Citi's Dirk Willer on How You Know When the Bubble Is Over

SPEAKER_2 (0:02)

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Joe Weisenthal (0:18)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:23)

And I'm Tracy Alloway.

Joe Weisenthal (0:24)

Tracy, markets getting interesting again.

Tracy Alloway (0:26)

I love interesting markets.

Joe Weisenthal (0:28)

We always say we're long volatility.

Tracy Alloway (0:30)

That's right.

Joe Weisenthal (0:31)

Here at the Odd Lots Podcast, all financial journalists are long volatility, I guess.

Tracy Alloway (0:36)

Yes, I mean, you can actually see it in the listener and readership numbers. Our traffic follows the vids.

Joe Weisenthal (0:41)

There's some bad incentives. Perhaps. But if it bleeds, it leads. They've been saying this about the news forever.

Tracy Alloway (0:49)

Yeah. So at the moment, we are recording this on Friday, November 14th.

Joe Weisenthal (0:54)

At 10:07 AM.

Tracy Alloway (0:55)

Yeah. We have to say that. We have to be very specific because things are changing so fast. At the moment, the S&P 500 is down 0.7 percent, but it was down more than 1 percent earlier. And then yesterday, it fell 1.8 percent. So this is a pretty substantial slide. And of course, it comes at a time when people were already worried about things like tech valuations and the possibility of an AI bubble.

Joe Weisenthal (1:20)

Totally. The US stock market has had a phenomenal year. And this is all kind of minor in the grand scheme of things. But some of the moves haven't been that minor for some big things. It is some of the most volatile period since April, really. I mean, it's kind of been a smooth ride up since the end of April or the middle of April, whenever that bottom. There's just a lot going on. Questions about the Fed. Gold, interestingly, had a massive year, and it also is selling off. So that sort of raises the question about what's been driving gold. Bitcoin getting absolutely clobbered, of course. You know, it's sort of a glorified tech stock, and the way it trades. So many interesting things. So many market winners fading a little bit.

Tracy Alloway (2:01)

You know what was really interesting this morning? For a second, bonds weren't really doing anything. They weren't rallying. And so if you can't go into gold, if you can't go into bonds, if everything's selling off at the same time, that seems kind of worrying.

Joe Weisenthal (2:12)

Well, this is really interesting and probably needs to be discussed more. But you're absolutely right. I think yields on the 10-year were actually up yesterday, November 13th. In the last week, I was looking at the work function on the Bloomberg terminal. Odds of a December rate cut have come in quite a bit. It's closer to a coin flip. A week ago, it was 66%. There have been some speeches from some of the FOMC members talking about, you know, they're uncertain. And part of the reason we're uncertain, because we've had so little data, I guess we're going to start getting data again now that the government...

Tracy Alloway (2:43)

Although it's still going to be messy.

Joe Weisenthal (2:44)

It's still going to be super messy. You know, understanding the economy in real time is harder than the best of times. It's really hard when there's no data. And then it's really hard when the data that does come out is going to be driven by the lack of government employment, which then make the data even more ambiguous. So a million questions, very interesting moment in a very interesting year for markets. We sort of got to get a better understanding of what's going on.

Tracy Alloway (3:06)

Can I say one more thing before we get to our guest? Which is I think part of the discussion at the Fed, we're kind of getting very circular here because I suspect what's happening is, yes, the Fed is worried about inflation. So some FOMC members are getting a little bit more hawkish in their speech. I think they're worried about AI bubble possibilities and valuations as well. And the longer they keep rates low, the longer this goes on, and then maybe the mess is even bigger when they eventually have to clean it up.

Joe Weisenthal (3:33)

Totally. All kinds of crosswinds, so to speak. Well, anyway, I'm very excited to say that we do indeed have the perfect guest, someone we've never had on the show before, but very excited to talk to him. We're going to be speaking with Dirk Willer. He is the head of global macro strategy at Citi. He brought us a book too that he co-authored, Trading Fixed Income and Effects in Emerging Markets.