What Goes UpWhile the drama surrounding regional US banks has largely subsided following the failure of three lenders in March, that doesn’t mean the ripple effects of Federal Reserve interest-rate hikes are over. This is according to Que Nguyen, chief investment officer of equities at Research Affiliates, who joined the What Goes Up podcast to give her outlook on markets and talk about why she doesn’t foresee a soft landing for the economy.
“When the Fed raises rates and it breaks something, it rarely happens that it’s a very small break,” she says. “Usually it’s a very big break. And so while I’d never thought that we would get to a great-financial-crisis level of breakdown, I do believe—and I did believe, and I still believe—that there would be more things that break. Whether that continued to be in the small regional banks or whether that bled over to something else such as real estate lending, private credit—definitely those dangers still remain out there.”
Hello, and welcome to What Goes Up, a weekly markets podcast. My name is Mike Reagan. I'm a senior editor at Bloomberg.
And Umbildana Hi Across Asset reported with Bloomberg and this week on the show.
Well, we've heard it a million times this year from strategists and fund managers and pretty much everyone else. Don't trust this rally in stocks that has pushed the S and P five hundred up more than eight percent year to date at its highs. Well, finally, this week we saw a bit of a dip following a really slow grind higher for more than a month following March's regional bank drama. So what should we make of that? Is it time to once again buy the dip or is this the start of a serious correction that so many have warned us about? And if that's the case, what are the best areas of the market to hide out in until the coast is clear. We'll get into it all with the chief investment officer of equity strategies at a major investment firm. But first of Filbata, you know, I think people that listen to this podcast assume we're all sitting around a table together or something like that. But you've actually fled, You've fled the state I did.
Yeah, I mean typically we are sitting around a table together.
Yeah.
True, which is which can be fun. It has its downsides, too, well, tell tell us why you fled. It might have had something to do with you. Now, I'm kidding. It's I'm in Chicago for the annual morning Star Investment Conference. I'm having so much fun.
Yeah, what's so? What's so fun about morning Star?
I'm at the well today, I'm at the Bloomberg office because we have a wonderful office here and it's on the forty nine floor and has really nice views. But I get, I don't know, scared, I get some sort of fright as soon as I approach one of the windows to look out, because you look down and it's so it's just so scary to me. But the views from further away are nice.
That's too high for me.
Forty nine forty nine, Yeah, entirely wild, too high. But the conference is really nice too. It faces the lake, which is beautiful and the waters are green, and then another side of the conference center faces the Chicago skyline.
It's very nice.
Yeah, my views this week are really nice.
You're You're never coming back, are you?
Nah? Actually our guests used to live here as well, even though she's in New York City now, but I do want to introduce her. It's Quay Win, CIO of Equities at Research Affiliates. Quay, I'm so happy you could join us. Welcome to the show.
Thank you very much, happy to be here.
Maybe we can start with a bit of your background and how you ended up at Research Affiliates.
I really started out my career right out of college in quantitative research at Barra, which is now part of MSCI, and that was really my introduction to finance. I had actually studied math in college, you know, like a lot of college students, I didn't know what I could do or wanted to do, and bar gave me the opportunity to learn something new, apply math to an area that I'd never really looked at before, and it really stuck. And so from there I made my way into the asset management world at stag Street Globe Advisors, then Morgan Stanley Investment Management, and then finally at Numeric and Investors, which is now part of Man Group. During that time, I had my first child and one of the things I realized was that being a new parent trading and being active in the markets. Trading in the markets was not exactly easy, and I really lucked out because a former client of mine for my Morgan Stanley days had become chief investment officer at University of Chicago's endowment and he contacted me, said he was expanding his team, and one thing led to another, went through a formal search, but ultimately it gave me the opportunity to do investing from the other side of the table as an asset owner, not just as an asset manager, and gave me a whole new perspective on what it is that investors need, what they want, and what they're trying to achieve. With that, I stayed on the asset owner side for about ten years, and when I was finally ready to go back into asset management, I contacted several people I knew, some of whom were at research affiliates. Chris Brightman and Rob are Not were people that I'd known in the industry for a number of years, and it was a small firm. It was the kind of thing that I really wanted to join. It was quantitative investing, but with really a fundamental twist to it. And also one of the things that Research Affiliates really stands for is value investing. And one of the things that I saw a few years ago was the large gap between value and growth stocks, something that had never really been seen before and something that I felt could not be sustained and that there would be a quick snap back towards value and that value would likely see a renaissance over the next few years. So with that opportunity in mind, I joined Research Affiliates.
