WEBVTT - Grandma Likes Amazon 0:00:03.680 --> 0:00:07.120 Scrap on your parachute. It's time for What Goes Up 0:00:07.360 --> 0:00:15.000 with Sarah Ponzick and Mike Reagan. Hello and welcome to 0:00:15.080 --> 0:00:18.760 What goes Up, a Bloomberg weekly markets podcast. I'm Sara Ponze, 0:00:19.079 --> 0:00:21.640 reporter on the Cross Asset team, and I'm Mike Reagan, 0:00:21.800 --> 0:00:25.040 a senior editor at Bloomberg. This week on the show, 0:00:25.239 --> 0:00:29.440 the growth stock selloff continues as a proxy Cathy Wood's 0:00:29.480 --> 0:00:33.440 archyt fel into a technical bear market as shares of 0:00:33.440 --> 0:00:36.479 companies like Tesla continue to head lower than NAZAC one 0:00:36.520 --> 0:00:39.600 hundreds now down from a high. And this, of course, 0:00:39.640 --> 0:00:42.840 as rates continue their trek higher, how long can it last? 0:00:42.960 --> 0:00:46.600 We'll discuss and uh, Sarah, I'm afraid. What we also 0:00:46.680 --> 0:00:50.280 have to discuss on this very special episode of What 0:00:50.400 --> 0:00:55.400 Goes Up is my embarrassing high school nickname. If you 0:00:55.440 --> 0:00:59.600 can't tell. Mike is really excited about this, But look, Mike, 0:01:00.120 --> 0:01:02.600 you did this to yourself. Mike a couple of episodes 0:01:02.640 --> 0:01:05.840 ago said look, if we get two hundred ratings on 0:01:05.880 --> 0:01:08.880 Apple podcasts, that he would go out and he would 0:01:08.920 --> 0:01:11.640 dole out his embarrassing high school nickname. He should have 0:01:11.720 --> 0:01:14.679 set the bar higher. But all of our listeners are 0:01:14.680 --> 0:01:17.319 clearly very loyal and everyone more than anything wants to 0:01:17.360 --> 0:01:21.399 know your nickname. So you delivered, you delivered? Do I miss? 0:01:21.440 --> 0:01:24.720 I miss priced this trade terribly. I thought two hundred 0:01:24.880 --> 0:01:27.679 ratings will never get there. I'm safe, but uh, but 0:01:27.720 --> 0:01:30.360 thank you for everyone who listened and left the rating. 0:01:30.400 --> 0:01:33.000 It's means a lot to us. You know, Sarah and 0:01:33.080 --> 0:01:35.280 I have a lot of various duties at Bloomberg, but 0:01:35.319 --> 0:01:38.320 I think, um, this this shows our baby, and uh 0:01:38.440 --> 0:01:39.959 we have we look forward to it every week, and 0:01:39.959 --> 0:01:43.880 it's it's good to see people uh, you know, listening 0:01:43.920 --> 0:01:47.000 and rating and reviewing, regardless of how much pain it 0:01:47.080 --> 0:01:50.720 may cause me. Actually, Sarah, I it's been kind of 0:01:50.760 --> 0:01:55.280 therapeutic for me because, um, I've I've hated this nickname 0:01:55.320 --> 0:01:58.320 for thirty five years, but I've kind of come to 0:01:58.560 --> 0:02:01.200 terms with it, uh through this hole. And I'll explain 0:02:01.240 --> 0:02:02.800 why at the end of the show when we get 0:02:02.840 --> 0:02:07.640 to that nickname. Because although uh, there are some who 0:02:07.680 --> 0:02:10.079 are listening only to hear my embarrassing high school nickname, 0:02:10.080 --> 0:02:13.000 I think more people are listening because we know we 0:02:13.080 --> 0:02:17.120 have a tradition here of having excellent, uh smart expert 0:02:17.160 --> 0:02:21.720 guests to explain the week in the markets, and once 0:02:21.760 --> 0:02:24.680 again we are very excited to have a guest who's 0:02:24.680 --> 0:02:27.360 going to do exactly that. She is the head of 0:02:27.480 --> 0:02:31.680 US equities at Aviva Investors in Chicago. Her name is 0:02:31.720 --> 0:02:35.160 Susan Schmitt. Susan, welcome back to the show. Thank you 0:02:35.360 --> 0:02:38.000 great to be here, and Susan, I think for this 0:02:38.040 --> 0:02:40.840 week the most important question, obviously is did you have 0:02:40.880 --> 0:02:49.320 any embarrassing nicknames in high school? Most important? Exactly exactly, 0:02:49.800 --> 0:02:53.239 But no, I have not made any miss priced ranger here. 0:02:53.360 --> 0:02:56.079 So no, I have not. I have nothing to disclose. 