WEBVTT - Bad News is Good News, Again? 0:00:13.360 --> 0:00:17.000 Hello, and welcome to What Goes Up a weekly markets podcast. 0:00:17.280 --> 0:00:19.400 My name is Mike Creagan, and I'm a senior editor 0:00:19.480 --> 0:00:22.680 at Bloomberg and I'm val Donna, hi across asset reporter 0:00:22.720 --> 0:00:25.840 at Bloomberg. And this week on the show, while the 0:00:25.960 --> 0:00:30.000 SMP fire just kept a seventh straight monthly gain, it 0:00:30.120 --> 0:00:33.200 happened in the same month that Federal Reserve officials made 0:00:33.200 --> 0:00:35.440 it pretty clear that they're ready to start taking their 0:00:35.479 --> 0:00:37.519 foot off the gas pedal. When it comes to the 0:00:37.640 --> 0:00:41.520 stimulative monetary policy that's been so important for this rally, 0:00:42.680 --> 0:00:44.440 how much of the rally actually has been due to 0:00:44.479 --> 0:00:47.239 that stimilios and how much was due to the ebulent 0:00:47.360 --> 0:00:50.760 investor psychology that accompanied it, and how should we think 0:00:50.760 --> 0:00:53.720 about what happens now. We'll get into it with a 0:00:53.800 --> 0:00:56.680 chief investment officer who actually helped start her own new 0:00:56.720 --> 0:01:00.000 firm just about two years ago. But first, vill Dona, 0:01:00.640 --> 0:01:04.400 some trivia I just learned about you and this chief 0:01:04.440 --> 0:01:06.960 investment officer. Neither one of you has a middle name. 0:01:08.080 --> 0:01:11.200 That's true, right, that's true, that's right. Yeah. Her name 0:01:11.240 --> 0:01:15.120 is Kim Forrest. She's the chief investment officer at Boca 0:01:15.240 --> 0:01:18.240 Capital Management. Kim, Welcome, to the show. Thank you, thank 0:01:18.240 --> 0:01:21.759 you for having me. Yeah, Kim, let's just start off 0:01:22.080 --> 0:01:24.480 before we get to the actual nuts and bolts of 0:01:24.840 --> 0:01:26.520 your views on the market. Tell us a little bit 0:01:26.600 --> 0:01:28.399 bit about this firm. I know you just started it 0:01:28.440 --> 0:01:32.720 in what two thousand and nineteen. UM You're based in Pittsburgh, right, 0:01:32.760 --> 0:01:34.399 Give us a little bit about how it all came 0:01:34.400 --> 0:01:37.320 about and sort of what your strategies are. Sure, So, 0:01:37.600 --> 0:01:42.319 I have been a uh PM for probably about I 0:01:42.360 --> 0:01:45.920 don't know, sixteen years, and before that, I started this 0:01:46.880 --> 0:01:51.520 career as a cell side analyst covering software stocks. Before that, 0:01:51.640 --> 0:01:55.360 I was a software engineer for thirteen years. And I 0:01:55.520 --> 0:01:58.120 found this world because I went to an MBA program 0:01:58.160 --> 0:02:03.680 to become a salesman essentially of UM software and services. 0:02:03.760 --> 0:02:06.360 And I thought I needed to get the vocabulary of business, 0:02:06.400 --> 0:02:08.120 so I got an m b A and instead I 0:02:08.240 --> 0:02:11.480 changed careers. It's so crazy because I found finance and 0:02:11.520 --> 0:02:14.600 I love it. So so that's how I got here. 0:02:14.919 --> 0:02:17.960 And I guess I'm entrepreneurial by nature because I've always 0:02:18.040 --> 0:02:20.640 kind of been itching to do my own thing, and 0:02:20.680 --> 0:02:25.160 in twenty nine I finally took the leap. So I'm 0:02:25.240 --> 0:02:29.400 a equity analyst, and we have some strategies here that 0:02:29.480 --> 0:02:33.240 are based off of the core of what I believe, 0:02:33.360 --> 0:02:36.600 and that's growth at a reasonable price. I believe that 0:02:36.680 --> 0:02:40.200 the markets always reward growth, but UM, you should be 0:02:40.240 --> 0:02:42.720 prudent about putting your money to work. So that's kind 0:02:42.720 --> 0:02:45.240 of um what we do, and we do it well. 0:02:46.480 --> 0:02:48.359 And Kim, you and I have been talking for a 0:02:48.440 --> 0:02:50.799 couple of years now. One of the things we very 0:02:50.840 --> 0:02:54.600 frequently talked about is your pets and my pet So 0:02:54.720 --> 0:02:56.760 maybe you can touch on that a bit. But I 0:02:56.760 --> 0:02:59.920 also want to ask you about UH tech. I know 0:03:00.000 --> 0:03:02.160 you and I have talked about tech a million times. 