World's Hottest Market

people hanging. All right, we believe him hanging. We'd like to leave him hanging. Usually we leave them hanging un till the end for the craziest thing we saw in markets this week, But this time we're gonna leave him hanging. Uh. For the world's hottest stock market, I'll call that might be a little bit of a hit. And also, for fans of our segment, the Craziest thing I ever saw

in markets this week a special treat. I think it's gonna be an elongated version of that segment because Sarah and I the stars were aligned this week and we both picked the same crazy market story to talk about, and it's a big one. It's a doozy so right, so we'll get to that earlier than usual as well, and also joining us this week on the podcast. So you know, it was a big week for bank earnings.

All the big banks reported earnings. These are incredibly important for a variety of reasons in markets, UH, and to help us break it all down, we are happy to have Bloomberg reporter Felice Morans on the show. Fleee welcome, Thank you for having me and for our craziest thing we saw in markets this week discussion. We're bringing in the big guns here, Chris Nag, Executive editor of Markets

at Bloomberg. Chris, welcome to the show. Welcome back. I guess police let's start with you though, Um, just big picture, what was sort of your main takeaway from this UH parade of bank earnings saw this week? So it's important to remember that four big banks all reported simultaneously on Tuesday morning, and that really doesn't happen too often if every day. Yeah, so a lot of what happened passed

in a giant flood. I would say the big takeaway is that everybody did really well except for Goldman Sacks. So walk us through the results. So let's start with Goldman sacks. They didn't do well. So where was the big miss? What was the issue? So with Goldman, Uh, there were a couple of things. Overall, the earnings per share did miss. There were just a lot of things that caused them to miss and to be disappointing. On Tuesday, you had spectacular results from JP Morgan, and then Goldman came,

and then you had City and Wells Fargo. And City and Wells Fargo weren't initially received so well either, but as the day went on, people became more positive. So a lot of what I've read is that one real stand out point of the business in this quarter was what they call fick uh, you know, fixed income commodities and currency trading um predominantly because of the volatility in

the bond market we saw. So, you know, I'm as a consumer, you know, as a suitor sort of non bank stock investor, I always want to see what the macro takeaway is from these earnings, you know, and I'm not sure that a robust bond trading environment is necessarily

a great sign for the economy. Uh. You know, a lot of this volume came because, uh, you know, markets were so nervous about the economy uh in this quarter, but walk us through sort of the consumer facing elements of the bank, I understand they were pretty strong results as well, despite this really narrow yield curves that we've seen that presumably would affect their net interest margins. I would say that if you were looking at trading, you

would indeed think, oh, fick, that was a standout. But if you look overall at these results, the consumer was very healthy and one big bright spot was credit card spending that helped lift City Group. In fact, shares of City Group after its executives talked about how good credit cards were. I know Jamie Diamond flat out said on the earnings call that the consumer still seems to be

very healthy. However, he did signal out business confidence and said that we still see an issue surrounding business confidence, and he even talked about the trade war and tariffs to a sense, did we hear any of the other executives talking about it on these calls? I mean, how much was consumer confidence or business confidence really a focus of some of the conversation when analysts or even the media we're asking questions. Well, I think Jamie Diamond's comments

were very interesting in the statement. He was very careful to swing back and forth between saying something very positive and then caveatting, and then saying another positive thing and then caveatting. I did notice that some people felt he wasn't as exuberant or cheerful as he usually is. He's seen as a big, very charismatic cheerleader for banks, and and he wasn't as much this quarter. I did also read at UH several of the banks UH did increase

their reserves for potential bad loans going forward. Was that a common theme and is that just them reacting to what the rest of us have reacted to all years, that this uncertainty about the economy. Well, there had been a little bit of an increase for energy loans, capital markets were soft, there was some energy problems. UM. I think some banks also talked about credit normalization. That's because they've made more loans, so you have to UH take

precautions just because you have more lending out there. I think the takeaway really was that the consumer is healthy, people are still employed. There may be some hints or signs in the distant future, but for the third quarter, the economy stood solidly on the shoulders of the U S consumer You know, Chris, I often hear people say, well, you really need the bank stocks to rally to do well in order to kind of confirm a bullish stock market. Um.