0:02:57.800 --> 0:03:01.839 The answer is yes, will she share it? No, Well, 0:03:01.840 --> 0:03:04.760 that's fine, I guess. I guess I. I made my 0:03:04.800 --> 0:03:06.600 own bed here. I have to ligne it. But Uh 0:03:07.120 --> 0:03:10.239 says and I mean obviously. Once again, this week the 0:03:10.400 --> 0:03:13.840 big story for equities is UH the sideshow of the 0:03:13.880 --> 0:03:18.040 bond market UH rates spiking up on Thursday again above 0:03:18.360 --> 0:03:23.080 one point five in the ten year UM. I suppose 0:03:23.160 --> 0:03:25.920 Jerome Pal did not give the market what he was 0:03:25.960 --> 0:03:29.480 hoping for. I don't know what exactly they were expecting 0:03:29.480 --> 0:03:32.560 out of him, maybe some sort of hint at a 0:03:32.639 --> 0:03:36.200 quote unquote operation twist or yield curve control but how 0:03:36.240 --> 0:03:41.360 do you sort of explain uh, what Pal did on 0:03:41.400 --> 0:03:45.240 Thursday and did he sort of missed the boat or 0:03:45.880 --> 0:03:48.520 I'm kind of about the opinion that taking a little 0:03:48.560 --> 0:03:52.200 froth out of the market is not necessarily uh something 0:03:52.240 --> 0:03:54.000 he's against. I mean, he can always go out and 0:03:54.040 --> 0:03:56.839 give give another speech next week if this one didn't work. 0:03:56.880 --> 0:03:59.200 But what do you think? What's your your take on 0:03:59.320 --> 0:04:03.040 rates and at Wes and Jerome pal speech this week? Well, 0:04:03.080 --> 0:04:05.960 what is happening with rates and equities? So we're seeing 0:04:06.000 --> 0:04:08.200 a lot of ankst and it's the push me, pull 0:04:08.240 --> 0:04:11.120 you market because rates go up, should equities go down? 0:04:11.240 --> 0:04:13.080 Is this a good thing or a bad thing? If 0:04:13.160 --> 0:04:16.000 rates are going up because we expect more growth, that's 0:04:16.000 --> 0:04:18.839 actually a really good thing. And so as we're seeing 0:04:18.839 --> 0:04:22.640 the tenure approach one point five percent and now safely 0:04:22.680 --> 0:04:25.560 they're all all of this week, I think the equity 0:04:25.600 --> 0:04:28.120 markets having a hard time figuring out whether that is 0:04:28.160 --> 0:04:31.120 going to suppress growth or if that just represents the 0:04:31.360 --> 0:04:35.520 optimism that the market has and the achievable optimism and 0:04:35.560 --> 0:04:37.760 goals that we have for the economy as it rolls 0:04:37.760 --> 0:04:40.760 out with the vaccine over the next eighteen months. I 0:04:40.800 --> 0:04:43.680 think Powell statement was pretty interesting because he has been 0:04:43.760 --> 0:04:46.479 so consistent in his messaging that he is going to 0:04:46.520 --> 0:04:50.440 support the economy throughout, and the market is always waiting 0:04:50.440 --> 0:04:54.400 for him to say something slightly different, take a new variation, 0:04:54.640 --> 0:04:57.200 take a new tact on that, take a new track 0:04:57.240 --> 0:04:59.560 on that, and he hasn't. And I think today was 0:04:59.600 --> 0:05:02.159 more of the same. He's still saying he's very important 0:05:02.200 --> 0:05:05.599 the economy. He's not doing any big changes. He's going 0:05:05.640 --> 0:05:08.520 to let this volatility continue at the high end of 0:05:08.560 --> 0:05:10.520 that long the high end at the long end of 0:05:10.520 --> 0:05:13.680 the curve isn't scaring him at all. He's not backing off, 0:05:13.720 --> 0:05:16.000 and the Fed's going to continue to stay the course. 0:05:16.320 --> 0:05:18.679 So I think the market has to absorb that there's 0:05:18.720 --> 0:05:21.160 so many moving parts in the equity markets right now 0:05:21.200 --> 0:05:22.960 that it's really hard to put all the pieces of 0:05:23.000 --> 0:05:26.600 the puzzle together. So, like you said, and Jerom Pell 0:05:26.720 --> 0:05:29.000 has said himself that what we are seeing in the 0:05:29.000 --> 0:05:31.880 bond market is a quote unquote statement of confidence in 0:05:31.920 --> 0:05:36.279 the growth outlook. And I find it interesting. On Thursday, 0:05:37.560 --> 0:05:40.360 when Powell was giving his speech, one of my colleagues, 