Odd Lots Revisited: Our First Episode with Tom Keene

time time flies when you're having fun. That's a long time. And when we first started, you were in New York, yes, and then you went to I went to Abby Dhabi and I remember I remember sitting on my living room floor on this big Oriental carpet with like a Moroccan poof in front of me and recording all thoughts episode at six pm in the evening. And then and then I went to Hong Kong, and then you made your

life even then you made it even more. And then it was like ten or eleven pm at night, and I was recording these episodes from an apartment that was mostly made out of cement, which means that the sound just echoed off of the walls and it was a complete nightmare from an audio perspective. When in that process did you get your dog? Oh? That was so he was a pandemic puppy, and so he would have been making noise in the background while I was huddled under

a blanket. And I used to cut the air conditioner in Hong Kong as well because it was really noisy. So I'd be in a cement apartment under a blanket without any air conditioning, and the humidity is like a hud percent and it's you know, ninety degrees out and the puppy is winding behind me. So I'm glad to say that, at least from my perspective, the recording options have improved vastly since then. Yeah, I'm glad you're back.

I felt bad by the end, like you, having to do these episodes there one that I did it like three in the morning one. But it must have been a really good guest. Yes, it was all worth it. It was all worth it, and it led us to um this moment here where we're reunited in the New York office. We're in a proper recording studio and we get to talk about our first ever episode. So I think we actually recorded that episode in the exact studio

that we're in right now. We've recorded it in a few different places, but I think it was literally in this room right So for this festive holiday season, we are re releasing our first ever episode. Our guest for that episode was Tom Keane, who is our colleague over here at Bloomberg News. You might recognize him from Bloomberg Television. He hosts the Surveillance Morning Show, and when you listen to it, you might notice that a few things are different,

a few different here and there. You know, we probably sound a little bit different as well. We didn't know what we were doing. We didn't know what Odds was

going to be. I mean, I still don't know what it is, but we definitely didn't know at the time, and so it was one of these things that were like whoa podcast seemed fun, A lot of people are listening to them, and you know, before we joined Bloomberg, like Tom Keane sort of this legendary figure at the company, sort of like someone that many of us idolized or I certainly did, and his interview style and his intelligence and just the sort of like general flair and esthetic

of Tom Keene for those who know him, a very distinctive figure. So it's like, I gotta talk to Tom, you said. Distinctive figure. For those who don't know Tom is like what six ft seven or something. He's big.

He wears a bow tie. I think he used to play hockey, and he just kind of strides the corridors of Bloomberg's office, throwing out one liners like slope matters, and if you get him going, he's really into talk about musical instruments, like his banjo, got some some guitar strings that he bought off a guy who lives in Europe that he's always wanted amps. He can talk about anything. Yeah, So I think this is one of the reasons why

we had him on. He was sort of our like initial test subject, just to see what it would be like recording a podcast, but we also wanted to talk about things with him, So I think on this episode we spoke about music, as you just mentioned, We talked about Matt Winkler, who was sort of one of the founding fathers of Bloomberg News. We talked about both ties and his wardrobe. I think we talked about how his mom, Tom's mom taught him how to make stock charge. Oh, yes,

very important. This is where the whole Slope Matters thing comes from. So there's you know, it was one of our first interviews. But it's also very very so it's interesting to listen to just from from that perspective to see how far we've come. But it's also with Tom Keane, who's an interesting guy, and uh, we should we should

listen to it again. I am really excited that we are digging this one from the vaults, both because I'm still such a big fan of Tom and also sort of take stock of the last seven years, how far we've come figured out this format. And you know, one day in the year I guess twenty nine, we'll be listening to this episode and we're like, Wow, we've come along. Hopefully we've come along basin our production values. Have it

improved immensely? Um? Okay, Well, without further ado, here is the rerun of our very first Odd Lots episode featuring Bloomberg's Tom Keane. Enjoy Hello, and welcome to the first episode of Odd Lots. I'm Joe Wisnthal, co host of What Do You miss and editor of Bloomberg Markets. Now,

