Bloomberg Markets Full Show (05/20/2022)

Bloomberg Markets Full Show (05/20/2022)

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From the financial centers of the world. This is Bloomberg Markets with Alix Steel and Guy Johnson. It is 30 minutes into the US trading day on this Friday May 20th. Here are the top market stories that we're following for you at this hour. Say goodbye to a tough week. Stock bounced Friday while still heading for their longest weekly decline in twenty one years. Is there any reason to be bullish.

And credit cracks. High yield spreads widen the most this month since the pandemic. We're going to speak to veteran fund manager Marco Korda of Sycamore Tree Capital Partners to find out the opportunities and earnings. You got the bad you got the sparkly. Deer says higher farming costs are hurting demand and rich mom warns on China and softening luxury demand. You've got companies caught between inflation and a growth scare. From New York I'm Alix Steel my co-host in London Guy Johnson. Welcome to Bloomberg Markets and guy. I feel like those earnings are key because we haven't yet seen those revisions to that weaker

demand. That's like the next shoe to drop. Now I'd like to commend you. I can't remember the last time I had the word sparkly in a headline. So good luck. It's a Friday. Yeah I think the day ratings are are fascinating. They like second derivative margin pressure. Basically our customers are facing margin pressure. IBEX costs

are going up. They can't afford new tractors. And as a result of which we're going to suffer as well. Plus we've got a cost issue. The rich will think it feels like a China story as well in a fairly significant way as well which is something that I think increasingly given what's happening with the president out in Asia we're gonna need to focus on as well.

There's a lot going on today isn't there. And none of it's particularly good apart from the fact that you got the word sparkly in a headline. Yes. And also that the Nasdaq is up 1 percent. I think the why is really in question with that one. Well I think after being battered for a few days it was inevitable that at some point there was gonna be a bounce. I

know a lot of people describing that to China. I have my doubts on that. I think we've just been beaten up for a number of days and as a result of which there's an opportunity maybe to buy. But we've also got some expiry is to get through as well. So we could see a few bumps along the way today. A Question of the Day is a fairly straightforward one. Alex alluded to it in the opening. Is there any reason to be bullish. And if there's not any reason to be bullish. Is that a reason to be bullish. Romaine Bostick. Matt Miller. We're going to get we're going go around on this one. Bloomberg Markets the close co-anchor and Christine Aquino European markets editor to be found in New York for the next

three months joins us now. Romain if we are at the point where there's no good news. Is that good news. No. I mean in short no. I mean look if there's no good news I guess it gives you sort of the general sense here that if people are sort of expecting the worst and prepared for the worst maybe you avoid the absolute worst case scenario. But I think the key phrase there is absolute. Because if we still end up in a situation where even sort of a fraction of the worst case scenario ends up becoming a reality here it's still going to push the market down a well below the current levels that we're at. I think when you look at some of the economic conditions and the huge huge slate of economic data

that we're getting next week I think people are going to be in for a real shock into just not just how bad things are but more importantly just how bad sentiment is right now. And that's the real driver of the market. Yeah. And to point that out in euro area confidence is at a negative 21. I mean just pointing out that these numbers are really bad whether you're across the Atlantic or here in the US. Hey Christine I'm wondering how you would answer that question because this is the kind of weekend where my husband and I start to panic about the Fidelity account and what happened to the S&P this week cetera. Is there any reason to be bullish. Well listen Alex I mean I'm going to take the other side of this question and say yes actually there is

some reason to be not bullish fully. Then a little bit more optimistic because you know in some ways this week felt like it was the first time in a while where we actually saw two we risk in markets. You know we were talking about risk on risk off sort of days. And really to me that's kind of a signal that there is a little bit of normality coming back to markets here. I think

that's a lot to do with the fact that some of the big catalysts that we know about. Right. Inflation and how that's going to hit consumers and then what the Fed is going to be doing about that as well as other big central banks. I mean that is a sign of markets kind of digesting through some of those big catalysts. And you know really kind of coming to grips with that and coming to terms with that. And that means that it's not necessarily a one way trade in markets. And so even if it's not a reason to be outright bullish certainly unhedged and a longer term is it at the very least kind of offering investors some opportunities here as guys said. You know it's not necessarily a reason a clear reason to be bear then perhaps there are opportunities to

