Surveillance: Silver Slumps as Reddit Trades Crumble

and Alphabet signal this afternoon? So Tom, I we're expecting decent earnings there, Tom, and I think it will be more of the same, strong growth through the pandemic. Great company to own when times are tough, but also great companies to own as the economy for covers. So you know, the spotlight is on game Stop, but but the action the sizzles and game Stock. The steak is Amazon and Google and Facebook, etcetera. One of the ways you go higher. Our selected walls of worry measure the walls of worry

right now? Is there enough gloom out there, Chris where you've got major enthusiasm about a leg up? Oh? I think so, Tom. I mean everyone for the last week has been talking about how the markets are broken because game Stop has gone up a thousand percent and and we need regulation, and it seems to me the markets are working pretty well. Game Stop is coming back down to earth. Uh, nobody's gone no broker dealer has gone bankrupt, etcetera.

And people made or lost the money as capitalists do so, but I think the attention ought to come back to where the cash flow really is, which are for many the large technology and others. Two parts of that answer. Let's go with the first part first, Chris, orderly is a word we hear a lot. Can you just walk me through the distinction between the orderly price action that you witnessed and something you would consider to be more disorder Oh sure, Well, you know, obviously disorderly has a

new definition of the dictionary under game Stop. And it was the short squeeze really of my thirty five year career. Um So, but again the system work, uh, steam is coming out investors. Capital plugged the whole of the hedge funds and robin Hood so that we could continue through it, and it did it in its own self. And you know, I don't think this is a terrible story of a broken system. I think it's a system that's stressed and then work any distications you took advantage of, Chris absolutely.

I think that's a great point, Jonathan. When prices moved without fundamental reasons for them moving, there's always opportunities. So while the focus was were on these small short squeezes, um, you know, the rest of the market, as you guys covered, really dropped the worst in October. So stocks like Facebook that came in um with quite stronger and last week, uh you know, and it's down ten or fifteen percent from its highs of a couple of months ago. A

terrific opportunities. So we moved in there. Um, we would move into Lockheed Martin. We bought a new position in Texas instruments we called semiconductors the oil of the digital economy. Um, all of that stuff was left by the wayside, and the attention focused on this kind of tiny bit of the market. Christmas Santy and folks game stop breaking through the new lows one thirty two level right now, Chris Kers Santy. In terms of measured investment, it does come

back to earnings and revenue. I guess we're seeing earnings resiliency are we seeing revenue resiliency. I don't think yet, Tom, you are. For obviously the companies that we all knew were resilient, like the Amazon. But I think you'll see more fickle to stuff like a Disney with the theme parks, like a Comcast. Um. You'll see these companies show their resiliency as the economy opens up. And of course the

market is in anticipating that. But but we're in the middle of the cold, dark winter, and uh, what if you rolled the tape forward, You've already vaccinated almost ten percent of the population if you rolled the tape forward three or four months. It's hard not to be optimistic about the emerging county. Fact, I'm more worried about overheating by the end of the year. But but I'm very confident the economy is going to get there and you'll see that revenue growth well do you kind of will

get rid of the revenue growth picks up? We're getting out front. Now are we pricing for the end of summer? Are we already pricing into two thousand twenty two? Oh? I don't think so, Tom. I think when when when an economy comes out of a recession, And remember that says this was a deep recession for many travel companies, restaurant companies, things like that. UM, the revenue and earnings

growth typically takes analysts by surprise on the upside. So how many of us are sitting at home planning that vacation we haven't been able to take for eighteen months now? So I think you're gonna see pent up the and I think you're gonna see strong ernie. Um. Have we priced some of that in? Absolutely? Have we priced it all in? I don't think. Let me jump in, Tom. Do you remember when we talked about Mr Olariya over