Great Quai, I'd love to just get into sort of how you're thinking about the market over call it the last five or six weeks, you know, because early mid March we started to see the problems with the Bank's Silicon Valley Bank, collapsed, Signature Bank, Silver Core Capital, First Republic. We started looking weak and has been hanging on. But you know, at the time, it really felt like, well, this is it. The Fed's tightening campaign. Finally quote unquote broke something, you know, and here we'll get this sort of cathartic final leg lower inequities that so many people have been bracing for. But it didn't turn out that way. Obviously, the FED reacted very quickly the FDIIC reacted, a lot of liquidity added to this system. We saw the market rebound at least from the index level. A lot of the regional banks are still struggling, obviously their share prices, but now again First republics back in focus this week, it does feel like we're rolling over a little bit in the s and P. Five hundred. So I'm just curious, you know, how you've thought about this whole episode in the last five or six weeks. Did it make sense to you? You know, was it all about the liquidity sort of? Let us just pick your brain about what we just witnessed over the last six weeks.
Yeah, So when the banking crisis first emerged, the thing that I really thought about was how bad is this going to get? Is it going to be like the Great Financial Crisis? How is it going to be? And I think that we're in a much better place than we were in two thousand and seven, two thousand and eight. Banks in general, you know, with a few exceptions, are in a much stronger place. That being said, you know, when the FED raises rates and it breaks something that something doesn't usually just it rarely happens that it's a very small break. Usually it's a very big break. And so while I'd never thought that we would get to a great financial crisis level of a breakdown, I did believe and I still believe that there would be more things that break that came along, whether that continue to be in the small regional banks or whether that bled over to something else such as real estate lending, private credit. Definitely, I think those dangers still remain out there.
And can you talk about what you actually foresee for the economy, because for me being at the conference this week and hearing the morning Star economists talk about what they're projecting, they're actually foreseeing a soft landing, but in your view, you're saying that that may be a bit of an optimistic projection. So can you give us your outlook and how you're seeing things evolving with the economy.
Sure, I mean, I guess I'm biased because I started in this industry in the early nineties, and every single cycle that comes through, everybody says we're going to have a soft land They're going to have a soft land We're going to have a soft landing. And I don't really know what a soft landing is, because no landing that I've ever experienced, has ever really felt soft, and so I'm not really sure what that really means. There's always going to be something that breaks a little bit worse than you expect. It's very, very difficult to engineer that soft landing, and so I don't see, you know, why a soft landing is what people call for when we hardly ever achieve it. Perhaps they have achieved it before when I was a child, but certainly, you know, not since I've been in this industry. And at the same time, one of the things I would say is that we are also not just seeing a withdrawal of monetary support, but we're also seeing a withdrawal of fiscal support. Things that we're seeing such as extra snap benefits coming to an end, also the likelihood that student loan forgiveness is not going to happen and that people will have to start paying those loans again. All of these small, piecemeal withdrawal of fiscal support will make everything a little bit more tricky as well, because the consumer, it really is seventy percent of the US economy, and we really can't have a soft landing without having the consumer remain somewhat comfortable. And then you know, we're now beginning to see job losses spill over. At first it was just technology, then small pieces of the financial services industry, and now we're being to see other firms start laying off people Disney, for example, and then also additional rounds of job losses within technology continue to roll on. So, having said that, though you know, the question is this happens in the economy, We have economic cycles. It happens all the time. How should we think about it in the equity markets? It's really not unusual for equity markets to already bottomed by the time we know that we're in a recession, or by the time that the recession comes around. We already had a big draw down last year twenty percent in the SMP. I think Pete de trough last year. I think it was down almost as much as twenty five percent. That's a normal level of decline for equities preceding a recession. And so this year, as equities meander around, it could be that regardless of how soft or hard the landing is, we've already seen the worst of what there is to come, what there is to be in the equity markets overall.