0:05:40.360 --> 0:05:44.120 built on a Hirich, pointed out that on Twitter hashtag 0:05:44.200 --> 0:05:47.600 stock market crash was trending on Twitter, and it's almost 0:05:47.600 --> 0:05:49.560 a bit ironic because at that point in time, you 0:05:49.560 --> 0:05:51.000 looked at the S and p F punch over the 0:05:51.000 --> 0:05:53.400 past couple of days, what it was down three percent 0:05:53.520 --> 0:05:55.919 from a record. But of course there are areas of 0:05:55.960 --> 0:05:59.040 the market that are seeing significant pain. You look at 0:05:59.040 --> 0:06:01.760 a company like Test. High growth companies then set down 0:06:01.800 --> 0:06:04.760 ten percent, so well more and it depends in which 0:06:04.760 --> 0:06:08.400 companies you are really investing in. It's been said over 0:06:08.440 --> 0:06:11.720 and over that higher yields, well, that's bad for valuations 0:06:11.800 --> 0:06:14.760 or high valuation companies, or that's bad for high growth companies. 0:06:14.800 --> 0:06:17.560 Can you walk us through the actual reasoning for that. 0:06:17.880 --> 0:06:20.440 Why is it that when rates rise you see companies 0:06:20.440 --> 0:06:23.279 like this under pressure. I'm going to counter that with 0:06:23.480 --> 0:06:25.600 look at the Russell two thousand and look at where 0:06:25.600 --> 0:06:28.799 small caps are so well. Yes, these big tech names 0:06:28.839 --> 0:06:31.880 that did very well in twenty are down under pressure. 0:06:32.240 --> 0:06:34.320 At the same time, you're to date those Russell two 0:06:34.360 --> 0:06:37.880 thousand stocks that indexes up over ten percent. So it's 0:06:37.920 --> 0:06:39.920 a big conflict. And I think what you're seeing in 0:06:39.960 --> 0:06:44.680 the small cap names is the reaction to confidence in 0:06:45.080 --> 0:06:48.280 the forward growth and so suddenly these small caps are 0:06:48.320 --> 0:06:51.280 where people feel comfortable investing, when they feel comfortable about 0:06:51.279 --> 0:06:54.799 the economy going forward. We're seeing that in extra really well. 0:06:55.120 --> 0:06:58.320 We're seeing assets come out of those big cap names, 0:06:58.400 --> 0:07:01.640 which were the safe pavements for E twenty where people thought, Okay, 0:07:02.000 --> 0:07:03.760 I know I'm going to get through this with these 0:07:03.800 --> 0:07:06.320 tech heavy names. I'm going to stick here. Where's the 0:07:06.320 --> 0:07:08.279 biggest pressure When we see down days, it's in the 0:07:08.320 --> 0:07:11.240 nastac that tech out the index. So I think when 0:07:11.280 --> 0:07:15.280 people see rising rates, it's always interesting are they rising 0:07:15.280 --> 0:07:18.120 for the right reasons? What does that mean? And it 0:07:18.200 --> 0:07:21.320 has been a long time since we've seen rates rise 0:07:21.840 --> 0:07:24.320 in a gradual way where it hasn't led us into trouble. 0:07:24.400 --> 0:07:27.200 We had this happened when suddenly we had a pandemic. 0:07:27.840 --> 0:07:30.520 In the midstep before that was the FED maybe race 0:07:30.640 --> 0:07:32.440 rates a little too much, and the market had a 0:07:32.440 --> 0:07:35.800 conniption fit over that. So remember that the FED overshot 0:07:35.920 --> 0:07:38.960 slightly had been easing. Then we get to the pandemic 0:07:39.040 --> 0:07:41.840 and race had to drop to zero again. So now 0:07:41.960 --> 0:07:44.800 the markets adjusting to that. I think you have to 0:07:44.840 --> 0:07:48.000 look at the components of the market to see what's 0:07:48.040 --> 0:07:50.720 really moving. The fact that those small caps are doing well, 0:07:51.120 --> 0:07:55.520 tells me that optimism over that overall growth in the 0:07:55.520 --> 0:07:59.880 economy and rates at one point are actually positive. Rates 0:07:59.880 --> 0:08:02.080 are going up for the right reason, and that is 0:08:02.120 --> 0:08:06.640 the overall sentiment versus the other. You know. So one 0:08:06.640 --> 0:08:08.880 of the more interesting things I've read this week is 0:08:09.040 --> 0:08:11.760 UH City Group has some sort of model. Don't ask 0:08:11.760 --> 0:08:13.840 me what's in it. It's a model, alright, but no 0:08:13.880 --> 0:08:16.520 one no one really knows. But they somehow look at 0:08:16.560 --> 0:08:22.600 relative value um of cyclical value and value stocks versus 0:08:23.080 --> 0:08:25.320 that the growth and the big tech stocks that have 0:08:25.400 --> 0:08:29.920 led the way, and somehow they divine out a notion 0:08:30.000 --> 0:08:33.120 that the the equity market is pricing in basically a 0:08:33.200 --> 0:08:37.240 two point two tenure treasury yield um. And they're not 0:08:37.280 --> 0:08:40.240 necessarily saying the bond market is wrong. They're saying, maybe 0:08:40.240 --> 0:08:43.400 the equity market has gotten ahead of itself um with 0:08:43.480 --> 0:08:47.200 this rotation. And I think that's a that's something I 0:08:47.200 --> 0:08:49.280 think you always have to worry about in an environment 0:08:49.320 --> 0:08:53.080 like this. You know, you think, okay, last year, earnings collapsed, 0:08:53.200 --> 0:08:57.000 the economy collapsed, the stock market rose. What SMP rose, 0:08:58.559 --> 0:09:03.079 I mean is this payback? Now? You know, are we 0:09:03.200 --> 0:09:07.800 basically coming back to a rational analysis of the market now, 0:09:08.760 --> 0:09:13.000 especially given what valuations have done. Um and and it's 0:09:13.040 --> 0:09:15.400 the rotation, you know, those two ideas. I'm curious what 0:09:15.480 --> 0:09:19.440 you think about. Have we pulled forward the returns from 0:09:19.480 --> 0:09:22.640 from the earnings and economic rebound that we can expect 0:09:22.640 --> 0:09:25.240 this year? Did we pull them forward to last year? 0:09:25.320 --> 0:09:28.640 Kind of like we pulled forward the tax cut gains 0:09:28.880 --> 0:09:30.840 to the previous year and it was a sort of 0:09:30.840 --> 0:09:34.960 a sell the news event when when we actually got them. Um, 0:09:35.080 --> 0:09:36.920 what you're thinking on that as far as the has 0:09:36.960 --> 0:09:40.000 the rotation got ahead of itself and did the market 0:09:40.000 --> 0:09:42.120 get ahead of itself last year? And sort of how 0:09:42.160 --> 0:09:43.720 that relates to how we can think of the rest 0:09:43.720 --> 0:09:46.160 of two thousand and twenty one. Well, I think it's 0:09:46.200 --> 0:09:49.640 the nature of the market to overshoot in both directions, 0:09:49.920 --> 0:09:52.240 and so certainly we saw a very strong year in 0:09:53.320 --> 0:09:56.320 also in so if you stack those numbers for the 0:09:56.400 --> 0:10:01.120 nastacks the nastacks, that's we're up almost When you look 0:10:01.120 --> 0:10:03.400 at that, you have to think that, all right, this 0:10:03.480 --> 0:10:06.840 is pretty frosty, especially when you're given a pandemic the 0:10:06.880 --> 0:10:10.240 back half of that time frame, and the market probably 0:10:10.320 --> 0:10:12.440 is due for a little bit of a settling period 0:10:12.480 --> 0:10:14.960 and a pullback. Is the equity market too far ahead 0:10:14.960 --> 0:10:17.800 of itself. That's hard to say. When you look at 0:10:18.240 --> 0:10:21.640 zero percent interest on the short end longer term, that 0:10:21.760 --> 0:10:24.480 is really supportive for businesses that should be supportive for 0:10:24.520 --> 0:10:27.760 their growth longer term, and that's a positive. The debate 0:10:27.800 --> 0:10:32.400 between growth and value I think really as another complexity 0:10:32.400 --> 0:10:34.920 to the equation. I think the old monikers of growth 0:10:35.000 --> 0:10:39.160 and value aren't necessarily accurate anymore, and so how the 0:10:39.200 --> 0:10:42.160 indices divide themselves up to be a benchmark for growth 0:10:42.200 --> 0:10:44.600 or a benchmark for value, I like to look through 0:10:44.640 --> 0:10:46.520 and look into the details of that. A lot of 0:10:46.520 --> 0:10:48.200 times if you're in the value besch, it's just because 0:10:48.200 --> 0:10:51.120 you're paying a dividend. You might not be making any money. 