Hello, and welcome to What Goes Up, a weekly markets podcast. My name is Mike Reagan. I'm a senior editor at Bloomberg DNA hawk Across as it reported with Bloomberg at this week on the show, Well, for the last few weeks, we've been focused on the train wreck in the crypto market, but there's been some pretty interesting developments in the traditional markets. The SMP five hundred is up almost thirteen pcent from its bear market low in October. Interest rates have stopped their alarming surge higher, and there seems to be some cautious optimism that the worst of the inflation shock, not to mention, the worst of the monetary policy tightening by the Federal Reserve, maybe behind us. But is that really the right take? Right now, we'll talk to a global macro strategist who isn't quite convinced that inflation will fall completely back to Earth anytime soon. But Volta, Before we get into that, I have to ask, have you seen the movie e T Of course? Of course, okay, you never, I never know, you know. As an eighties child, of course I had to see it. But so many eighties movies in retrospect are problematic now the whole John Hughes series of movies are have all been canceled, I think by by the problematic. I don't know that's what. That's what. I don't you know. We were dumb in the eighties. We didn't know how problematic some of those movies were. But I guess that's a little teaser for my craziest Thing in the Market segment. I will say. I'm also excited because this week's guest is a native French speaker, and I know you've been taking French lessons, so yes, but I'm so bad. Don't call me out, No, I want you to. You got to introduce them in my French is horrible. What's that mean? It's horrible? Obviously, Hello, Hi horrible. We have Vincent Tellut. I hope I did a really good job with that pronunciation. He's the director of Global micro Strategy at Stone ex Financial. Vincent, welcome back to the show. Letter to be back, but maybe just to start out. So you just had this this note doubt about the seven deadly sins within the market, and you focus on tech specifically, and I'm thinking that actually is a really good view into how you're viewing the market and everything that's been going on, especially with some of the froth and speculation that we've seen over the last year. So maybe could you just go over how you're seeing things right now. I think, you know, this really reminds me of of what happened um in the summer when we also had a slightly positive INFACI and surprise and you know, all the strategies that had issued the peak Inflacian note in January, February, March April manager got this one, uh and we had a same story monster rally, a little bit of mean stock friend z that was bad, bath and beyond back then, and then the view that all right, you know, just just a couple of more hikes and will be done, and inflation is gonna go away, and it's time to to to go back in the hyper growth highly valued unicorn that we're soaring in in in You know, again, we we've seen the movie before. The main difference between this rally and and this summers is I do believe the path of this inflation is more valid now. I mean, I was probably one of the earlier strategies to come out with the view that would have eight nine percent in fish in the US in two and even I I have to admit, yes, the economy is disinflating, inflashing is going to slow. Um Where I disagree with the markets view is that it's not going to slow back to I think that if you look at a one year swap, we're probably looking at two point nine by next year and then slowly going down to two percent after that. This is the part that I disagree with. I think we're going to look at a sustainably higher plateau of inflation around four point four or five percent. And I would actually argue that's a good thing. Uh, And that's something that the market is still not pricing. Um. So I do think that this will eventually end in tears, which is one of the reasons why I wrote this piece on on the seven. That is enough secon value to show that a lot of the behaviors that we had during double years are still there. If anything, they're even more prevalent because the business is deteriorating. So a lot of the kind of funny accounting being employees and start over hiring, buying, fake growth, we've ad all that is still happening. You know. Again, things never go in a straight line. And now it's it's kind of a time where the deflation work inflation worries of taking a step back, but I expect that they will eventually return. Yeah, I was reading that uh seven Deadly Sins note, Vincent, and let me just read out one line here because it really uh stuck with me. It's it's sort of towards the end of the note, kind of kind of where your conclusion is, and you say, the real Fed pivot will not be to cut rates in three, but to accept that a decade, a decade of five percent inflation is the least painful way to de leverage the economy, reduce inequalities, and restore sustainable growth, while a decade of five percent inflation or I guess to your point, you know, maybe four and a half five. How does that play out in the markets and with the Fed? You know, right now the Fed funds futures are are pricing at a terminal rate of right around five would this course the Fed even higher than that? And and what's really driving that five percent for a decade in inflation? You know what? What's what? Let's unpack this whole note a little bit so, and my view is that the true people of three will will not so be be so much the two or three rate cuts of the market currently