be had in this market. OK. Let me take the other side of that again. I know I'm flip flopping Christine but we'll go with it. What I'm seeing in credit right now is starting to look a little bit more alarming. And I'm not entirely sure that equity markets are kind of on board with that or at least keeping out. Right now we need to separate out which markets we're talking about. Credit is starting to definitely take a turn for the worst. And I've heard from a lot of people that this is something that they're looking out for now that it's happening. Do we now will now see to start

to stop playing catch up or as Alex would say catch up. Well you know credit is always a favorite canary in the coal mine guy. And I know we've seen credit spreads widen definitely this week as they start kind of price in what we're going to be seeing from the Fed and how that's going to impact consumers and just individual companies that that the credit world is a lot more sensitive to. But then at the same time you know looking at those spreads we're not necessarily near very real crisis levels. You know we're probably kind of around the levels that we saw in the middle of 2020 in the aftermath of you know I've

known Christine from afar for a while now RTS always. And I never knew she was this optimistic here because when you look at credit spreads here in the US on an aggregate basis what are we up to. It's something like a hundred 50 basis points on that on the option adjusted spread. And it's not necessarily the level we're at. I mean although that matters. But I think the pace of which we've gone in what less generally a month from the beginning of April to where we are today from basically roughly 100 basis points to 150 basis points. And a lot of people sort of looking higher saying that that's going to continue to move higher given some of the economic data we're getting and you go back. I think you mentioned this at the start of the show with some of the retail earnings that we got. You know that you're talking about high risk companies with a lot of these retailers

highly leveraged companies companies that of course are on the lower end of the credit spectrum. And if they're not doing well I think you're going to see spreads widen out a lot more before we get to a place where they finally level off. Which also begs the question remain that we've been struggling with. Two is like where is the Fed put. Like we know it's not in the equity market but by. But like there's gotta be something whether it's liquidity whether it's spread blow out OK it's OK. No but is there a Fed. Well not. Where is the Fed. Is there a Fed put. Oh I don't think there's a Fed put anymore at least not in the traditional sense. Where are you going to market the falls. 5 percent. The Fed will step in.

They've made it clear that they want financial conditions to weaken further. I mean they've made that very clear. I think if you want to talk about the Fed putting more esoteric sense yeah there's certainly one around the economic conditions. And in credit conditions FTSE spreads continue to move higher. I mean I'm not going to put a number on it but we've had

strategists on this network that have talked about 200 basis points maybe being kind of the canary in the coal mine for the Fed. We're not there yet. So maybe that becomes the Fed put. But what happens if we go from 150 to 200 guy. The Fed I think is interesting because actually I think Mohamed El-Erian wrote another interesting piece kind of around the Fed this week. And what he talked about was the plumbing Christine. That's his fear. Now at the moment the Fed is fine. The Fed wants to tighten financial conditions. The Fed wants to effectively the stock market to go down but it wants to do it in an orderly way. We've started to see liquidity drying up. Liquidity has been drying up for a while.

If we start to get liquidity gaps if the market doesn't function anymore is that where you do actually get a Fed put. Is that the problem for the Fed. I know we're not there yet but it's that where things really start to crack. There's an excellent point guy. And I would have to agree I think it really will be the plumbing as you mentioned in the Treasury market as the Fed kind of moves on with this tiny cycle. Again it's a reminder to investors that it's not just rate hikes that we're talking about when we're talking about Fed policy normalization. Right. There's also that balance sheet question that I think doesn't

tend to get a lot of attention. It's still very very important to pay attention to. But in a way as you say guy that could be kind of the self limiting mechanism for the Fed if they start seeing liquidity really getting into worrying levels in this sort of balance sheet run of process then that could be something that gives them pause. And I think Romney is absolutely right. You know it might be McCain said he had in between now and 250 basis points. But when we get there potentially we get there around the summertime we could see a potential turning point there especially as you say guy the liquidity issues start coming up. I don't want to make a point to the guy's liquidity issue too because I think one thing that's a little bit different than maybe what we saw during past big market sort of crashes is there's sort of the liquidity drying up. There's been a lot slower here. So and I think that could actually play a big psychological effect not only for

market participants but also for the Fed as well. If you don't really have that bum rush for the door all sort of in one sort of short period of time does it really create panic if it's kind of like the slow boil sort of putting the frog in sort of a pot of cold water and just turning up the heat slowly. Maybe by the time we get to crash levels it'll be too late for anyone to really react. Sorry for being such a pessimist. Yeah thanks for that. Martin OK. All right. I guess we'll leave it there. But I do think it's interesting to also then keying on earnings like we're mentioning the deer like the demand destruction is real.

