1
00:00:02,520 --> 00:00:13,760
Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg

2
00:00:13,840 --> 00:00:17,880
Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern

3
00:00:18,200 --> 00:00:21,240
Speaker 1: on Apple car Play or Android Auto with the Bloomberg

4
00:00:21,320 --> 00:00:24,840
Speaker 1: Business app. Listen on demand wherever you get your podcasts,

5
00:00:25,280 --> 00:00:27,120
Speaker 1: or watch us live on YouTube.

6
00:00:27,480 --> 00:00:29,600
Speaker 2: This is really good. We got some precious timingre with

7
00:00:29,640 --> 00:00:32,680
Speaker 2: Sophia Drosi's working for point seventy two in New York.

8
00:00:32,720 --> 00:00:35,080
Speaker 2: But you know, we've we've got to do this. I mean,

9
00:00:35,360 --> 00:00:39,240
Speaker 2: it's one of the most fractious marriages out there, Steve Cohen.

10
00:00:39,280 --> 00:00:41,560
Speaker 2: Of course a point seven to two has a modest

11
00:00:41,640 --> 00:00:45,599
Speaker 2: New York Mets too. You have a Red Sox Mets marriage.

12
00:00:45,880 --> 00:00:46,640
Speaker 3: Is that true?

13
00:00:47,800 --> 00:00:51,280
Speaker 4: Yes, it's a mixed marriage LEAs.

14
00:00:51,560 --> 00:00:51,800
Speaker 2: Yes.

15
00:00:52,240 --> 00:00:55,760
Speaker 4: However, I did adopt the Patriots as my football team

16
00:00:55,840 --> 00:01:01,760
Speaker 4: because that was also, you know, the Michigan connection. So

17
00:01:01,840 --> 00:01:04,200
Speaker 4: for me, when my husband said I'm a Patriots fan,

18
00:01:04,319 --> 00:01:07,000
Speaker 4: that's a deal breaker for me. I was like Tom Brady,

19
00:01:07,080 --> 00:01:08,720
Speaker 4: I knew since he was number ten.

20
00:01:08,680 --> 00:01:13,000
Speaker 2: How's your husband doing? I Soto in a Mets uniform

21
00:01:13,080 --> 00:01:16,440
Speaker 2: is un American? Is he holding up? I mean the meds?

22
00:01:17,160 --> 00:01:20,360
Speaker 4: You know, you know, the Mets nation is very welcoming.

23
00:01:20,600 --> 00:01:23,000
Speaker 4: So when we do go to Cityfield, my husband will

24
00:01:23,040 --> 00:01:26,480
Speaker 4: wear his red Sox hat. The Mets nation super welcoming.

25
00:01:26,720 --> 00:01:28,960
Speaker 2: Very a good update there, and of course we are

26
00:01:29,000 --> 00:01:32,840
Speaker 2: ready for the baseball season. We're also ready Sophia drosis

27
00:01:32,880 --> 00:01:35,679
Speaker 2: for an economy and your research note says it all.

28
00:01:35,920 --> 00:01:38,880
Speaker 2: I think you use the word uncertainty forty seven times.

29
00:01:39,200 --> 00:01:43,520
Speaker 2: What is the character of our economic and market uncertainty?

30
00:01:44,200 --> 00:01:48,040
Speaker 4: Yes, well, uncertainty is something that we haven't had to

31
00:01:48,040 --> 00:01:52,000
Speaker 4: deal with until more recently on the policy front, So

32
00:01:52,200 --> 00:01:55,680
Speaker 4: last year was a year where there was fiscal spending,

33
00:01:55,840 --> 00:01:58,960
Speaker 4: there was a preemptive FED easing, It was very positive

34
00:01:59,000 --> 00:02:01,880
Speaker 4: tailwinds for the market, and we came into this year

35
00:02:01,960 --> 00:02:04,880
Speaker 4: with the markets I think for the first time in

36
00:02:04,920 --> 00:02:08,839
Speaker 4: a long time, investors were looking at the glasses half

37
00:02:08,840 --> 00:02:12,440
Speaker 4: full and taking kind of the upside on economic growth.

38
00:02:12,760 --> 00:02:19,000
Speaker 4: And the policy uncertainty I think has permeated that a bit.