And can you talk about when you're for seeing this because another part of the discussion at the conference was that potentially we could even be in a recession right now. Is that what you're seeing or is it something down the line.
Oh, I definitely think that we could already be in the beginning stages of recession right now. You know, typically we don't know that we're in a recession until six months after started. By the time that we know that we're in a recession, we may already be in recovery.
You know. I think if you look at the short term interest rate market, people are basically pricing in as many as two rate cuts by the end of the year from the FED, which you know, leads me to believe a lot of people are agree with you that a soft landing is going to be pretty hard, if not impossible, in this occasion, and that the FED is going to have to react to prop up the economy by the end of the year. But one thing I wonder is if it's possible that we're looking at something in between, like a stagflationary environment where growth does slow, maybe it doesn't go deeply negative for a full blown recession, but that we still regardless of that, don't tame this inflation problem to the satisfaction of the FED, so that that pricing for rate cuts later in the years is mispriced, and that even if the Fed's done hiking, that they're going to hold at those this higher level for a longer period.
Is that a.
Possibility in your mind? You know, something between you know, a heart and soft landing, more of a stagflation type of environment, you.
Know, I wouldn't call a stack plation somewhere between a hard and soft landing. I would say stagflation is sort of, you know, a fork in the road where we fork into something that weird, you know, that we just haven't seen in a really, really long time. I definitely think the stag plation is a possibility. I thought the stag plation was a possibility for a while. Two rate cuts by the end of the year. I wouldn't be surprised if the FED started to accommodate. Depending on how hard the landing is, how quickly the job losses mount, how how quickly spending slows. You know, member of the FED has a dual mandate both price stability and full employment, and they are at odds with each other, and the FED has to has to ride that balance. So depending on how the numbers evolve through the end of the year, two rate cuts are are still a possibility. But at the same time, one of the things that we are seeing is that inflations come down. It's come down significantly, you know, I think it peeked out at over eight percent. It's now running above four, right below five. If the Fed does cut through the end of the year, we're not going to get back to that two percent goal that they have. If they do cut, it will be because the underlying economic fundamentals aside from inflation, require that, and so as they accommodate, it wouldn't be surprising to see inflation go back up, and therefore the FED is going to either have to hold at a higher level or resume hiking, right which could send us into you know, the classic double dip, which is what had to happen before inflation was finally tamed in the early eighties.
And so where do you see inflation topping out? Is it still above four percent?
Yes? I do think that if the FED has to ease through the end of the year, I think inflation is going to stay above four percent in this intermediate cycle. I think ultimately, the FED will succeed in getting it back down to two percent. It's just that what we're going to have to do to get there could be either very very arduous in the short term or less arduous but spread out over a longer cycle.
So how would you break it down as far as what are the areas of the stock market that are most attractive right now given sort of all these uncertainties and this very real chance of a hard landing. I know you focus exclusively on equities, so I want to ask you about actual portfolio allocation unless you want to get into that. You know, it is an interesting time for you know, cross asset allocations, with money market funds finally offering a real yield, even bank savings accounts offering in some cases above four percent. But you know, how are you thinking about allocation within equities and within the whole portfolio in this environment?