It's here and it's coming and we haven't necessarily remade it for that either. All right guys thanks a lot. Bloomberg's Romaine Bostick and Christine Aquino really good round the round table. Thank you so much for joining us on this Friday. Well coming up what is the next bullish signal to look for in the market. Our next guest has a model for it. Jay KOEPPEL a sentiment trader is going to be joining us next. If there is a reason be

bullish for now. What about in the future. What do you look for. This is Bloomberg. Market functioning it can get better excuse to actually stop biting ratably and maybe even start talking in a friendly way for the markets ie easing potentially long tail founder and see eye opening about. Sally speaking with us yesterday. Let's get back to the Question of the Day. If you look at the S&P we're up by three tenths of one percent.

Is there any reason to be bullish. Joining us now is J. Capital a senior research analyst over at Sentiment Trader. Do you got some models for this. Good morning Bill. Well as a matter of fact the indicators that I follow are actually net bearish. So I'm not fully invested at the moment but I do have a reason for optimism. So one of the best indicators I have come across involves new highs and new lows on the NASDAQ index. And when new lows overwhelm new highs completely as it has done recently it is it typically happens near capitulation not necessarily at the bottom but very close. So the model that that I follow it's given nine signals since 1990. The most recent one occurred last Thursday May 12th. The previous eight signals all saw the Nasdaq rise in the next 12 months. In fact the average gain was over 40

percent. Now that doesn't mean that's going to happen this time. It certainly sounds very optimistic at the moment but it is definitely something I'm keeping an eye on given all the negativity. It's perfect. And it's one of those indicators. As the old saying goes when the time comes to buy you won't want to. And I think that applies right here. So I'm keeping a close eye on that. One thing to keep in mind though historically the previous eight signals the average number of days between the signal and the actual bottom is about six to 11 trading days. So that's about a week or so a week or two up to a month. And the average decline from the time of the

signal until the actual low is the average is about six to eight percent. So picture a scenario where about a week from now the Nasdaq is six to eight percent lower. Imagine the fear and panic that's going to be going on at the market at that point. And yes I absolutely think that that if that unfolds that way would set up a terrific buying opportunity. So it's not necessarily reason

T.J. bullish at the moment but some to keep an eye on when we get there. When we get that. If we get that. What do I want to buy. OK so the big problems right now in the market everybody knows inflation rising interest rates and poor price action. So we did a study at Sentiment Trader and we looked at when inflation is high as it is today. And when interest rates are

rising as they are today and when those two factors are in play since 1926 the top three sectors have been energy health care and consumer staples. OK. So this year energy has been terrific. It's up Excel. He is up over 47 percent for the year. The other two Excel V and Excel P are both down about 9 percent which isn't good but it's better than the minus 18 percent for the S&P. And by trading those three together you return for the year so far is a little over 10 percent. And I think a lot of people would be pretty happy about that right now. Yeah absolutely. Well let me get in here because I feel like one thing that may make this time different and I say that with some air quotes is what we've seen with the retail investor over the last two years. And I'm wondering how that kind of flow and sentiment plays into those models. If they don't they don't. They're standalone models. We look at you know that's what we do. We're a research firm. We look at data. And basically all we're looking for is ways to find an edge in the market. And we're not necessarily looking at even the current environment to

say well what might happen here. In other words we don't try to predict. We try to find a question that we tell people to answer is not what do we think the market's going to do next. The question really for any investor is how are you going to allocate your capital. Because that is really what's going to decide you or

your fate. So just to act to follow up on that at the moment. Yep. If I may. The model that I follow right now is 30 percent in cash which is very boring. And it's not making much although it could make more as interest rates rise. And it's certainly better than minus 18 percent on the S&P. Plus I do have some capital available if if the scenario that I've talked about before unfolds. So the second part is 20 percent in commodities NIKKEI which have done phenomenal this week. This year they're probably due for a pullback. But I did a study a while back and. Based on reversion to the mean I would not be surprised to see commodities continue to outperform stocks for the next two to three to five years. And

