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Speaker 1: Bryan Branch.

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Speaker 2: Can we go to Sam Dickey for a market update.

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Speaker 2: Equity markets a whisker off their all time highs, this

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Speaker 2: despite a few wobbles recently. So what about the risks?

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Speaker 2: Sam is with us now? Good evening, Good evening, Ryan.

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Speaker 2: We've talked a lot about the exciting sort of positive

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Speaker 2: catalyst for markets over the last few months. But what

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Speaker 2: are the key risks investors should be focused on this year. Yes,

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Speaker 2: there's been so many perceived risky headlines so far. So

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Speaker 2: far this year is kind of like drinking from a

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Speaker 2: fire hose. So we find it helpful to remember what

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Speaker 2: really drive stock markets, and that's three things. So the

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Speaker 2: direction of economic and corporating is growth, the level of

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Speaker 2: interest rates, and the valuational price of stocks. So if

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Speaker 2: we look at one key risk in each of those

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Speaker 2: buckets and ignore the rest of the noise, A key

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Speaker 2: driver of growth in the US has been the massive

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Speaker 2: build out of AI infrastructure. So the rubber meets the

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Speaker 2: road this year on where the big tech companies can

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Speaker 2: make a return on the hundreds of billions of dollars

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Speaker 2: they spend on AI and as is in the side, Ryan,

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Speaker 2: Remember we were speaking back in October November about how

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Speaker 2: bubbly things that God in Ailand. The good news there

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Speaker 2: is there's been a healthy correction in the riskier names

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Speaker 2: so Orackland call Weave, which were using tons of debt

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Speaker 2: to fund that a built out there, down forty to

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Speaker 2: fifty percent.

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Speaker 1: Point there is. That's good news that investors are becoming

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Speaker 1: more discerning. The second one is on the level of

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Speaker 1: interest rates. Keep an eye on debt levels of particularly

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Speaker 1: OECD countries like Japan and the US. So take Japan,

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Speaker 1: for example, on the thirty year debt that the government borrows.

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Speaker 1: Only five to six years ago, the government used to

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Speaker 1: pay zero percent on that thirty year bonds. Government bonds

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Speaker 1: were at zero percent. Today it pays almost four percent,

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Speaker 1: and the interest rate has been going up rapidly. So

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Speaker 1: the point there is keep an eye on those longer

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Speaker 1: dated interest rates for the US and Japan for signs

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Speaker 1: of stress. And the final thing is markets have had

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Speaker 1: a very strong run since April last year. Equity markets

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Speaker 1: are up forty four percent eight months, which is astonishing,

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Speaker 1: and the headline valuation is elevated at twenty two times

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Speaker 1: simplistic price to earnings ratio. The good news there though,

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Speaker 1: is that's reflective of just some of those really big

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Speaker 1: top ten kick companies being fully valued, like Tesla trades

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Speaker 1: on two hundred times p which is pretty ritzy. The

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Speaker 1: good news is blue chip companies or quality companies that

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Speaker 1: sit outside of that top ten were left behind, and

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Speaker 1: twenty twenty five, in fact, some of those companies of

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Speaker 1: the most out of favor in thirty years, So that

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Speaker 1: bodes really well for focused, selective stop picking investors.

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Speaker 2: What about picking particular markets like you know, Japan and Germany.

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Speaker 2: There's a lot of talk about their stimulus that you know,

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Speaker 2: pumping the cash and which often leads to the lift

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Speaker 2: in markets. Is that something that we should pay close

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Speaker 2: attention to or have we maybe missed the boat on

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Speaker 2: that already? That's what's the story there.

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Speaker 1: I think that's important. That's one of the key lessons.

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Speaker 1: You and I spoke late late last year about what

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Speaker 1: were the key lessons of twenty twenty five. Well, the

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Speaker 1: key lesson is it's possible to make money outside of

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Speaker 1: the US, and for the third time in fifteen years,

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Speaker 1: non US markets outperformed the US, Japan, as you mentioned, China, Brazil,

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Speaker 1: emerging markets. There's some good places to make money. Japan

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Speaker 1: has had a specific stock market sort of stimulus package

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Speaker 1: going on. Apart from the fact they're trying to reflate

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Speaker 1: their economy, they've also told all of the companies that

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Speaker 1: are listed on their stock market that they must do

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Speaker 1: shareholder fenny things. They must use some of the lazy

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Speaker 1: cash on their balance sheet, they must pay higher dividends,

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Speaker 1: they must drive up return. So that's been really, really positive,

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Speaker 1: and I think there's still more to run there, notwithstanding

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Speaker 1: by the way that overriding risk of the price of

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Speaker 1: money there. I mean, just keep an eye on those

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Speaker 1: thirty year bonds. They moved very aggressively two days ago,

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Speaker 1: So we just want to make sure that the Bank

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Speaker 1: of Japan doesn't lose control of its bond market.