has priced. So I do think we raised to five per cents, and the pace of it ultimately is irrelevant, right, I mean maybe the seventy you know bibs monster hikes are over right, So yeah, we can probably you know, afford to do a couple of fifty even twenty five. But then I think rates do not drop after you know, mid twenty three, like the futures market has it, because inflation doesn't redrop. And the reason inflation doesn't drop is because that by then inflation will be mostly about wages, and wages are I would expect will be around four or five percent by then, and I think we'll get to a point where the third will be in the position of George W. Bush after the invasion of Iraq. So you remember two thousand three, right, Well, we're going looking for w M. D Uh. We don't find them. Um, So the war is not going well, the occupation is not going well. So what do we do? We declare victory? Right, and we never talked about it after again, right, this is when you had George W. On the aircraft carry the big sign. Mission accomplished. Right. If I were J Power, I would do the exact same thing. I'd say, Hey, mission accomplished. Right. But by May I think we we'll get to maybe four or five percent inflation. We'll have four or five percent fat funds rate. So so he's done it. He's the volcan time. He's raised the fat funds rate above the you know, the rate of inflation. Mission accomplished. And then we should never talk again about what happened in one when the feed was buying you know, thirty five billion of mrtgage backed securities when we had the massive housing bubble. That that we can forget, just like we forgot about the UMD Dolph. Just get rid of that supercent target. Yes, now put that on on hold. That wouldn't be the worst thing in the world. And that's my point. I mean, if you look back at the history of the two percent target, it's it's amazed number. It came, I think from a press conference in New Zealand in the late eighties. They had a problem inflasion back then, and they had an economist on TV and you know, he was asked, what what what is I think inflation is good target? For inflation is two percent, why too, you know, not too high, not too low. I mean, there was no there's no scientific backing behind the two percent. If you look at the distribution of inflation and growth in the US, will actually notice that growth has been actually faster, Really economic growth has been faster. Inflation has been in the four to five percent range. And you can very much, very well make the case that what really hurts is when you have inflation at above ten percent or really unpredictable inflation, because this is when agents complan for the future, Investments don't get made, people wore stuff. But as long as you have stable, somewhat moderate inflation, whether it's two or four or five percent, doesn't really change things. And I think that's the way most Americans also feel like the most Americans don't don't even know what the FED does. They don't know about the two percent faction, and they just think of inflation as as whatever happened in the past, So that that's where the inflasion expectation channel comes in. So a decade of four or five percent in facition is is really not bad. I think we are in a period where we have a structurally tighter labor market, mostly because of demography, uh and also because we no longer have access to Mexican labor um. A lot of the great moderation of the past thirty years was with the product of free forces. On the labor side, you had about twelve million Mexicans that across the border between UM basically the under the tecular crisis n four and two thousand seven, and that this flow is stopped and even reversed since COVID, so we no longer have cheap labor. On the good side, it was a China shock, right, We had this massive evaluation on the RMB about at that the station crisis, the entry of China and t o them subsidizing all sorts of productions. So suddenly we have access to the supply Chaine courtesy of of Amazon and First World more than Amazon obviously. You know, if you follow what's been happening in China right now, this is maybe not why you want to supply chain and and this is not you know, if you just to get a demography of China, we'll have a massive crunch in the population of young workers in China because of the one child policy, So we don't have cheap goods from China. We don't have cheap labor from Mexico. And then the last the last part was cheap capital as the US of these massive deficits in the late nineties. But that meant is that you had all these countries that as a very large troopers Europe, Germany, Japan, uh and then Saudi Arabia, Commari, polus in countries, and these these services would flow back into the U S treasury market get a capital account because all these countries were trying to under undercat their currencies so that they could get more exports. So for the U S it worked great, right because we basically send people treasuries, send them treasuries, and then we got goods from them. So it was it was it was fantastic that channel is also clogged now Japan and Germany in Afroanic count deficits, China actually selling treasuries. So the three factors that boosted univation low. And then maybe it's so easy for us to achieve that two percent inflation are gone cheap labor, cheap good, cheap capital, so it would be a lot harder to get down to two percent. I mean, I'm sure we could like if if if Power wanted to be Vulcan and he gets the fat funds right percent, we get to two percent. You know, why, why would