Are you a buyer of that theory? Uh? And you know, does this week's earnings sort of make you optimistic about the chance we'll get to another record this year. I'm not really a buyer of that theory, but I'm probably a sayer of that theory. I think that's one of these Wall Street uh um axioms that you you have trouble uh not repeating about four thousand times in your career,

even if you wonder if it's true. Um. From the perspective of here's the engine of the uh the consumer engine of the economy, I think you you basically have to say, at least that plank looks a little better than it did a couple of weeks, or at least you get some confirmation that isn't falling off a cliff in the same way that manufacturing has. And that's by far the biggest the market's biggest concern at the moment,

So that's good. We talk about bank earnings as if they're almost all that's happened this week, because we typically focus on bank earnings the first week. But we got results from Honeywell I want to point out in which we did see them raise their profit forecast for the fourth quarter. Uh. We also got some not so great

earnings from the likes of Netflix. I guess you could call it except shares rallied because international subscriber growth was much better than expected if you just look across the board. It's still very early on. But where do we currently stand in the earning season and how do people feel

at this point in time. Well, I feel like Netflix is a big deal because there's sort of this creeping concern right now that for various reasons, most of them having to do with we work that basically the price of speculative equity on Wall Street is about to come

come in for a reckoning and a reevaluation. So the fact that one of the poster children for those valuations is able to rally, and I don't think the rally totally lasted, and the fact that Netflix uh was was able to stay elevated with that valuation after earnings is also basically net net a good sign for for the market state at the moment, so fo least, obviously we had the big banks come out. What else is coming up in the next week that's on your radar that

we should keep an eye out. Well, I think it's interesting that Chris mentioned we work. I want to point out all so that Goldman reduced the value of its stake and we work by I think it was eighty million dollars. And people are keeping an eye on I P O s all sorts of things. Another thing happening in the week to come, Mark Zuckerberg, Facebook's CEO, is

going to be testifying again in front of Congress. Uh. The payments companies who are partners in Libra have been dropping out, so he's probably not going to be uh in the spotlight for the cryptocurrency Libra as much as he would have been, but he'll still get asked a lot of really tough questions. So Fulice, you also report a lot on the intersection of markets and policy. Give us a sense, Like you said, Mark Zuckerberg will be testifying once again as we lead up to and the

presidential election. We just had another Democratic debate this last week. What's the general sense how much our investors, analysts strategists really thinking about the election is something you need to take it into account when thinking about how to invest.

Investors are definitely keeping a very close watch to investor surveys. Uh. Just in recent days showed us that investors think Elizabeth Warren is going to be the Democratic nominee and they overwhelmingly think at the current moment that President Trump will be re elected. In hard to reconcile this, I guess, but I'll tell you what, Sarah, I think. We it's time to transition right into the craziest thing for the doozy, all right, And as we both agreed, uh, this is

uh wild story. It was in Vanity Fair by William Cohen, and let me just read the headline to you, uh quote, there's definite hanky panky going on. Okay, I got my interests, all right. And then the rest of it is the

fantastically profitable mystery of the Trump Chaos trades. And what the story is about is a bunch of really high volume trades in SMP futures h that the author believes or points out occurred right before announcements from President Trump were sort of other geo political events that ended up boosting the stock market, and you know he you know, writes about them suspiciously. Let me just read you one

paragraph of this story. Traders in the Chicago pits have been watching these kinds of wagers with an increasing mixture of shock and awe since the start of the Trump presidency. The precision and timing of these trades and the vast amount of money being made as a result of them, make the traders wonder if all this is on the level.