0:10:51.160 --> 0:10:54.000 So it's times as well. So it's a it's a 0:10:54.080 --> 0:10:57.800 complicated and messy situation. We're fundamental bottoms up investors. We 0:10:57.920 --> 0:11:00.680 like companies that generate cash flow. A lot of the 0:11:00.720 --> 0:11:02.640 companies that are in those value indicties or once that 0:11:02.679 --> 0:11:05.880 we wouldn't even consider it on. So when you look 0:11:05.880 --> 0:11:08.000 at the market overall, you've got a couple of things 0:11:08.000 --> 0:11:10.920 going on. Back to did we pull too much forward 0:11:10.920 --> 0:11:13.520 in equities or are we too fast in this rotation. 0:11:14.200 --> 0:11:17.640 We had a lot of emphasis on those safety play 0:11:17.720 --> 0:11:21.640 growth names last year. I think diversifying the portfolio is 0:11:21.679 --> 0:11:25.160 a natural progression of that, and so seeing money shift 0:11:25.240 --> 0:11:29.280 into more cyclical names is actually healthy for the market, 0:11:29.360 --> 0:11:32.320 and you're broadening out your base of what you're investing in. Right, 0:11:32.360 --> 0:11:35.640 more business models are acceptable to investors, So I don't 0:11:35.640 --> 0:11:39.720 think we're too far ahead in that diversification. Valuation is 0:11:39.720 --> 0:11:42.440 a completely different story, and I think that is driven 0:11:42.480 --> 0:11:45.679 by what are my alternatives? And when you have interest 0:11:45.760 --> 0:11:49.360 rates still at very low levels, equities are a compelling 0:11:49.400 --> 0:11:52.200 place to be. The issue I think we have in 0:11:52.240 --> 0:11:55.480 today's market is you've had cross currents with the Tenure 0:11:55.520 --> 0:11:58.880 eight going up to one point five acid allocators who 0:11:59.160 --> 0:12:01.160 I don't really look in a stock by stock, but 0:12:01.280 --> 0:12:05.319 overall asset classes, so fixed income or equities are now 0:12:05.360 --> 0:12:08.800 looking at that one percent rates. Saying you're fixed income 0:12:08.840 --> 0:12:11.320 actually is okay for me to move part of my 0:12:11.440 --> 0:12:15.040 investments back into fixingcome to get that secure rate. And 0:12:15.040 --> 0:12:17.520 they were almost all equity exposed as we went into 0:12:17.640 --> 0:12:19.679 your end twenty twenty. Where else are they going to go? 0:12:19.960 --> 0:12:22.360 So I think we're also seeing that shift in acid 0:12:22.400 --> 0:12:27.000 allocation happen along with the diversification of the portfolios beyond 0:12:27.200 --> 0:12:30.480 just the growth tech names. You get those two together, 0:12:30.640 --> 0:12:32.720 and I think that's what's crossing all of this noise 0:12:32.760 --> 0:12:43.880 in the market. We talked about this divergence that we've 0:12:43.920 --> 0:12:46.440 seen amidst this rotation, and I'm just looking at some 0:12:46.440 --> 0:12:47.920 of the numbers from the past month or so, just 0:12:47.960 --> 0:12:53.040 looking at sectors in the SMP energy Meanwhile, consumer discretionaries 0:12:53.080 --> 0:12:56.760 down close to ten percent, financials up six percent. I mean, massive, 0:12:56.920 --> 0:13:00.360 massive gaps between different industries, and then you so have 0:13:00.800 --> 0:13:03.920 pretty wide gaps within equities within the industries. And I 0:13:03.960 --> 0:13:06.120 know we hear this over and over again, and you 0:13:06.160 --> 0:13:09.720 guys are fundamental bottoms up stock pickers, but we've heard 0:13:09.880 --> 0:13:12.040 every year after year after year that this is going 0:13:12.080 --> 0:13:13.680 to be the year of the stock picker. And Bank 0:13:13.679 --> 0:13:16.240 of America put out a report the month of February 0:13:16.360 --> 0:13:19.280 was actually the best month for large cup active managers, 0:13:19.320 --> 0:13:22.520 active stock pickers since two thousand and seven. So would 0:13:22.559 --> 0:13:25.760 you say that what the shows is possibly the time 0:13:25.840 --> 0:13:28.560 is actually here and you can show the skill that 0:13:28.600 --> 0:13:33.040 you have. I definitely think that's the case, but you're right, 0:13:33.120 --> 0:13:36.440 we're active stock pickers. What else are we going to say? 0:13:38.240 --> 0:13:42.480 Some honesty? Finally, we'll be honest. We do have we 0:13:42.559 --> 0:13:44.600 believe that it's why we do what we do. But 0:13:44.679 --> 0:13:47.000 I do think that you're gonna see some of that 0:13:47.040 --> 0:13:49.560 come through because there's so much uncertainty in the market. 