Ryan Air. I think it's about three months ago and he came on Bloomberg and he said the beaches will be packed in Europe next summer. They will be packed three months later. Tom, there's anyone think the beaches will be packed in Europe this summer now? And again it's it is about the COVID the vaccine recovery. But John, as you mentioned earlier, the fact is we are seeing better statistics in the United States and we have some form of a daily and John, I'm gonna say this

on the X axis as much as I can. It is a daily effort to get people vaccinated, and to me, that's non linear. That really pays off down the road. Find a question, Chris. It's really spice here. Sure, but but I think you're being way to pestimistic John as usual. Hey, Chris, I've got the flight book for Italy that I'm just asking a question. I'm just asking a questions. It's a

matter of timing. It's not a matter of if. It's a matter of when, So the beaches will be packed in or later, and that's what we're inst I hope. So Chris, git to catch you up first. Thank you, m Ai Capital on the vaccine. This is my most important conversation of the day. Washington State and the University of Washington is definitive in microbiology. Leading their charge academically is Deborah Fuller. They do terrific work across all of biology and virology as well. Dr Fuller, thank you so

much for joining us. The Mayo Clinic tells me I need a tetness shot every ten years to prose like you just assume that we're going to be vaccinated for COVID out into the future. We're anticipating that these particular viruses as we see this virus evolve and we see new variants occur UH. That desirous is going to the endemic, and that means that it will remain in our population for years UH to come, and that we can anticipate occasional outbreaks and possibly even new variants to merge UM.

But we do have the weapon to fight that, and that is with vaccines. Just like you mentioned with tetanus, that's every ten years we've studied the particular pathogen and we know that's how often you need to get re vaccinated to sustain your immunity. We're going to be studying that for stars covie too, and it could be just like influenza, where you have to get the annual vaccination

to sustain your immunity. Do you assume that this covid vaccination is specific to this two thousand twenty bug or can it be used on other covid viruses forward. That's a great question. We are studying that right now in terms of particularly with the development of vaccines and trying to design new vaccines that will eventually protect against just this SARS covie too. But could we actually design vaccines

against future variants that we haven't even seen yet. And the way we do that is we try to focus immune responses against parts of the virus that will not undergo viral evolution. They just can't, otherwise it would actually result in loss of fitness of the virus itself. So, uh so that's a that's a futuristic study of futuristic

exaccine down the line. In the meantime, tweaking viruses and updating them to keep pace of emerging variant is a common practice, one that we know work certainly for other pathogens, and we anticipated it should work for this one too, Deborah, is the question of the moment. I keep going back to it, vaccine nationalism. Can you just comment on it, how world you are about it vaccine nationalism? To find that for me, please absolutely sure. So Europe right now

does not want to export some of the vaccines. The UK is far more concerned about vaccinating its population beyond just the at risk in society, to try and get the whole population towards what some people would consider her immunity at the sense of not making sure that the developing world also has access to the vaccine, and therefore we could have a proliferation of the mutations that we've seen already in places like Brazil, South Africa and in in the UK, and it would stop us from being able

to re up from the economy. Is that okay, No, that's not okay. That's a major concern. As long as there is virus somewhere in the world, we are going to be battling this pandemic. So it needs to be a worldwide collective effort to to shut down this uh, this pandemic everywhere in the world. And that's that's why too we're looking at wanting to make sure that we develop vaccines that are going to be able to be distributed UH to far reaches of the world and we

cost effective and hopefully UH work potentially in a single shot. Debra, thank you appreciate your time this morning. Thank you very much. Debra Fella, the University of Washington School of Medicine, Microbiology Professor. On some of the key issues right now surrunder up as the society general, they have an acute heritage of mathematics and bonds where thrills you could join us today

on rates strategy, sour boundary. What level do you need on ten year yield to signal breakout out of the range for me that level is is one twenty in intense. I think that it's that teny years. We're gonna struggle to get past one until we see clear signs of uh, you know, return to normalcy, you know, more vaccine deployment. So so really the struggle is going to be trying to get past one twenty. Also, I think has implications

for a broader risky assets. If you talk to say equity analysts or or corporate bonds strategies, what yourtability time to hear is that you know, beyond one intense they could see some stress in the in risky assets, and the FED is very much heen on keeping rates in place so that you know, you don't see the sort of route in ski assets. So that's gonna be a moving target. But I just wonder where they're comfortable and

where they start to get uncomfortable. We know the e c B from our reporting there are some levels of spreads that they are targeting. We don't know what those levels are, but apparently they exist. What do you think it is the point on the curve that they're focused on the level of rights yields that makes them a little bit more uncomfortable. Well, I think any sort of

rapid rising yields is going to make them uncomfortable. So the repricing in rates has to be very gradual and something that they feel like they have have a handle on. We don't want to see what we saw back in in March, where you saw this unruly moving in yields and the felt had to come in and intervene. So if you do see a rising yields, and if it's gradual and over time and warranted as fundamentals improved, then