then we got to pass off the lows that we touched on the equity said. So let's let's talk about the duration of any rally when we see it turn. I bottoms 10 bottoms tend to form quickly and bounces tend to happen fast. How long how long kind of scenario are we looking at here. Is this we bounce into into the full later on this year. Summer looks good. Kind of how short and

sharp is this going to be or is it going to be something you're going to be able to trade into. Well as I mentioned before if I just focus on the indicator that the new high new low indicators they talked about before the follow up rallies have been terrific. The last signal was in the middle late part of March 2020. And I mentioned before about how when the signal comes you won't want to use it. Well that was perfect right in the heart of the pandemic. The previous signal was Christmas Eve of 2018 was followed by three of the most awful days that anybody's seen leading up to Christmas Eve in in 2018 had a terrific rally. So once it starts the thing that I'm finding is sentiment is

getting very very overdone to the downside. And everybody seems to acknowledge that. But the one thing we haven't really had yet I keep I keep saying this. We have fear. We have doubt we have angst but we don't have capitulation. We just we don't have people dumping stocks yet. And I think that probably will only just have about 45 seconds left. But at a mix of 28 what does it need to be to sell capitulation. I'm sorry. What was the question. If the VIX is at 28 and motivation why does it need to be. I tweeted out yesterday ISE wake me when it hits 45 is if you look at history f all the big declines it spikes at 40 or 45. So yeah 30 isn't going to do it.

Fair enough. Some people are arguing that you need to look at single stock volatility maybe this time around because people are so out of the options market. But J I think as you say I think people are going to be watching carefully. Jay Capital Absolutely. I've sent him a trailer. Sir thank you very much indeed. Coming up ETF investors are showing signs the U.S. Treasury yields may have peaked. Find out why next. This is Bloomberg. It's time for the Bloomberg Businessweek to look at some of the biggest business stories in the news right now. Average could get to another roadblock for Boeing which is trying to get airlines in China to resume flying the 737 Max. China Eastern

Airlines has outlined several actions it needs to take before operating the Mac again. Amongst them more pilot training and modifications to the aircraft. Boeing says it continues to work with both airlines and regulators. Shares of raw store are plummeting in premarket trade. Trading now the discount retailer cut its full year outlook and first quarter results missed

estimates. The outlook downgrade follows similar moves by Kohl's Target and Wal-Mart. And shares are higher. The chains forecasts show the retailer is overcoming Nike's move to sell more of its shoes by its own channels. But Walker said it expects full year sales and profit to be at the high end of its prior expectations. And that is your latest business flash Alec. All right. Thanks so much Riddick. Let's get to these markets here. The rally fading just a bit. There's a lot of options that are expiring tied to equities as well as ETF. So let's get a look at where we're positioned for that. Kitty Greifeld co-anchor of

Bloomberg ETF IQ is looking at how investors are positioning around these moves. It's been a crazy week. Could be a crazy day. What have you noticed. Well I've been keeping my eye on TLT specifically because we have seen that big comeback into bonds which has been a little bit interesting because inflation is so super hot right now. So you take a look at TLT caught my eye that if you look at short interest on this ETF it's actually collapse. Just in the past few weeks just thirteen point seven percent of TLT is outstanding. Shares are sold short at the moment. That was as high as 43 percent at the end of last year.

And TLT I mean even with that little bit of a bid coming back into bonds it's still down nearly 20 percent year to date. So the fact that you're seeing these shorts collapse at this moment I mean it sort of highlights this broader shift in sentiment we've seen in the markets that the fear has really turned just from inflation to worrying about growth as well and a slowing economy that should benefit bonds and that should benefit TLT. So let's talk about the options expiry. What should we expect. Well you probably saw the big number from Goldman that one point nine trillion dollars in expirations are expected today but specifically in ETF. It's worth keeping an eye on QQQ. So that's invest goes NASDAQ one hundred tracking ETF. It has all your big tech names. And if you look at combined put and call open interest it's actually at the highest level since late