You know, let's talk about equities first. I think with inequities, what I would focus are in the areas that really got beaten up, because when you buy something cheap, you buy yourself a lot of downside protection. And if you take a look at what's got beaten up, there are really two areas right now. The first is financials. The banking crisis or the mini crisis in March really led to that, and what you're getting in financials is a lot of high quality banks that got beaten down because the baby got thrown out with the bathwater. Right So, I think interesting ideas might be, you know, certain banks that are trading at eight times earnings, you know that are very high quality. City bank Wells Fargo fit that bill for example. Insurance companies were also some of the companies that were collateral damage along the way. But it's not as if people are going to go out there and start canceling insurance. You know, Insurance is one of these things that everybody needs, just like banks or things that everybody needs. And again, if they're priced well, they become reasonable investments, and you know in the short and the medium term. So MetLife, for example, is trading at seven times earnings and AIG's treating something like EAT. So when you get single digit multiples like that in name brand, high quality companies, they tend to offer some upside potential as well as some stability in the event of a downturn because they've already priced so much of that in other cyclical areas have also got beaten down. So within technology, for example, we're seeing some attractive names in semiconductors. A lot of this has to do with the trade war with China, but the reality is that nobody's giving up their phones, nobody's giving up their computers. You know, even speakers need to have cars, and so semiconductors there's a structural growing demand there. And what you're seeing is you're seeing a lot of high quality companies again getting up and there could be opportunities to invest there for long term growth. A company like Qualcom, for example, it's treating it twelve times. And then within the consumer segment, the home builders, right the ultimate cyclical play. The home builders are priced very attractively right now. So both Pulti Group and Toll Brothers are, you know, treating at seven times earnings, and Lenar's a little more expensive there eleven times. You know, you do have to be volatility tolerant every time you go into equities, and this is going to have the normal equity volatility, but to some extent, if you're afraid of a recession, then go and buy the stocks that are already priced for a recession, you know, don't necessarily buy the stocks that are optimistic that there's not going to be a recession. And then the other thing that I would add to that is that given what happened last year the megacap stars, the fang stocks, I think there are opportunities to pick up some very high quality stocks at reasonable multiples. So a good example of that might be a Meta, Right. Meta used to be one of those great glamour stocks that really beaten up, is now trading at fifteen times. I wouldn't necessarily say that it was outright cheap, but for a company that just generates so much cash flow and then so profitable, you know, it looks like it looks like an interesting play. Of course, it would have been mettered by this thing in January, right, because it's up seventy eighty percent this year already, But still even so, it still represents I think an interesting and interesting entree into a high quality name.
That's a fascinating point about the insurance companies that you bring up, because we don't hear people talking about them a lot, and you mentioned how cheap they got. What do you think explains why that happened? Is it just a matter of them being loaded up with low yielding treasury similar to the way that the banks are. Is that the main area of concern, do you think?
Yeah, so, I think there are really two areas of concern. I think that is one area for concerns. Their investment portfolio is how are they doing? And you definitely see a separation between certain insurance companies and other insurance companies depending on the mix. Add to that the fact that many insurance companies over the last ten to fifteen years have increased their allocation to private investments a lot, specifically venture and the failure of SPB and the story of venture are very interrelated, right. The slowdown adventure cause, you know, led to some of the issues SVB. The unwining of SVB is going to undermine the funding of venture. It becomes a negative cycle. And so depending on what the insurance portfolio is in there could be some ramifications from that. But ultimately what we're seeing, you know, what I'm reading about in the insurance industry is that they are are all able to hold their premium rates. Their loss ratios are not significantly worse than what has historically been. Yes, last year was a really bad year for investment portfolios. This year is a lot better. This is what happens to investment portfolios. You know, it's not an unusual thing. What you really do want to do, is you really want to you know, as Warren Buffett says, by when others are fearful and.
I'm curious about your methodology, Like what are you looking for when you're looking at these different stocks. Is it just the cheapness factor that you're singling out or what are some of the other components.
So we definitely try to identify stocks that are fundamentally undervalued, but some of the stocks that are cheap, as they say, are stocks that deserve to be cheap because they're going out of business. A classic example of that last year was bed Back and Beyond. Right, we know that bed Bath and Beyond recently five for chapter eleven, but it was a long road to that, and during that time time it would always show up on any sort of value screen a very very cheap stock. And so what's important to us is to pair that with two things, is to pair that with a quality screen where we're really trying to avoid the companies that are close to distress as well as avoid companies that have what we would consider less capital discipline. And then we also look at the recent momentum because there could be news flow, there could be something else that is not yet in the financials that is causing the stock to move one way or the other. What we like to see is we like to see strong risk adjusted returns or moderate risk adjusted returns. Right. We don't want something spiking up or spiking down. If something is spiking down, what we would probably do is just try to either avoid it until the volatility settles down, or just own less of it. And really, they're all we're trying to say is, you know, the markets can be irrational for far longer than you can remain solvent, so you know, take steps to protect yourselves. Those are the things that we that we look at.