you want to destroy the labor market when we are seeing the gap for minority wages actually closing, We're seeing young people do better. Finally, we are seeing asset prices go down, which is a good thing. You want people to be able to buy homes. You are seeing the real value of the dead being wiped out. I mean inflation, if it doesn't go above seven eight percent is actually the medicine that we need. And we need to let that run out for a couple of years and will be in a much better place. And by the way, it's not just me saying that there was a very good outped I think in the ft about the same thing. So I think you'll see a lot more of that next year as central bankers realized that the cost of going back to back to two greatly exceed the scenario. To me sounds though like a nightmare for profit margins and US corporate profits EPs for the span is that is that the sort of bottom line conclusion from from that type of outcome. I think for now we are steal in the first order concept once of infaction when in facial invades everything, including profits, Like there's the money illusion in in terms of Kanes, everybody thinks they're getting richer. Uh And and and also because of how accounting works with with inventories, like if you if you value inventory at the lower pre infaction costs, which actually shows very very high profits. So I think that's one of the reasons why we saw profit margin spike in But as some passes, You're absolutely right, I mean, the cost of everything goes up, right, Your cost of energy goes up, the cost of labor is going up. Wages are not slowing. Maybe they're hitting a plateau, but there's something not slowing in service is and then you supply chains getting a lot more complex. If you can produce in China, you cannot do the just in time anymore. So, yes, margins would need to come down, but I mean, unless you're an owner, I would argue that's a good thing. I mean, one of the issue we had for four years is this steady expansion of margins um at the expense of labor. Uh and that contributed to the concentration of wealth one percent. Inequality issues and I think that the pendulum is finally swinging the other way in terms of sharing the you know, the value added by by the economy was being captured by a handful of monopolies and and and and their capital owners. And now the dependulm sushing back and power is swishing back towards towards labor. And I would argue that's a healthy thing after four years of concentration. I like your caveat there, unless you're an owner of stock, which might be one or two listeners out there, I hope more than two three, very hopefully vincent. I'm wondering how likely it would be for for the FED to give up on its two percent inflation target, because with that not absolutely destroy their credibility. Well, that's why they would have to be smart about it, and I think they can. There are many ways you can do it quietly without actually acknowledging. And I do agree that, you know, my whole plan only works if people believe the two percent target is still a reality, right, because what are we talking about, funny, is ultimately fincial repression. Right, So you need to convince bond holder to keep buying bonds and are at low yield and then you constantly kind of stealthily defaulting on them, but by this highly inflation. So you I don't think you know, J. Powell is going to come out and say, you know, guys, you know five years on YouTube, but there are many ways you can do it. One days is one way you could do it is called hedonic adjustment. So hedonic adjustment is something that the FEDS has developed over time to address for the fact houses get bigger, cars get better, TVs get smaller and larger story uh and and that the quality of the product increases. So they only apply that to I think about six percent on the index right now. And it's it's um it has a very strong deflational impact, right because the two thousand, for example, the phone. You know, the price of an iPhone is you know, a thousand, one thousand bucks now, but if you look in the CPI you see it come downtown down because the fat is I think correctly saying well, an iPhone is incomparably better than the the old Nokia that I'm sure Michael still uses. That's such a good dig I did have one of them. Yes, he doesn't know how to open it though he doesn't know how to plup it open. So yeah, so the so the fat has been hedonically adjusted at certain time series and others not for example, Men's out where his head on the clear justice, but our underwear is not so And I could go on with the list. Cars are hedonically adjusted, meaning when cars do get better, the price in the CPI is adjusted down, but motorcycle or not. So you have a lot of leeway. And this is like a really tiny technical thing, like you don't even need to issue a press release that you know that they could just do that that the b RS could just do that overnight, no one would notice. Uh. Another way, you could kind of adjust the index in the infasionary way, sorry, in a defasionary way, so that you actually tolerate a higher level of infation while still showing that you're technically meeting the two percent target. Would be on the rents um and the onn recurrent rents. So there's this huge debate right now about you know the way the FED computes rent and especially oh e R so shelter as a whole is about thirty percent the CPI. You have seven percent in ran on rent. These are horrible statistical monsters that the BRS computes and really and it's lagging a lot, right that that's that's what people are