YouSaid · the spoken record

Ed Harrison

lines on the record: 72
first: 2022-05-12
most recent: 2022-05-12
sittings or episodes: 1
sources: podcast

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“Yeah, so I think that if you go to the main page of Bloomberg and hit the tab, there's a section that says newsletters and my newsletter is amongst those newsletters. And you can subscribe that way. And it's free, which is great. So it's not behind the paywall. And just after we speak today, I'm going to talk about what is, I'm going to talk to my editor about what's on our agenda next for next week. Next Tuesday, every Tuesday comes out.”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“Repo crisis, etc., etc. And so now that the Fed is normalizing policy, I think that those risks, a host of them, will pop up in ways that are more difficult for us to maneuver. We had singular risks that popped up that were easier to deal with during the zero rate regime, but now the everything risk is Invoking the sense that we're in a completely different era, and that means that those risks manifest themselves in ways that we can't project”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so I think my view is that in 2008, 2009, we moved into the new regime. That is the zero-rate regime. And in so doing, we believed that we were in a new era. And in some ways we were. The easy money era. And that meant that the charge for equities, lots of different things, looked very different than it did before. But that era is now over. And moreover, it created a whole host of risks that have metastasized in various ways, even since then that have been, we've had to suppress. We saw that with the European debt crisis. We saw that with the shale oil capital misallocation bubble. We saw that with the”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“Basis that's because of yield differentials is really close to where it needs to be as a top. So I think that means more dollar weakness in the future. But then you have the discontinuity that can happen overnight. And in terms of where the Fed is concerned, they're not going to be concerned at these levels. They're only going to be concerned if it goes up beyond these levels, which I don't think it will do. without the discontinuity.”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“Me, and I think that we were talking about this with our former colleague from Real Vision Max Withy, what is the dollar telling us? And generally speaking, I think I agree with Max that it's mostly telling us that there's a differential in policy and in rape policy. And then the question is, are we at max differential policy differential? And what does that mean for the dollar? That's the primary focus. However, as I said, the discontinuities of Fed policy make it so that the whole dollar smile problem does come into play. Because as soon as you get a discontinuity in markets, you know, a panic, a crash, a crisis, then everything's going to go towards the dollar. So I think that the dollar on a”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“You know, it's interesting you mentioned Japan because immediately I was thinking about Japan after we talked about Europe, but from a different angle, and that is, why is it that they aren't seeing the same sort of price pressures that when you look at their price levels, it's nothing like what you see in Europe and the United States? I mean, inflation in Japan simply is not the same problem. What are they doing that's different? I don't know, I'm not close enough to the situation, so I can't really say. So I think that is interesting. But if you look at DXY, 70% of it is the dollar yen and dollar euro. So DXY at 104 or thereabouts now is mostly because of that. And then, of course, you also have the pound, which is getting crushed as well. So the question therefore for me.”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so the ECB, as you say, it's the most behind out of all global central banks with the possible exception of the BOJ, the Bank of Japan, but I don't think they really count because the Bank of Japan is sort of raising their eyes and saying, yeah, we're behind, but we want to be behind. We do not want interest rates to rise at all. They're doing yield curve control. And this sort of monetary suppression, hard monetary suppression from the BOJ, soft perhaps suppression from the ECB. Let's just call it devishness has caused the dollar to explode higher against the yen as well as the euro. What do you make of the strong dollar and how strong does the dollar have to be before it it itself is something that worries the Fed?”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“I'm at a loss, to be honest with you. I don't know what's going on there. All I know is that they're the ones who are the furthest behind. And it's not clear when and how they're going to catch up and what the outcome is going to be for their economies, especially given the weapon that Russia has against them in terms of natural gas. So whereas you might have said, I wanted to rotate into Europe because basically there was a differential in terms of price earnings ratios, in terms of how attractive those stocks were. And the Europeans at some point were actually performing better. Now you can't do that. It's definitely fraught with risk because we really volatile situation there than it is in the United States. If that can actually be the case.”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“What is going on in Europe with inflation and the European Central Bank? I think Germany's PPI producer price index is at something like 30%, a lot of that because of energy. The ECB is still at negative rates. Are they making plans to hike rates or are they saying that the economy is too weak? What's going on?”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“Be discontinuous. That is that you're going to have a period of above trend, inflation, inflation falling less quickly than you want it to be. The Fed jamming it on in order to get the levels down. And then suddenly, like that, you have a discontinuity.”