2007. Coming into today's expiration. So the majority of that is inputs. But call open interest. It's higher relative to this fund's history but no one really knows for sure what to ever expect on IBEX Day. But it's been. That is why it's fun. There should be some volatility coming in this fund. So keep an eye on the cues. I'm just before we wrap up the spines of the ETF tracks the S&P. Are we noticing any change in those short interest or call options. So if you look at market data specifically you have seen short interest on spy particularly

come down. And you Mary that together with the fact that you're seeing short interest or rather short interest on spy it's gone up. So people are betting against stocks. They're pulling back their bets against bonds. That sort of ties into that broader picture that we're talking about about people worried about a slowing U.S. economy as you got really a lot of big names warning about a recession. Could it really be that watch the action. Thank you very much indeed. Katy Greifeld joining us on what is happening around the options expiry right now. You've got a market that is bid a

little bit. It's fascinating to see over the last five days what you're seeing here though both the Nasdaq and the S&P both still in negative territory. Yes we're bouncing but it doesn't feel overly convincing at this point. And we've got to get through a few bumps along the road. Coming up where can you find protection from rising interest rates. We are going to speak with the co-founder and CEO of Sycamore Tree Capital Partners. Mark Carter is going to be joining us. We'll talk about what is

happening not only in the credit markets where we're certainly seeing I think probably credit leading equities. And we've seen a fairly big move in credit this week. But we'll talk about what's happening and see yellow market as well and try and get an idea of what is happening there. Is it time maybe to shift out of loans into other assets. We'll get Mark's view on all of that. As I say markets started coming up. Sycamore Tree Capital Partners co-founder and CEO. This is Bloomberg. We're an hour into the U.S. trading session I bet everyone is happy that it's Friday. We are seeing some gains here but how

long can they really last. Few. Abigail Doolittle is tracking some of those moves have begun. Hey Alex. Yeah a bit of a wild Friday. And this is the week mimicking the week because of the sell the rip kind of week and day. We do have small gains for the S&P 500 the other indexes but much smaller than what we had earlier on the open and on the week. You can see at one point on that big rally day the S&P 500 many futures had actually been on pace for a gain. However with the bearish action that we've had

since then not so much. And that means that we are looking at the longest losing streak on a weekly basis for the S&P 500 going back to two thousand one. If we go into the Bloomberg terminal we can see this illustrated. So we always hear people talk about this reminds me of 2018 2011 2008 2001. Well here's one reason to think that these could really be a long rolling bear market. That bear market was basically two thousand two thousand three. You'd have big drops

followed by big gains. Right now we haven't really seen that bear market rally yet but who knows. Maybe this seven down weeks provide some sort of ground for it. It's also important to remember that today is options expiration. Lots of derivatives changing hands. The volume could really skyrocket. And really anything is possible between now and the closer we've learned even on non options expiration day. As for the big story and one reason that we have these huge declines all about earnings especially for retail but retail earnings in particular today raw stories coming out that stock plunging similar to what we saw out of Wal-Mart Target. Those stocks down sharply the day after they reported for for their

quarters. And there is Netflix also really leading the way down 35 percent not retail. But this is the story of this earnings season guy that some of these companies just being brutally punished not priced in at all happening in a one day event. Will this continue or are we going to see something brighter next week. I know that Macy's reports. Will they be a bright spot. We'll have to find out. We know there are a few bright spots out there wouldn't it.

Abigail thank you very much indeed. That was certainly a bright spot. Abigail thank you very much indeed. So let's talk about the signs of a bear markets. Are they going to be any signs of a bear market rally. Well let's talk about this marathon as it is thought about again Marathon Asset Management. It is Friday. CEO Bruce Bruce Richards spoke to us a little bit earlier on this week. High yield is now gone from low yield of 4 percent to a more reasonable high yield of around 7 8 percent. So what we see in the marketplace is the markets have adjusted. There is heavy volume these last couple of weeks. And so there there's a lot of capitulation. The markets can now move into this bear market

rally which we're entering right now. Chris Richards let's get another view. Mark Korda Sycamore Tree Capital Partners co-founder and CEO. Mark great to see you. It's been quite the week. You've seen high yield widening out really quite sharply. Credit markets really starting to move. People getting nervous about

loans and getting out of that market as well. What do you make of the price action. One guy it's certainly a an interesting start to the year for credit markets. We've seen AIG have the worst start ever in the history of that market. High yield is down over 10. That would put it number two

on the list you know. And and it really is kind of interesting that nothing is really fundamentally happened within these markets to spur a move like that. And one of the most important things we're seeing to a start like this it's this ugly is really that dispersion is rising across names. The market is starting to really punish those

companies that that underperform. Those that have issues are passing along some of this inflationary dynamic within their cost structure. And that's very interesting to us. I think I think if I were to think about the last 35 years that we've been in this business this may be the first real cycle that we are entering into since in the last 20 years since the 2003 market.