39
00:02:19,120 --> 00:02:21,200
Speaker 4: So we came into the year with a lot of

40
00:02:21,240 --> 00:02:25,880
Speaker 4: expectations for deregulation and animal spirits, and the sequencing has

41
00:02:25,960 --> 00:02:29,760
Speaker 4: brought perhaps the more onerous parts of policy up first,

42
00:02:30,160 --> 00:02:34,240
Speaker 4: with the uncertainty over trade how it will end up

43
00:02:34,440 --> 00:02:37,560
Speaker 4: how will it affect the economy? And you know, we're

44
00:02:37,600 --> 00:02:41,280
Speaker 4: still looking at that April to deadline and not quite

45
00:02:41,400 --> 00:02:44,200
Speaker 4: sure exactly how things are going to pan out or

46
00:02:44,240 --> 00:02:45,760
Speaker 4: if that will be a clearing event.

47
00:02:46,160 --> 00:02:48,320
Speaker 5: So one of the issues coming into this year for

48
00:02:48,360 --> 00:02:50,480
Speaker 5: the markets was the Fed's probably not going.

49
00:02:50,440 --> 00:02:52,120
Speaker 6: To do a whole lot to help these markets. It's

50
00:02:52,120 --> 00:02:53,160
Speaker 6: going to be earnings driven.

51
00:02:53,240 --> 00:02:55,840
Speaker 5: So therefore I need my economy to be shroun How

52
00:02:55,840 --> 00:02:59,040
Speaker 5: do you think about the economic outlook and how that

53
00:02:59,120 --> 00:03:02,840
Speaker 5: might be it challenge potentially for the earning story.

54
00:03:03,000 --> 00:03:06,040
Speaker 4: Yes, well, on the on the earnings front, we are

55
00:03:06,080 --> 00:03:09,400
Speaker 4: coming off a period of time where corporate margins have

56
00:03:09,560 --> 00:03:13,560
Speaker 4: been at record highs and earnings have been quite strong.

57
00:03:13,840 --> 00:03:16,840
Speaker 4: And if we're coming into a period where economic growth

58
00:03:16,919 --> 00:03:19,639
Speaker 4: is expected to moderate and there is a lot of

59
00:03:19,760 --> 00:03:24,639
Speaker 4: uncertainty facing corporations with regard to tariffs, their input costs,

60
00:03:24,720 --> 00:03:28,720
Speaker 4: and the outlook for the US consumer, it seems more

61
00:03:28,840 --> 00:03:32,840
Speaker 4: likely that we're going to see a moderation in corporate profits.

62
00:03:32,880 --> 00:03:36,480
Speaker 4: And I think that this first batch of earnings reports

63
00:03:36,520 --> 00:03:38,760
Speaker 4: at the end of April will be very key for

64
00:03:38,840 --> 00:03:41,320
Speaker 4: the market. Directionally, I look.

65
00:03:41,240 --> 00:03:44,120
Speaker 2: At what you just said, clearing events folks, this is

66
00:03:44,160 --> 00:03:47,800
Speaker 2: a Midwest agreed right here. Michigan and Anna Arbor was

67
00:03:47,840 --> 00:03:52,000
Speaker 2: basically East Chicago. It comes back to ninety and uncertainty

68
00:03:52,280 --> 00:03:54,360
Speaker 2: and the you know, it almost folds into what Friedrich

69
00:03:54,400 --> 00:03:57,520
Speaker 2: Kayak would say, which is, you've got these clearing events

70
00:03:57,560 --> 00:04:01,960
Speaker 2: where things clean out. So on April third, you suggest

71
00:04:02,040 --> 00:04:04,680
Speaker 2: we may have enough clarity to go along.

72
00:04:05,720 --> 00:04:09,040
Speaker 4: Unfortunately, I don't think we'll have the clarity on April third.

73
00:04:09,280 --> 00:04:13,320
Speaker 4: So the issue has been on April second, we are

74
00:04:13,400 --> 00:04:16,720
Speaker 4: anticipating to get a sense of the blueprint on the

75
00:04:16,760 --> 00:04:20,839
Speaker 4: reciprocal tariffs, but the commentary from the White House has

76
00:04:20,960 --> 00:04:25,279
Speaker 4: been that there's likely to be ongoing tariff threats in

77
00:04:25,400 --> 00:04:30,040
Speaker 4: terms of specific industries and products. So April on April

78
00:04:30,080 --> 00:04:33,640
Speaker 4: two will know a bit about this reciprocity that will

79
00:04:33,640 --> 00:04:36,880
Speaker 4: be going on, but we won't know enough about what's

80
00:04:36,920 --> 00:04:38,720
Speaker 4: going to happen with specific sectors.