0:13:49.720 --> 0:13:51.720 And I do think if you go forward a couple 0:13:51.720 --> 0:13:53.760 of months, I can get a lot of economic noise. 0:13:54.160 --> 0:13:56.320 You know, you're over your comparisons aren't going to make 0:13:56.360 --> 0:13:59.480 any sense because a year ago things were nowhere, We 0:13:59.679 --> 0:14:03.000 close down the economy, we put everything on pause. And 0:14:03.080 --> 0:14:06.959 so I think that is somewhat what JAIRMYN. Powell was 0:14:07.000 --> 0:14:09.680 alluding to on Thursday. He's saying that, you know, he's 0:14:09.720 --> 0:14:13.280 not going to be distressed by some really wacky numbers 0:14:13.320 --> 0:14:16.559 because that may not necessarily be the true picture as 0:14:16.600 --> 0:14:19.640 you roll forward into what's happening. And I think that's 0:14:19.640 --> 0:14:22.840 where investors need to remember, you're over your data and 0:14:22.920 --> 0:14:26.000 some of these top headline numbers. You really need to 0:14:26.040 --> 0:14:29.000 look into the componentry of it, because those top headline 0:14:29.040 --> 0:14:33.560 numbers may not be revealing the true picture of things left. 0:14:33.560 --> 0:14:36.120 And by honesty, I mean for that phrase of the 0:14:36.160 --> 0:14:37.640 year of the stock picker. I think it's been the 0:14:37.720 --> 0:14:40.000 year of the stock picker every year I've been doing 0:14:40.040 --> 0:14:42.280 to this, which is longer than I care to remember. 0:14:42.320 --> 0:14:44.720 I will tell you I think the year after John 0:14:44.720 --> 0:14:47.440 Bogel came out with that first index fund, someone was like, 0:14:47.720 --> 0:14:49.480 that's good, but this is the year of the stock 0:14:49.480 --> 0:14:52.720 picker this year. But I want to go back to 0:14:53.000 --> 0:14:54.640 what you guys are looking at right now, because you 0:14:54.640 --> 0:14:57.320 mentioned earlier on in the show that when you look 0:14:57.360 --> 0:15:00.280 at some broad value indices they include some com means 0:15:00.320 --> 0:15:03.160 that you guys wouldn't even be interested in investing in. 0:15:03.560 --> 0:15:06.440 And right now it seems as though we are seeing 0:15:07.080 --> 0:15:11.640 energy rise at least one percent every single day. Financials 0:15:11.640 --> 0:15:13.760 also getting a boost as we see yields rise as well. 0:15:14.000 --> 0:15:16.400 Would you say, though, that it's not as easy as 0:15:16.440 --> 0:15:19.160 just saying, all right, I want to buy energy companies 0:15:19.200 --> 0:15:21.320 at large, because of course, I mean, energy is a 0:15:21.320 --> 0:15:24.160 sector that that's had a lot of hardship of late. 0:15:25.440 --> 0:15:27.920 Energy is a boom or bust sector. You either love 0:15:28.200 --> 0:15:30.440 you hate it, and it really just depends on the day. 0:15:30.960 --> 0:15:34.480 And so it's it's tough to be out of energy 0:15:34.520 --> 0:15:39.120 when it's working because it works well, aggressively well, and 0:15:39.360 --> 0:15:41.840 when it's terrible, it's really terrible. You don't want to 0:15:41.840 --> 0:15:44.920 be anywhere near it. So in the market today, what 0:15:45.080 --> 0:15:48.080 you're seeing is a lot of control going on in energy. 0:15:48.280 --> 0:15:51.320 The OPAC announcement that came out on Thursday is interesting, right, 0:15:51.360 --> 0:15:53.280 because it's telling you that there is still going to 0:15:53.320 --> 0:15:56.320 be suppression of supply, there's going to be control in 0:15:56.400 --> 0:15:59.560 that supply demand balanced and so you're seeing a lot 0:15:59.600 --> 0:16:02.160 of prey support and I think that that is what 0:16:02.280 --> 0:16:05.360 has been encouraging the market. At the same time, even 0:16:05.440 --> 0:16:08.840 before this came into play with with Thursday's decision, you 0:16:08.920 --> 0:16:12.480 saw the market recognizing that there's going to be future growth. 