complaining about, is that the FED is driving in the review mirror that the real estate market is already turning, has already turned. We can see those data. But because of the way it's computing, the BS compute renting faction, that's going to keep increasing for the next twelve months. Well, maybe they could revise that, say, you know what, we just wanted to make it better closer to reality. And what that would do is that it would are you know, it wouldn't change the reality, but it would make that what would have been five pre cientifation becomes stuporcentifaction and being metric. I'd love to hear the rationale for the underwear not being adjusted. Just there's just no innovation in underwear underwear anymore. I guess maybe maybe that's it. But but but so, how does one position their investments for this type of environment you're describing, Uh, you know, it sounds like maybe take advantage of real yields if if you get if you're able to get some to boil it down in the equity market, Is it as simple as a growth versus value trade to stick with, stick with value over growth, that sort of thing. You're generally correct, Um, you know, short duration. If my scenari is correct, I would expect the yield care to steep and quite aggressively next year. Yeah. I find some of the short term rates to be quite attractive. I mean, we now have positive rear rates in the US for the first time, tips rates, you know, one five one point six percent time. I actually, if you really want to get crazy with tips going Brazil, they're like six to seven percent inflation adjusted yield on on on short term Brazilian bonds. In terms of equities, the portfolio that I've been recommending is what I call the Holy Trinity uh and it's three equity sectors with very simpol ty of to trade, Energy, healthcare, financials. That portfolio just equally spit one third one third, one third is up sixteen percent for the year. Your sixty four portfolio is down sev I would stick with that, you know, because with what I love about that Holy Trinity re portfolio is that it hedges against the free macro ris that we're facing. One, of course, is still inflation. In my opinion. You need your energy there. Energy is kind of your dark horse, you know scenario or I go if we have something that happening in Russia or trying to reopening Song suddenly whatever your cities. Energy a weapon. That's how it works. In energy was your risk off asset. So energy helges against inflation. Healthcare hedgies against recessionary risk. Healthcare is actually the most defensive sector, performs best in recession, better than utilities, especially now that you know the problem is that with a recession with higher rates, right, so, you don't want to go in your utilities or consumer stable. You want to go in a sector that actually has some potential for secular growth in addition to being defensive, which is what health care is. Uh. And then the third pillar of my holy Trinity portfolio is financials, which which I'm very excited going into Tree. If my scenario is correct. Um, so I will see is your curule step and and that's very good for banks. You'll have you know, you have about one point five tree and in reserves access reserve right now. I mean they're just gonna sit just sitting at the FED. They're gonna connect five recent from from zero. So that's about like cant readio the math. I think that's about only fifty billion subsidiy, just increasing pure profit, just for for the banks to have excess cause of the FED. Uh. And then if I'm correct that the economy is actually doing quite well, you know, like the labor market is very resilient, wedges are still growing, people are not going to default. Um, So I think the market is somewhat expricing a bit of a repeat of two thousand eight. Oh, like you know, create card bounces are going up, the you know, the housing market is including. I do not believe these things are going to happen in twenty twenty three. And as a result, think banks are going to be the leader in my holy trenity portfolio in twenty three. How about the US versus rest of the world inequities? You know, it's uh some outperformance. Uh you know global x US type of the next is these days? Is that? Uh? Is that going to continue? I think when the market starts to understand that the FED will people on inflation, um, that trend of our performance of the US will stop. It will be back to kind of the reflation trade like what we saw in two thousand three. Two thousand seven week dollar. So you want to be long emerging market, I would say emerging markets outside of China, which I've already done very well. By the way, that the one issue with with you know, global investing is is Europe. So okay, forget about Europe, forget about Japard, forget about China. Now the problem is this is really the big pieces of Europe. You know, if you look at the MSCI index, these are the three big pieces. But once you've dropped, the things that have gone down your left were actually pretty good stuff. So I call that the bim chip. It's Brazil, Indonesia, Mexico, Chile, India, and Peru. Uh. These are seven countries that are actually up on the year. UH, and they are emerging markets. And these are not the count of countries that you would expect to do well in a year. And when the fedest tightened by about four hundred basis point and the US dollar has you know, dollar in excess as radied by twenty points, these these used to be thought as these kind of weak, vulnerable emerging markets, and they actually doing very well. There there is still a very