81
00:04:38,760 --> 00:04:40,600
Speaker 2: Yeah, I'm not without giving away the point seven to

82
00:04:40,600 --> 00:04:43,479
Speaker 2: two cards. But the basic idea here is with this

83
00:04:43,640 --> 00:04:47,320
Speaker 2: colossal uncertainty is and then this is a bit off

84
00:04:47,360 --> 00:04:49,679
Speaker 2: your remit, but I'm going to ask anyways and be rude.

85
00:04:49,960 --> 00:04:52,400
Speaker 2: Is cash a preferred asset right now?

86
00:04:53,200 --> 00:04:56,560
Speaker 4: Well? I've been looking at things like gold and cash.

87
00:04:56,680 --> 00:05:00,119
Speaker 4: Gold has been performing incredibly well, and so in an

88
00:05:00,200 --> 00:05:04,800
Speaker 4: environment where investors might see some risks, ask Thatt. Allocation

89
00:05:04,920 --> 00:05:09,360
Speaker 4: theory would suggest trying to increase some of your safer holdings.

90
00:05:09,560 --> 00:05:13,520
Speaker 4: And there are different views on treasuries and the fiscal trajectory.

91
00:05:13,920 --> 00:05:17,280
Speaker 4: So investors, I think have increasingly been looking at things

92
00:05:17,320 --> 00:05:18,320
Speaker 4: like cash and gold.

93
00:05:18,600 --> 00:05:22,560
Speaker 2: Oh, I mean, I mean talk about gold. Crazy Wan

94
00:05:22,720 --> 00:05:26,480
Speaker 2: Sodo seventy five million dollars signing bonus for him seven

95
00:05:26,520 --> 00:05:30,160
Speaker 2: hundred and sixty five thousand guarantee. Excuse me, not off

96
00:05:30,680 --> 00:05:34,360
Speaker 2: seven hundred and sixty five million guaranteed and he's underpaid

97
00:05:34,520 --> 00:05:37,640
Speaker 2: fifty one million a year. Sure, he's got a base

98
00:05:37,680 --> 00:05:38,680
Speaker 2: of forty six.

99
00:05:38,560 --> 00:05:40,960
Speaker 6: Large I can hit.

100
00:05:41,440 --> 00:05:45,320
Speaker 2: I mean, Oh, it's correct. It's like there's a second

101
00:05:45,320 --> 00:05:48,719
Speaker 2: coming of way backs over a little more in Power City.

102
00:05:48,760 --> 00:05:51,160
Speaker 6: Feel no questions, great, Sophia, what'll be different if.

103
00:05:51,320 --> 00:05:53,240
Speaker 2: We talk enough about the Mets, can we get back?

104
00:05:53,760 --> 00:05:55,440
Speaker 6: We'll get six seats?

105
00:05:55,880 --> 00:05:57,840
Speaker 2: Well, one more question, get it in there quick?

106
00:05:57,839 --> 00:06:00,400
Speaker 6: Fixed income? Do I take credit risk or not? Here?

107
00:06:00,480 --> 00:06:00,839
Speaker 6: Do you think?

108
00:06:01,360 --> 00:06:06,240
Speaker 4: So it's an environment where I think we've started to

109
00:06:06,279 --> 00:06:08,760
Speaker 4: see a little bit of a pickup, I think in

110
00:06:08,920 --> 00:06:12,800
Speaker 4: the delinquencies and the like, but the types of credits

111
00:06:12,800 --> 00:06:16,159
Speaker 4: that are in public markets are typically relatively strong. I

112
00:06:16,160 --> 00:06:18,560
Speaker 4: think the bigger question is what's going to happen with

113
00:06:18,680 --> 00:06:21,120
Speaker 4: the outlook for the economy and what does that mean

114
00:06:21,160 --> 00:06:22,960
Speaker 4: for all us based risk assets.

115
00:06:22,920 --> 00:06:25,039
Speaker 2: We go to Fenway just gaze out at the Ted

116
00:06:25,080 --> 00:06:29,200
Speaker 2: Williams reds yea Sophia drosis. Thank you so much, A

117
00:06:29,320 --> 00:06:32,520
Speaker 2: point as seven to just fabulous over the years with

118
00:06:32,600 --> 00:06:37,160
Speaker 2: the wonderful synthesis of economics and the impact on our investment.

119
00:06:37,839 --> 00:06:41,720
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

120
00:06:41,800 --> 00:06:44,799
Speaker 1: starting at seven am Eastern on Apple Corplay and Android

121
00:06:44,839 --> 00:06:47,880
Speaker 1: Auto with the Bloomberg Business app. You can also listen

122
00:06:47,960 --> 00:06:51,200
Speaker 1: live on Amazon Alexa from our flagship New York station,

123
00:06:51,760 --> 00:06:55,240
Speaker 1: Just say Alexa Play Bloomberg eleven thirty joining.

