Live on Bloomberg TV

00:00But Maxwell headquarters in New York Caroline Hyde. I'm Joe Weisenthal I'm Romaine Bostick. Let's get you caught up on where we stand in financial markets. Synchronized highs across the board. The S & P Dow and Nasdaq closing at record highs. The question is what you missed. An extraordinary week. Record highs on the stock market but also on the death count. The push pull of short term anxiety coupled with long term optimism of course is seeing assets being pushed and pulled around too from stocks commodities crypto risk assets have been on fire. And what exactly are they pricing in hopes of a vaccine. Hopes of further stimulus. How long of course can the economy tread water without some sort of fiscal lifeline right now. That's the jobs data today. It was so bad that it looked good because well many then started off. But in that we'd see Congress actually push through some sort of deal. Joe so many angles to digest today. But what's clear is this rotation trade it is on front and center. Yeah absolutely. I mean everything's flying. But what's really been flying are a lot of these cyclicals deep cyclicals commodity linked equities that had been dormant for most of the year. And they continued to have a really strong we could you see that there. There's the energy stocks popular Excel Lee ETF. If you look really at the end of November basically. Right. Ever since since we got the vaccine news they've been shooting straight up and they had another strong week. But if you look overall. So down 31 percent for the year. So big question of whether it can keep running into selling the big majors here. I mean a lot of those shale producers that a lot of people have left for dead or a few months ago really rallied hard particularly on this day. You're talking about Continental was up about 18 percent on the day diamond back. I'll finish the day up about 13 percent. Apache Oxy. You get the picture here. Also there is a general sense here that as you start to get that economic recovery as you start to see more demand for raw materials whether it's in the metals space or in the energy space that could have the benefit for the market overall. All right. So joining us with more Inside Tell back in Capital Advisors founder and CEO Michael Purvis. Michael thank you so much for joining us. It's a pretty impressive stretch now that these cyclical commodity linked companies have put together basically about a month of real outperformance. Can this be sustained. Or maybe the better question is what would it take for this outperformance to be sustained. Because of course on the longer chart there is still no doubt massively massive underperformers. Or know one name that I've been really focused on Joe has been U.S. Steel which was you know frankly a stock that was not trading well before coal and no steel prices which really determine its top line and its earnings there. And of course Kobe didn't help matters anymore. But the way I look at this particular name is that the stock was left for dead. Every analyst hated it but steel prices were quietly sort of skyrocket. The other words you know just in late August there were 450 a time. Today they're a hundred and twenty dollars a tonne. Eight hundred twenty dollars a tonne is a nice price for steel. If you look back over the last 10 or 15 years but the stock is just I think it's just started climbing here. So I think I would say there's you know you ask what is needed for U.S. Steel. That's basically double. It was up 10 percent today. It's doubled just in the last few weeks. What's needed to ta ta for it to go higher really. I think you can make the case that steel just needs to steel prices need to not they don't need to go up much more. They just need just not collapse. Right. And I think for me anyway as an s as more of a macro analyst I can make that I can feel pretty comfortable that steel prices are probably not going to collapse not in the neck in the in the near to mid-term. Any settling. I know I was at a record high today with Dr. Copper continuing to show its optimism surrounding the economy where some some clever pieces to be playing this at the moment that perhaps haven't been swept up in the fervor that we've seen thus far. Yeah. You know it's funny I think there's been. I think I think you have to look at each name differently. You know you may have seen platinum was just breaking out. That's a precious metal that has. It's a bit different than gold and silver in some respects. I think you have to look at things you know little bit you know really sort of case by case here. I got very comfortable with owning U.S. Steel and I'm still along it and I'm recommending it to my clients. I think it could either easily go up. It could easily double here based on its know basically some key assumptions hold it together which I think they will. I think when you get into the energy names I think it's a little bit different there. And I think you have to be a little bit careful about what is a big tactical bounce and what is sort of a baby a longer term investment there. So I think it really comes down on your time horizon here. But look I think you know right now I think I think you can make it more obvious case to buy a mispriced materials name like U.S. Steel than it's maybe a little bit more obvious in buying an airline or something that really is so much more dependent on vaccine recovery. A