That's huge. I mean that's a big shift. And removing that Fed put is a huge shift. Also you mentioned that dispersion was picking up which I would think mean there's more idiosyncratic opportunities. Where are they. Is it ideas at high yield to see yellows as a leverage loans. Well I think that the theme that that has been durable that will work in the beginning of cycles is always to be up and quality and a floating rate. So we're doing very well in that part of the marketplace. And it's but it's really more of a defensive call. Defense wins championships. Yeah. Think a viable defense

turns in offense at defense in the fact that you're floating rate you're not taking any sort of rainfall in here and participating in that and being up in quality. It has been relatively just a great move. Just look at loans versus high yield loans are down a couple of points. High yields down 10. So that outperformance is massive. And I think that continues. But again if this is more about if this is the start of a real cycle which the market has not seen in over 20 years the game changes. It's not this sort of dialogue that I keep hearing on the show which is a risk on risk topped by the dips.

Everything goes down. Everything goes up. It's more about being a good credit picker avoiding things that you should known because those get punished in here and then picking things that that I think will turn around. There's certainly much more to buy right now than there was say a month ago. And we're finding things to do that you know quite frankly we think we're getting overpaid for that. But it's early in the cycle. OK two questions. What do you think being overpaid for. And I want to come back to the question of why loans will continue to outperform higher. What do you think you're getting overpaid for right now. I'm up. So list is this should take a look at those two markets from a top down basis. So you've got you've got high

yield yielding around 8 percent which is certainly better than when it was at 4 or 5. The loans are probably seven and a half percent. You're frightening right. You're not taking in the interest rate risk. You are some taking some interest rate risk and more credit risk. I would argue and you sound on a relative basis that's probably a better balance. If we think about high grade zero debt which is a NIKKEI market for your audience. But just to look at it quickly that triple-A debt is yielding over 5 percent. That's better than the Barclays AG. It's triple-A. You're not taking any credit risk. You're taking some risk but you're not taking any interest rate risk and you're getting paid more than the market. That is ridiculous. And we think that's

that's super cheap. That's that's a great dignity. Do you think that. Do you think that that credit risk that you're not taking does though start to emerge. A lot of people got into loans because it allowed them to to deal with the inflation story. But we're now moving on from the inflation story to the implications of the inflation story which is slower growth. And I'm wondering whether loans are the best vehicle to do that with. I appreciate what you're saying about going up and quality but nevertheless

are loans the best way to play that. Again I I mean I think if we are going to real psycho guy this is less about talking about asset classes and more about what you do within those asset classes that stuff. So again it's it's there are going to be winners and losers in all of these markets. And when we talk about coming up in quality in the early part of a cycle that's that's that's the move. So there are things in in high yield. There are things NCL loans are

things that are loans that are high quality and they should be fairly resilient in here. Balance sheets across corporate America are pretty good. Yeah. I mean we don't have a real fundamental issue yet but borrowers that are finding fundamental issues in their eagerness and erratic sort performance are getting punished. I mean markets gap those those things can trade down in can trade down 5 10 points in a blink. And so it's really more of a function of doing your homework and discipline you taking advantage of that and that that sort of alpha by avoidance dynamic that we talk about a lot that's paying off in here. But on the flip side it's like Martin. Yes. You mentioned that we're still early in the credit cycle. I wonder how long you think that if we are in this kind of credit cycle for the first

time in 20 years how long do you think it actually lasts like one of the phases that you're looking for. This could be years. This is a much larger market than we've ever seen. Credit as it as an asset class has grown multiples and multiples of the 2001 period for example. And and so it will take a long time to readjust this. I think this dynamic the Fed put being gone and that's kind of our view as interest rates have gone in this long term declining trough and now it's starting to flatten out and probably go back up. In general that lack of the Fed put means that you'd better be comfortable with

what you want. And if you don't you're not going to get to sell it to someone else later on when Rachel lower. So you better be good about your homework and that risk premium is rising and it's going to take a while. It just it will take potentially years to get through all of this. Mark one final quick question. You just talked about how happy the market is. Things moving pretty quickly. Are you seeing any liquidity problems. Is the market

functioning. Market is functioning but I wouldn't say it's completely open for say high yields. It really opened. You can't do a new we see a low right now but there is liquidity. There is a buyer at a price. And that's the best reason why the market is happy with that price at times is certainly not what you would want it to