124
00:06:55,040 --> 00:06:57,360
Speaker 2: Us right now, you folks. It's like I'm a Choppoliver.

125
00:06:57,480 --> 00:07:00,440
Speaker 2: I mean, I mean, it's other is to it? Sweete

126
00:07:00,480 --> 00:07:03,960
Speaker 2: and Tom Keane and we are after her conversation with

127
00:07:04,040 --> 00:07:08,360
Speaker 2: the legend Kenny pulcarry over at the New York Stock Exchange.

128
00:07:08,480 --> 00:07:11,560
Speaker 2: That's trader talk. That was yesterday Kay, what do you

129
00:07:11,640 --> 00:07:13,840
Speaker 2: say to Ken Paul Caerry that you don't say to me.

130
00:07:13,960 --> 00:07:17,320
Speaker 2: I mean that's like like in and out of the market, right, Yeah.

131
00:07:17,400 --> 00:07:21,040
Speaker 7: Look, it is a good reminder that there's all these

132
00:07:21,040 --> 00:07:24,240
Speaker 7: short term movements in markets that are driving the volatility

133
00:07:24,240 --> 00:07:26,480
Speaker 7: that we're experiencing. But you have to keep the long

134
00:07:26,560 --> 00:07:29,440
Speaker 7: term in mind, which is why we've been continuously saying

135
00:07:29,440 --> 00:07:31,400
Speaker 7: to clients it's not where the S and P five

136
00:07:31,480 --> 00:07:33,680
Speaker 7: hundred ends at the end of this year, it's what

137
00:07:33,720 --> 00:07:35,480
Speaker 7: you do with the volatility along the way.

138
00:07:35,480 --> 00:07:38,320
Speaker 2: We traders getting slammed as a general statement, I mean

139
00:07:38,400 --> 00:07:41,760
Speaker 2: trying to gain this market right now, is anybody making money?

140
00:07:41,840 --> 00:07:45,760
Speaker 7: Well, we've certainly seen traders move from being max long

141
00:07:45,800 --> 00:07:48,480
Speaker 7: equities at the beginning of this year ninety eighth percentile

142
00:07:48,560 --> 00:07:50,840
Speaker 7: kind of positioning to that's now fall into the twenty

143
00:07:50,880 --> 00:07:54,280
Speaker 7: six percentile, So there's probably been some pain along the way.

144
00:07:54,400 --> 00:07:57,240
Speaker 2: Paul Cary looks like out of Central Casting, Game of

145
00:07:57,320 --> 00:07:59,960
Speaker 2: Thrones or Outlander or one of those things. I mean,

146
00:08:00,120 --> 00:08:01,720
Speaker 2: this is he retired.

147
00:08:02,160 --> 00:08:03,840
Speaker 3: No, he's trucking, he's trunckling.

148
00:08:04,440 --> 00:08:06,720
Speaker 2: Good morning to Ken punk Car and everybody down with

149
00:08:06,800 --> 00:08:07,120
Speaker 2: the New.

150
00:08:07,080 --> 00:08:09,800
Speaker 5: York Salma bum this guy back in the day. Your

151
00:08:09,840 --> 00:08:12,680
Speaker 5: note is the end of US exceptionalism? Is it the

152
00:08:12,760 --> 00:08:14,960
Speaker 5: end of US exceptionalism? Or do we still have room

153
00:08:15,000 --> 00:08:15,280
Speaker 5: to grow?

154
00:08:15,320 --> 00:08:15,920
Speaker 6: What do you think?

155
00:08:16,360 --> 00:08:18,760
Speaker 7: So what we what we wrote about is this idea

156
00:08:18,800 --> 00:08:21,600
Speaker 7: is that it's very easy to ascribe a narrative to

157
00:08:21,640 --> 00:08:24,160
Speaker 7: price action. Everybody looks at the weakness in the US

158
00:08:24,240 --> 00:08:26,600
Speaker 7: dollar year to date, they look at the outperformance of

159
00:08:26,640 --> 00:08:29,880
Speaker 7: Europe versus the rest of the of the US, and

160
00:08:30,000 --> 00:08:32,560
Speaker 7: they say it must be the end of US exceptionalism.

161
00:08:32,840 --> 00:08:34,880
Speaker 7: But if you look it really is a function of

162
00:08:34,920 --> 00:08:36,800
Speaker 7: the fact that we started the year with a massive,

163
00:08:37,200 --> 00:08:40,680
Speaker 7: very very crowded dollar long position that has since been unwound.