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I might have to punt on that because it's hard to say. I have to say because I think that as I was saying, we're dealing with a dynamic situation. And I think back when I was at Real Vision, we used to talk about Scylla and Charybdis charting the course. And I think we're still very much in that mode where you could just crash on one side or the other. It's a very tricky thing and you're being buffeted on both sides and it could easily just veer off course either way. So if I had to choose, what I would say is over a five-year period that there will be an episode that is somewhat debt deflationary, that could get you to those levels. And so those levels aren't necessarily off, but it will.”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“Earlier, you said you used to be a deflationist, now you're flirting with being an inflationist. I want to put you to the test. So the five-year inflation break-even, what the market is pricing in for inflation over the next five years is 2.92%. Do you think it's over or under in terms of what we realize for inflation over the next five years?”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“Of debt and also the potential debt deflationary forces, interestingly for me at least, you can still unleash those in that sort of situation. That basically they're trying to sandpat pancake the level of demand and then in so doing potentially they could unleash debt deflation dynamics and they stand at the ready of course with extraordinary measures if that were to happen but it's a very dynamic system that we're playing with”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“It was interesting when I was listening to the Fed officials talk about this, and we were having a question within my team, which is the markets live team that does the Bloomberg terminal blog. And the question was, is it a supply or a demand side driven recession if the Fed intervenes? And what the Fed officials have been saying is something of like we need to get supply and demand in balance. And then you ask yourself, you try to unpack that. What does that really mean, right? Because what they're saying essentially is supply is limited. And we need to get supply and demand imbalance. To me, that sounds like if supply is limited and demands up here, we need to demand reduced to that level. And if you think about the macro preconditions in terms of”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, that is so true, Ed. A year ago, deflationists and people who were on Team Transitory were saying inflation is supply side driven, it's supply center, with the implication being if it's supply side driven, things will get fixed out because companies in China, they're not making the necessary products and it's causing a jam in the works. But, you know, in a few months, it's all going to settle itself out. I actually think not only were they wrong, I actually think it's the exact opposite, where they're more than wrong, where supply side is much more serious because it can last for a very long time. If there's a global energy shortage, that could last for five, ten years. Whereas if it's demand side, all the Fed needs to do is hike interest rates to 3% and destroy demand, cause a little recession, and then game over. We're good. What are the implications of inflation that is primarily supply side driven and therefore one that is somewhat immune to monetary tightening by the federal”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“Term, but also medium and potentially long term, especially if the preconditions economically are make you fragile and prone to shock in a negative way.”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, definitely. And so when you ask that, I immediately think back to 73 to 79. I wasn't old enough to know what was going on then. You weren't born then. And so we can't really say, but my understanding is that there were embargoes. There weren't stoppages. It wasn't that the Middle East said, we're going to stop producing oil. In some senses, you could say it was a supply shock in the exact same way that what we're getting now is a supply shock. And yet, you know, the prices went way up. Saudi Arabia, I think they tripled their price overnight. And that's what caused the whole problem. So it's a supply shock. So even though you have a supply shock, it doesn't mean that it doesn't have reverberations that are not just short.”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“that that market is very volatile you know it's not a it's not like uh we can invest there and it will come back and we can uh we can keep our investments like deep water horizon was a problem but once they kept the well people weren't saying we're going to stop drilling deep water um before that they didn't suddenly things weren't suddenly different afterwards but with uh with shale i think that um after the shale bust people are looking at it in quite a different way that we really need levels Be really high before we're willing to gamble with massive capital investment there.”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I think that it goes back to what we were talking about in terms of short to medium term over the long term. When we were talking about debt deflation, it's like the whole concept of peak oil, peak oil reserves or peak conventional oil reserves. I think that the toggle that we're starting to see now in the oil market is shale. That's what you're talking about. But that's a very difficult structure to deal with because those wells, they deplete very quickly. And at the same time, you have the whole capital investment problems that you were just talking about because we went through that in 2014-15. So I think that it just creates a whole level of complexity in terms of understanding how the market will Resolve the any.”