0:03:02.360 --> 0:03:04.560 I think you like certain chip companies. I think you 0:03:04.680 --> 0:03:08.240 like the five G space. Maybe one of your main 0:03:08.240 --> 0:03:10.960 funds is up forming them this year. So maybe you 0:03:11.000 --> 0:03:15.000 can tell us a bit more about your your strategy. Sure, 0:03:15.080 --> 0:03:18.080 and we'll leave pets to UH in a couple of minutes. 0:03:18.160 --> 0:03:21.920 So so right, Probably because of my first career as 0:03:21.919 --> 0:03:25.560 a software engineer, I see things through the lens of 0:03:25.600 --> 0:03:30.079 trying to find really good companies that use technology really well. 0:03:30.400 --> 0:03:34.320 What I discovered, um, when I was on the software 0:03:34.360 --> 0:03:38.800 gig was that certain companies would kind of do well, 0:03:38.880 --> 0:03:41.280 not so great things with technology that's been a whole 0:03:41.320 --> 0:03:45.040 lot of money. It was cool, it was cutting edge, 0:03:45.080 --> 0:03:47.920 but it didn't do much for them as a company. 0:03:48.000 --> 0:03:50.600 So that's the kind of software I try to stay 0:03:50.600 --> 0:03:53.640 away from, right is. You know, just because it's cool 0:03:53.720 --> 0:03:57.760 doesn't mean it's good. So I'm looking for productivity. So 0:03:57.800 --> 0:04:01.920 that's the thread again, growth a reasonable price, but companies 0:04:01.960 --> 0:04:05.360 that can really deploy technology well. And I also like 0:04:05.440 --> 0:04:09.600 companies that make technology. Um. Right now, I've figured it 0:04:09.600 --> 0:04:12.840 out that at the very core of any kind of 0:04:12.880 --> 0:04:16.080 software is hardware that runs on a chip. So I've 0:04:16.120 --> 0:04:20.839 been really investing in chips to the uh, you know, 0:04:20.920 --> 0:04:22.840 I haven't really found a whole lot of software companies 0:04:22.839 --> 0:04:25.320 that I like at this point, but chips look cheap 0:04:25.920 --> 0:04:30.479 and um. Even though we started right running this portfolio 0:04:30.640 --> 0:04:34.479 right at the beginning of covid UM, chips have really 0:04:34.520 --> 0:04:38.839 performed well and they're constrained. But here's the thing. We're 0:04:38.839 --> 0:04:40.960 going to need more next year and the year after 0:04:41.120 --> 0:04:45.280 and the year after, and I think we're under um 0:04:45.440 --> 0:04:48.120 estimating how many chips we're going to need because of 0:04:48.160 --> 0:04:52.040 five G bringing us Internet of Things to be finally 0:04:52.200 --> 0:04:57.440 a thing in the in the corporate world, and I 0:04:57.480 --> 0:05:01.000 don't bring up pets just to bring up pet Mike. 0:05:01.440 --> 0:05:04.280 I don't know if you've read Kim's annual reports, but 0:05:04.360 --> 0:05:07.680 she she has included I think you once included a 0:05:07.680 --> 0:05:12.120 picture of your chickens. Was it this past year? I 0:05:12.160 --> 0:05:16.599 think so. Yes. I have four chickens and everybody works 0:05:16.600 --> 0:05:20.160 in this house. They lay eggs. They are all egg producing. Um. 0:05:20.160 --> 0:05:22.080 I haven't had to buy eggs from the store in 0:05:22.120 --> 0:05:24.400 a very long time, and I'm glad because my eggs 0:05:24.400 --> 0:05:30.120 are golden and tasty and not like those sad, mass 0:05:30.160 --> 0:05:32.559 produced yellow eggs. I saw a picture of your chickens. 0:05:32.560 --> 0:05:36.279 I'm very jealous. I'm an aspiring backyard chicken farmer myself, 0:05:36.320 --> 0:05:40.320 but uh, my neighbors are not do not share my aspirations. 0:05:40.360 --> 0:05:43.559 So I'm not sure if we could uh make that happen. 