One area everyone's fearful about is commercial real estate these days, you know, especially you look at the publicly traded office ruts just been destroyed. There are, at least on paper, some some pretty attractive yields on a lot of those stocks. But I wonder if it's you know, sometimes it pays to be fearful to what everyone else is fearful. So I'm wondering how you're thinking about about commercial real estate specifically, both you know, the public equities involved in the space, but also sort of it's macro influence on the rest of the economy and the banks and the credit credit situation.
Sure, I mean, one of the things that I think is very interesting about commercial real estate is that these things do show up on our value screens, but they it's hard for them to make it past their quality screens, and so so we haven't really been involved heavily in commercial real estate in our portfolios. But having said that, I think one of the things about value investing is that it is a bet on mean reversion, or is a bet on stability. Right then you generally have this very stable situation and that things get really out of whack, and then you buy when others are fearful because that fear is out of whack, and then you just ride the convergence back to stability or normalcy. The problem with commercial real estate right now, as specifically office, is that we could be in the midst of a secular change, and that's not something that value investing adequately addresses. And so that is something that is addressed through for example, momentum. Right, you look at the momentum of these things, they look awful. Having said that, you know, I don't know. I mean, we're all sitting here around a virtual table, yeah, and our conversation is extremely effective. It's not like video conferencing was twenty years ago. And so is there really a need to have an office? I think it's nice to have an office. I like going to the office and seeing other humans and interacting with them and chatting. But it's not necessary like it was. It's not as much of a necessity. And so the use of office I think will still be there. I just think that people will use less of it.
That's the secular change. What you mean by secular change, I assume exactly.
And so I think that we all have to go through an adjustment on that, and you know, both in terms of professionals as well as in terms of how we invest. I do worry about the lack of full return to office, not necessarily for myself personally, but really, how does it affect new entrance into the white collar workforce? How do they get integrated into a firm culture, or how do they get trained. I was speaking to a friend of mine whose firm has basically gone mostly virtual, and one of the things that he said is that it's actually very difficult to hire the younger analysts because they don't want to work in a virtual office. They want to work with real people from whom they can learn.
I think it's all about sweatpants, Phil Dona. If they could remove the stigma of wearing sweatpants in the office, I think.
Everything, then you'd be more happy to come in back five days a week. Honestly, I wouldn't mind it either. Yoga pants, Lula Lemon pin Way, if we can just go back to that point, because that the remote work point, or you know, the lack of the return to office is something that you're also is one of the factors in your economic outlook, right, because your thought is it's changing everything not just from you know, how offices are utilized, but also transportation, et cetera, et cetera.
Yeah, so it is changing how how transportation is organized. And so that's one of the secular headwinds against something like oil right, gas right, People just aren't filling up their cars as much as they used to. It also puts pressure on a lot of metropolitan transportation situations. Such as New York's ridership remains pretty low on the subway compared to pre pandemic. But having said that, you know, one of the things that it does do is it does put more money back into the pockets of families. And so this could be something that cushions the blow in terms of when people have to start repaying student loans, for example. And one of the things that somebody else pointed out to me was that, you know, he used to come to work in Midtown every day, and he would have lunch in Midtown every day, and now he works from home two to three days a week and in Brooklyn, in his neighborhood. All of a sudden, there are so many more options for lunch than there used to be. And so one of the things that he's saying is that it's not just about are the people returning to offices, it's also about the migration of different types of business to different neighborhoods. Right, So you may actually see what looks like a depressed downtown area, but then you actually have more vibrant residential areas from a business point of view. So there gives and takes to that I don't necessarily see the return to office as being an economic negative for the economy as a whole. Definitely, it will impact certain regions, certain cities more than others, But as a whole, I don't necessarily think that it is an overall negative.
You mentioned and your preference for value, and you know, last year it really looked like value was finally having that moment in the sun where it was outperforming growth again. I mean, it's kind of a tricky subject, I think because the composition of what's in the value indexes versus the growth indexes has changed pretty dramatically. But if you think of the old school growth, you know, if you use the Nasdaq one hundred as a sort of a proxy for it, it looks like growth is back in the leadership again. What do you think explains that and is not going to last? I mean, is the value trade gonna return this year? Do you think it's a favor and what would drive that? If so?