strong case for global investing. You just don't want to do it for an index, because the index is gonna get you into places you don't necessarily want to be, which is mostly Europe or China's big deck, which you know, who knows what's going to happen there? And what I do. Want to go back to your seven Deadly Sins note and talk about number one and six because they're kind of two sides of the same coin, one being uh paying employees with stock instead of cash, and the other being uh, what you call bad buy backs buy backs that incinerate value for share shareholders. You you mentioned uh Meta in particular, metas by back program incinerated seventy five billion of shareholder wealth or thirty of its current capitalization. So how do you see both of those issues playing out in the next few years? You know, the this massive buy back binge that US market spent on for I don't know a decade or longer, and that notion of silicon value using you know, stock as a currency to pay employees. Are both of them sort of jump the shark, if you will, or both of those things kind of taboo going forward? Do you think, well, first of all, a muslag a complaint because you gave my craziest thing. Um, so I'm gonna think of something else on the fly. So in the case of Facebook, is sweet to uh so I want is just you You multiply the price that which here rebushes the shares by the quantity, and then you compare to where they are today. So that that's about betting lost right there. And the other one is it is by really saying that you know, if if you if you do a buy back because you issued yourself some you know, some stocks, you're not really doing a buy back. You're just taking your shareholders money and putting in your pocket. So I had the stock based compensation. It's about thirty five billion in the past five years of Facebook. So half half of that came from from totally timing to buy back and the stock price declining last year, and then half of that came from stock based conversation, which by the way, is the norm. Like in another example would be Google. So in the past three years, Google as we purchased about eleven percent of its uh of its share of sending if you just get number, but the shares of sending haven't changed. Why is that because because they've been issuing that too. To shareholders. So you know that that that's long been going on, and I think investors have used to have a somewhat of the benign neglect on on the practice when sock price going up because technical to buyback made money, right, I mean if the sockpwrice higher next year, you can say, oh, look at back a hundred nurse hundred twenties. So I it's been a wise use of share all the money, even though really what it is it's just a trick to save cash. And then um, you know it's tax advantage also a little bit um and then it makes you look better on certain metrics like free cash flow or in cash flow. All that looks a lot better because you're paying. In most big tech companies about half of your salary is paid in stock. So yeah, when when when the bubble was going, everybody was happy with that. And and now I think, you know, we're seeing the reality bike right, I think the the interest of the shareholders and that of of workers are not aligned. Uh. And you see a lot of companies that you know, now that the stock price have cone down, they actually have to give out more stock, right because they want to give X dollars to their employee to be competitive with the Google, the Facebook, whatever. And now that you know stock prices you have dropped by eight percent, they have to give five times stock as they used to. So the amount of delution that people are taking from from this is enormous. UM and I do expect that, you know, next year there will be somewhat of a shareholder revolt because not only are is the company not not performing? Um, you know, you've seen this kind of slow down in in in deck and social media, but on top of that, whatever earnings is left has diluted across you know, much many more shades. Well, so if that's if a company is actually reducing its number of shares outstanding with buy backs, is that, uh do they get sort of a pass on the deadly sin of bad buy backs? Yeah? Apple would be a case where you have about a one to one ratio between buy back and flow drink. I think, by the way, that's that's insane that I think Apple recrut is more than five hundred billion in stock since he started to buy back. I mean five hundred billion. Can you imagine this? This? I mean this, this would have been the largest company in this and five just a couple of years ago. Yeah, I mean you have always don't less they want to go in the you know, the buy back debate. Some some people you know hate them. I mean it's if you make a lot of money the way Apple does, if you don't return cash your shareholder, you'll end up, as you know, having more and more equity and less and less debt. Right, And you may want to keep your fincial structure the same, and the buy back is a way to do that. And it's a way to do that in a way that's more flexible than the dividend, right, because if you get the dividend, people are going to get back mad at you. Buy back is a bit different. But so I'm not like philosophically against the use of buy backs. I'm philosophically against the use of buy backs if it's a trick to hide lavish stock option packages to employees that basically just you know, use the company as a stock printing machine and run away the cash. But in theory, there's nothing wrong with the buybacks. What I will say, however, is that the