I'm Tracy Alloway, executive editor of Bloomberg Markets. Here at Odd Lots, we want to have a discussion every week about economics, finance, markets, market structure, which Tracy loved, maybe some politics and culture thrown in stuff that doesn't necessarily fit into the normal day to day conversation. And we couldn't think of any guest better to have than Tom Keen in my Guinea Pig, You're the guinea pig. Tom Keane, as everyone should know, is the host of Bloomberg Surveillance

on TV and radio here Bloomberg. He knows more about markets and economics and world events than just about anyone else in the room. He's a very eclectic background in music and mathematics. And I wanted to have I wanted to have Tom Keene on the show because Tom is always interviewing people, but he's never answering questions, never behind, try to avoid it. So we're gonna doing this for you, Joe. I'm doing this for Tracy. Everybody knows that. But who

are you Tom? Why are you here? How did you get to be Tom Keane who everybody knows and love? I get it a lot, And what I would suggest is it's one part short term stuff, one part long term stuff, and one part blind luck. The long term thing is is being acutely aware when I was a kid and evermore every day knowing how twisted the early years where I found something met Stan Freeburg record and you don't know Stan Freeburg is he was a great comedian.

He just died this year. And then recently it was about the privilege of running into Matt Winkler and basically Matt and I with the support of l Mayers who runs Bloomberg Media, and Ted Fine who runs TV, they're the ones that made all this happen. Matt win Clair, for our listeners who don't know, is the guy who founded Bloomberg News essentially, so you got lucky met Matt win Clair. He just hired me because the bow tie.

But to make a long story short, you get lucky and I met Matt and we basically invented what you see. That's that's a safe statement. What were you doing before then? Because when I think of you, I think you projected or of someone who's been doing radio for decades. But what were you doing before you did radio and TV? Well before the media thing, I was in the investment business. But there's a whole sidecar thing in music and an entertainment um, for example. And I gauge it off my

oldest child's age. I used to hold him in my arms into the stock report in Boston. And this is the vanilla days, not cross asset, the dal Jones industrial average up forty two points today, eight forty two blah blah blah. You know that. And so I did a little bit of investment stuff back then, but a lot of it was just the music business as well, which is the show business aspect which a lot of people in business media try to ignore every day. And they're wrong.

I mean, the f T s pink. It's pink for a reason. It's pink. It's like what you did. I mean, you invented the modern headline in modern business journalism. So it's just you know that Wisnthal wrote that headliner. You just know that. How has her investment experience informed your career? Huge huge um. It's a massive type two and that you learn so much enjoying losing money. It's it's for those of you gaus see and it's log normal. Uh, you learn way more on the downside and the upside.

Lots of fat tail risks. There's fat tail risk, but that's not that that's over emphasized. It's the joy of losing money within the fat tails, which is I think that's when you learn factors more losing money than making money factors. But I can tell you that the way I learned to lose money was enjoying losing money in the options market. And then so when you're doing the show, whether on radio or TV, how do you apply that the fact that you learned so much more when you

lost money. When you think about it, humility show, it's a it's a humility thing of knowing every day how dumb you are and trying to always work at getting smarter, laughing at your mistakes. There's a there's a lot there's less now after the financial crisis, but there's lots of people strutting around with a certain intellectual arrogance about economics, finance, investment. Right now nobody has arrogance and international relations. Did you

have to learn how much you don't know? Like, what's the point earlier in your career where you thought you knew it all and then you know certitude of yeah, you you you learn from a wide set of mistakes and cycles, which gives you a humility which forces you to get smarter. For example, I went to a wedding this weekend and half the wedding was from Uruguay. I know nothing about Mona Badeo except one of my kids. Friends all went down there because it couldn't get a