0:05:43.640 --> 0:05:47.920 Maybe in retirement, I'll get get finally get those chickens. Um, Chem. 0:05:48.000 --> 0:05:51.039 I wanted to unpack a little bit about your approach 0:05:51.160 --> 0:05:56.240 to uh looking at chip makers, um and I have 0:05:56.279 --> 0:05:58.479 a lot of questions about this, and as just my style, 0:05:58.520 --> 0:06:00.760 I might pack them all into like a thirty part 0:06:00.839 --> 0:06:03.000 question for you, so so stand by for that. But 0:06:03.000 --> 0:06:06.760 but but I feel like a lot of investors get 0:06:06.800 --> 0:06:11.360 intimidated with the semiconductor space because there's so much going on, 0:06:11.440 --> 0:06:15.320 there's so much nuance, and also there's so much sort 0:06:15.360 --> 0:06:18.120 of there's this like boom and bust cycle of of 0:06:18.120 --> 0:06:22.240 supplying demand. Um. Obviously now we're in this still in 0:06:22.240 --> 0:06:25.800 this kind of mismatched supplying to demand environment where everyone 0:06:25.839 --> 0:06:29.000 needs chips. Uh, they're not making enough, you know, for 0:06:29.080 --> 0:06:33.000 carmakers and other applications. But let's start first with that 0:06:33.160 --> 0:06:36.640 idea of the sort of you know, the the cycle 0:06:36.720 --> 0:06:39.400 for chip makers, which it doesn't seem to always be 0:06:39.880 --> 0:06:42.799 correspond with the regular economic cycle. It kind of has 0:06:42.800 --> 0:06:45.560 its mind of its own um and the share prices 0:06:45.600 --> 0:06:48.360 kind of through their own thing as well. So is it, 0:06:48.480 --> 0:06:51.840 you know, do you try to time that cycle uh 0:06:52.200 --> 0:06:54.000 to sort of get in and out of these names 0:06:54.320 --> 0:06:56.160 along with it, or is that is is that as 0:06:56.200 --> 0:06:59.760 foolish as trying to time the regular market as a whole. 0:07:01.520 --> 0:07:05.480 That is an excellent question with multi parts. So here 0:07:05.520 --> 0:07:07.479 I'm going to take a shot at it. First, to 0:07:07.560 --> 0:07:11.440 the timing aspect um, I think we're always surprised, both 0:07:11.440 --> 0:07:14.920 to the upside and downside. We're rational people. We look 0:07:14.960 --> 0:07:16.880 at things and we say, X, Y and Z are 0:07:16.880 --> 0:07:19.960 going to happen, and then ABC happens. Right, So I 0:07:20.080 --> 0:07:24.960 try to take most of the timing away from any 0:07:25.040 --> 0:07:28.320 kind of thing other than today's price. Like I have 0:07:28.400 --> 0:07:31.280 a little band of maybe sixty days where I look 0:07:31.320 --> 0:07:34.200 at something and go, that's gonna come back down. I 0:07:34.240 --> 0:07:36.400 can wait for that, right, So that's my at a 0:07:36.480 --> 0:07:41.760 reasonable price. Um. That being said, in the world of chips, 0:07:42.080 --> 0:07:47.600 there are definite pockets and you can even though you're 0:07:47.640 --> 0:07:52.040 not a technologist, you can figure these things out. For example, 0:07:52.360 --> 0:07:56.880 there's one um it's called Micron. It's one of the 0:07:56.960 --> 0:08:00.800 names we own, the ticker symbols M you. And one 0:08:00.840 --> 0:08:03.200 of the things that they make is this stuff called 0:08:03.400 --> 0:08:06.880 nand N A N D And that is a way 0:08:06.960 --> 0:08:13.840 it's it is a chip, but it is really um storage. Right. 0:08:14.080 --> 0:08:16.680 It doesn't have to have electricity. You can put stuff 0:08:16.680 --> 0:08:18.920 on it. It's like those little cards that used to 0:08:18.960 --> 0:08:22.000 have for your camera or your phone. Right that that's 0:08:22.040 --> 0:08:26.520 that is what we're talking about. So that definitely has 0:08:26.640 --> 0:08:30.040 boom and bust cycles. And it's only because only eight 0:08:30.160 --> 0:08:34.280 companies make it. So when somebody brings a new line 0:08:34.720 --> 0:08:39.200 or a new fab online that kind of destroys the 0:08:39.240 --> 0:08:44.360 whole supply demand um curve. Right, So then the chips 0:08:44.400 --> 0:08:49.120 get cheap because you know, these are unbelievably expensive fabricating plants. 