The NASTAK one hundred, remember I think has something over twenty percent in its top two stocks.
It's kind of it's getting ridiculous.
All right, And so when you talk about Nasdaq one hundred, you know you're really talking about some of your narrow sets, right, those stocks happen to be what I consider to be a very high quality stocks. Apples one of them, very you know, very strong consumer based, very loyal consumer base, lots of cash generation, high profit margins, strong capital discipline. I know that everybody made fun of Tim Cook when he started paying a dividend on the stock many years ago, but you know, that's just an example of you know, he's got good capital discipline. He knows he's not going to invest in something silly, he's going to return it to shareholders. What I saw was not necessarily a return to growth, but really people going in and buying high quality stocks at more reasonable valuations and having a preference for these very high quality stocks in the face of continued market and economic uncertainty.
They're the new new defensives almost.
You know, yes, yes, the new defensives almost right, And then they were you know, it's just that before at the beginning of twenty twenty two, they were trading at ridiculous multiples, and all of a sudden, at the beginning of twenty twenty three, it was a completely different story. It was a much more reasonable place to start buying these stocks. We metas just one example, but definitely Apple, Google are other examples of that. I mean. One of the things that value does though, is that it's not meant to be static, right, It's not meant to say value always buy this company, or value always buy that company. Value will buy what is what is cheap in the market. And then in addition to that, one of the things that we try to do is not just take a look at absolute cheapness. Absolute cheapness is great, we also try to take a look at a more comprehensive, well rounded valuation, right, which is one of the reasons where we find stocks like Meta to be interesting.
Well, Qui Gwen of Research Affiliates quite a treat to pick your brain here today on What Goes Up. We really appreciate your time, can't let you go just yet. We do have a tradition on this show where we have to discuss the craziest things we saw in markets this week.
So drum roll on my little laptop.
Yeah, well, why do you get us started?
Okay, this is another Marella special. Marale is my sister. She's our new craziest thing. Corresponded, I would say, right, she sends me a bunch of stuff, and I asked her for something specific. I was like, what have you seen that's weird? And she pointed out, and this is from a couple of days ago, that there's this new viral song from Drake and The Weekend. Yeah, you probably don't know who those who those two are.
Yeah, I do. Come on, I've got I've got teenage daughters, females.
Oh right, okay, okay, you get a path. And it was created entirely by AI.
Wow.
Yeah, that's that's a bizarre one.
Yeah, and I think it was like one of the top streaming They even had to pull it from Apple and Spotify because Drake obviously wasn't very happy. But it was totally created by AI.
I feel like, if there's a way to go long on copyright lawyers quite I think AI, Yeah this is it.
Yeah, I think that would be a private investment.
Yeah, out of your wheelhouse. But I feel like there's we're going to be seeing a lot of cases over this stuff. You know, really, what does chat GPT do but go out to the internet and copy and paste some information from other websites. Well that's pretty good. That is a good one. Really not market related. Vildona but I'll allow it.
It's the potential for vastly increased productivity from drake.
There you go.
Yeah, it was pretty productive to start with, So that's pretty good. All right. QUI, how about you? Have you seen anything crazy recently?
Yes? I saw a story earlier this week about a crypto wallet that was dormant for something like eight or nine years, and I guess back then it participated in the initial coin offering of and so it was allocated just a few thousand dollars of etherium at thirty one cents per coin. And then for whatever reason, the owner of this wallet just sort of went away and didn't do anything, and Rip van Winkle wakes up wallets now beginning to be active. It's had essentially a six hundred thousand percent return.
Wow.
Right, of course they missed the giant run up also the big massive draw down. But are you really that unhappy that you missed the giant run up? I mean, aren't you pretty happy with a six hundred thousand percent return?
It's it's me I'm not all own.
One of the things that really struck me about this is that, you know, this is really an example of the Rip van Winkle. You know philosophy of investing right, you buy it for the long term. If you say you're going to buy it for the long term, just buy it for the long term, hold it and then look at it many many years later and you'll do line. But not many of us have that kind of patience. But here's an example of a person who did.