I think they'll be comfortable with it. I mean, our forecast for your end is one fifteen ten or yields. I think it's on the high end of of street forecast contrast to what we had last year when we were in the had the lowest forecast for for ten ye year olds. Um. So I think that we will get there, but I think it has to be very, very gradual. I think a lot of that move in tenny years is going to happen in the second half,

not so much in the first half. What's positioning like Savantra right now, it just feels like a massive change that everyone's on the same page for once of a treasuries typically come into any given year and people will be looking for something a hundred basis points higher, something north of that. Sometimes it seems like the ranges for estimates is a lot lot tighter than it has been in years gone by. Yeah, it's it's entirely because of

fair intervention. I mean J Pow fed chair J Power last week basically shot down the idea of tapering asset purchases anytime this year. They're sort of on track to continue to to buy bonds. So I think for the most part, positioning it's kind of, you know, is sort of favoring the range trade. Are you when you start getting towards you know, one percent, you know, investors are broadly thinking, oh, this is probably a good good place to go short the market. And around one seventy you're

gonna start seeing people cover shorts. So that's kind of the range I think that people are going to be trading in. That's right right where I wanted to God. The idea here of convexity or the dynamics of the full faith and credit a ginormous market as well. If we go one eleven to one twenty, do we get accelerated tendencies can convexity click in and the market as

deep as the ten year yield. Yeah, I mean you do have some some convexity hedging activity, but you know, for the most part, it's not going to come from the mortgage universe. And for the mortgage convexity had just to come in and start hedging their duration. It's going to have to happen perhaps beyond one twenty, but I think within one to one twenty you're going to see the range trade, um, you know, alive and well where people start to sort of take profits when they get

to intense. How will the Federal respond at one I don't think they're going to be concerned. If the fundamentals warrant the rise in years, and we saw at any yields get to one seventeen are so in today this year. So I think that if it's if it's accompanied by strong data, arise in inflation expectations arise in real yields, which is what we saw earlier on this year, so it's sort of a healthy reflation trade, then I think

the Fed is not going to be very concerned. I think that they're much more concerned, but sort of you know, dramatic moves higher or lower and yields um You know that that's going to you know, disrupt the risky assets and and and the national conditions generally speaking. Spante graz catchy up. Now, the estimate in this ball market last year really did Supantrac Grazer, catchy up. Sabato Japa of Silk Gent talk about the global commandities markets, talk about gold,

oil and silver. Jeffrey Curry Golden sax Scobe ahead of commodities. Jeffrey, thank you so much for coming on. I don't know whether the parallels right between game Stop and some of the Reddit action can really directly transferred to silver because it's a differ market and actually in the positions from a lot of the hedge funds were completely different. Well, I think when we look at the silver market, one thing to keep in mind, it is a lot larger

than these equity markets. You know, you put the total amount of of open interest of silver, including both above ground and below ground, you know, somewhere in that two hundred billion dollar range on an annual output basis, you know that is substantially larger, and as a result, to

corner the market and create a short squeeze. Um, we estimate it require each one of these Wall Street individuals to accumulate a positions of somewhere around that's a lot of silver, and where are you going to put it? So that the analogy to let's say, the Hunt Brothers are uh, you know Thursday, you know silver Thursday, I

think are far stretched. And also, let's not forget because of the Hunt Brothers squeeze back in nineteen eighty, there are regulatory policies put in place that prevent a re replication of that, you know, i e. Position limits. So to see a similar type of dynamic take place in a macro market, we see it as extremely unlikely. So, Jeff, what are you expecting silver to go from here until

the end of the year. You know, our target is thirty dollars announced, really being driven by a combination of a stronger gold market as well as you know, the solar panel demand or call it the green capex driving prices. Now, we do expect if you see the Biden administration approved its solar ambitions, UM that target had moved to thirty three dollars announced. Now, given the markets trade in in that dollars announced, it means there's a real fundamental story here.