lot of these names can benefit just by simply you know buy some fiscal stimulus coming together by the fact that inventories were way down and so forth. If you are trading in the shale names or in the majors and oil you're obviously taking on a lot of oil data there. And that's a very different type of discussion. It's a pretty complex one. And I don't I don't I'm not an oil analyst. But I don't necessarily feel wonderful about thinking that oil prices are going to keep rising here into into 2021. I think you have to be very careful. And it's very very much a know sort of a single stock buy single stock. This is I think one point I would make from a more macro point of view is that what this rotation is revealing is is that stock picking is real and sector picking is extraordinarily important right now. The tide is lifting a lot of boats. But but but the alpha is really made on the single stock basis right. Yeah absolutely. And then when you sort of looking at that macro picture. Picture. Michael are you focusing a little bit more on the consumer spending side of this recovery or the business spending side of this recovery. Are there certain areas that you think gives a little bit more clarity as to the pace of that recovery. Look I think you know from an overall economic picture you know obviously the consumer's really important. The consumer has been you know sort of surviving this pandemic better than and certainly a lot of expectations there. I think at some point though you know the consumer that the corporate spending rather you know seeing more of a commitment to capital expenditures is going to be really key. And I think you can flash back to 2018 as an echo of what we're sort of seeing right now. Right now we have this sort of vaccine stimulus if you will maybe some fiscal stimulus to help lift us out of this this very severe economic contraction. 2018 you had this notion that we were going to return back towards sort of like a above trend growth after the tax deal was passed. And that really look this lasted six months right. And then you had all those usual structural forces coming back into play again. So from the macro side I think there's an echo of 2018 and 2021. And I think you have to be careful and watch watch the corporate spending and the commitment into fixed goods the commitment to capital expenditures. How is that really growing and how much is that going to be changed by Cove. It will go real quickly and you just have about a minute left. But going back to the materials and some of these cyclicals I mean one way some of these prices of commodities can really run is if there was significant underinvestment and diminished capacity. You know in the past causing this kind of price squeeze do you feel that you know even pre covered we knew that a lot of these industries like steel like other commodities is really suffering. Pride diminished investment closing of different facilities. Does that in your view make this run more sustainable. Because there just isn't the supply capacity like there may have been in the past. Yeah. Oh sure. Look I mean commodity commodity theme you know you go back to 2010 and 2007 and 8 you know metals and oil where we're going to go ever higher because of the China notion. And then when China backed off that and we started getting that transformation and the Chinese economy we wouldn't sort of a commodities bear market that ultimately resulted in a lot of supply contraction across the spectrum. You know from copper to steel and so forth. Ultimately those supply contractions will change. U.S. Steel is just you know opening a plant right now. Right. So. So I think you have to look at all of these these materials names. The context of a very powerful bounce as opposed to necessarily a word a whole new world order. Where where you have to have a five year overlay to commodities. I look at this as as how do you navigate Alpha in the near to intermediate term and not necessarily something that you just stick in your own K and forget about for five years. Michael always great insights here. Have a wonderful weekend. That's Michael Purvis back in Capital Advisors CEO and founder there. All right. Coming up next here on the show of course you got that big November jobs report the faint pulse of that labor market recovery. We're gonna break down the numbers coming up next. This is Bloomberg. All right about 30 this morning Wall Street time we found out the U.S. labor market added two hundred and forty five thousand jobs in the month of November. That was well below what most people were looking for on the street. And raising a lot of concerns here Joe about the pace and I guess the the the bigger U.S. economic recovery. Well it definitely missed expectations. But you know this is not what you normally see after a miss. And that was in the immediate knee jerk reaction to the report. We actually saw a 10 year yields tick higher. So it's one thing to say like OK sometimes stocks move higher because you expect more Fed easing. Isn't that what you see there right at age 30. The 10 year yield jumping and ending on ending the week there at point nine seven just below 1 percent. This seems to be the trading range you've been in. The question is can we break above 1 percent. And also what's the Fed going to think about 1 percent. Right. And of course just to be clear. One theory is that perhaps the weak report will kick them