Liz Truss's Ronald Reagan Moment

Federal Reserve doubles down on its inflation fighting strategy. Plus the U s midterms are coming up, which could cause even more market turbulence. What's it all mean for the rest of the year. We will get into it with a veteran Wall Street strategist, but first, vil Donna, it's exciting news. This week we have finally gotten more than three hundred ratings on Apple podcast. And you know what

that means. That means, I believe the deal was you now have to accept me in your professional network on LinkedIn. That was not the deal. That was not the deal. You are still pending approval on LinkedIn. Still on read There you know, Emily Grafao co hosted one podcast with Me and your Friends on LinkedIn, and then she invited me to join her professional network on LinkedIn. And nice of her. It's and you nothing nothing, I'm just the deal. The deal was that I revealed my high school nickname.

I think. Okay, so you're ready to reveal your high school nickame. Well, first I have to congratulate you, because this is a pretty good ploy to get people to write reviews. It was. It was a smart idea. Some may called a gimmick. Gimick, and I'm fine with that. Actually, if if you want to call it's fun and the reviews are on. Remember somebody asked me if I would marry them. Yeah, in one of the reviews I accepted. I did. We're happily married. Now. Love is love. Love

is love. But so, okay, to reveal my high school nickname, I think we'll just we'll have to wait until we do craziest things in markets and then maybe I'll reveal it there. All right, sounds good deal. Deal Okay, but you I think you heard our guests this week laughing in the background, and I do want to bring him and I'm so happy to have him on the show. Julian Emmanuel ever Core i s S chief Equity and quantitative Strategists, and I've been trying to get him on

for so long and I'm so happy he's here. Great to be here. You know, the problem was a little pandemic got in the way, But here we are a little pandemic, just a minor pandemic, a minor hiccup. But Julian um so Mike already mentioned what's been happening in the UK over the past couple of days. So maybe just to start, you can tell us how important what's going on in the UK right now is for global markets.

So I think the backdrop here is just to understand that for investors, the storm that has been two thus far, the you know, dominance of macro imperatives across all assets has really been unprecedented. And it really goes back to this idea that after twenty five years of quiescent inflation, we had a breakout in the readings that's now been over a year and and obviously you know, really feeding into the FEDS imperative to get inflation under control by

going on this and you know, unprecedented degree of hiking. Uh. You know, we we think about the current status as something from that movie Supersize Me. You've done three seventy five Supersized, you might do a fourth in November. But what's happening is that this is the kind of you know, rapid acceleration and tightening that reverberates across the globe. Obviously, the conduit has really been the strength and the dollar

feeding into the UK. You've had a leadership change, the Queen's passing, a new prime minister, a new government, just total huge challenges in a market that had already been showing strains frankly since the Brexit vote in So really, you know, testing the outer bands of volatility across every asset that's in the UK. You know what I find fascinating about it, Julian, is this volatility we've seen in the bond market globally, but especially this week. You know.

And and for listeners who are are listening to this later we're recording here. It's Wednesday afternoon. So the big news today was um, the Back of England came out and said, you know, they will basically buy all of the British bonds. They need to to to sort of tame the bond market. So I'm looking at the ten year guilt British guilt yield dawn fifty basis points in a single day, uh U s yields as a result, Canadian yields everything is down like twenty some basis points.

I mean, for one thing, these are just I think nightmarish moves from sort of a a you know, how do you price the risk free rate when it's jumping around like this? But I wonder, in particular, what do you make of how UK is kind of leading the

bond market globally? Now? Is it, you know, is it just sort of a relative value or correlation that should cause US yields to to revert back when UK yields do, or is it you know, is there sort of an assumption going on that the b o E is is foreshadowing what's to come from other central banks, you know? Or eventually is the FED and the ECB gonna have to come out and say, yeah, well we'll do whatever it takes to to keep on markets in check. What

what exactly is the relationship there? Do you think, Well, if you go back to the end of last week, it really all started with a point in time, call it Friday morning, where one looked up on one screen and every single indicator, every single asset, every single market