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“Very difficult. And so we may see over the next year another shock, another inflationary shock as a result of the war in Ukraine. The last shock I would mention is that given everything that we've been saying, the Russians, they understand all of the dynamics here. And so they may want to preemptively use natural gas as a weapon. So they made preemptively cut off, say, Germany from natural gas in order to inflict damage because that's their best ability to do so.”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“So, you know, when we look at oil as being fungible, even though there are grade differentials and refining capacity is perhaps limited to one particular grade of oil, you can transport it all around the world. Natural gas, on the other hand, you can't transport all around the world unless you have liquefied natural gas that's coming in. And they don't have the terminals in Europe. The United States in terms of exporting liquefied natural gas doesn't have the terminals per se to completely supplant Russia. So it's going to be more difficult to deal with natural gas than it is going to be to deal with oil. And then it's to be determined what happens in Ukraine with regard to wheat because Ukraine's major exporter of wheat displanting season has been”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“All of those things are things that China uses in droves. And as a result of the lack of demand in China, there's going to be a price moderation there. So that could actually be over some period of time positive. But obviously, they may have to play catch-up once they leave the lockdowns. And so it's not clear what sort of impact it's going to have over the medium term in terms of inflation.”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, China is exporting stagflation in particular because their zero COVID policy means that supply chains are snarled and it adds into inflation. But at the same time, it lowers demand within China. You know, when people can't go out of their home homes to do anything, the net spending is lower. So you have a massive loss of aggregate demand as a result of what's going on in China and an increase in inflation. And that's being transmitted out to the rest of the world. And that's overall negative. The only positive from an inflationary perspective is the commodity price impact. Perhaps the commodity price impact overrides the supply chain impact. So, you know, you could look at copper. You can look at oil.”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“Most vulnerable, but it turns out that they were. I think that Tesla and Nvidia are also vulnerable. And then when you get to the last bastion of Phantom Man, those are the oldest, the most diversified Microsoft alphabet. And what's the last of the three? I'm forgetting now. No, no, no. It's actually, it was Amazon, but it's also alphabet and Apple. An apple, yes. And Microsoft. Those are the stalwarts. When you start to see problems there, that's when you know it's infected the rest of the economy. We haven't gotten there yet. And so until that happens, I think that we probably will not be in a recession. We may not enter into a panic, a financial calamity. I think that when those last three in the Phantom Man stocks give way, that's when we have to worry that the overall economy has been compromised.”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“Then you had Apple, you had Netflix, you have Tesla, you have Amazon, then you have Microsoft, you also have Alphabet and then NVIDIA. So that's the whole Phantom Man. Those are the top eight. And even in the S&P 500, they were pretty much some of the eight largest stocks. They were only one or two, maybe an oil company like ExxonMobil that outweighed them. On a market cap-based perspective, S&P and Nasdaq, they're very important. And what we've seen is a one by one picking off of the Phantom Man stocks. First, we saw Facebook and Netflix single day massive losses because they missed earnings. And then most recently we saw Amazon. I didn't think that Amazon was actually the next.”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so actually it's Phantom Man. Because it's NVIDIA, which is the last end. And I look at the Phantom Man stocks as the eight largest Nasdaq 100 stocks or that were the eight largest when the Nasdaq first started to sell off in November, at its apogee in November. So the largest were Facebook, aka, what is it called?”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“So, Ed, what is your outlook on the Phantom Mag stocks? Explain what the Phantom Mag stocks are. A lot of carnage in the speculative growth stocks, but is it really going to drag down the Phantom Mag? And if they do, how much of a sell-off do you think we're going to see?”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, the second. It's the latter. It's the fact that even after the crisis was over, they were continuing to create money and continue the crisis mode. And so that allowed a bubble to form and for completely speculative stocks to get a bid and that distorted the market in ways that we're now appreciating.”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“And was that a response? What they did in March and April of 2020 rolling out all those programs, you know, expanding the balance sheet by hundreds of billion dollars in a few weeks? Or was it the fact that they continued quantitative easing and low rates until long after it was necessary?”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“Monetary policy. So rather than move with the fiscal authorities, we're going to move against the fiscal authorities because they're moving so aggressively, we can do that. And that ensures that inflation won't spiral out of control. The Fed did the opposite. And so that's the reason that we're in the position that we're in. So when I look at the totality of events and I think about what the fiscal response was in the UK, what the fiscal response was in Japan, what it was in Germany, I think that ultimately Fiscal response in the United States was commensurate with what you see in other places, and that wasn't the error. The error was in the monetary response. That is, it is moving in concert with the fiscal response.”