job in America. And I read seven articles this weekend in Uruguay just to to begin to I have no clue about Uruguay. There's that kind of madness, but compounded over time. I know nothing about Uruguay. I know nothing about Monte Videt was a great humble bred because you slide in how easily you knew the capital. Now I have to ask you talk about certitude on Wall Street And in addition to having a musical background, you also

have a mathematical background. And it seems like one of the areas in markets where people start to get really certain and have that certain mathematical swagger is when it comes to models, and you love talking about models. How does your experience in mathematics feed into yeah that the background there was growing up with it. I have the clearest memories of gooding up on my tiptoes and looking

over my father's desk. Is he did very sophisticated triple integration of space satellites and I would literally play on the floor with the French curves is a million years ago and like like think spot Nick and I g y and all that, and all of that became a mathiness which culminated in Max peters fabulous program at the University of Colorado. Max Peters was a highly decorated Italian infantryman up the spine of Italy and World War Two, and he went out to Colorado and put together, uh,

the mother of all grinds in engineering academics. And I was extremely fortunate to parachute into that for a couple of years. So you take, you know what I get in math and what I don't get, and trust me, is a lot I don't get. And then you overlay that into some of the certitude of quantitative finance and you get a massive humility. I think the math overlay is a it's a massive type one. You've got it, But what it really is, and I see it every day and it's getting worse. It's a little better in

a couple of last couple of years. Is the math phobia within economics, finance, investments just stunning. It's just breathtaking that you see rampant math phobia, because other people have argued that it's just the opposite, that economics and finances become too mathy to the point where people can't explain in clear English what they're talking about. Yeah, well, let

me part that debate. You're absolutely right, Joe. The basic idea is there was an era, particularly coming out of World War Two, of math, too much math, math anxiety, etcetera, etcetera. And then at the undergraduate level, not at the PhD, not at the doctor trak level, the graduate level, but at the undergraduate level, a vast majority of people don't have the dynamics in their head to do even basic martiality and microeconomics or you know, name the flavor of

macro you want to do. The British are very different. In the French, they have much better, as a rule of thumb, undergraduate mathematics than we do. If I, if I talked to British students, their knowledge of first order difference equations off the chart honors undergraduate programs in the US. Some of them. They have no clue what what that is. I'm pleased to say I've I've forgotten almost all the mathematics I learned interversity and college. However, however, I want

to know. So when you see something like the events of August when the market sold off and a lot of people were talking about mathematical formulas and model based equations and risk parody at the center of that sell off, what do you think. I think some of it was extremely valid this time around. Uh I, I think that the model fatigue is much more in the macro area.

The work Olivia Blanchard did at the i m F with Joe Stiglson others really important to ask the non sophisticated and the very sophisticated differential equation models that pro PhDs use, and I don't pretend to be fluent in them. They're very suspect after what we went through in August of O seven. Stepping back, so you have this interest in lifelong interest in mathematics in music, which I was also want to get to. But then how did that?

When did it click that markets and investments when you were in the earliest memories, earliest it was permeating in my house. My my grandfather knew a w CO and the point and figure guy. He did point and figure charts. My mother did point and figure charts. Comes from a family totally totally permeating investment theory and investment analysis, you know, just original Graham, Dodd and Coddle up. And in addition to everything else, you were always interested in. You always

knew that this was something you wanted to know. You know, you didn't know it just was there, just there, It was just there kind of thing. I'm also, I don't think a lot of people know about your musical background, but why do you give us the six Here's Tom King's music. The ninety second version is real simple. At eight years old, I walked into a place called Stutsman's, which is legendary and the acoustic music business with my father.

