and that more of that component is going to be inflation and a little less of that component

is going to be real growth. But I don't think that there's a lot of people that are looking for the economy to turn south anytime soon, unless something comes along to break it. Markets are picking up on that. It feels like economist behind the curve. Though on this gym you speak to many market parts, hispan sound economists separately. It just feels like the economists haven't quite upgraded their forecasts yet, and the same way this market has, particularly

in the bond market. Yeah, I think what they're they're being influenced by is interest rates. They're heading higher, and I think they're going to continue to head higher. But it's been a gradual grind, and so when I talk about the potential of inflation coming. I understand there's a base effect, but then after that and ray it's might continue to move higher. On inflation, the answer, or the

question is why aren't they going up? Now? You've got the Federal Reserve buying a trillion and a half dollars of bonds a year, and that's probably dampening the type of move we would have x them as well. But I do think it's there, and I think that they're just economists are starting to pick up on this idea that, as Dennis Gartman said in the last hour, the supercyclist turned commodities are moving higher and inflation looks like something that is coming back that we haven't seen in about

thirty years. So it's also something that's very new for a lot of people. That's actually what I was going to say, that there's been a conditioning over the years that just because the Federal Reserve is incredibly involved in markets doesn't necessarily mean that we're going to get higher inflation. I am wondering, and not to harp on this, but

good inflation versus bad inflation. You know, if if the goods that you buy and everyone is buying more of them and no services or not as many services during the pandemic, and those goods are getting more expensive because of the increased demand. So the real inflation is going up faster than perhaps some of the headline E gauges is is that good do wages necessarily follow? What's your sense? Well, the two things on the goods inflation, you're not seeing

it as much in the data. But matt I Glaciers brought up a good point on Twitter over the weekend. You're getting rational in go buy something at home depot or lows and it's the price is cheap and you'll get it in April. You're you know, so they're rationing out their supply as opposed to raising their prices. Well, that's a form of inflation. It's just not showing up

in in the data as well too. As far as where we're gonna go from here, I think you know, when you talk about bad inflation, the question is gonna be once we reopen with all the stimulus and services start to move because a lot of them are dormant right now because of the lockdown restrictions, are we gonna see that start to move? And finally you mentioned about wages, Uh, we have already been, you know the vernacular even using we've been mailing people money. We just got done mailing

them six hundred dollars. We're gonna mail them fourtellars. I understand why we're doing it. That's the American income right now is being sent to you via the government in the form of stimulus. And there's another big one coming. Don't need wage inflation, you have personal income inflation because the government is making up that difference, and that's going to lead to a big stimulus. One thing's reopen later this year. And this is the big distinction that people

are pointing to. Why we're going to get inflation that's much faster than people are expecting. As economists become more accepting of this idea, how high can yields go? Well, you know that that's the that is the concern, because we have a deeply negative real yield right now. If you were to get inflation back to the Fed says that they'll tolerate two and a half percent, Okay, fine, let's use that, and then people believe that inflation is

is something to stick with. We might have to move the positive yields that could get you at least to two and a half percent in the ten year note. I mean over a long period of time like the end of next year, and in this leveled b on market, that kind of move would be very unsettling. Even though you might look at it from a long history and say it's still two and a half percent. It's a

very low yield. But from the perspective of the way that bonds are traded and held and especially financed through the repo market, that kind of moving yields will not will be a very difficult one for everybody to swallow. Jim, I want you to go back to your training and technical analysis. You are a CMT. How do you find the breaking of trend on the real yield? The real yield breaking of trend is going to be very difficult to find right now because it's it's been in a

down trend and it really hasn't turned very much. But what I have found in looking at those charts is when it does break, it tends to move rapidly, you know. So you know, I heard John say, you know what, you know, maybe there's a little bit of a turn here, and that's inaccurate description, and then there's a little bit more of a turn and then pow, it just goes. And that's really what people are most worried out. When it comes to real yields, they won't be this gradual

rise like you have with nominal yields. They could move a lot faster. Yeah, what's important to your Jim is red zone, green zone. So your experience here on two stins spread or real yield is when you go boom, you go, is boom right to a positive statistic? No, I don't think it will be to a positive statistic right away because there's a long way to go. It's

almost a hundred basis points. But it will definitely break the downtrend that we've been in, and it will also be upsetting unsettling because remember, who's the biggest buyer of of real yields is a federal reserve. They own that market right now and they're buying it, you know, aggressively every day. And if that moves starts in the face of all that fed buying, you start thinking what's the private sector doing in that market selling aggressively? And that

will be further unsettling for everybody. Jim, just find a one you're watching that herring lights? Yeah, I'm gonna watch the hearing. Unfortunately, I think they're missing the point. It seems like it's gonna be about justifying short sale instead of some of the things that have gone on. It's gonna be theater, but I don't know if it's gonna have much substance. Jim, isn't that always the white gonna say? You said? Jim? Research and President right now on what

we will see today? Gregory Meeks joins us. He is the chairman of the House Foreign Affairs Committee. He is also a member of the House of Financial Services Committee. He's been on the watch since and for those of you truly nationwide and worldwide, you've never been more to his district as you go to jfk As. He represents the fifth of New York, which is that traffic in the new construction, the infrastructure build through the fifth construct