was completely read. Okay, you know whatever was indiscriminate selling that to us was the start of this emotional phase that because it was clear the policy mitch mismatch between the new trust government and and Quartet the Chancellor of the Exchequer UH, and where the Bank of England felt it needs to go, need needed to go, needs to go, and that's an open concept, which is why I keep

changing tenses. UH is is that is that it's really caused this instability that got some feeling as if there was this idea that the UK was about to become an emerging market and seeing the kind of volatility in the bond markets there that one had seen throughout time and places like Mexico during crisis, or Brazil or you know, going back to the Asian UH Tiger crisis, that type of volatility, and frankly, because so much of UK debt is denominated in sterling, that wasn't necessarily going to be

uh the way it would play out. But nevertheless, the markets have become just very, very liquid, and people got very very afraid of buying bonds in an environment where there's still no concrete evidence that inflation, particularly in Europe, is shown signs of topping, although that evidence is starting

to build quite rapidly in the US. And Julian, how much would you say, how much of what's going on in the UK would you ascribe to the choppiness that we've seen in US markets or is it more the case that what's happening with our stock market for instance the last couple of days we can more ascribe, you know,

blame what's going on with interest rates or whatever else. Well, it's definitely sort of what we would call across assets psychology and the driver as it has been the entire year, is this now positive correlation between stocks and bonds, and so as the yields continued to ratchet higher, uh, you know, obviously the U K's rise and yields feeding into the US, feeding into Italy. With the political changes over the weekend that certainly you know, put provide upside pressure two yields

there as well. It's really became a bit of a snowball, which is why from our point of view, the Bank of England had to act in a reasonably decisive manner. You know, Julian, I was reading one of your most recent notes, and UM, obviously the other big story of the week is UH set a new law when the U star market for this bear market spundred, closing at

the lowest since November. UM. I get the sense from your note though, that you think the acute selling UH maybe over and then maybe there's a bear market rally and store for us? Is that A Is that a fair reading of your note? We are feeling that way basically from our point of view. These kinds of bear markets, and if you go back to the highs in January,

they don't move in straight lines. And the last several weeks again in response to this ratcheting higher in yields across the globe has been pretty much of a straight line moved down UM in stocks, which if you think about it, September, we don't want to go back to school, We don't want to go back to the office four

or five days a week. The psychology tends to be poor in every September, but particularly so this year because you have all this macro uncertainty and a FED who's commit a it UH to hiking rates and keeping pressure uh really on the rest of the world via the stronger dollar through the rate hike transmission mechanism. But for us, we started seeing signs that this kind of activity was unsustainable.

The VIX has started spiking. You've seen investor sentiment really only as bad as has ever been near the trough in two thousand and nine and near the bottom of the first Gulf War bear market in And so for us, those kinds of ideas, along with the fact that October tends to be a turning point for stocks and the data that as much as we don't want to think about mid terms, the following year after mid terms tends

to be good as well. Uh, to us, just really uh, Given the fact that we thought that the yield moves were becoming parabolically unsustainable, we did feel and do feel that that will transmit into higher equity prices, certainly in the near term, perhaps even longer. And I think, Julian you wrote recently for stocks, the bigger, the bigger they fall, the harder they bounce, right, So is that part of

that equation here? Very much so? So? He basically, at at the new lows, you were down almost twenty from

the highs. And what we did was we looked at the history of prior bear markets going back fifty years or so, and what we found was, once you started a bear market rally, which we defined as either five per cent or more over five trading days or more from that kind of depressed level, the average run is on the order of seventeen over the course of thirty five trading days, which interestingly enough takes you in proximity to the two hundred day moving average, which is where

the market failed in its rally and August, but more importantly takes you in proximity to not only the November second FED meeting, but also the November eighth election, which you know are going to be very interesting events. Indeed so so all the stars are aligning in one place there. But what let's talk about those mid terms a little bit, Julian, because um, you know that is something people talk about a lot, is that uh mid term ears can can