be. And I think that that makes sense given the fact that it's a little bit early in the cycle to the. Stepping adjust to this new reality of where we're at with dispersion. I think people will step in and buy some of these names recently are looking at a lot of robot names that are higher quality that are down or five points and we think that's a robot. So so as that starts to happen you will see a better functioning secondary market a little bit more flow and the bid ask will come in. Hey Mark it's really good to catch up. It's gonna be quite a week and lasting a few years. I'm sure we'll

get you back on the show as well. Michael kind of Sycamore Tree Capital Partners co-founder and CEO. Thank you very much. I kind of think President Biden kicked off his Asian trip with a visit to a Samsung factory just outside of Seoul. We're going to discuss the U.S. strategy in Asia with a former official of the office of the U.S. Trade Representative Representative Amy Zelikow Denton's Global Advisors. This is Bloomberg. This is Bloomberg Markets I'm rich kid. GUPTA You're looking at a live shot of the principal room coming up David Salvi the anchor managing director and portfolio manager joining Bloomberg Television 330 p.m. New York Time. This is Bloomberg.

And keeping you up to date with news from around the world is the best way I could get to it. Former New York City Mayor Bill de Blasio is running for Congress. De Blasio told MSNBC he'll seek the Democratic nomination for the 10th Congressional District which includes parts of Manhattan and Brooklyn. The primary election will be August 20 3rd. President Biden is in South Korea where his immediate focus was on the semiconductor shortage that has dragged on the global economy. The president toward a Samsung factory that has some of the biggest chip production lines in the world. And he has a message for Congress

hopefully soon. The Bipartisan Innovation Act will deliver historic federal investments in U.S. research and development including funding for something called the chip set to revitalize the U.S. semiconductor industry. Meanwhile Samsung is breaking ground this year on a semiconductor factory in Texas. Global news 24 hours a day on air and on Bloomberg Quicktake powered by more than twenty seven hundred journalists and analysts and more than 120 countries. How much could get done. This is Bloomberg Alex. All right. Thanks so much Riddick. Let's get one. Biden's first presidential trip to Asia. Want to bring in Amy Zelikow Denton's Global Advisors principal and head of China Practice. Amy if

President Biden comes back to the U.S. what would be a win. What would he be able to say. This was my trip and this was what made it awesome. Well great to be with you Alex. What will make it a win for the president is if he can deliver messages to the community in the Indo-Pacific and messages back home that resonate with both audiences in the Indo-Pacific. Of course reinforcing the fact that the United States is capable of leading a global effort to thwart what Vladimir Putin is doing in Ukraine. At the same time that it can reinforce that it wants to continue to be a security leader in the Indo-Pacific and an economic partner to the countries there. That is the message that he wants to to deliver

there. While he's not going to China on his first visit to Asia he'll only be in South Korea and Japan and speaking with other leaders in the Indo-Pacific from there. He's certainly going to be talking about China and dealing with the highly competitive relationship that the United States has with China with all of those leaders back home as we saw in his visit to a Samsung factory. He's talking about what the United States needs to be doing in order to have Indo-Pacific partners as part of the American economy. Samsung investing in a semiconductor chip facility in Texas in order to make our supply chains more

resilient employ more American citizens strengthen the U.S. economy at home. What does failure look like Amy. Failure unfortunately guy would I think be the most possible although I do not think probable in the economic message that the president wants to deliver to Indo-Pacific countries that the United States is not just a strong security partner which it certainly is and it's demonstrated already. But it is going to be the president will be rolling out the Indo-Pacific economic framework while he is in Tokyo. You'll be inviting other countries as to participate in the launch. The Biden administration has been very busy since last fall talking about this economic framework which has four broad pillars and inviting countries to join. And so far in

advance of leaving the White House signaled that there could be as many as 13 participants in this launch of the economic. Got it. The economic framework Indo-Pacific economic framework. Failure is if the countries say this sounds okay but we don't think it delivers what the United States must do to be an economic leader in the region. Can a country sign that agreement and also still be friends of China. That's been a real point of contention for especially a lot of the Southeast Asian countries. But even for South Korea for the new president of South Korea how does he balance obviously already having a very strong security relationship and rock solid bilateral alliance with the United States and in the South Korean leader needs that as we're dealing with instability in North Korea right now. But the South Korean president has not as he threatened to do