We like silver, however, we don't like it because of a sports short squeeze. We like it because of the fundamental story behind it. But Jeff Curry, you were mentioning as we went into the interview about Jennings Bryan and the cross of gold. Let's talk about the cross of silver right now, which is the fixation of the public on trading commodities versus the fundamental story around tangible assets. You've always waited the fundamental story is that a dated view?

Do you have to shift and be more supple than you're thinking about the speculative market of tangible assets. Well, we think about the fundamental story of commodities in real assets more broadly. Part of the reason we never saw a commodity bullmarket over the last let's say, twelve or fifteen years is because we never saw significant demand for commodities. What we think that these populist movements are likely to do is create an environment in which government starts spending,

particularly on lower income households. That will create that demand for commodities and goods more broadly and create a more cyclical commodity intensity economic backdrop. And that really sits at the core of our bullish view on commodities as we see red policies, redistributional policies, environmental policies like environmental capex and versatility and supply chains, um and and these things

are very much related. You know, I think I could use green leveling spending on green capex to level income. These types of expansion programs are really going to be behind our bullish view on commodities. Your bulls, your bullish view and commodities. There's been noted there's some people pushing against you, Jeff Curry. It seems like it's just guarded and you're out two standard deviations. Uh, through the trend. It's a really remarkable breakout of the long term resistance

that we've seen. Reaffirmed the magnitude of the movement you believe we will see. Yeah, I would put it on car to the bullmarket we saw in the seventies or the bull market we saw in the two thousands. I would say this is more akin to what we saw in the seventies to the two thousands. Why our redistributional policies back then were the um the greatest society of

the War on poverty, are environmental policies. You had the War on Acid rain, Clean Air Act, you had the Clean Water Acts and lots of spending environmental policy back then. And then our be our versatility and supply chains or resiliency and supply chains. You know, then you have the Cold War with Russia. Now we have a quaisi cold war with China's that can require spending. In fact, the big move in agriculture that we have seen over the

last week is buying by the Chinese. Their building strategic reserves and grains, very similar to what the US and Europeans did back in the seventies and when they built their strategic reserves. So you know, the analogy here in the magnitude is probably something more similar to the supercycle of the seventies than the one of the two thousand's. And Jeff, going back to the silver trait, do you see the potential for retail traders to actually break into

natural gas or oil? Again, the size of these markets, they're extremely large. They can break in it and they trade it and they have been a part of these markets. Um, you have the e T f s and natural gas, you have the e T s in oil, which are very large and um you do see an active presence of retail participation in those markets. However, I think what what is different about this is the idea that they

could drive these markets and push them. And they did drive and push silver yesterday, But when you start to get to markets like oil and natural gas, the liquidity is substantially larger and it becomes that much more difficult to do. So, I don't you know, there's a question here participation. Yes they are participating, Yes they are part of these markets. But to be the marginal driver of these markets like they wear in silver yesterday, is you know,

a much larger question. Market different. Is there an instrument though that that could if that's what they decided to do, you know, would they play it through E t S or is there an instrument that would make it easier of access? You know? The E t F is that the the easiest accessing one thing, And I want to point out that makes oil radically different than silver or gold. The E t F in silver and gold is physically back.

In fact, that short that the retail investors were focused on in the comax market is the hedging of that physical position in the E t F. The E t F in natural gas and oil is nothing other than a rolling front month G s c I style contract. It is a paper position. It's not a physical position. To understand why, I like to make this simple example, you can take all of the E T F physical position in gold and put it in your office. It may break the four floor it's so heavy is it

would fall through. However, you can fit it in this office. And then let's think about this. The E T F position in oil, if you were to hold it in physical position, it will require something like seventy or ninety b LCCs. Now, imagine in your head parking ninety b LCCs in the East Rimber in New York. Are the Thames here in London, It would be pretty difficult. Jeffrey, thanks so much, Jeffrey Curry there, Goldman Saxon. Thanks for

listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm on Twitter at Tom Keane before the podcast. You can always catch us worldwide. I'm Bloomberg Radio