often be weak in the stock market. I mean, I think I think you just have to chalk that up to coincidence. Perhaps this year, although you know, maybe some of the extenuating uh nos of the of the drop was was related to that. But what type of you know, scenario do you think is most constructive h two stocks in this mid term. There's that sort of generalization people like that, you know, gridlock, a divided Congress is often supportive of stocks. Is is that the type of setup

you think that that would work best? Uh? In this So it's particularly difficult to handicap that outcome now, especially since A you've had as negative a year as you've had thus far, and be because the balance of power, despite the fact that the Democrats controlled both houses, the

balance of power is so perricarious. So what we'll do is we'll tell you what history actually says about this, And what history says is that there is a very pronounced out performance over the course of a hundred years worth of stock market returns when government is unified, you know,

one party controls both Houses of Congress and the White House. Now, the market would, in our view have a knee jerk reaction lower on that kind of outcome because A despite the number of times that my team and I remind investors, and we've been doing this constantly since of that kind of data, people refuse to acknowledge it. Okay, Number one and number two. The assumption is here with the presidential election, which is obviously going to be an exceptionally contentious event.

Whoever ends up running two years later, the preference would be more than likely for less action rather than more. But yet the data clearly shows that unified government i e. The potential for more action rather than less has been better for some I think in a recent note you also said that DCS aggravating some of the recent trends. Is that right? So maybe you can talk a little bit about this because I know you think a lot about how policy is affecting the market. Yeah, there's no

question about it. Look from from from the point of view of the political situation, I don't think that there's any debate about the fact that the divisiveness and the part citizenship in the country without the ability to actually have reason discourse uh is certainly affects markets, It affects uncertainty,

it affects how people are thinking about policy. But again, when when we think about further down the road on Constitution Avenue, which is the home of the Federal Reserve, there's no question about the fact that the FED, in our view, is perhaps gone a little bit too quickly and hasn't given the markets and the economy enough time to digest the amount of hiking UH that has been put into the system already, and that to us has really been sort of where the pressure points have come?

And where are you know, our head of ever, coore s I ed Hyman has taken his GDP forecast down to zero. So it tells you that in a lot of ways, the FED is thinking very closely that a recession might be a necessary condition to get inflation under control. Certainly not desirable, but counting and counting thing that that kind of outcome, as was the case forty years ago

during the Valkal administration. So all of these underpinn volatility. Well, let's talk about that November FED meeting coming up, Julian. You know, I think it's safe to say that the FED sort of surprised most investors by being more hawkish at the September meeting than perhaps a lot of people were expecting. The initial sense was that we'd get at least seventy five basis points in November and again in December.

Some I think we're even thinking perhaps a full hundred basis points um at at least one of the meetings, UM. But you know, financial conditions have tightened quite a bit since then, in part because of the UK and just the reaction to the the hawk ish FED itself. Is have they tightened enough for for maybe the Fed to reconsider seventy five basis points, maybe go to fifty in

the next two meetings. So the first thing I'll say is that the fact that you could have an outcome more hawkish than those eight minutes at Jackson Hall was shocking. I think it was shocking to the markets. It's certainly shocked us, UM. But what we think is the FED is really potentially in its zeal to not commit the mistakes of the mid nineties seventies. I e. Chairman of the FED, Arthur Burns cut rates in the middle of

the inflation firestorm because there was an oncoming recession. Ultimately he was able to, uh, you know, cause the recession to dissipate, but the outcome was inflation remaining higher for much longer. The FED might actually be making a different kind of mistake in a similar type of way. By overtightening, you really get to the point where you may have to cut rates despite the fact that the FED has been adamant about not wanting to do that, and and from our point of view, you know, what do you

do if you've got a GDP quarter or quarters. We've already had two negative quarters, even though this is not a recession in two. But what if you had a negative three quarter and it was clear that there might be a need to cut rates at the same time inflation stays call it above three, which is number not tolerable to the FED. That's a conundrum that really really