market has become very reliant on these buy backs. Um So over the past year we had about a tree Dan dollar in buy back in the past year. That is a lot. It's a lot that that is a record, and I doubt that this is going to keep happening because you know, it's a lot harder to issue that you have a lot, a lot more to pay on that um a lot of company of conserving cash. We also have a buy back tax that's coming as part of the Inflasion Reduction Act, is a one percent tax on your buy back. So one of my concerns that we could see a fall in buy backs next year, also because the big tech companies are not going to get away with these take buy backs anymore. And maybe you could see dropped from one trillion to five billion. And then the question is what replaced that five billion equity demand. I don't have a good answer for that. I think Goldman is estimating something like eight billion. But I want to ask about one of your other since, which is over hiring. And obviously we've seen a bunch of tech layoffs, obviously a ton of crypto layoffs. There's seemingly a new company in crypto announcing layoffs just about every day. So I'm just wondering if that's sort of representative of what you think potentially we could be seeing going forward in the labor market because we're not seeing it yet, right, Yes, that's a good question. So I want to put the tech layoffs in in perspective. And of course, you know we all have friends and I mean led in San Francisco, So I want have friends who are you're concerned with it or so it's it's unfortunate when when that happens. But um, if you look at the MAGA stock, the Big textalks head count doubled since uh pre Covid you had this insane hiring boom one. I mean, I have you know, friends who are like you know who told me I couldn't even Google, I couldn't do my job because I spend my days just interviewing candidates. And what the panemic did? It created this once in a lifetime flood of demand for device online entertainment, U cloud services and another big tech firms. I thought that this was going to be permanent in some way. That kind of reminded me of what happened in oh six or or five or six with the big banks. You know when that that's when I started. I remember that you had these lavish cocktail parties at US universities where you know, the class of seven was twice the class of for the new analysts and UM and of course the hangover lasted for ten years in the banks. UM. So I think what we're seeing in tech is very similar UM. And it's unfortunately just the tip of the iceberg. So it doubles into thousand nineteen. Right, so we could technically all have the Twitter treatment of firing fifty percent the workforce and we would only be back but by three years. UM. Now, as far as what that means for the labor market, I really would not UM um over emphasize the relevance of the tech layoff for the economy. I mean, is still a very small sector, and it's it's not a very working inventive sector. I mean, you know, the bulk of your workers in the US are cashiers, UH, wires, factory workers. UM. And and this is where the inflation problem is. Like if you look at the job openings data, the wage cool of data, you you'll see that the pressure is at the low end. UM. It's very hard to get a roofer, it's very hard to get a waiter that's gonna stick around for more than a month. Uh, it's very very hard to get, um, someone to work in the kitchen. And I don't really see how you know, laying off somewhat overpaid, you know, twenty five year old product managers at a LinkedIn who you know used to go to the office to do yoga and eat avocado toasts is really going to address then shame the millennials. I don't shame in the zoomers here. Hey, I eat avocado toast and I'm a well, not getting what generation, but but Fince, it's your point on all that. You know, every time that Jolts job openings number comes out, I'm just my mind kind of boggles at the fact that there's still this ten million job openings. How big of a deal is that or are they gonna just sort of evaporate? Um? Were they just going to keep stay there and keep this unemployment rate low regardless of how many Silicon Valley layoffs we've seen, you know, to your point, you know, maybe a twenty five year old avocado toast eater at Lincoln doesn't want to go be a waiter, but at some point maybe they want to have a choice. We'll see. There's been some debate about the quality of that jolt data, because if you do, I mean where we are is absurd, right, I mean if you plant the series over time, I mean the prior peaks in you know, seven, we had about five million job openings and now we at ten, basically because it's it's free now to post the job opening somewhere. That is one argument that people have made. Also because of the work from home movement. Uh, you're no longer you know, if you're a Google you you only advertised in Mountain View or Silicon Valley, right, But now since your your labor pool is potentially uh can be spread across the country or then the world, maybe you're gonna have ten job posting for a single position. It's possible that there is some of that. But to me, the real labor shortage, and I think any labor economies would agree, is not product manager at at at LinkedIn or or Facebook or one more data scientists at Twitter. Uh, it's it's kind of the old economy boring job that you know, I'm going back to retail cash ears waiters and these are not the kind of jobs that are posted on LinkedIn. That with a son in bonus, um so I actually do believe that the labor market is going to remain tight um. And