Are the people behind these trades incredibly lucky or do they have access to information that other people don't have about say Trump or Beijing's latest thinking on the trade war, or any other of a number of ways that Trump is able to move the markets through his tweeting or slips of the tongue. So basically kind of accusing Trump of leaking insider information about his plans to Uh traders and investor is in the market. Uh, Chris Nag, you're one of the gurus in this company as far as

analyzing trade by trade. Uh, you know what's going on. Um, we talked about this earlier. I think if you were editing this story, Uh, it might not have been published in exactly the same form. No, one would have read it. But what's your sort of takeaway on the story. And I know your team's working on a story basically dissecting

what happened here. I mean, I don't think that there's gigantic opposition to the idea that the basic premise that Trump could be, as you put it earlier, wittingly or unwittingly telegraphing stuff that Wall Street traders in there, you know, immense wherewithal are able to pick up on in some cases front run pretty much the unanimous view of of of people we talked to is that this is sort of an instance of proof through a kind of juxtaposition.

You're you're able to take, uh, Wall Street coughs up an enormous amount of gigantic futures trades in any given day or week, and if you want to go, uh find one at times in a sort of overly lucky way against some geo political eventor basically anything my my cats rolling over, you can you can you could easily uh make a case that there's a causal or there's a casual link between the two. I think some of the words that you use, uh in describing the article

are are key. He he's pointing these things out and he's juxtapsing, he's juxtapositioning them. He's doing it in a very arch and moral way, and he's making it clear with his what his point is. But really it's it's kind of a marvel of juxtaposition and a lot of things are trotted out that would be true literally at any time. It's also true that Trump is moving markets all of the time too, so you have a very rich, uh landscape to mine, uh, whatever thesis you want out of.

And I think that's basically how people are viewing this. I was speaking with an investor and trader about this article and he said, yeah, you can basically back up a story or a narrative for any trade out there. The problem is that if you have a story like this that runs, they never actually write about it obviously when you're wrong. The big Yeah, it's sort of the no hypothesis argument that, uh, there can't be tons of other trades that look just like this that fall flat.

But the fact is there are uh, your average you know whatever, ten ten thousand or a hundred thousand contract sp futurest trade doesn't proceed a big market move, and all of those get ignored. People aren't in the business of trying to sell magazines by writing about those, which I think is irrelevant topic here. So what we're left with is some unnamed traders in the Chicago Pits saying this looks a little fishy. I gotta say, I didn't even realize there were any pits left in Chicago. Yeah,

still has. Chicago Pits are where basically the high frequency trading industry grew out of, so one of the great technological things that's ever happened in this country. People are gonna also, it's not like it's not like we want to disparage the Chicago Pits, but it's also true that a scary amount of conspiracy theorizing seems to emanate from that area as well. Well, I gotta call those guys

up more. I need to know journalists take note. We'll leave it at that then, Chris nag Police Marins, thank you so much for coming on the show. Thanks, thank you. So Sarah, let's shift gears now to that world's hottest stock market, and let's give listeners a little hint here courtesy of a great band from Baltimore called jaw Works. So, Sarah, obviously the name of this podcast is what goes up? And one thing that's been going up consistently in recent

years is the Jamaican stock market. Last I look, it's up about four percent since the end of two thousand and thirteen, and that's in US dollar terms. By far and large, it's the best performing stock market in recent years by by a mile. Um. And it's a very interesting market. I mean, it's uh small market, obviously a

small country, small stock market, um. And it's not the most convenient for foreign investors to invest in, but you cannot ignore how well it's been doing so earlier in the year, or actually at the end of two thousand and eighteen, it was I I traveled to Kingston to report on it, and I'll tell you it was just a pure coincidence that my trip was in the middle

of the winter. I'm sure that there was no other reason that you pitched a story idea to travel to Jamaica in the middle of what was it the February

maybe Coincidencember December. So as it gets a little bit colder now, I'm thinking it might be time for a return trip to the record on it, because once again, it's one of the best performing stock markets, and pretty much everyone I talked to while I was there talked about the reasons for it being linked to the government finances being brought in order the dead to GDP ratio and Jamaica was approaching about a hundred and fifty percent after the last recession, and they took some some very

dressed steps to get that down UH, including a debt exchange where holders of Jamaican bonds swapped their bonds for UH for bonds paying a little bit less interest and longer maturities UM. And one of the fellas who was very instrumental in that debt exchange that for the first that exchange they did too, but he was the finance minister during the first exchange, and he's joining us on the show. His name is Oddly Shaw. Welcome to the show. Oddly,

thank you, thank you. And now his title, he's got a better title now it's Minister of Industry, Commerce, Agriculture and Fisheries. So you've got a lot on your plate there, yes, thank you. And and I was Finance Minister between all seven and eleven and then sixteen to eighteen, and it was in that period into my shron the the stock exchange that I in fact guided that process in two thousand and nine when we established the Junior Stock Exchange.