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“Level of fiscal response in order to prevent worst case outcomes, especially in the United States where we're not going, where people get separated from their jobs. You don't have schemes where you can have people working and then top up their salary even if they're only working half time, which is what they do in Germany and the Netherlands and places like that. So that means the people never get separated from their positions and when the lockdowns are over, they can go back to their positions. In the United States, you had unemployment go up to record levels. So what do you do in those cases? You jam it on fiscally. The Fed's position should be in that case to offset that. That is that here we are in a situation where we're jamming it on fiscally. This gives us the opportunity to have tight.”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“That means that whatever happened impacts the course of events going forward. So there's a stickiness to the problem so that the problem like inflation has become so embedded, the transitory inflation has gone on for so long that it actually starts to seep in and create its own momentum for future events. And I think one way to look at this, this is the way that I look at it certainly, is in terms of the monetary offset. So a lot of people, they talk about the fiscal side of things, but really if you're thinking about what's the optimal response to a pandemic, which is unprecedented and shutdowns, probably it's some gargantuan.”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so Jack, you have the long term, and you have the medium and the short term. There are lots of long-term negatives in terms of demographics and high levels of aggregate debt within the global economy that are restraining on inflation, so that disinflation and potentially deflation and debt deflation are problems when you hit crisis periods. Over the short and medium term, you can get dynamics that go counter to that longer-term trend. And I think this is what we're seeing. The level of stimulus was so great, not just in the United States, but globally. And then you add in the supply chain problems that over not just a year, but two, three years, you can get effects, hysteresis, so to speak. In terms of that inflation.”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“That limits how embedded inflation can get. But the gargantuan pandemic policy response and the lingering supply chain and consumption changes make me think inflation will remain elevated for years. Tell us about your thinking and how does that change your outlook?”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“Really, the Fed put is about credit. It's about financial conditions tightening so much that basically no trades are getting done. And then the Fed has to come in and make it so that the market clears.”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“So we can just look at all of the pivots that we've seen before, and that would give you an indication. The last one was March 2020. The one before that was December 2018, I would say arguably the one before that was probably all the way back in 2008. And then you can go back probably to 2000 or to 1997 with LTCM. So it's those kinds of discontinuities where you could have a debt deflation unless they intercede and make financial markets clear. That's the kind of thing that I think that's the only thing that will stop them. So whenever when people talk about the Fed put and they talk about equities falling out of bed, I think that that's not accurate.”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“And the coming up, what would that look like? Because I think the Federal Reserve a few days ago put out its latest stability report, how they think how stable they think the financial system is. And I'm just reading exact quote corporate bond valuations, quote, remain high and that forward price to earnings ratios in the stock market, quote, are still in the top quintile of their historical distribution. Fed still thinks that stocks and bonds are overvalued. What would have to happen? What about coming up of the works? What would that look like in order for the Fed to back off and to have another Powell pivot?”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“Is a market that has discontinuities where they are therefore forced to intercede because they need to clear the market, that the market has become gummed up in a way that is deleterious to the functioning of financial, of the real economy.”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“Though in the near term, that's not going to happen largely because, as Powell told us, they haven't talked about it yet. And if they haven't talked about it yet, they can't really do it. They're not going to surprise the market. But it's on the table for the future. And when she was asked by Mike McKee, my colleague at Bloomberg about recession, her answer suggested that it is a possibility that the Fed could push us into recession, meaning she said completely dodging that part of the question. I'm totally concerned with inflation. So you have to take away from that is that inflation is such a sticky issue for the Fed. It's such a political issue in the United States now that the Fed has to completely disregard the real economy. And the only thing that will cause them some level of distress.”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“It's hard to say. I mean, it's anyone's call, but I think in terms of what the Fed is saying, it's interesting. There were two Fed officials yesterday that I listened to that I thought were interesting. One was Raphael Bostik of the Atlanta Fed, and he was talking about, he thought that the cadence, he used that term, was good that they were on, i.e. they did 50, meaning I thought implicitly he was suggesting they're going to do more 50s. So 50, 50, 50. And then he said, we'll just have to see what the markets say, as if there was an implicit put, meaning we're going to do 50-50-50, but if the markets fall out of bed, maybe we'll lower that cadence. That was my takeaway. Then there was Mester, who was speaking almost from the other side. She was saying, we're not taking 75 basis points off the table.”