And yeah, really interesting, what was it. Jack Bogol used to joke about you should burn your password to to Vanguard and just go have them reboot it when it's time to.
Return, not burn your crypto passwords.
That's true, it doesn't work to that. Well, kway you you brought it up. So we get to ask you what do you think of crypto? Are you a believer? You skeptic? How do you? How do you think about crypto?
To me, crypto is really an expression of sentiment, you know, it's it's something that trades off of sentiment. There's no intrinsic value necessarily related to crypto. Where crypto does derive value is in the community that is enthusiastic about it. And so if the community is really enthusiastic about it, it's great. If the enthusi If the community loses interest in it, it just goes away. So you know, that's where it is today. Now, can we take crypto and make something more out of it? Make something more out of the technology the blockchain. Certainly people are trying, but thus far, I haven't necessarily seen anything that you know, makes that application real.
I think that's uh, that's a smart way to think about it. I'm gonna delve into the non encrypted currency markets, the good old fashioned currency markets Feldanna coins. And this is courtesy I don't do you follow Stephen Dennis, the Senate reporter at Bloomberg.
Oh, he had he posts like the houses.
In the He posts, yeah, Zillow, he does Sunday nights. He posts like the nicest and weirdest houses on zillo. But he posted what he calls an eye popping stat from the US men mints, and it's regarding sitting in jars somewhere two hundred billion pennies sitting in jars. But probably because of that lost circulation, the mint has to keep making new pennies, millions, billions of pennies every year. Okay, And he brought up the cost for the US Mint to actually mint a penny. So it's time to play the prices precise. Quay, you're on a game show now. I hate to inform you. I want you, guys to guess the cost of the US mint to make a penny and put it in circulation one one cent, one US.
Penny, Okay, I'm going to say it's slightly above one cent.
What should give me a number?
I don't know. How do you measure slightly above one cent one point?
I don't know you need Satoshi's I think you do.
One point zero one zero, so it will be zero points zers. I really don't know how to do this. I'm just gonna go slightly above one cent, all right?
QUI, how about you? What do you think it costs to mint a penny?
I think it's going to cost two cents.
That's pretty good. That's pretty close two point seven cents to make a penny. Why are we bothering at this point to bink? Oh my gosh, it's ridiculous. And when's the last time either of you actually spent a penny? Have you? I can't even think of the last time I spent one.
Well, I don't keep cash in my wallet to begin with, so it'd be very hard.
Yeah, aside from my day job. I'm also the treasurer for my son's school, PTAH, and they had a bank. They had a bake sale, and so then I had to gather the cash and actually deposited at the bank. And in that stack of cash was a whole bunch of pennies.
You put it in the bank, not into a value, not in some value stocks lay.
I don't think that our PTA is allowed to make investment.
Your mandates are strict mandates. And for a nickel, how about this, a nickel ten point four cents to a nickel, I say, get rid of get rid of all of them.
Well, we all have digital wallets now anyway, right Fenmosal Yeah, apple pie, yep, yeah.
Although I guess they like to have those pennies. They can they can make their pennies off of their transactions, so digital pennies carry on.
You know, I think that the main thing about getting rid of the penny is I think the state of Illinois might get annoyed. Lincoln, now you're there, you're a little.
Land of Lincoln. A penny for your thoughts. That's a penny for your thoughts.
Right, you still do the five dollar, but you're right, like things like that like a penny for your thoughts. Those sort of witticisms will sort of go away and our grandchildren won't know what we mean. What are you talking about? Kind of thing?
I literally didn't know what really what happened? Like, I know people use that phrase, but I always.
Was like, who what penny for your thoughts? Good reason to keep the penny around? I guess fair point. But I think that is all our time for this week. Gwig Gwen of Research Affiliates. I really appreciate your time and your wisdom, and hopefully we can talk to you again someday soon.
Yes, thank you for coming on 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 and review the show so more listeners can find us. And you can find us on Twitter, follow me at bildana Hire. Mike Reagan is at Reaganonymous. You can also follow Bloomer Podcasts at podcasts. What Goes Up is produced by Stacy Long and our head of podcasts is Stage Boutman. Thanks for listening, and we'll see you next week,