But I must say to you that it it had come out of a period not just of of important adjustments on the watchful eyes of the I m F in terms of the whole macro economy and how we managed the budgetary process and so on. It also came out of a period when the private sector had gotten risk averse. They had suffered from uh periods of extremely high interest rates. In fact, in the nineteen nineties, the average commercial bank lending rate was in excess of for

a decade. It was the highest, if not the highest, in the world. Okay, unbelievable. So so people just came out of productive end of us and investments and we went into buy and sell because you have to buy and sell and making money fast to pay those kinds of extraordinary interest rates. In some countries, including yours, it's

illegal to have interest rates like that. So so um, this talk exchange came out of the need to say, hold on, forget about going to banks to borrow high interest rate money, go for equity, right And I started there and and at the same time simultaneously we started a program of bringing down interest rates, and I can I can probably tell you that today we are now having private sector borroing money in single digit interest rates.

It's six percent, seven percent, eight percent, absolutely right. And at the same time they're also investing heavily in the junior stock exchange, and that is why it is growing at the phenomenal rate that that is growing at that at this time because in urging equity investments and a lot of young entrepreneurs um are our targeting that avenue and we're very pleased with the progress that is making.

So the junior exchanges for very small companies that was it a hundred millions makion dollars I believe or less roughly that right, and they get a tax in center, isn't that correct? Yes? Absolutely fun the stock. No, they don't have to pay uh income tax for what is it a few years after it's it's ten years, ten years, yes, absolutely.

In In fact, in fact, in much of two thousand and sixteen, the previous government was going to close it down and that's when I became a finance minister again after after a four year break, and the first act that I took was to was to keep it the same. No, the junior stock Exchange remains in place, and as a result of that, there is renewed interest, more people going for equity financing rather than than than you know, loans and um. And it's it's really phenomenal what's happening now.

As a matter of fact, I'm now encouraging the human and stuff finance to look at at another feature called nano stock exchange. It's it's aimed, it's aimed at the micro, the micro even smaller than than what the Junior Stock Exchange targeted. And because you see of Jamaican businesses are small and medium enterprises. Okay, And one of the things that is ironic about it right now is that the bulk of loans to the private sector are elevated among

the ten percent. Many of them don't even have loans. But if they were able to get more equity financing right, then they will be able to be more productive. Then they will be able to systematically work with the government in targeting critical areas of new development and growth. Uh export markets. I mean, in Jamaica, we produce so many good things that that we now need to put it at an industrial level to to replace the traditional sugarcane.

We have orchard crops, you have mangoes, you have fruit of all types, avocados, um you know, all kinds of things that are that are in global demands. And what you don't sell fresh, you can sell it processed. You have clear markets, you have the tourism industry of carry com. You have the diaspora with Jamaica and in the US, England, Canada. You have third country markets that are crying out for exotics. And I'm introducing another one which is exciting for us.

It's a home grown school feeding program. All of these things require investment, right and if we can and if we can get the micro and small businesses to embrace these opportunities, and part of embracing that is to have to have them access money in an affordable way through

the junior and possibly a microstock exchange. So the returns are undeniably strong on the Jamaican Stock Exchange, but I'm wondering how many companies have you guys been getting interests from in wanting to be listed on whether it's the regular stock exchange or a micro stock exchange or the junior stock exchange. Well, a lot of companies that don't have the exact numbers now because I'm not um that intimately that ministry anymore, but but the interest is there.