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Speaker 2: Sam, if we were to have a Trump Liberation Day

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Speaker 2: outburst again tomorrow, this is just a hypothetical, but throw

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Speaker 2: it at you. Do you think the markets would react,

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Speaker 2: wouldn't react as dramatically as they did last year. Like

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Speaker 2: we kind of learned the lesson with him a little

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Speaker 2: bit that that he you know, he goes crazy, he

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Speaker 2: does the art of the deal thing, and then he

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Speaker 2: pulls back and does a deal.

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Speaker 1: Yeah, I think it's it's a spot like one of

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Speaker 1: those diminishing marginal utility of the shock factor, right or

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Speaker 1: the out of the deal it is. I mean when

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Speaker 1: I talk about drinking from a fire hose to start

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Speaker 1: the year, that was most of those headlines were related

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Speaker 1: to Trump policies or tweets, should I say? And whether

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Speaker 1: it be captain credit card rates in the US. You know,

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Speaker 1: the Iran headlines have beenersuaded headlines, the Greenland headlines, and

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Speaker 1: I think he piled on so much, and those policies

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Speaker 1: came so thick and fast, and eventually the market did

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Speaker 1: link a couple of days ago. But then of course

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Speaker 1: he's already subsequently walked away from the Greenland threats to

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Speaker 1: an extent. The market had a big bounce overnight. So

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Speaker 1: I think you did right, Ryan. Is a diminishing marginal

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Speaker 1: utility of the shop factor.

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Speaker 2: What about the Iran That's the next one on the

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Speaker 2: cab off the rank if we're to believe what's coming

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Speaker 2: out of the White House. We spoke to Marco Rubio's

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Speaker 2: former pres Sect today and he was saying, look, this

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Speaker 2: is the one you want to watch. This is coming next.

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Speaker 2: There's a troop build up or military build up in

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Speaker 2: the Middle East from the United States. Is that as

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Speaker 2: big a deal? Would it be as big a deal

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Speaker 2: to markets as say, the Greenland threats have been.

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Speaker 1: I think these geopolitical you know, flare ups are always

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Speaker 1: concerning most not least, because there's a real human element.

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Speaker 1: Then we shouldn't forget about that. But what history does

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Speaker 1: tell us. You know, you can go back super long

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Speaker 1: term over one hundred and five years. You know, we've

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Speaker 1: had a couple of world wars, you know, a depression,

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Speaker 1: numerous recessions, and still markets are up, you know, hundreds

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Speaker 1: of fold you know. But then it even shorter term.

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Speaker 1: You go back to Ukraine and even if you'd had

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Speaker 1: tomorrow's newspaper yesterday wouldn't have made any money. People were

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Speaker 1: convinced that, you know, gas prices would saw, energy prices

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Speaker 1: would saw, grain prices would saw because you know, Ukraine's

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Speaker 1: a weak bowl of Europe. The factors the day before

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Speaker 1: Putin invaded was the highest price we saw for some

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Speaker 1: of those gas prices, the oil price, and some of

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Speaker 1: those food prices. So it's really hard to trade. The

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Speaker 1: point is it's really hard to trade around these geopolitical

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Speaker 1: events and politics as well the US midterm elections coming up.

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Speaker 1: That's the first point and the second point is, generally speaking,

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Speaker 1: and I don't say this lightly, the market fades these things.

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Speaker 1: They move on from these things fairly quickly. So I

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Speaker 1: would put that in the camp of not ultra important

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Speaker 1: for those three things the price of money or interest rates,

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Speaker 1: the price of stocks, and the direction of you know,

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Speaker 1: economic growth.

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Speaker 2: Interesting. Thanks for letting me throw anything I can and

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Speaker 2: I want to hit you. Sam always appreciated the problem

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Speaker 2: you're inside. Sam Dicky Pusher funds with us Tonight.

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