while he was running for office disavowed the necessity of having a strong economic relationship with China. And so what we have heard is for this Indo-Pacific economic framework the Biden administration watered down some of the requirements to join so that 1 countries don't have to take a strong stance against China and to they don't have to sign up for something that they're not sure that they want to remain. And so produce a petition next week in in the launch does not mean that all of these countries are going to end up signing on to this new framework agreement. I mean if North Korea fires a series of missiles while the president is in the region how does the United States respond. Well I think the United States is in a pretty good position to deal with that. Jake Sullivan talked about that possibility as they were looking at contingencies. While the president is in the region the North Koreans have a habit of of doing missile launches while there are Americans in the region. And of course they haven't done a nuclear test in a few years. And so that is that is a problem that is

very very strong possibility. I think the U.S. government is going to reinforce with South Korea that they'll enhance that missile defense systems in South Korea. The U.S. government has not been willing to respond positively to South Korea's request that there be nuclear weapons stationed on the southern part of the Korean peninsula because that would be so provocative not only for North Korea but also towards China. And so the U.S. feels that it has the ability to continue to act together with partners and allies. Unfortunately last year possibility to work with China on that but to come together in the face of a more significant North Korean threat. I mean great to catch up. Haven't seen it for a

while. Really interesting stuff. IBEX Echo of Ft. That's his Global Advisors Advisory Group. Thank you very much indeed. Thank you so much. Coming up we're going to hit deer hit by cost pressures especially the cost pressures of its customers i.e. farmers die as a result of going to buy less equipment shares. The world's largest ag agricultural equipment maker down down sharply today. We'll talk about that next. This is Blake. Market rolling over a bit S&P down by two tenths of one percent. A big part of that is Deere that stock down by about 11 percent. At one point we saw the biggest drop since March of 20 20. It's all about costs. And then what the demand destruction is. The

analyst call is going on right now. Joe Doe covers agricultural sector as well as many other commodity things for us. And he joins us now. Joe you're listening from the call. What did you learn. The analysts are calling this really messy. What happened. I think a lot of them a lot of people were wondering going into

the call. Listen you guys missed revenue by about a billion dollars of what the Wall Street average estimate was. They're trying to figure out wait a minute. We've known about supply chain issues. So what's really going on here. I think on the call they've basically said listen back half of the year we expect the supply chain situation to remain constant. That means you don't see getting worse but they also don't see it getting that much better. And I think this also comes as one analyst told me in a call earlier this morning at a timing wise at a bad time when the rest of the market's been getting crushed because of supply chain issues. Right. You had Target and Wal-Mart coming out with

their information and coming out and saying that supply chain issue and the inflation stuff is hitting you is just poor timing all around. But we kind of knew that. Joe what struck me about what they were saying was that farmers are starting to feel that margin pressure as well. Agriculture going out diesel is going up all kinds of things are going up for their customers. And as a result of which that's going to mean they're less able to purchase new agricultural equipment. Exactly Guy. I mean one of the things that we've had is kind of you know the trump card

here for dear is that regardless of drought or war farmers still need equipment. Right. But one of the things we started hearing in the past month and a half especially from one of our guys on machinery Pete had been talking to a lot of farmers and you know out in the field saying hey listen these fuel prices are really starting to get to us. And to hear Deere say it I think it has an especially it's much more impactful to the market. And so there is a worry that if you have high fuel costs that these farmers maybe won't have the cash to spend on new equipment. Maybe it will just keep running out older equipment and doing repairs. And that's obviously a big concern here in the market. Joe we'll leave it there. Great stuff. Thank you very much indeed. We'll get you back. Get back to the call. Really appreciate it. Bloomberg's Joe Doe listening in on what days

management is saying right now what he got for you. We're gonna be talking next about the European clothes were coming into the end of what is a bumpy bumpy week. We're going to be talking about the economic story as well. It does give you a quick price check. European stocks are actually big. We're just north of 430 right now. We're up by around nine tenths of one percent. Euro dollar is on offer but we're still not the 1 0 5. The U.K. tenure is on offer as well. Yields coming up. We've got to talk

about the economic picture here in Europe and a little bit more detail. Moritz Kraemer chief economist at Alba W is going to be joining us next to get his take on what is happening. What if the eurozone go next. Where does the U.K. go next. That conversation to follow. This is Bloomberg Daybreak.

2022-05-23 10:38

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