could have serious reverberations. And that's part of our view that the FED might be better served instead of being dogmatic about doing seventy five in November, being more open minded about what it may remain not do. And I think it's entirely possible over the next number of days that we see some commentary from other FED governors that perhaps the door is open to a little bit of flexibility. Julian, you're very prolific with your note writing, which makes my

job so much easier. And I read all of your notes, but this is why I have to have been referencing a lot of them so much so. One of them said, the FED space case is a recession in three. So do you think that stocks already have prices something like that in so we'll clarify that just that was dramatic intent.

So the FEDS base case, if you look at the at the summary of economic projections, is one percent growth or thereabouts in three However, it's projection of the unemployment rate at four point four percent, up from the trough this July at three point five pc, really is an implicit call. It nod to the probability of recession being close to a hundred percent, because you've never had that kind of rise in unemployment without recession happening really almost

subsequently in in very uh neyar time. And so for us, when we think about how stocks are priced, a deep recession is absolutely not priced in right now because if you look at a hundred years of stock market history, the average recession bear market ends up being down on the order of forty one and a half percent. We're

only down around twenty at the trough. But we still think there's enough uncertainty and enough potential, particularly if you had other geopolitical positive developments, uh you know, lessening of the tensions in Russia, or or perhaps you know something positive recurring in China. All all outliers right now. But this entire year has been a series of outliers, So we don't want to fully you know, eliminate the upside tail risk along with recognizing the degree of the downside.

Tell that's what I was gonna ask you. How realistic is it to think of um, uh, some improving rhetoric out of Moscow? I mean that. The other big story obviously this week was that nord Stream pipeline uh, mysteriously malfunctioning and springing a leak in the middle of the ocean. Obviously, there's a lot of speculation that perhaps it was it was sabotaged by Russia. That's that has been confirmed, but I think, um, a lot of people are just assuming

that's that to be the case. Russia sort of sending a signal how bad could this winter get for Europe? Um? And has the market really priced in that worst case scenario? Uh? So far we're um, could could there be a further negative shock that really Royal's markets uh, due to the the Russia Europe tension? So if you've got a terrible winter, I cannot imagine that that's price in you know, rivers icing over and so on and so forth. Um, But if you actually look at natural gas futures traded in Europe,

they peaked earlier in the spring. Yes, they've remained at this very elevated level that clearly is going to put an enormous amount of pressure on the European and the UK consumer. But on the other hand, it really hasn't. What's happening is the market is adjusting to a base case where Russian supply will be next to nothing for

the foreseeable future. And I think if you go back several weeks ago, part of of what calmed markets for at least a while was this idea that storage was proceeding on pace or even ahead of the normal seasonal build. So from that perspective, you know, combine that with getting new supplies from the US and and elsewhere. Could you

bandid it? You could? Do? You need the weather to cooperate. Absolutely, This is part of the idea that maybe potentially we could have some upside for stocks, right, the idea that we could see some positive developments maybe out of DC or Moscow or London. I think is what you said recently? Is that right? Yeah? Absolutely, And and if you look

at what's happened this week. Thus far, the b of boes intervention and switching really on a dime from quantitative tightening quantitative using once more buying bonds is the first positive policy development, certainly in terms of stabilizing markets, and again going back to that relationship that has been a near unity correlation between stocks and bonds recently, you could also get a positive policy development out of Tokyo in

the coming days. The Japanese intervened in dollar again a week ago or so, we would say that if they were thinking about trying to achieve maximum efficacy, they might look at the fact that the market has endorsed the Bank of England's policy response and perhaps maybe would endorse to a greater extent a further intervention by Japan. So

that's something that could happen. But again it's one of these things where you don't want to plan for a base case being positive policy developments, but when the psychology turns as we think it could over the next few days, it's something that could make the moves and markets all the more exaggerated. Yeah, that's even before we get into China and the coming Communist Party Congress, which uh could could bring some surprises I guess if they decided to reopen, uh,