I'm not sure that we we want to destroy it. I mean sure, you know, like like I said, if if we get the fat forms rate at ten percent, uh, we'll solve it. Wow, We'll have you know, ten percent employment rate, we'll have food riots, uh, and will undo the past few years we've actually seen gains for young workers, for minority workers, for workers paid hourly, for workers of our college degrees. I mean, this is what we want it. Right for ten years, you know, every double Summit was about, oh, how do we solve inequality? You know, you know, because they care? Right? Uh, now we have it. So why would we want to destroy that? Especially as inflation is slowing naturally, like even even you know, like why is inflation slowing because of commodities and US cars and playing tickets? Um, So just because of its own inertia, inflation is going to slow. So why would you want to kill the labor market on top of that event? And I want to go back to the point you made about China because you mentioned China, but we haven't really talked about and how what your views are on what's going on there? Or what we can expect from China and any potential reopening they have. I'm wondering how hard it is to have conviction in your views right now when China is such a big part of the equation and we don't quite know what's going to be happening with China, that that isn't an excellent point. Uh And that's difficult, especially in commodity sectors right where you know it's copper, iron ore, I mean, you know, China famously consumes half of everything um and and the fact that you know, Chinese policy is so erratic right now makes it very hard to plan. Uh So in the short term, unfortunately, I think there is no good answer other than how would argue kind of avoiding it and focusing on on non China I am the beamship countries I mentioned. Um. In the long term, I actually do think that that what we're seeing is is a trap for the deflation is crowd to the pick inflation crowd, right, because what's going on really is, you know, China is looking down much harder than people thought. Uh And as a result, that gets all your your iron or your copper, your steel, or all the comedy prices are are falling off a cliff and that makes you feel like, oh, it's working. You know, infaction is slowing down, the fret is the fet is solving the problem. No, it's not the real problem. And I would argue it's not a problem, but it's a problem if you want to go back to the personal problem in the US is wages in the labor market. But because of the China situation, we are seeing this this air pocket that that inflation isn't dropping very rapidly. But that's temporary, right, I mean, at some point we know that China is going to reopen, so whatever we are getting now in terms of deflation will be tomorrows inflation. And then also what what the China situation does is that it further messages up your supply chained. It made the global economy less efficient, and at the end of the day, that is a long term problem with inflation is you know, if we cannot you know, manufacture everything in China anymore and have the super efficient supply chain with your inventory, we'll have to pay more for stuff. So the more messed up China is, the more inflation we have here. Eventually, So I think, what what China is doing is laying out almost a perfect trap for the uh. He always told you that infection was going to beat crowd. Uh and and we'll we'll get the second effect consequences in points only three. Vincent tell Ward of Stone as always a real treat to get your views. And I apologize that I front ran your craziest thing there. That's that's bad bad etiquette on my part. I do feel bad now. The data trivia question about Et. Do you know the name of the actor who actually played Et? No, I have no coal. Do you think there was an actor inside the suit playing Et? I don't know how they did it about it. It was not a small, little skinny neck actor inside of it. It was actually a mechatronic model. It's really cool. I wish you know on the podcast you can't. I can't really describe it. But it's this sale bundle of cables and circuits and metal and it is for sale. Mecatronic model used is going up for auction at Julian's auction. Let me tell you a little bit about it before the bidding starts in our Prices precise segment, which Vincent, by the way, I regret to inform you you are a contestant on our game show. The prices precise, precise. It's made from Dora aluminum. Try. I don't even not insure what that is. It has eighty five points of movement. It can blink, make abdomen rotations. Uh. It's enabled through both electric and mechanical cables. Takes twelve people. By the way it's operate the ET model UM one disupporting A hole in the story from art net where I got this is. They don't tell you if it's still operating the way it should. I assume it is, I thought, I think. I assume it probably is. I don't know. You know, these things are built to last. There's uh, you know, it looks like it is anyway. However, this ET mechatronic model is considered his masterpiece. So the question for you two is what do you think the auction house expects to get the winning bid for the mechatronic model of ET. You're ready to bid, You're ready to bid. I'm gonna go with three point eight million. Three point eight million. Vincent's making big eyes. I'm gonna say one above, what do you have three point eight three point It seems like a lot, honesty. Do you know what I'm gonna No, No, the FED height rates, Uh you know comies. No, I'm I'm going to go to I'm gonna go at one