0:08:49.160 --> 0:08:51.200 They have to be running at full tilt the whole way, 0:08:51.280 --> 0:08:54.400 or nobody makes any money. So they just keep shoving 0:08:54.440 --> 0:08:56.959 them out the door. And it's kind of commodity. Now 0:08:56.960 --> 0:09:00.120 a couple of things. First, not all nanda is at 0:09:00.200 --> 0:09:04.480 it equals some are is getting faster, better, stronger than others. Um, 0:09:04.559 --> 0:09:07.520 So that is kind of adding some discrimination to your 0:09:07.559 --> 0:09:10.800 ability to pick a better company from. You know, it's 0:09:10.840 --> 0:09:14.679 no longer commodity. But the second thing is we are 0:09:14.760 --> 0:09:20.040 so quickly moving away from older storage devices like spinning disks, 0:09:20.080 --> 0:09:23.280 and certainly we don't put anything on metal tape anymore. 0:09:23.280 --> 0:09:26.000 Remember those big tape rooms where okay, yeah, that's gone, 0:09:26.080 --> 0:09:30.199 that's not a thing anymore. So because of that, I 0:09:30.240 --> 0:09:32.560 think we're gonna kind of flatten out and we're gonna 0:09:32.559 --> 0:09:37.640 have boom let cycles, not boom and bust cycles. Right So, 0:09:38.040 --> 0:09:41.400 because I do think we're just we have so much 0:09:41.480 --> 0:09:44.000 data that it has to go somewhere, and it's going 0:09:44.040 --> 0:09:48.800 on these nean devices which are now going into um uh, 0:09:48.840 --> 0:09:52.760 you know, enterprise storage areas. So that's thing. One thing 0:09:52.880 --> 0:09:58.800 too is you can discriminate across the makers of chips 0:09:59.320 --> 0:10:03.240 to high tech, which is like you're in video, right, 0:10:03.280 --> 0:10:07.199 because they're doing very very fast chips for graphics cards 0:10:07.240 --> 0:10:10.200 for gamers, but all serve for bitcoin mining and I 0:10:10.240 --> 0:10:14.400 say that with a smile, bitcoin mining and AI, so 0:10:14.800 --> 0:10:17.480 you know you're gonna pay a premium for those chips, 0:10:18.040 --> 0:10:21.560 so that it is probably not gonna go in a 0:10:21.600 --> 0:10:26.320 boom and bust cycle, unless well, they maybe make cyber 0:10:27.240 --> 0:10:33.079 uh uh currency you know illegal that might that might 0:10:33.200 --> 0:10:37.679 imbeed that, but um that's probably not your biggest worry anyhow, 0:10:37.800 --> 0:10:41.520 So right, so there are things that you can kind 0:10:41.559 --> 0:10:45.000 of try to avoid, but then again, I don't know. 0:10:45.120 --> 0:10:48.000 Sometimes things happen and the demand goes right back up, 0:10:48.800 --> 0:10:51.560 so you know, I like to have always some exposure. 0:10:52.040 --> 0:10:56.280 So that's kind of the Miss America answer, right, something 0:10:56.360 --> 0:11:07.600 for everybody. Kim. Can I ask you how you're thinking 0:11:07.679 --> 0:11:11.679 about supplying supply chain issues, because I've actually been reading 0:11:11.679 --> 0:11:15.080 some reports this week, maybe over the last two weeks 0:11:15.120 --> 0:11:17.360 or so, where more and more people are thinking that 0:11:17.440 --> 0:11:20.680 some of the supply chain problems are going to be 0:11:21.160 --> 0:11:24.600 dragging out for longer and longer potentially, And I know 0:11:24.679 --> 0:11:26.679 chips is a big, big part of this, But how 0:11:26.679 --> 0:11:30.120 are you thinking about the big picture. Sure, well, I'm 0:11:30.160 --> 0:11:33.440 going further and further out the timeline because I think 0:11:33.440 --> 0:11:37.000 there are going to be UM supply disruptions and a 0:11:37.000 --> 0:11:39.400 lot of it is because a lot of the actual 0:11:40.000 --> 0:11:43.560 especially CPU chips are being made in one central location, 0:11:43.600 --> 0:11:49.800 and that is Taiwan. And I strongly believe that UM, 0:11:50.040 --> 0:11:52.960 especially Taiwan Semiconductor, is just going to have to move 0:11:53.040 --> 0:11:58.200 some of its production around the world to reduce its risk, 0:11:58.800 --> 0:12:02.200 just for no other reason. And I believe other chip 0:12:02.280 --> 0:12:05.440 makers are going to kind of have to move around 0:12:05.480 --> 0:12:08.560 the world. So why is this something that we're discussing, 0:12:08.600 --> 0:12:11.320 Because I think it gives you opportunity. You can go 0:12:11.360 --> 0:12:14.400 a little