into action in Congress and get that stimulus. But for more let's bring in your Leno show. You had two of us soon. Senior U.S. economist for Bloomberg Economics. How bad was this report. I mean the headline Jobs Created No Missed Labor Force Participation Rate actually slid back. It was below expectations. How concerned concerning are the numbers to. I think it was a pretty bad record actually all across. We saw deterioration in the pace of growth in payrolls. We see that is happening as though it was for the most vulnerable industries private. Service sector is getting hurt and the worst news is that it's just the beginning. So in fact we are forecasting headline payrolls print for the December reading in the vicinity of a hundred and fifty negative print. So just simply because the lockdowns that started in the beginning of November and that they caused this deceleration in the pace of growth they worsened in the second half of November and going into December. So we will see a worst reading this month and that we will probably see a pickup in the unemployment rate. So I mean interesting to hear this data point we're getting today. And obviously people are expecting that weakness in the next report here. As Joe was pointing out the market reaction Alina seems to be that this is going to get Congress to act potentially and maybe even the Fed to act. Is there a longer term trajectory here a longer term trend that you're seeing in this numbers that you would actually think would make the Fed change or somehow adjust its policy in some way. Well look. Yeah. So bad news good news I guess for the markets. So the idea that people are expecting that that will push Congress to act faster and in fact I remain quite skeptical that we will get a comprehensive package with a neighbor with the amount in it. And that is just screaming. You know the latest data is just screaming that they need to put the act together and really act quickly to you know to avoid a drop in economic output in the first quarter of next year. And we are expecting that already because simply because nothing has been yet done. Talk to us about how the data is screaming it. Because I think what's been interesting is how some of the worst predictions the dire predictions particularly when we started seeing those fiscal cliffs come into action when people stopped getting the extra six hundred dollars a week for example everyone thought retail spending would fall and it just didn't work. What do you think is going to be different this time. So this time we do see the acceleration in this case. And that was a huge driver in the beginning of this year obviously. And you know it seems like it's happening right now. So it's really a force loaded down that force slowdowns that are closing parts of the economy and having a huge impact on economic growth. So obviously you know the the help from the Fed the Cures Act that in the beginning of this year that that helped a lot. But really the reopening of the economy had the most profound impact on economic growth as the economy reopened into the third quarter. And we saw this huge rebound in economic growth back then. I think that's what we're going to see in the near term. We will see a significant deterioration in economic growth into the year end. And most the worst will probably come in the first quarter regardless of you know policy help and things like that. And once the vaccine is available we will see a rebound then does it. There's really nothing much you can do about this. It's just you know policy has to try to soften this blow. And you know that's what we hope is going to happen. All right. Great stuff. We'll continue to watch that. Our thanks to you initially and of our senior U.S. economist for Bloomberg Economics. And coming up bitcoin and hit an all time high this week and pulled back just a little bit. So we'll discuss what's fueling a rally with bit wise asset management chief operating officer said if your sorrow. That's next. This is Bloomberg. Today we are focused on the extraordinary week in markets and crypto is in it. Bitcoin hovering near the nineteen thousand dollar mark but at one point Joe it was at twenty thousand record highs. In fact we'll get breaking news that right block chain. Obviously a company caught up in all of this is filing to sell some more shares. Yeah that now is the time it would look like. But yeah absolutely. Pretty extraordinary week. And we're just shy currently of those record highs. But you know like half where we were a few weeks ago. So for double where we were. Joining us now Teddy if you sorrow chief operating officer at Bit Wise Asset Management today I mean it kind of comes back to this question is who is the buyer that's driving this. Is it institutions. Is it retail. Is it high net worth like in your view. What. Where's the marginal dollars coming in right now. Joe heroin remain. Thank you guys for having me back. Great to be with you on a on a jobs report day. No less time to talk about crypto. I think what we're seeing that is different this time around compared to previous rallies Joe is that it becomes very difficult for professional investors to not have an opinion at some point. It's going to be the case that that if you're managing other people's money and you're professionally investing you're not doing your job if you don't have an opinion. I don't think we're there yet. But oftentimes