164
00:08:40,760 --> 00:08:44,280
Speaker 7: Traders are now slightly short the dollar, and we actually

165
00:08:44,280 --> 00:08:47,640
Speaker 7: think that you could see some dollars stability here now

166
00:08:47,679 --> 00:08:50,520
Speaker 7: that you've burned off all of that crowded positioning.

167
00:08:50,960 --> 00:08:52,800
Speaker 5: Interesting, So what do I mean when you talk to

168
00:08:52,840 --> 00:08:56,480
Speaker 5: your clients here again, we had that peaked to trough

169
00:08:56,559 --> 00:08:57,880
Speaker 5: draw down in the S and P five hundred of

170
00:08:57,920 --> 00:09:01,120
Speaker 5: about ten percent. Did they view that as a healthy

171
00:09:01,679 --> 00:09:04,280
Speaker 5: pullback in an otherwise positive market or is.

172
00:09:04,200 --> 00:09:04,840
Speaker 6: It something else?

173
00:09:05,320 --> 00:09:08,240
Speaker 7: We'd hope that we've talked to clients enough and set

174
00:09:08,320 --> 00:09:11,520
Speaker 7: up the potential for volatility that there is a degree

175
00:09:11,520 --> 00:09:13,800
Speaker 7: of calm when we see it. We often talk that

176
00:09:13,960 --> 00:09:17,320
Speaker 7: volatility is a feature of being an equity investor and

177
00:09:17,360 --> 00:09:20,200
Speaker 7: that we should see it as opportunity. Now we think

178
00:09:20,200 --> 00:09:22,240
Speaker 7: the other reason why there's been this calm is that

179
00:09:22,280 --> 00:09:25,800
Speaker 7: if you look at a seventy thirty portfolio for AQUI,

180
00:09:25,960 --> 00:09:30,160
Speaker 7: so that's an international balance portfolio including the US and

181
00:09:30,240 --> 00:09:31,560
Speaker 7: the AGG you're still.

182
00:09:31,400 --> 00:09:32,040
Speaker 3: Up on the year.

183
00:09:32,240 --> 00:09:35,280
Speaker 7: So, yes, we've seen the US stock market pull in,

184
00:09:35,360 --> 00:09:38,439
Speaker 7: but the end of the day, it's not been cataclysmic.

185
00:09:38,600 --> 00:09:41,720
Speaker 2: Are we getting used asked Michael dart I alluded to

186
00:09:41,760 --> 00:09:44,920
Speaker 2: this with Michael Data more directly with Cam Dawson. Are

187
00:09:44,960 --> 00:09:48,040
Speaker 2: we needing to slot in the understanding that equities are

188
00:09:48,080 --> 00:09:52,240
Speaker 2: a single digit return in our double digit return addiction?

189
00:09:52,600 --> 00:09:55,400
Speaker 7: Yeah, I think that that's very very likely. Is that

190
00:09:56,040 --> 00:09:58,480
Speaker 7: we've been in this world a very strong double digit

191
00:09:58,520 --> 00:10:02,320
Speaker 7: returns the last two years. Investors got conditioned to expecting that,

192
00:10:02,400 --> 00:10:05,679
Speaker 7: which is why you saw these estimates for seven thousand

193
00:10:05,720 --> 00:10:08,360
Speaker 7: plus in the S and P. Five hundred. That's very

194
00:10:08,400 --> 00:10:10,520
Speaker 7: hard to do when you start the year at twenty

195
00:10:10,520 --> 00:10:13,040
Speaker 7: two point six times forward earnings you start the year

196
00:10:13,080 --> 00:10:15,080
Speaker 7: at the ninetieth percent tile of positioning.

197
00:10:15,400 --> 00:10:16,920
Speaker 3: So our best case.

198
00:10:16,720 --> 00:10:19,800
Speaker 7: Scenario for twenty twenty five is that you get growth

199
00:10:20,240 --> 00:10:23,760
Speaker 7: upside that's equivalent to earnings growth. But that assumes that

200
00:10:23,880 --> 00:10:27,000
Speaker 7: multiple stay constant, and we're not sure if you get

201
00:10:27,120 --> 00:10:30,079
Speaker 7: multiple stay in constant in a world where you're cutting

202
00:10:30,120 --> 00:10:32,640
Speaker 7: earning sestaments and there's some risk off flavor.