who knows what that will do to markets. But Julian, I know it's great to talk to you because I know you've got an eye on every asset class uh and sort of all the different catalysts in the market. And I know you you uh always keep at least

one eye on the options market. And there's really been a narrative that's evolved over the last few years that options are become sort of the tail that wags the dog in the US stock market, that you know, gamma hedging and other delta hedging and other Greek letters that I don't I'll be honest, I don't really understand completely that that you know, all that hedging and expiration activity really tends to push and pull the stock market, uh

in a way that suggests the fundamentals aren't really always in charge, that the the the options market has sort of taken the driver's seat in the market at least certain times a month near expiration. Is that truth to that? And how would you suggest to us non Greek alphabet experts how to sort of look at the options market and its influence on the equity market. UM with a reasonable sort of sober minded view of of what its influences.

So the options market has been this evolving thing, a living, breathing organism basically since the pandemic began. Uh you had, you know, extraordinary call option volumes in the summer of as as you know, the stocks to stay at home stocks basically screamed higher driven by options activity. Then you had obviously the meme stocks in spring of being pushed

by options activity. And now it's fascinating, and this is something we never really expected that would happen, is that there is still a speculative element in the markets, despite the fact that we've had as poor year as we've had, that instead of buying stocks is actually buying call options

and parking its cash and treasuries. So in essence, what you're doing is you're getting the risk free rate on a portion of your holdings, and yet you're actually getting the same exposure that you would be getting through holding stocks via holding options. So there's a leverage component there as well. And what it does is it exacerbates the moves in both sides, and we've certainly seen that in

recent weeks. But interestingly enough, if you're someone who's thinking about hedging with options, and we don't think that's for everyone. It actually makes hedging both upside and downside more appealing depending on the kinds of things that you're looking to hedge. For example, in the energy sector, Uh, there has been an outright fear of recession. At the same time there's been an outright fear that a favorable resolution to Russia

would depress oil prices. So really what you're having is that is that all in there's complete discounting of you know, conditions where multiples are half that versus the rest of the index. And for options people, you're seeing that in fear of puts being much more expensive. But to us, that's an opportunity. So what I think the messages is that you can find these relationships, um and and because we now have the end of free money and we

have you know, quote unquote real yields. I joke with my sons that maybe they're going to have interest on their checking account one of these days, weeks or months. Uh, that these relationships are much more interesting to express and to also analyze where the market may go. So you told me that your answer to what goes up these days is that we're seeing a bullmarket in cash, and everybody's beinging up cash the last couple of days to me, and you know how parking your your money in cash

or you know, short data treasuries or whatever. So what is it that that is making cash so appealing right now? So obviously the Fed is is behind all of this, no question about it, the rapidity with which the hiking has occurred, but it's also this idea. And if you go back to the spring um, when we first started suggesting that investors overweight cash as stock started to weaken, we got pushed back because, well, how could you possibly lock in a minus five rate of return when inflation

was trading at eight percent? And our answer to that was, well, the thing about cash is in a portfolio context, it helps you manage and it helps you buy when you should be buying, not sell when you should be buying. And that's what we've seen from time to time, particularly at the Juli low, and for us, it really becomes this whole idea that you know, the whole concept of Tina there is no alternative. Two stocks is a thing of the past, and we don't think it's coming back

anytime soon. Supporting the bullmarket in cash and now I think Mike, the new acronym is Tara. There's a reasonable alternative. Yeahs, yeah, that was Julian. The only way to make a name for yourself in this industry anymore is a good acronym. You gotta you gotta work on a good acronym. I don't know, maybe this this podcast needs a good acronym. Yeah,

we can try to think of Tara. Well. You know, it's it's interesting that the conversation around really yields Julian, because I think it's sort of depends on how you define real yields, right. You know, if an inflation that eight or nine percent and treasuries are at three and a half for are you okay? That's deeply negative. But you know, looking out at the break even inflation rates, you know, basically the difference between yields a nominal treasuries