further away from actually owning chips to maybe 0:12:14.400 --> 0:12:18.440 owning things like UM we own software that helps you 0:12:18.520 --> 0:12:22.440 to design chips, so you can do that. You could 0:12:22.600 --> 0:12:25.960 invest in the companies that make the machines that make 0:12:26.000 --> 0:12:29.720 the chips right, And I encourage people to think about 0:12:29.760 --> 0:12:32.439 that because I think demand is going up, but so 0:12:32.640 --> 0:12:36.560 is UM. You know, risk remediation. So they're gonna have 0:12:36.600 --> 0:12:39.720 to build these fabs away from off of Taiwan into 0:12:39.760 --> 0:12:42.240 other areas of the world, and that will drive a 0:12:42.280 --> 0:12:44.640 whole lot of spending that you can take advantage of 0:12:44.679 --> 0:12:48.440 because there's relatively few makers of the things that make chips. 0:12:48.760 --> 0:12:53.000 With all the sort of nationalism sweeping the world and 0:12:53.200 --> 0:12:55.640 even the supply chain issues we've seen, it seems like 0:12:55.760 --> 0:12:58.679 that is something yet that you must be preparing for 0:12:58.720 --> 0:13:02.840 in the futures. This this kind of you know, big 0:13:03.240 --> 0:13:07.560 electronic manufacturers bringing chips production in house, and and you 0:13:07.600 --> 0:13:11.720 know people trying to produce their own fabrication plants, make 0:13:11.720 --> 0:13:14.120 their own fabrication plants, like even in the US. That's 0:13:14.760 --> 0:13:18.160 that Is that a real? Is that really where the 0:13:18.200 --> 0:13:20.680 industry is going, do you think? Or is it just 0:13:20.760 --> 0:13:23.240 kind of being hype that way? I think it's being 0:13:23.320 --> 0:13:26.720 hyped that way. But I could see centers around the world, 0:13:27.240 --> 0:13:32.000 like in probably tax friendly and resource friendly areas, And 0:13:33.320 --> 0:13:35.680 Intel's chips are still made in the US, so I 0:13:35.679 --> 0:13:38.160 think that is always going to stay that way, right, 0:13:38.480 --> 0:13:40.960 but I can see it maybe moving over to I 0:13:41.000 --> 0:13:44.079 don't know, Ireland, because you know, they've been a friend 0:13:44.080 --> 0:13:47.199 of pharma, So why not be a friend of tech. 0:13:47.520 --> 0:13:50.600 They're they're just really good about allowing people to come 0:13:50.640 --> 0:13:53.000 in and they know how to handle that. So so 0:13:53.040 --> 0:13:56.120 I think that there could be these pockets around the 0:13:56.160 --> 0:14:00.800 world of technology. And you know, it's not perfect where 0:14:00.880 --> 0:14:05.559 you know, Belgium has its own you know, chip making plant, 0:14:05.800 --> 0:14:08.280 you know, and so does Luxembourg. I mean, I think 0:14:08.320 --> 0:14:10.800 that's getting kind of crazy, you know, too too small. 0:14:11.160 --> 0:14:14.920 But I do think having all of the uh computing 0:14:15.160 --> 0:14:18.560 of the world being made in one area is not 0:14:18.679 --> 0:14:22.000 the smartest thing. And let's take geopolitical out of it. 0:14:22.680 --> 0:14:28.880 They have earthquakes there. It's it's just not super smart, right, Yeah, Okay, 0:14:29.000 --> 0:14:31.040 let's get to all the all the various things I 0:14:31.080 --> 0:14:34.080 promised in the introduction here, which I I promise our 0:14:34.120 --> 0:14:37.280 listeners you will explain with great authority, which is, you know, 0:14:37.320 --> 0:14:41.880 we've had this this long, ferocious rally. Now, I mean 0:14:41.920 --> 0:14:44.000 we call it a seven month rally. It's it's you know, 0:14:44.040 --> 0:14:46.760 it's really longer than that eighteen month rally. Just those 0:14:46.800 --> 0:14:51.640 seven consecutive months, and now you know, we do sort 0:14:51.680 --> 0:14:54.000 of all. I've gained the confidence that the FED is 0:14:54.800 --> 0:14:58.760 you know, getting ready to start taping, tapering asset purchases. 