203
00:10:33,040 --> 00:10:35,360
Speaker 5: How about Europe's had a heck of a start to

204
00:10:35,400 --> 00:10:38,480
Speaker 5: the year here and that story we had heard kind

205
00:10:38,520 --> 00:10:41,959
Speaker 5: of last year where European and international money coming into

206
00:10:42,040 --> 00:10:44,280
Speaker 5: the US market had a little bit of a reversal

207
00:10:44,320 --> 00:10:45,760
Speaker 5: of that. How do you think about the performance of

208
00:10:45,800 --> 00:10:46,720
Speaker 5: European equities?

209
00:10:46,800 --> 00:10:49,040
Speaker 7: We do think that the easy part is over for

210
00:10:49,120 --> 00:10:52,240
Speaker 7: European equities. You started at thirteen and a half times forward,

211
00:10:52,400 --> 00:10:55,840
Speaker 7: now you're training at fifteen times. Fifteen times doesn't seem

212
00:10:55,880 --> 00:10:57,600
Speaker 7: like a lot when you compare it to the twenty

213
00:10:57,640 --> 00:11:00,160
Speaker 7: times in the US, but it is the high of

214
00:11:00,440 --> 00:11:03,080
Speaker 7: the valuation range and the pre pandemic range for Europe.

215
00:11:03,120 --> 00:11:06,400
Speaker 7: So it really comes down to earnings delivering. Quite interestingly,

216
00:11:06,600 --> 00:11:09,800
Speaker 7: earnings for Europe have continuously been getting cut even as

217
00:11:09,840 --> 00:11:11,560
Speaker 7: we've been seeing this rally so interesting.

218
00:11:11,640 --> 00:11:13,280
Speaker 3: It's a show me story right now.

219
00:11:13,320 --> 00:11:15,360
Speaker 2: The show me story is Cameron Dawson with us this

220
00:11:15,400 --> 00:11:17,319
Speaker 2: morning with New Edge Wealthy. Welcome all of you in

221
00:11:17,360 --> 00:11:20,280
Speaker 2: your commute across the nation. Good morning, ninety two nine

222
00:11:20,400 --> 00:11:25,079
Speaker 2: FM in Boston, ninety nine one FM and Washington. Bloomberg

223
00:11:25,120 --> 00:11:28,040
Speaker 2: eleven three to zero in New York. An ample conversation

224
00:11:28,160 --> 00:11:33,400
Speaker 2: with Cam Dawson on YouTube. Subscribe to Bloomberg Podcast. Even

225
00:11:33,520 --> 00:11:35,160
Speaker 2: Cam Dawson subscribed.

226
00:11:35,200 --> 00:11:38,040
Speaker 5: It's just like savvy put us up to forty two

227
00:11:38,160 --> 00:11:41,160
Speaker 5: is amazing exactly. You know, I'm looking at the relative

228
00:11:41,160 --> 00:11:43,640
Speaker 5: strength index, the RSI on the Bloomberg Criminal for the

229
00:11:43,679 --> 00:11:47,280
Speaker 5: S and P five hundred. Man, we kind of bottomed

230
00:11:47,320 --> 00:11:50,240
Speaker 5: back just like ten days ago, but now we're moving

231
00:11:50,320 --> 00:11:50,760
Speaker 5: higher here.

232
00:11:50,800 --> 00:11:52,880
Speaker 6: I mean, how did these technicals feel? It feels like

233
00:11:53,880 --> 00:11:55,760
Speaker 6: is the sell off? Are we done with this cell

234
00:11:55,800 --> 00:11:57,880
Speaker 6: off here? Or how's that? How do you think about it?

235
00:11:57,920 --> 00:12:00,200
Speaker 7: So we certainly got over sold enough to bounce, which

236
00:12:00,200 --> 00:12:03,119
Speaker 7: is why we think we're bouncing today and yesterday.

237
00:12:03,600 --> 00:12:06,000
Speaker 3: What the question is what happens.

238
00:12:05,520 --> 00:12:09,319
Speaker 7: When you hit resistance and are you having enough momentum

239
00:12:09,360 --> 00:12:11,800
Speaker 7: to break through that wall of resistance which we think

240
00:12:11,880 --> 00:12:14,360
Speaker 7: is around the fifty nine hundred and six thousand level

241
00:12:14,600 --> 00:12:17,679
Speaker 7: that you're downward sloping fifty day moving average. You have

242
00:12:17,760 --> 00:12:20,800
Speaker 7: been losing momentum in this market really for the last

243
00:12:21,000 --> 00:12:24,200
Speaker 7: nine months. If you look at things like a weekly MACD.