0:16:12.560 --> 0:16:15.520 Therefore we're going to have increased demand for energy, and 0:16:15.560 --> 0:16:18.880 that baseline price of oil has been rising, so all 0:16:18.920 --> 0:16:20.720 of those you know, I think in this case, I 0:16:20.800 --> 0:16:22.920 mean the swing and energy which is working in the 0:16:23.000 --> 0:16:25.560 right direction, and as an investor, you want to have 0:16:25.640 --> 0:16:28.880 some exposure to that. At the same time, always in 0:16:28.920 --> 0:16:30.800 the back of your mind, when energy is working, you 0:16:30.800 --> 0:16:33.400 have to be thinking about when does this stop, because 0:16:33.400 --> 0:16:36.120 it will quickly reverse and go the other way right, 0:16:36.560 --> 0:16:38.960 and perhaps if it goes too high, it becomes the 0:16:39.000 --> 0:16:43.800 headwinds your your consumer and retail UH stocks now. And 0:16:43.840 --> 0:16:46.480 I wonder how I mean because we talk about a 0:16:46.560 --> 0:16:49.560 dramatic move and will UH not as dramatic as last 0:16:49.600 --> 0:16:51.200 year when I went negative. But you know, I don't 0:16:51.200 --> 0:16:54.040 know how you compute the year over year change from 0:16:54.040 --> 0:16:55.800 a negative number. I'll have to. I'll get one of 0:16:55.800 --> 0:16:58.360 my daughters who's starting calculus to figure that out for me. 0:16:58.440 --> 0:17:03.080 But but brings up the whole notion of commodity inflation. 0:17:03.160 --> 0:17:07.879 I mean oils front center. But we've seen lumber go nuts, 0:17:08.320 --> 0:17:13.240 you know, the the industrial metals, um that all sort 0:17:13.240 --> 0:17:17.720 of input pricing to a lot of stocks out there. Um, 0:17:17.760 --> 0:17:20.240 how do you separate the good inflation from the bed 0:17:20.560 --> 0:17:24.400 UH in an environment like this? I mean could could? Yeah? 0:17:24.440 --> 0:17:26.480 The you know, the yields are up because of the 0:17:26.480 --> 0:17:31.000 the outlook for growth, Um, but could inflation bite some sucktors? 0:17:31.000 --> 0:17:33.880 Do you think this year? Well? Is it short term 0:17:33.880 --> 0:17:36.679 inflation or long term inflation? Because I think that this 0:17:36.760 --> 0:17:38.960 year that's what you have to worry about. We've certainly 0:17:38.960 --> 0:17:42.240 got some supply constraints, and I think those supply lines 0:17:42.280 --> 0:17:45.200 are what is going to feel some what will feel pressure. 0:17:45.800 --> 0:17:50.240 We have issues where again you're comparable is a pandemic. 0:17:50.359 --> 0:17:53.760 People actually shut down. We asked everyone to go on pause. 0:17:53.880 --> 0:17:57.120 Inventory lines have been depleted, and so if people ramp 0:17:57.160 --> 0:18:00.119 back up, these businesses come back to life, they do 0:18:00.520 --> 0:18:04.120 need raw materials being pulled through the pipeline, and they're 0:18:04.160 --> 0:18:07.240 not always readily available. We're also seeing a boom in 0:18:07.280 --> 0:18:10.639 certain industries at lumber, look at housing, so you know 0:18:10.640 --> 0:18:13.399 we've had this great boom and housing suddenly where everyone 0:18:13.440 --> 0:18:15.560 wants to find a house, we don't have enough houses, 0:18:15.840 --> 0:18:19.919 and so they're working on supply. That's an issue for lumber. 0:18:20.480 --> 0:18:24.159 Short term is that supply long going to continue to 0:18:24.200 --> 0:18:26.720 be constrained, probably for a couple of months. But I 0:18:26.760 --> 0:18:30.119 think longer term, I actually think you have to watch 0:18:30.160 --> 0:18:33.680 how those supply channels come back online. If they're functioning 0:18:33.760 --> 0:18:37.600 normally longer term, you shouldn't see that kind of constraint, 0:18:37.680 --> 0:18:41.080 and therefore your short term inflation actually can ease out 0:18:41.160 --> 0:18:44.960 into consistent long term growth. You know, I was really 0:18:44.960 --> 0:18:48.439 curious about what the terminal would say about