and inflation protected treasuries. You know that break even rates like to two point three two point three over ten years um, which signals that the bottom market's best guests is inflation will average roum two point three five over the next ten years? Are they? Are they right? Are the break evens right? Do you think, or is that just a miss priced another miss price market right now. So again we tend from point to point not to argue with the concept that market pricing is right because

it's where you can transact at any moment. Look looking out over the longer term. If you think about eds Hyman's forecast for inflation next year, it's three percent, clearly far north of that two three to forty number. Are we eventually going to get back closer to two? Absolutely are?

And frankly that's part of our concern with the Fed, perhaps not stepping back to assess the effect of the tightening that we've seen, but point blank, what it does reinforce is this whole idea that if we believed as investors that this was the nineteen seventies ingrain, you know, inflation expectations in high single digits, potentially low double digits for weeks and months and years on end. This is not the nine seventies. As a child, we were on a four hour gas line waiting for my mother to

fill the car up. That's not what this is. I think you called when when you were talking about stocks and bonds in a recent note both being negative this year, you called it breathtaking, I think was the word. Can you talk about how unusual that is? I wrote about a risk parity e t F that has seen a record draw down. I think it's done something like thirty two from the highs it reached last remember, So how unusual is it for both stocks and months to be

down as much as we've seen this year. So we've been showing a scattered plot of of the stock bond return quadrants going back to nineteen seventy seven and two is a lower left outlier on the orders of magnitude such that you've only actually ever seen one other year where the returns on the combined stock bond portfolio we're both negative and only marginally so, and that was uh the year that people were trying at the beginning of the hiking cycle to equate to Obviously you've seen volatility

of a much higher order there um. But what it really does is is when you have this kind of correlation, it calls into question risk parity one thirty thirty strategies and frankly, the employment of leverage across any investing strategy, as well as a rethink of what valuations makes sense. Because there's a very good argument to be made that the valuation paradigm of the last decade or so, which is closer to eight, nine twenty times, is no longer

the correct way to assess what stocks are worth. Yeah, so, Joya, let's uh so break it down for me. If I were to send you my brokerage account password and said, Julian, just set me up for the rest of the year, here can do. Yeah, right, What's what's it gonna look like when you're done with it? Oh my goodness, the foreheads dripping from that kind But I don't worry. There's

not a lot to lose in there. So so, so what we think is that, particularly when you look out towards your end and you think about this heightened probability of recession, the thing that's most attractive to us is probably the thing that, given the last week, is the

most difficult to buy, and that's longer term bonds. Uh. Again, whether it's thinking about inflation break evens, thinking about a heightened probability of recession, thinking about the the importation of tighter financial conditions from around the globe to us, it really makes sense, uh to go back to at least what what has happened over the last couple of years is the typical sixty forty bond portfolio has gravitated to sixty thirty five or seventy thirty because we've all been

sold on this idea that owning government bonds was a negative expected return outcome, and it's been true in large part for the last two years. We haven't been positive on bonds since we think that's where you want to dip your toe in first again if you want to get your equity exposure, which clearly as a function of the portfolio breakdown, if you have any cash at all, by default your cash levels have been rising, you probably do want to put a little bit more um inequities.

And then let's see how policy and earnings play out. Because we have had earnings downgrades, were likely to have them again, but the market knows this, so it may be come with something that doesn't look like the potential for a deep earnings recession, perhaps just a shallow one. And Julian, just to wrap things up, I think you you recently downgraded your ear and price target for the SMP five hundred, So how do we square that with you know, what we were talking about earlier about the

potential for a rally posts the mid terms. Well, what's amazing is in again in this market, Uh, things evolve literally by the minute or the hour, not by the day, week, or month, as is typical in you know, really the