244
00:12:24,400 --> 00:12:27,480
Speaker 7: So we do think that this is an environment that

245
00:12:27,600 --> 00:12:29,400
Speaker 7: you could roll at resistance, you're going to.

246
00:12:29,320 --> 00:12:30,959
Speaker 2: Go right there because I hate it. I hate I'm

247
00:12:31,000 --> 00:12:33,080
Speaker 2: not a MACD fan. Folks who won't go into the

248
00:12:33,600 --> 00:12:37,640
Speaker 2: nuances of it. Sixteen hundred Pennsylvania is not looking at

249
00:12:37,640 --> 00:12:41,160
Speaker 2: the weekly mac D. I mean they're not. The bottom

250
00:12:41,200 --> 00:12:45,600
Speaker 2: line is we can't lift until we get political clarity

251
00:12:45,800 --> 00:12:46,920
Speaker 2: right exactly.

252
00:12:47,320 --> 00:12:49,960
Speaker 7: Why would we trade back up to all time highs

253
00:12:50,000 --> 00:12:53,679
Speaker 7: when we've cut earnings estimates since and we have valuations

254
00:12:53,679 --> 00:12:55,920
Speaker 7: that would have to go to new highs to get there,

255
00:12:55,960 --> 00:12:58,680
Speaker 7: Which is why we think this year at best is

256
00:12:58,720 --> 00:13:02,160
Speaker 7: that wide choppy rain. Because of the degree of uncertainty

257
00:13:02,240 --> 00:13:05,119
Speaker 7: and because of the potential downsides to growth, it's depressing.

258
00:13:05,640 --> 00:13:08,560
Speaker 2: MAG seven. Are they still the MAG seven? Even ex Tesla.

259
00:13:08,800 --> 00:13:10,520
Speaker 7: We've been raising the question if they're more like the

260
00:13:10,600 --> 00:13:12,880
Speaker 7: LAG seven we talked I think last week.

261
00:13:12,920 --> 00:13:15,080
Speaker 2: Do you see a lessening of their cash flow free

262
00:13:15,080 --> 00:13:15,600
Speaker 2: cash flow.

263
00:13:16,280 --> 00:13:19,720
Speaker 7: It is happening because of the big uptick within capex.

264
00:13:19,760 --> 00:13:22,679
Speaker 7: You are seeing free cash flow margins come in. Now,

265
00:13:22,720 --> 00:13:25,000
Speaker 7: these free cash flow margins are still so much better

266
00:13:25,040 --> 00:13:27,000
Speaker 7: than you can get in the rest of the market exactly.

267
00:13:27,200 --> 00:13:29,280
Speaker 7: So do they become a safe haven when people have

268
00:13:29,400 --> 00:13:32,720
Speaker 7: questions about growth o their places? Very possibly. The valuations

269
00:13:32,720 --> 00:13:35,680
Speaker 7: aren't in stretches. They are, but the market cares about

270
00:13:35,720 --> 00:13:38,360
Speaker 7: second derivatives. The market cares about the slow down in

271
00:13:38,400 --> 00:13:41,600
Speaker 7: earnings growth, which is inevitable when they had such massive

272
00:13:41,640 --> 00:13:43,000
Speaker 7: earnings growth over the past two years.

273
00:13:43,040 --> 00:13:45,560
Speaker 2: But you said the free cash flow will sustain even

274
00:13:45,600 --> 00:13:48,440
Speaker 2: if earnings come down, But it is. I mean, Zuckerberg

275
00:13:48,520 --> 00:13:51,199
Speaker 2: is going to manage the P and L statement right.

276
00:13:51,160 --> 00:13:54,360
Speaker 7: And they're sitting on massive, huge cash balances as well

277
00:13:54,400 --> 00:13:56,800
Speaker 7: that they could deploy to repurchase shares.

278
00:13:56,960 --> 00:13:59,680
Speaker 2: So sore they the new Deminian Electric? You're too young

279
00:13:59,720 --> 00:14:02,120
Speaker 2: to know that? Would you get me someone in here

280
00:14:02,320 --> 00:14:05,360
Speaker 2: older that actually knows what D is? Are they the

281
00:14:05,360 --> 00:14:07,080
Speaker 2: new utility?

282
00:14:07,440 --> 00:14:08,760
Speaker 3: That is an interesting question.