And that is why I'm actually proposing to my minister, mic colleague minister, and to the Prime Minister that that we don't rule out looking at at a at a nano stock exchange, um, because I think that that will that will help to further us to mulate they drive towards more productive investments, right, and the old tradition of buy and sell. Is that enough to help you to

to to lift especially rural areas from poverty. Okay, we need to add value and we need to build a value chain from what you grow to what you process and what you target not just the local markets, but to the export markets. And if you were to speak to sort of the international class of investors, which I imagine there's a few of them among our our listeners, um, what type of investment into Jamaica would be your preferred

uh style? I mean, I'm thinking, you know, I'm not necessarily sure that Jamaica wants to see say a Starbucks on every corner or a McDonald's on every quarter. What is the type of investment that you would like to see happen. Well, I'll tell you something. The construction industry booming right now, absolutely booming. That's the only word I can I can use to describe it. Partly as a

function of interest rates, I imagine it absolutely. But in addition to that, now, where where investors can come and benefit is to bring technology and and and work with

our farmers and and and create the industrial base. So they're moving to from fresh to agrib processing, right, So what you don't sell fresh yourself processed, and I mean nowhere as as as demonstrated that more than the United States, right, And that's an opportunity that that we could have between investors coming, bring technology, bring bring markets, and and share

in joint venture with Jamaican producers. Now one emerging industry, of course as the cannabis industry, and that is an area now that requires a lot of drilling the because part of what is holding up the rapid advancement of a legitimate international medicinal cannabis industry, ironically is the is the slowness with which the United States is dealing with

the issue. Um, there are some good early signs, however, they have now approved the hemp production which is low in the THHC, which is the toxic level UM zero point three that's now approved in a farm bill right and which means banking is all right for that. A few weeks ago they approved the Safe Banking Act, which is allows for banks within within each state to do banking of cannabis. What has not been done and needs

to be done now is interstate banking. It needs to be allowed and then correspondent banking between countries that have a legitimate licensed at international standards a cannabis industry uh and and that correspondent banking once put in place, we'll see the rapid advancement of an industry which your own researchers. By the way, I was at a Harvard, I was at Harbord recently a few weeks ago at at US

a conference on fight amnicnce and cannabis. And they have since come to Jamaica because of our uniqueness with with cannabis in Jamaica, and they are it is being demonstrated beyond the shadow of a doubt that medicinal cannabis is a credible alternative to the opioid epidemic that is killing off Americans. Between fifty to seventy thousand Americans are being killed from opioid overdose right now, and medicinal cannabis, beyond the shadow of a doubt, has been proven to have

more good to it. Right well, cannabis has more good to it than bad. And of course medicinal cannabis carefully targeted, carefully researched, is a credible answer as an alternative to opioids, and I obviously a tremendous potential source of economic growth free, absolutely absolutely, and from a stock market perspective, which is

the way through the lens we view things from. I know for you, it's it's very frustrating to see Canadian companies able to list in the United States and yet yeah, you're pretty much completely locked out of the But but can you guys tell me explain to me why our banks that are inextricably linked to New York banks, where we're transferring money from Jamaican banks, we go through New York.

Can you please explain to me how it is that that cannabis companies in Jamaica the bank schools them down right because of the lack of correspondent banking in New York, Yet cannabis companies from Canada can list on the New York Stock Exchange. Hello, can somebody explain this to me? I wish I could explain it. I cannot explain it. If anyone can, they can call the What Goes Up Hotline and explain it to us. Uh, the Honorable Oddly Show. It is great to have you on the show. We

really appreciate your time. Thank you, Thank you, What Goes Up. We'll be back next week. Until then, you can find us on the Bloomberg Terminal website and app, or wherever you get your podcasts. We'd love it if you took the time to rate, interview the show on Apple Podcasts. Some more listeners can find us, and you can find us on Twitter. Follow me at Sara Pontact, Mike is at Rea Anonymous, Our guest Chris Nag is at Chris

Nag one, and Oddly Shaw is at Oddly Shaw. You can also follow Bloomberg Podcast at podcast and Don't forget. You can call our very own Bloomberg Podcast hotline at six or six three two four three four nine zero. If you leave us a message, Remember, we may even play it on the show What Goes Up is produced by Toper Foreheads. The head of Bloomberg Podcast is Francesco lev Thanks for listening, See you next time.