0:14:59.480 --> 0:15:02.560 I wonder you know how important was that in your 0:15:02.600 --> 0:15:06.760 opinions to the rally? Uh? And does tapering matter given 0:15:06.840 --> 0:15:11.240 sort of you know, that reopening uh trend that's going 0:15:11.320 --> 0:15:15.360 on with all these people with you know, swollen savings 0:15:15.360 --> 0:15:19.080 accounts now to some degree or not, you know, maybe 0:15:19.080 --> 0:15:21.760 not fully ready to take those cruise ships, but at 0:15:21.800 --> 0:15:24.640 least ready to go out and eat and maybe you know, 0:15:25.520 --> 0:15:28.200 do something besides sit on zoom calls and watch Netflix 0:15:28.240 --> 0:15:33.360 all day? You know, is tapering a sort of a 0:15:33.400 --> 0:15:35.520 boogeyman that we don't have to worry about giving all 0:15:35.560 --> 0:15:39.080 those other forces in the real economy. I'm not usually 0:15:39.120 --> 0:15:44.880 a fan of, Oh, I don't know, collective government thought, right, Like, 0:15:45.040 --> 0:15:47.960 I'm an American, I'm you know, independent, I'm a hippie, 0:15:47.960 --> 0:15:50.800 I'm whatever you wanna, you know. But I think the 0:15:50.800 --> 0:15:54.400 Fed has done exactly the right thing in these last 0:15:54.480 --> 0:15:57.840 eighteen months. And we're gonna get to that answer about 0:15:57.880 --> 0:16:00.840 how it's affected the markets. Right. So the thing it 0:16:00.920 --> 0:16:04.720 did was bring rates down immediately back to that zero 0:16:04.960 --> 0:16:08.240 like sorry, quarter of basis point close enough to zero 0:16:08.280 --> 0:16:11.400 we call it zero interest rates, right, And then they 0:16:11.480 --> 0:16:14.480 did they understood from the two thousand and eight time 0:16:14.520 --> 0:16:18.800 frame that to really make sure that interest rates stay low, 0:16:18.920 --> 0:16:21.080 you have to do these bond purchases, so they've been 0:16:21.160 --> 0:16:25.040 doing that now. I think what Powell's theory is this, 0:16:25.520 --> 0:16:28.960 and this came through so clear to me, or maybe 0:16:29.000 --> 0:16:31.800 he was just talking. What I believe is you have 0:16:31.880 --> 0:16:35.360 to get people back to work, all of them that can. 0:16:36.040 --> 0:16:39.960 And that is his focus, not an on not on inflation, 0:16:40.840 --> 0:16:43.320 but on getting people back to work. And that is 0:16:43.360 --> 0:16:47.720 going to make it palatable to be weaned off of 0:16:47.760 --> 0:16:53.320 the bond purchases because I don't believe that interest rates 0:16:53.320 --> 0:16:55.920 will shoot back up, right, And I'm talking when I 0:16:55.920 --> 0:16:58.560 talk interest rates, I'm talking the tenure, So the ten 0:16:58.640 --> 0:17:00.720 uere isn't going to go like a two in a 0:17:00.760 --> 0:17:04.760 minute and a half after they start or start tapering. Right. 0:17:05.200 --> 0:17:09.600 But I think in stock prices, we always look at 0:17:09.640 --> 0:17:14.480 PE price over earnings. So right now we're at high 0:17:14.560 --> 0:17:18.919 PE right where we are paying more for that stream 0:17:18.960 --> 0:17:21.040 of cash flows. So we have to be willing to 0:17:21.080 --> 0:17:23.640 pay more for these companies. What we need to do 0:17:23.720 --> 0:17:27.880 is have the earnings grow so the PE follow falls, 0:17:27.960 --> 0:17:30.800 but the price doesn't fall. Does that make sense. I'm 0:17:30.800 --> 0:17:34.879 trying to do math on radio, so it's really tough. 0:17:35.400 --> 0:17:38.439 But you know, this is a division problem, and you 0:17:38.520 --> 0:17:41.200 don't want to make the price change all that much 0:17:41.200 --> 0:17:44.720 whenever you're raising interest rates. And I think Powell is 0:17:44.760 --> 0:17:48.800 trying to guarantee that companies will have more earnings if 0:17:49.200 --> 0:17:53.280 the economies back to more or less full speed. And 0:17:53.320 --> 0:17:56.760 that's why he's been judicious about not cutting these the 0:17:56.800 --> 0:18:00.720 bond purchases before this, because he's seen these uh. I 0:18:00.760 --> 0:18:04.359 don't think he's clear voiant. He's just been overly cautious 0:18:04.440 --> 0:18:07.840 and been paid back with all of the variant kind 0:18:07.880 --> 0:18:11.119 of noise in the system. Does that make sense? It 0:18:11.160 --> 0:18:13.359 makes sense, And I have I do have a follow 0:18:13.440 --> 0:18:17.159 up in UH in that I've read a couple of 0:18:17.359 --> 0:18:20.600 reports again reports, and I spent all my time reading 0:18:20.640 --> 0:18:23.320 reports and notes, but a few of them this week 0:18:23.359 --> 0:18:26.560 said that we're back in a bad news is good 0:18:26.600 --> 0:18:31.720 news environment. I know the ADP number disappointed this week, 0:18:31.760 --> 0:18:34.920 and that's exactly when I started seeing some of those notes. 0:18:34.920 --> 0:18:37.119 So I'm wondering if if that makes sense to you, 0:18:37.840 --> 0:18:40.840 if potentially we could be in another bad news is 0:18:40.880 --> 0:18:44.960 good news environment. Yeah, I mean everybody loves low interest rates. 0:18:45.080 --> 0:18:47.800 Everybody on Wall Street, let's put it that way, except 0:18:47.840 --> 0:18:51.959 for the banks themselves, love love low interest rates. And 0:18:52.000 --> 0:18:56.639 it's because it gives us the freedom to continue buying 0:18:56.800 --> 0:19:02.919 those cash flows at elevated ratios. Right So, we're paying 0:19:03.480 --> 0:19:07.840 what thirty seven times forward earnings for Microsoft right now, 0:19:07.840 --> 0:19:11.960 which is you know, huge, But if their earnings can 0:19:12.000 --> 0:19:15.720 continue to grow while interest rates fall, then their price 0:19:15.720 --> 0:19:36.000 shouldn't fall, you know, uh can Before we get to 0:19:36.680 --> 0:19:39.639 our Craziest Things segment, I also wanted to talk just 0:19:39.760 --> 0:19:44.639 briefly about UM, your sector neutral strategy, which I know 0:19:44.800 --> 0:19:49.439 is doing well this year, outperforming the SMP at least UM, 0:19:49.480 --> 0:19:52.480 which obviously is doing well this year. Talk to me 0:19:52.520 --> 0:19:56.960 about sort of what is the appeal of going sector neutral? 0:19:57.000 --> 0:20:00.680 I mean, my guess is that there are certain investors 0:20:00.720 --> 0:20:03.239 who want to be exposed to growth but don't want 0:20:03.280 --> 0:20:06.320 to be overloaded with tech. Maybe is that? Is that? It? 0:20:06.359 --> 0:20:12.320 In a nutshell, it is, and I mean I kind 0:20:12.359 --> 0:20:15.280 of when I came up with it, I was trying 0:20:15.320 --> 0:20:21.040 to do risk remediation. Because the strategy was made UM 0:20:21.040 --> 0:20:25.280 we started running it for another advisor and you know, 0:20:25.359 --> 0:20:29.240 doing it for their clients and Boca as a subadvisor, 0:20:29.880 --> 0:20:33.760 so they wanted more growth, but not like scary growth, 0:20:34.119 --> 0:20:36.440 and I said, sure, we can do this sector neutral 0:20:36.520 --> 0:20:41.320 thing which will force my hand is a portfolio manager 0:20:41.680 --> 0:20:47.480 to maintain, you know, alignment with the all of the sectors. 0:20:48.000 --> 0:20:50.280 Why is this important? A lot of people who are 0:20:50.320 --> 0:20:53.120 running money will say things like I hate energy, I'm 0:20:53.160 --> 0:20:55.240 not gonna have any energy. And then when energy does 0:20:55.320 --> 0:20:58.880 really well any year, they get their clock cleaned. Right, Well, 0:20:58.920 --> 0:21:01.080 who cares about the manage? Are the people who are 0:21:01.119 --> 0:21:04.879 holding those assets get their clock cleaned? And you know 0:21:05.040 --> 0:21:10.920 that's tough. What it really is a great little way 0:21:11.000 --> 0:21:13.320 to take a little bit of risk off the table. 0:21:13.680 --> 0:21:17.000 But what we're doing is this is where UM. The 0:21:17.200 --> 0:21:20.879 SNP five is the benchmark. The SNP five has a 0:21:20.960 --> 0:21:24.760 lot concentrated in those top five names, right, so we're 0:21:24.760 --> 0:21:30.159 going further down into the market cap, you know, lower 0:21:30.280 --> 0:21:34.439 market caps. And the great thing is some of the 0:21:34.480 --> 0:21:38.080 stocks I've picked have been scooped up by larger companies. 