that percent 0:18:48.520 --> 0:18:51.200 change in oil MIC. So if you pull up a 0:18:51.280 --> 0:18:52.920 chart on the terminal, there's a way that you could 0:18:52.920 --> 0:18:55.440 annotate the chart and you basically just draw a line 0:18:55.480 --> 0:18:58.040 from one point to an accident will tell you either 0:18:58.119 --> 0:19:01.520 their percent gain or the percent. It just says gain 0:19:01.600 --> 0:19:06.160 in parentheses numbers, So the Bloomberg terminal won't even calculate 0:19:06.200 --> 0:19:12.280 it for you. I guess, yeah, exactly exactly. But put 0:19:12.320 --> 0:19:14.560 this all together for us, then where do you guys 0:19:14.640 --> 0:19:19.560 actually see opportunity then? Right now, well back to the 0:19:19.600 --> 0:19:24.680 great lineup. It's a stock pickers market. Go back to fundamentals. 0:19:25.040 --> 0:19:29.040 We are looking for a big reopening trade, and I'm 0:19:29.040 --> 0:19:32.080 looking for opportunity in names that are going to benefit 0:19:32.160 --> 0:19:35.760 from that. It's interesting because even anecdotally, you can look 0:19:35.800 --> 0:19:39.440 across and I'm sure everyone has friends who have been 0:19:39.520 --> 0:19:43.479 cooped up this entire time and are itching to go out. Right. 0:19:44.760 --> 0:19:47.800 I'm based in Chicago. Chicago restaurants have opened up there 0:19:47.800 --> 0:19:51.119 at twenty percent capacity. But you can go out and 0:19:51.160 --> 0:19:54.040 go to a restaurant. You can even sit outside and 0:19:54.080 --> 0:19:56.240 go to a restaurant. In mind, you we're in Chicago 0:19:56.280 --> 0:19:59.199 and it's the winter, so people are still willing to 0:19:59.280 --> 0:20:02.040 do that. If you want to go out, you can't 0:20:02.040 --> 0:20:04.919 get a reservation. Things are booking up and maybe you 0:20:04.920 --> 0:20:06.560 can eat it five pm or you can eat at 0:20:06.600 --> 0:20:09.200 nine pm, but there's nothing in between. It's the same 0:20:09.240 --> 0:20:12.320 in New York. People want to get out and I 0:20:12.920 --> 0:20:16.159 think that shows you there's this pent up demand and 0:20:16.280 --> 0:20:19.440 back to the fteen hundred dollar check that's going in 0:20:19.560 --> 0:20:23.400 consumers pockets. Consumers have a very strong balance sheet right now, 0:20:23.920 --> 0:20:26.920 and so when you look at it, they have stored 0:20:26.960 --> 0:20:29.520 that up, saving three through at all time highs. They've 0:20:29.560 --> 0:20:33.440 been very good about managing to get through this pandemic. 0:20:33.560 --> 0:20:35.679 And I think once things open up, I think you 0:20:35.720 --> 0:20:39.080 are going to see a big flurry of consumer activity 0:20:39.640 --> 0:20:42.440 and with that, I think you get opportunity and looking 0:20:42.480 --> 0:20:45.359 for the company's name services especially that are going to 0:20:45.480 --> 0:20:49.080 benefit from that. Yeah, the personal savings rate was just 0:20:49.160 --> 0:20:52.320 through the roof there for for many months. I mean, it's, uh, 0:20:52.480 --> 0:20:56.000 it's a fascinating set up, but you know it's not 0:20:56.760 --> 0:20:59.639 obviously I think everyone is still bush. Maybe not everyone, 0:20:59.680 --> 0:21:02.360 but um, it makes a lot of sense to still 0:21:02.359 --> 0:21:05.120 be bullish on that reopening trade, I think. But then 0:21:05.160 --> 0:21:07.320 you look at that stay at home trade and there's 0:21:07.359 --> 0:21:09.680 some of the just I think over the long term, 0:21:09.920 --> 0:21:14.000 really some of the most intriguing stocks. Uh, you know 0:21:14.040 --> 0:21:17.280 around Facebook's not going anywhere, Google is not going anywhere, 0:21:17.400 --> 0:21:21.320 Netflix Zoom, Uh, you know, it's not going anywhere. When 0:21:21.359 --> 0:21:23.280 do you sort of know when to go, when to 0:21:23.520 --> 0:21:27.560 revert back to the darlings of of the you know, 0:21:27.840 --> 0:21:30.320 former era of the of the bullmarket. You know what, 0:21:30.320 --> 0:21:32.840 what would you sort of look forward to to ring 0:21:32.880 --> 0:21:35.560