once you do sit down and you study the asset class and you do develop an opinion you do become a buyer. And I think that's really what we have started to see really since the late summer. I'm not saying that everyone is going to arrive at the conclusion that they should be long but I think that that is where this marginal buyer has been coming from for the last couple of months. Yeah everyone certainly has an opinion. I am curious Teddy about some of the reports that we heard about you know Pay Pal and Square and some of these payments companies embracing Bitcoin in a way that folks didn't necessarily think whatever happened. How much of an impact did that actually have on the run up in prices of any. Yeah I mean there's no question that it's had a significant impact and I think you have the same dynamic there with these other companies that are getting involved. And I think people also underestimate the reach that PayPal has. But I think what really does happen is if you sit down around the investment committee or as a management group and believe me right now all of these companies are it's hard to get to a different conclusion. All public companies or many of the public companies that have announced that they're going to be involved in Bitcoin or cryptocurrency many of the public companies that have announced that they've purchased Bitcoin or cryptocurrency have been rewarded by the public markets. And and remember this is against a backdrop of a fixed size asset classes only limited issuance of Bitcoin and other crypto currencies that are out there. So as the space becomes more crowded the supply is fixed and there's not that many seats at the table. And so what we have is an increase in price. Teddy is there a risk that given that limited supply. People stopped going down the food chain and looking at alternative coins that perhaps don't quite have the business model behind them that vindicate the sort of price point. Yeah absolutely important question. There are risks. I want to be clear about that there are significant risks including regulatory risks and people should absolutely consider them. But it is also been a classic feature of previous bull markets in crypto that people get a taste for Bitcoin. They start investing there and then they begin to look over into other apps into other assets in the space. In fact though our strongest pieces that bit wise is index based investing in the asset class. We think probably a theorem is going to become maybe the story of 2021 as we move forward into the next year here. And we think that the risk is that folks and investors don't appropriately screen these additional assets or analyze these additional assets. And most most of us. As with day jobs don't have the time to consider those risks that you're talking about Carolyn. It is important that as investors begin to move over into the other assets besides Bitcoin which we think is the natural progression and which is why we think index investing is the right approach for so many credible investors. We think that that's the dynamic that will occur. A final question. We just have a few seconds left. But you know you talk about everyone needing to have an opinion on Bitcoin and probably it is kind of like that. Everyone does feel like they have an opinion. But with other assets there are sort of clear ideas on how to value them. Obviously equities obviously bonds gold is historically tied to real interest rates and volatility. Do people have any idea of why bitcoin at nineteen thousand as opposed to bitcoin at nineteen hundred or one hundred ninety thousand. Like little ideas of where it should be at. Or is everyone just sort of grasping for straws on this. I think valuation is an important question. Joe you raise a good question about where is the right price. The traditional metric certainly don't apply. We started to see reports coming out from from professional analysts that city at BCG Martin Mike McGlone that the Bloomberg commodity analysts was out this week with a very bullish report as well. They did shout not a lot of slack in the street. I liked that phrase. And thank you for the show today. Sara Rice speaking with me. Stay well. And we wish a team well for some who are based in San Francisco SIF at ISE Asset Management. All right. Great conversation there. And just a reminder to all of our viewers you can also become our listeners. Subscribe to our weekly podcast. It's called What You Missed this Week. You're going to find all of our best content each Friday. Not our worst joy over the weekend. It's available wherever we should make a second. So just say good bye just for that. It's just the worst of the worst of the week. I might actually be pretty popular. Those guys would never come back. Yeah. How would we indicate that. Maybe it just be our invented it. It is the worst. It's this part. That's when watching it. Bloomberg Technology is up next. Have a great weekend. This is Bloomberg.

No schedule data available.

'What'd You Miss?' Full Show (12/04/2020)

Caroline Hyde, Romaine Bostick & Joe Weisenthal bring the news and analysis you may have missed after the closing bell on Wall Street. Today's show tackles the themes of the week: commodities, the labor market and crypto Guests Today: Michael Purves of Tallbacken Capital Advsiors, Teddy Fusaro of Bitwise Asset Management. (Source: Bloomberg)

More From What'd You Miss?
All episodes and clips