0:21:38.840 --> 0:21:42.199 And it's been great so far, right because you know, 0:21:42.280 --> 0:21:45.560 now I have to find another smaller company for healthcare 0:21:45.600 --> 0:21:48.640 because one of my UM stocks is getting taken out 0:21:48.920 --> 0:21:51.280 and it's a double in eighteen months. I'll take that 0:21:51.359 --> 0:21:55.480 all day. So that's kind of reinforcing. Now you have 0:21:55.520 --> 0:21:57.120 to be a good stock picker. You have to pick 0:21:57.359 --> 0:22:00.280 you know, good stocks and you know come a needs 0:22:00.320 --> 0:22:02.439 that other companies want to buy. I mean, that's not 0:22:02.480 --> 0:22:04.239 why I'm doing it. I just said, oh, this is 0:22:04.320 --> 0:22:08.680 somebody with an unusual product line and looks poised for growth. 0:22:09.080 --> 0:22:13.280 So you know, that gives you an opportunity to participate 0:22:13.440 --> 0:22:18.359 in that cycle of smaller companies being bought by larger companies, 0:22:18.480 --> 0:22:21.000 and so far it's working. It's it's a fascinating phenomenon 0:22:21.119 --> 0:22:23.080 that I feel like a lot of managers of either 0:22:23.119 --> 0:22:26.639 small caps are all caps type of funds. They never 0:22:26.680 --> 0:22:29.800 say they explicitly are looking for takeover targets, but that 0:22:29.840 --> 0:22:32.359 always ends up being sort of a big source of 0:22:32.400 --> 0:22:34.400 their their positive returns. I mean, I guess you drive 0:22:34.440 --> 0:22:39.280 yourself nuts just trying to look for targets exclusively. Well 0:22:39.359 --> 0:22:43.359 you can't. But what I've found is if you get quality, 0:22:43.640 --> 0:22:45.880 like everybody's looking for the same thing, I don't care 0:22:45.920 --> 0:22:48.639 if it's an investor or a company that wants to 0:22:48.680 --> 0:22:51.960 grow and they say, oh, we'll do We'll buy instead 0:22:51.960 --> 0:22:54.879 of build Okay, I mean that's what every company is 0:22:54.920 --> 0:22:59.280 doing if you can find that team of good managers 0:22:59.400 --> 0:23:03.080 that are made cut products that customers love. And this 0:23:03.160 --> 0:23:07.520 isn't just regular like retail customers. Corporate customers can love 0:23:07.560 --> 0:23:10.960 a product too, and if you're good at making that product, 0:23:11.040 --> 0:23:16.160 you are a candidate for takeover. And yeah, and it's 0:23:16.160 --> 0:23:19.480 a good it's a good gig. And at another good gig, Bildonna, 0:23:20.119 --> 0:23:23.160 I'm really struggling for the segway here, but uh, let's 0:23:23.160 --> 0:23:26.280 go with that. Another good gig is the crazy Things segment. 0:23:26.720 --> 0:23:30.359 Stand clear of the craziest things we saw in markets 0:23:30.400 --> 0:23:33.640 this week. That's a good gig for you, of Aldonna. 0:23:33.760 --> 0:23:36.119 So you start us off, what's the craziest thing you 0:23:36.160 --> 0:23:39.919 saw in markets this week? Well, before we get to 0:23:39.960 --> 0:23:43.439 what the craziest thing I saw was, I wanted to 0:23:43.600 --> 0:23:46.680 remind everybody that everybody can give us a call at 0:23:46.720 --> 0:23:50.480 six four six three to four zero, leave us a 0:23:50.560 --> 0:23:52.960 voicemail and we may even play it on the show. 0:23:53.680 --> 0:23:56.080 Another way to get your craziest thing on the show 0:23:56.320 --> 0:23:58.800 is to send me a Twitter message, which which somebody 0:23:58.840 --> 0:24:01.160 did earlier this week. And so I want to give 0:24:01.280 --> 0:24:06.920 doctor at Dr Einstein a shout out. I really hope 0:24:06.920 --> 0:24:11.000 I'm pronouncing that correctly. Of course, his real name, I'm 0:24:11.040 --> 0:24:15.439 sure it is. Doctor is his first name. Einstein is 0:24:15.520 --> 0:24:18.760 his second name. Uh, and I say Stein because there's 0:24:18.920 --> 0:24:21.680 there's a little underscore, a little dash between the one 0:24:21.800 --> 0:24:25.520 and the stein. So forgive me, but um, he and 0:24:25.560 --> 0:24:29.320 I have been exchanging messages on Twitter, and he and he, 0:24:29.480 --> 0:24:31.879