two million, one point two million, I think, given the rules of the game. Unfortunately, Vincent Juan Villdonna, when you were closer, you were closer. But but Vincent Winds given uh you Bob over three million. It's what they're expecting. I can kind of see that for you know, a movie, you know, I can kind of see it. Okay, should I go? Mine is very good too? But I love your teeth? So that was really good. Okay, And we have to talk about crypto. What's a week this year without crypto? So this this story is from the Ft. It's about all the lavish spending that happened at f t X. First, the story says Amazon didn't deliver to the Bahamas, so f TX actually hired a private air carrier to fly in orders. They's been three d million dollars in real estate in the Bahamas, and the Ft says most of those purchases related to homes and vacation properties used by senior executives. Then they had round the clock catering. They had free groceries, a barbershop pop up, bi weekly massages. They had a full street of cars and gas covered for all employees, and also unlimited, full expense covered trips to any office globally. That sounds cool. Staff at f t X US, So that's the US arm of f t X. Separate, separate arm. But they were allowed two hundred dollars a day indoor dash delivery credits. That's all that stood out to me. Two who could spend two hundred like I would spend thirty bucks? And and then the last one is Almita Research owed Margaritaville in Nassau nine open Jimmy Buffett restaurant, Yes, exactly, yep, my goodness. But they were told to be good tippers because of the whole altruism thing. So there's that. I don't know they're gonna miss them down there in the Bahamas. The bartenders of the Bahamas and the waiters and waitresses might be the hardest hit, uh, victims of this unbelievable then, So have you ever spent two hundred a day on DoorDash? He's shaking his head, no, yeah, speechless. That's good, right, how's it going? That was a good good stuff? Hey they I don't know. I don't know what to say anymore about F t X. The minute you think you've heard it all, it just keeps getting stranger and stranger. Well I'm gonna add my own strange thing to that. And again, apologies, I'm going on the fly here. But so this is more of a question than a crazy thing. Um. I still on Twitter, and apparently there's already a movie. Um, of course there's always a movie being ready, you know, like Netflix now will come out with movies before the event. Actually take the case. And one thing that really puzzled me was they had rhyme Goslings SBF. Have you guys seen that? And was that? Was that like a fake? Or who thought that would be a good idea? I did not see Ryan Gosling being started SPF. Is there is there truth to this rumor? Maybe we should ask the audit? You never know. I mean they did give him like a weird uh wig and they tried their best to to to hide our attractive he is. But um, we still very far from you know, the original cast. I actuously await that movie regardless of who it is. Where was that guy Seth Rogan. I think I could play him right with the curly hair. Yes, Seth rog would be a much better pick. Yeah up to Uh. But but if if I may use this like as as you know, an opportunity to kind of make a broader social case. UM. I think if you look at the list of the top grossing movies or documentaries of the past couple of years, it's all about fraud. You know, you got your your Tinder swindler, your Anna you know is so good paraos. Uh, of course it's going to be the crypto stuff. And I think it says something about U, you know, the time we live in um compared to you know when when I was growing up. You know, it's your your rambos and rockies, you know, kind of manly matchual man and and now we have this really weird sub general that is highly popular of all fire festival like you know, documentaries about epic frauds um. And I think it, you know, it speak to the zygas of our time. That's pretty good observation. Actually, So someone Vell Donna could uh cough make a story out of that. Perhaps I could, Perhaps this is a good idea, but no, It's true when you when you log into Netflix, it tells you what's trending on Netflix, and it is always tender Swindler, a couple of like those Love Is Blind shows, which I'm gonna admit I love those films. They're so fun to watch. And then yeah, the rest is like stuff that's happened. That's real life stories where somebody got swindled out of a lot of money. Yeah, there you go. Oh with the Hollywood, who were the two that were breaking in all the Hollywood stars? That was a big one too, And what was the name of that? I don't remember, you know they were they became famous for breaking in all the Hollywood I don't I'll buy duxt Holmes. Was that the name of it? Bling Ring, Our producer Stacy says, it's ring, Thank you, Stacy bling Ring. You know, they would go on social media and if some a list celebrity was like looking forward to a vacation in Hawaii, they'd be like, all right, they'd head to their house and rip them off. Not quite fraud, but smart criminals. That's a good observation. Vincent tell Ward Uh, director of Global macro Strategy at stone X, always fascinating to hear how you thinking about markets and movies too, So we appreciate it and hope we can bring you back again someday soon. Yeah, thank you, Vincent, 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 Rea Anonymous. Bill Donna Hirich is at Bildonna Hirich. You can also follow Bloomberg Podcasts at podcasts. What Goes Up is produced by Stacy Wong. Thanks for listening, See you next time. Wh