There were six Grutch White Falcons lined up and Rochester, New York Kodak, and my father bought me a forty two dollar you know, acoustic guitar and then I just began grinding away and there were three or four iterations of it. But to make a long story short, I ended up doing the New England singer songwriter thing, juggling a bunch of other stuff. There's a place in Nashville called the Blueberg Cafe, which is magical. You know. It was just the New England folks and it was sort

of you know in terms of artists around it. Uh, it was post Tracy Chapman, Um Susanne Vega was really happening with Luca and Solitude standing and then a whole host of people came on, really jumped, started by a guy named David Wilcox who did an album called Either Hurricane for A and M Records, which just there was like this mini folk boom and what was so cool? We knew when we this is before the internet. That's

a key statement. Even we had no idea what was coming in digital, but we knew how lucky we were to do it. When we were doing it, we knew it couldn't last. What was the greatest guitar you've ever owned? The one I got now with the greatest guitar my my concert Gibson J one hundred, which was picked out by Eric Schoenberg up in Boston, was stolen and I got it back four years ago. I told Dave Drummond and Google. I got it off Google Images. There was

my guitar and Google images. But that and I've got some others now, but I think that's you know, I guess the best ones that when my father had, but that's been lost. So with your very very idiosyncratic background in mathematics, so it's like Joe Wisenthals an investment. When you do your show today at Bloomberg and you look around the world, what do you see as the most important story going on right now? Um, I think the number one stories. One of my kids said to me, Daddy,

when does this get got to be fun? And I think there's a massive understanding by people of a certain vintage that the kids don't have. They have lots of wonderful digital stuff and medical stuff, etcetera, etcetera, but the optimism has been shattered. And the answer Jeff emmel I was with two years ago, I'm guessing and he said, look, all we need is three point two percent g d P and that solves a lot of problems. That's a very smart comment by the applied methematician from Dartmouth. We

don't have that. The the younger people, people under about thirty two, have never no own normal so when you look at the world, you don't necessarily see problems of inequality, you see generational problems. No, I think they're both there, but I think in two thousand and fifteen that the generational issues are less spoken, which to an extent speaks of the anger in the politics today. When do you

think it wasn't normal or when was it was? Well, you know, you stand on the floor of the Republican convention ex conventions ago and you go, well, this is surreal or the Democratic doesn't matter which part party, But the answer is we are programmed for certain nominally real GDP that ain't happened. There's a quarter here at quarter there, Macroeconomic Advisors right now is third quarter at one. The

next quarter is a little bit better. But we we have not had the run rate of GDP that provides base psychological comfort to a lot of people, whether it's over educated torps like my kids, or you know, people

really struggling millions of Americas. Do you think I mean, I remember thinking in and when we had the Raging Dead ceiling debate, and I think that was the first time that we saw this huge I would say the crisis and the economy seeming to really spill over into politics and we had to start division the Tea Party and leadership. But it hasn't faded as much as I

would have guessed, given how far unemployment has dropped. I mean, the economy is much better than it was in eleven, but we still have and look at Donald Trump and leading in the polls, and you have a rise of more radical politicians everywhere. Do you think it's something beyond economics. It has to do with the media environment, the Internet. It has to do the media, and it has to do with speed of trans Twitter and all. I mean the cypress crisis alone with Twitter was surreal that Saturday

morning when how the Twitter dialogue changed the discussion. But what I would what is under emphasized from a Newtonian mechanics standpoint is inertial force and the word chronic. And the answer is you totally right about ten and eleven. And what's different now is it may not be force masure like it was then, but there's just this chronic weight of gridlock in Washington, this chronic sense of g d P under performing even while unemployment supposedly gets better.

And that goes back to productivity. You know, we could board. Everybody was three ratio productivity analysis. Productivity in the media is appallingly reported. There's capital, there's labor, and there's a separate ratio wrapped around something called total factor productivity or TFP. And the pros know all that and they sort of just, you know, when we talk about productivity, gloss over it.