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“Fault rate that Moody's the ratings agency is projecting, then you have to get that price up the risk rate up or the Moody's rate has to come down. I think what you're going to see is that this is going to go up. It could be that Moody's thing goes up and it goes up even more. So all of that's going to happen and it's not going to happen in a glide pathway. December of 2018 tells you that it happens in a crescendo kind of way. And then that's when you get the 30% I think that you were talking about, things of that nature, these discontinuities.”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I think that's definitely the case. And also, just going back to December 2018, we still haven't had that event yet. That credit, enough of the deterioration, the credit that it causes the Fed pause. So we're definitely not there yet. The credit spreads haven't gapped out enough. It hasn't hit the triple Bs. And interestingly enough, I think I saw Marty Fritson, who's a high yield analyst. He's a specialist there. Everyone knows. He was talking about the default rates. The default rates that were seen versus what Moody's, you know, that the default rate that's implicit in the spreads is less than what even an analyst like Moody's is saying they expect in the market. So if there's that discrepancy between the actual price, the implied default rate.”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“Exactly. And so I think that you're going to see more distress. And once that distress seeps in, then we'll, you know, that's when the slowing will begin. And, you know, the markets can't fully price all of that in. There's still the potential that inflation relents, that the Fed doesn't do the 50 basis points, hikes, et cetera. So it's not fully priced in. It will only be fully priced in once it happens.”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“The real economy for those most vulnerable, those companies most vulnerable, that's going to be more difficult for them in the coming months.”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so I think that it's What's going to happen? Because we can't see into the future. But what I think is going to happen is we're going to get the reality check in terms of credit distress. And also we'll get a reality check in terms of the mortgage market. And so I think that we'll see a lot of slowing on both of those things. That is people who are looking to refinance, to re-up. There's going to be more distress there because of the levels. And then we're also going to see in the housing sector, we're going to see a slowing. We've already seen that slowing. We've already seen some level of distress if you look at junk, triple Cs, which are the lowest non-default, non-distress ranked high yield bonds. They've tanked under the onslaught. But we're going to see it accelerate. So I think that”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“Sort of that LTCM Asian crisis period, that is you were starting to see a little bit of a correction and then the Fed back then reverse course and that allowed you to have the ultimate blast off. And so that's what we saw over the last two years. And unfortunately, that also means a much more restrictive Fed, just like back then we saw a final 50 basis point hike now because of inflation. We're going to see three 50s in a row. And so it could be, and I would predict it will be worse in many ways in terms of the outcome.”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“Over the last two years, basically, I think what you had was a full-bore fiscal and monetary stimulus. So if you looked at 2018 to 2019, we got to a point in December 2018 where the credit conditions were poor enough that the Fed relented. And then they started to backtrack. That was playing out just as the pandemic hit. And so could we have gotten a soft landing? Maybe. Would it have been a recession? It's hard to say. But then suddenly full bore reversal of policy. And that delayed the reckoning that we were experiencing in 2020. And so the last two years have been sort of, if you go back to the dot-com period,”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“What was the macro backdrop of the past two years that was so favorable for ARC? Low interest rates from the Fed, a stimulative fiscal policy as well. Why was that so stimulative to, let's say, ARKK? And moving on from ARKK, what's different about it? And perhaps can you go into why higher interest rates are bad for sort of long duration stocks as well as bonds”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“If the macro environment that I'm talking about is true, then you're going to see those dynamics play out. And therefore, those levels, we'll see them hit those levels and more because people are going to rotate away from the companies that are in that portfolio.”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT
“It's hard for me to say if it does become a buy because I don't know the constituent parts well enough I can just talk from a pure momentum perspective. I think that the real problem for ARC is the concentration and also the fact that it is people might pull their money out from a momentum perspective. So when you have a concentrated portfolio like they do with 30-some stocks and these are somewhat illiquid stocks, once the tide turns and people start selling and you get these redemptions, then it becomes very difficult to manage that just from a pure flows perspective because then you have to start selling your good with your bad and then it just creates a crescendo down. So I think that arc is in a very tough situation.”
2022-05-12 · Forward Guidance · The “Everything Risk” Is Here | Ed Harrison · IDENTIFIED FROM THE TRANSCRIPT