bull market of the last ten years or so. So when we took our price target down to thirty seventy five a week and a half ago or so, we were probably viewed as still being you know, quite bearish, uh, in in that context, and then all of a sudden, here we are the markets trading and breaking through the loads of thirty six thirty six, and we're looking like

some of the biggest bulls on wall streets. So what we're really trying to do is, you know, strike the trade off between what we felt are these oversold conditions that have the potential for a rebound with the positive

fourth quarter seasonality. Um. And and again when you think about next year, Uh, it's one thing to get your said allocation to where you're comfortable, but it's another to make assumptions at this point about how the market is going to behave next year with high conviction because the range of outcomes is so large. Great stuff that is Julian Emmanuel. He is the chief equity and quantitative strategist

at ever Core. I s I, Uh, Julian always such a pleasure to hear your thoughts and catch up with how you're looking at things in the market. Uh, no secret, I think Fildana. Julian is one of my favorites of the strategists, and they're always and he always picks up the phone, which is nice. He always gets back to nice guy, a brilliant guy. But Julian, we can't let you go without hearing your craziest thing you've seen in markets.

But let's start with. First off, we gotta reveal Aldonna's high school nickname because we did get those three ratings on Apple podcast. So a drum roll. If I had a drama would roll it. I guess maybe maybe Stacy, a producer, can add Yeah, that would be good. First, st my friends called me Bill, so I'm sorry. However, I have a feeling you're going to twist that into Bill n or evil evil evil, All right, let's go with that. So let's go with those two because the

other one is a little bit more boring. Evil. That's a I'm going with that one. That is that is that suits you. It does a little sadly, and of course your nickname with the website that transcribes the podcast by listening pill Dodi and Madonna. Sometimes I think they called you Madonna hijack. So we have yeah, we have a transcription service for the podcast. So we looked through the ranscript and every time I say my name, it

transcribes it as phil Doto, which is hilarious. I have some I have some friends who make fun of me for that now, and another one is Madonna hijack, which is also very good. There have been some really good ones. How about you, Julian? Did you have a nickname in high school? Well? I did. But the first thing I'd have to say is, based on what you just said, I have to think that there is a slice of the voice recognition software world that's probably overpriced still at

this point. Always a trade, He's always got a trade, Always a trade, always a trade. Mine was jewels, Okay, very simple jewels, and uh, I think in an environment like this, uh, you know, jewels have probably been as good an investment as stocks and bonds or art, so certainly part of portfolio diversification. That's good. Bringing it back. Yeah, bringing it always brings it back to the to the markets.

I love it. That's good stuff. All right. Well, well, Dona, I mean evil, What is your craziest thing for the week. So I was originally going to go with something that happened in the UK or one of these other wild moves, but I'm just going to go with something somewhat happy, which is that McDonald's is coming out with a happy meal for adults, and I think I think it's aimed at millennials, so my generation and you get you know, I think the option is one of four figurines when

you buy your big Mac or you're chicken McNuggets. So what are the what are the millennial figurines? Then? Is it it's like, oh, I forget it's Taylor Swift, bobblehead or something. I wish for that I would go to McDonald's. But no, I think it's like regular McDonald's figurines. Uh huh, that's pretty good. Yeah, I don't know. I don't know how successful that will be. I don't get the idle picture millennials eating a lot of McDonald's. To be honest, you guys seem too healthy for that. Is that is

that fair? We love cauliflower. Yeah, all you eat is cauliflower exclusively. All right, that's pretty good one, Julian. How about you, what's the craziest thing you've seen in markets these days? Well? I first got to pay tribute to the concept that I lived through college on special big Max. So so yeah, exactly exactly. I paid thirteen in Zurich a couple of years ago, so you know, Uh, inflation and uh, you know, the risk free arbitrage amongst currencies

and countries just not there. So I have to pay tribute to the UK, and I have to pay tribute to a legendary president, uh, Ronald Reagan. In our view, Uh, the fact that um that Liz Trust and quasi quarteg uh didn't fully appreciate the fact that their policy announcements tax cuts, subsidies for energy and so on would be as destabilizing in the near term as it has been