But the answers labor ain't happening. And certainly for a part of America, this Angus Deaton winning the Nobel Prize a big deal, big big deal. This is the death of aggregate aggregation, of summoning everything together, and that that's a really big deal that I talked to Shower tonight and I'm a chance to talk about it. Well, that brings us to again to your show. When you go out and talk to people, what makes some good interviews and who are the best interviewees that you think you've had,

it's a it's a chemistry. It's a mixture, uh, And there's always exceptions. There's hyper academic people that fail, and and that I do think it's a chemistry. We keep very careful track of who we like and who we don't like. And I would say the third rail is we don't want people that are scripted or consulted. That was the rage to three five years ago. There's less of that now. We have less and less people on talking points, which is where a consultant comes in and

tells them four things to say. That's going away. But mostly it's you know, it's a media phrase. Pop. They've got to have pop, particularly radio is critical. So we talked about these sort of big general generational issues that you see is the main thing? What about this moment specifically when you look at financial markets? What are the big things that you're watching. We're gonna get into prediction season soon for what do you? What do you what

do you have your on? What would you what are the charts that you look at first thing in the morning. My chart of the year's inflation adjusted come out of these back sixty seventy years. I've shown it in TV probably ten times. You can still it's a great chart, great great chart, and it looks like a persistent decline

in commodity prices over many years. And then there's a China aberration and we are, are, off the top of my head, two thirds to three quarters of our way back to normal, which is commodity long term commodity deflation, So you don't think the long term, we're not it's not over yet, if we're going to return to normal, I would suggest not that it's not over. I'm not going to make a prediction. I would say the people

predicting it is over ore on tenuous ground. That's Thomas media experience coming through that, refusing to make a prediction. Do you think one thing I feel is like everyone is talking about deflation in central banks around the world, failing to hit their policies, and how are they going to reflate? They can't do it? And then you see these conversations the Phillips curve, this idea that the employment and the inflation ratear inversely related, and how that's dead

and broken. Do you think we could be getting to an extreme in the other direction where everyone has just thrown in the towel on any sort of inflation coming back and anything like that, and no to get wonky on you within a class hi SLM matrix Johnny Hicks thirty nine and Krugman's written about this beautifully. What I would suggest is there's a total underestimation of real economy effects. Everybody's over in the bank. What's yelling gonna do, what's

karneiy gonna do? Which is fine, I mean, that's what keeps us in quite all rio's but the real economy effects have been grossly underrated from day one of the crisis August of oh seven. And the other thing I would suggest is the interest rate transmission between the real economy and the bank side of things. The l M curve is totally broken at the zero bound, and these there's things we don't understand that are going on in the interest rate sphere right now that there there there's

a mystery here. I can't believe we've gotten this far in the segment without talking about your bow ties and the fact that the boat's high was almost entirely responsible for bringing you to Bloomberg, since Mr Matt Winkler all so enjoys wearing those ties. I found a picture of my grandfather, my mother's father, five years ago, holding me, and he had a bow tie on. I have no

recollection of my grandfather having a bow tech um. It started when I was sort of sort of kind of like premed and I was in emergency rooms and they wouldn't let you wear a normal tie. Because they're afraid the patient will grab you with a regular tie, so I was forced to wear a bow tech uh, doing what was called extern This is a million years ago. This is before anesthesia and uh uh, you know it sort of started with that. I'm assuming back then they

weren't a maze ties though as they they were not. No, they weren't. We did the clip on thing minimally. I must admit that that was like, I don't want to do that. Do you have a favorite tie? Doesn't mean something? No, not really. This one's actually very old. This is like one of the original It's an orange tie for those we Thank you very much for joining us. That was a phenomenal discussion. I learned a lot about you. And

podcast is really cool. You know, we did them years ago and I totally agree with a new um enthusiasm podcast. Thank you for being our guinea pig. Tom, Thank you, thank you for joining us on the first episode of Odd Lots. Will be doing this every week and you can find it on Bloomberg dot com, iTunes, SoundCloud, and just about anywhere else. You can follow us on Twitter at at the Stalwart for me, at Tracy Ellaway for

Tracy will obviously be tweeting out the links. And thanks again to Tom Keene for joining us and being our guinea pig on this first episode, and thank you for listening