Congressional District. Congress and Meeks, thank you so much for joining us. What do you hope to accomplish today? Take us away from the theatrics to the adult nous of Maxine Waters. What's the job one today? Listening trying to understand what in fact did take place, trying to see what, if anything that we should also have dialogue and conversation with the sec. UH. It is basically the you know the name of the subcommittee that's in charges investor protection.

So as we've done on the Maxine Waters leadership previously, you know, we saw consumer protection when we had to hearing UH in regards to Wells Fargo UH. And sometimes something comes out of it. More we get ideas and thoughts and sometimes it doesn't. We want to make sure

that the average everyday investor UH is UH is protected. UH. And I think that you know, I know for me, you indicated I've been in Congress since that is after me and one of the worst times of my life was in two thousand and eight with the financial crisis. And I do believe that we you know, we could have been should have something. And that's what I hope

that we're doing. And we're looking UH and you know, I'm a former prosecutor also, so we're looking to see, UH, is there anything that we should be looking at and doing at members of Congress. Okay, you're congressman, you're underselling yourself. You're a former narcotics prosecutor on one of the toughest speeds in the country. This before you took over at the fifth District Congressman. I want to get you on the same page as Leon Cooperman from the South Bronx

who we just spoke to. Leon says, the rules are there, we're not affecting the rules. Why can't we get back to securities rules on the books that get us away from this high speed insanity. Well, because of technology, we've got to keep up with it. In technology, social media that makes things change, you can't leave you know, I learned that you can't go by some of the same rules that we had in fifteen twenty years ago because

things have changed and moved in advanced and such. So we've got to make sure that we're staying up to date. We of technical technological changes in the way that people are engaging in the markets. That's how you protect investors. So you can't just stay pack. You gotta look and see if you're moving with the times. You know, you said that I'm in the chair and I am a

chair the Foreign Advance Committee. The world is smaller than what it used to be, and so therefore there's different things that you gotta do today that you might have done differently twenty years ago. Uh, so we've got to look at these things and try to stay abreass. Well, let's talk about what you want to do today. Then

who are you looking forward to question NK. Well, I'm looking at you know, to talk about whether or not the potential there's any conflicts of interest, whether or not there was any particially harmful hedge fund practices or you know, as I said, and how social media is on our market and accessibility to public information. Uh that that's important. Uh, the operation of trading apps like robin Hood and the

impact on retail investors, that becomes important. So I want making ask some questions in that regards to try to see what those answers are. When I look at, for example, robin Hood, you know, whether they had a liquidity problem or not. I know that there was an issue that came up in this past December, and you know, and it's important. I mean, you're using robin Hood as an

example Number one. I like what they are trying to do in the sense that they're trying to get people who are the little guys into the market so that they have an opportunity to try to get in the market and and and and create wealth for themselves because I'm for take for something, to try to make sure that we create wealth. But at the same time, i want to make sure they protected give me for breaking in.

We just have about a minute left, and I'm wondering from your perspective, some people have said Robin Hood could do their job better if settlement times were shorter. We do live in a technological world, so why should it take three days for basic trades to settle? Perhaps two days or one day? Even this creates that gap that was the problem for Robin Hood. Do you endure spending the millions of dollars will be required to increase settlement

times and decrease these gaps. Well, I'm looking at it. I mean, we went from T three to T two, and some have recommended us that we look at T one. We go to to one day. So that's something that I want to, you know, another area of questioning, another probing that we can do. I'm my I'm my ears are all open, uh, and so that I can make a determination in that regard. I'm not ruling anything out or anything in. I'm here to learn, and only what you learn is by asking questions. Let's roll this in.

Can we catch up in a couple of days after this hearing, maybe Monday, maybe tomorrow. I'd love to do that. Congressman, thank you, Correct rems That of New York, Thank you, sir, thank you. Looking forward to the hearing. This is the Bloomberg Surveillance Podcast. Thanks for listening. Join us live weekdays from seven to ten am Eastern. I'm Bloomberg Radio and I'm Bloomberg Television each day from six to nine am for insight from the best in economics, finance, investment, and

in national relations. And subscribe to the Surveillance podcast on Apple, podcast, SoundCloud, Bloomberg dot com, and of course, on the terminal. I'm Tom keene In. This is Bloomberg.