to markets. Doesn't recognize the fact that they probably would have been better off announcing their policy in cowboy boots and chaps, the same way President Ronald Reagan did in the early nineteen eighties on top of his horse when he announced his version of Reaganomics. That shot directly against the vulcar fed the same way that the UK is

trying to shoot against the Bank of England. Um and frankly, for us, that kind of display of revelry and and find sartorial splendor might have been able to sell the markets a bit better, but alas we've needed the Bank of England to step in and hopefully it will have a happy ending. I'd love to see her rotting horse with chaps and a cowboy hat down Downing Street. That would go I think that would go over some funny

all right, good stuff, good stuff. I have to think about Liz Trust and cowboy boots and uh and and a hat can own it the way Reagan did though, that's uh that was his signature. Look all right, I'll give you mine. This is courtesy of Bloomberg our own Mark Alwood. He wrote about the investment market for handbags. But how many handbags do you want? Just one? Just one? I have? Okay too? Maybe three? No, I'm just kidding, I'm totally kidding. Literally, what's the most you've ever paid

for a handbag? I think honestly it was like so not not part of the whatever article you read that still sounds like a lot to me. For Oh no, they can be like ten. Why now, this story is all about some of the most ridiculous ones. There's the birken bag. I guess yeh, that's like ten tho or more. That is like the yeah, the most expensive a so black birken in crocodile crocodile skits. I guess it's actually made out of a crocodile hide. Fetched two hundred and

eight thousand dollars three years ago. But here's the here's where we get to play. The prices precise, Julie, I regret to inform you you're now a contestant on a little game show we have here called the prices precise. The prices right because I'm afraid of Bob Barker, but the prices precise because this story discusses credit Swiss actually did a analysis of Chanel handbags and what they did over the trailing twelve months ended in June. Now I think back into June. Okay, it was a awful period

for market sentiment. Bonds were falling, stocks were in a bear market. Everything was doing awful. Uh, what do you think Credit Swiss study of Chanel handbags said that those handbags did what was their return over the previous twelve months as of June sense percentage terms? Think of it as a a Chanel handbag index. I think up one, really, even though I mean socks were in a bear market market, otherwise we wouldn't be talking about that. You think Chanelle

was the ultimate safe haven? Up on, Julian, what what do you think Chanel handbags trailing twelve month return was as of June? Well, you can't have an equity strategist in a bear market giving numbers like that, But I would say it's probably somewhere on the order of twenty five or thirty, because again, this was the year where we were all coming out of our homes and re engaging, and boy, if you don't look good when you're seeing people you haven't seen in two years, you don't have

a second chance to make a new first impression. So you're saying you set up This is why Julian is the chief strategist ever queer, I s I hit it right on the head there, Julian, It's amazing. Twenty four point five previous year, I was shooting for the stars. Who knew the ultimate safe haven was a purse basically a purse. I won't have to buy one. I'll get I'll get you one next time I go to Europe.

I don't know, right instead of instead of ham, No, you fill it with ham if you if you get me a luxury handbag and fill it with Iberico ham, that that it's a deal. Uh. Anyway, I'm impressed, Julie, and you nailed it on the head. I think maybe he uh, maybe he saw that report. What do you think filled out it? He's shaking his head. No, he's just that good and Bloomberg, he is just that good. H Joan. Thank you so much for your time. We always appreciate it, and I hope we can get you

back again. Thank you think, Julian, what goes up? We'll be back next week. And so then you can find us on the Bloomberg Terminal website and app or wherever you get your podcasts. We love it if you took the time to rate and review the show on Apple Podcasts, so more listeners can find us. And you can find us on Twitter, follow me at reag Anonymous, Bill Donna hierarch Is at Bildanna Hirach. You can also follow Bloomberg Podcasts at Podcasts, What Goes Up is produced by Stacy Wan.

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