283
00:14:08,760 --> 00:14:12,680
Speaker 7: If they become such monopolized businesses that they are effective utilities,

284
00:14:12,840 --> 00:14:15,079
Speaker 7: then it raises the question of do they get regulated

285
00:14:15,120 --> 00:14:18,080
Speaker 7: like utilities do, and do we see those free cashlow

286
00:14:18,120 --> 00:14:22,160
Speaker 7: margins compress over time because of the fact that they

287
00:14:22,240 --> 00:14:23,200
Speaker 7: act like utilities.

288
00:14:23,280 --> 00:14:25,240
Speaker 2: I mean, Paul, you're the only one to extend in

289
00:14:25,240 --> 00:14:27,720
Speaker 2: this building that knows what Florida Power and Light is.

290
00:14:28,040 --> 00:14:29,960
Speaker 5: Dominion Energy based in Richmond, Virginia.

291
00:14:29,960 --> 00:14:32,840
Speaker 6: Home dividend grow exactly.

292
00:14:33,760 --> 00:14:36,280
Speaker 5: Earnings are important for this market because I'm not sure

293
00:14:36,320 --> 00:14:38,080
Speaker 5: the FED is going to give us a whole lot

294
00:14:38,080 --> 00:14:40,920
Speaker 5: this year, maybe one, maybe two rate cuts, so that

295
00:14:40,960 --> 00:14:43,720
Speaker 5: puts more even more pressure on earning story. And you

296
00:14:43,760 --> 00:14:46,720
Speaker 5: mentioned that earnings estimates are coming down. How risk are

297
00:14:46,720 --> 00:14:47,600
Speaker 5: the numbers that are out there?

298
00:14:47,600 --> 00:14:48,320
Speaker 6: Do you think so?

299
00:14:48,480 --> 00:14:52,240
Speaker 7: We think the biggest risk is possibly within financials. You've

300
00:14:52,280 --> 00:14:55,760
Speaker 7: been seeing every sector get cut. Financials have seen less,

301
00:14:55,760 --> 00:14:59,360
Speaker 7: earnings revisions lower. But think about the setup for financials

302
00:14:59,360 --> 00:15:02,200
Speaker 7: coming out of the LI people said a steeper yield curve.

303
00:15:02,240 --> 00:15:05,720
Speaker 7: We're getting M and A, we're getting IPOs, we're getting deregulation.

304
00:15:05,880 --> 00:15:07,080
Speaker 3: We've gotten none of that.

305
00:15:07,320 --> 00:15:09,800
Speaker 7: So we do wonder if that's an area of risk

306
00:15:09,840 --> 00:15:10,960
Speaker 7: going into first quarter earning.

307
00:15:11,000 --> 00:15:14,880
Speaker 2: Okay, Shanghai, good morning, good evening, I should say Shanghai,

308
00:15:15,080 --> 00:15:20,000
Speaker 2: China this morning listening in is China the opportunity, Sophia

309
00:15:20,160 --> 00:15:22,600
Speaker 2: Ross and Mike Darter, we're talking.

310
00:15:22,280 --> 00:15:25,880
Speaker 7: About, well, China certainly has that valuation opportunity where it

311
00:15:25,960 --> 00:15:28,400
Speaker 7: still trades such a huge discount to the US.

312
00:15:28,560 --> 00:15:31,240
Speaker 3: It's underloved, it's been called on you're going back.

313
00:15:31,080 --> 00:15:35,160
Speaker 2: To a textbook eight nine, twelve ten percent allocation to international.

314
00:15:35,640 --> 00:15:38,880
Speaker 7: So we are neutral international. We've said, you just can't

315
00:15:38,920 --> 00:15:43,520
Speaker 7: ignore the degree of outperformance in the US underperformance and international,

316
00:15:43,800 --> 00:15:46,320
Speaker 7: but we don't see signs yet that justifies going to

317
00:15:46,400 --> 00:15:47,360
Speaker 7: an overweight position.

318
00:15:47,680 --> 00:15:49,400
Speaker 6: What are we doing in fixed income? Here?

319
00:15:49,440 --> 00:15:52,320
Speaker 5: At my two year treasuries now back above four percent?

320
00:15:53,160 --> 00:15:54,840
Speaker 6: Do I stay there? Do I take some credit risk?

321
00:15:54,880 --> 00:15:55,400
Speaker 6: Where do I go?

322
00:15:55,760 --> 00:15:58,840
Speaker 7: So we don't think again that you're getting compensated for

323
00:15:59,200 --> 00:16:02,120
Speaker 7: mostly high yo credit risks. So we move to reduce

324
00:16:02,160 --> 00:16:05,000
Speaker 7: some positioning within high yield just to say, you know,

325
00:16:05,080 --> 00:16:07,760
Speaker 7: let's write out some of the equity volatility. But we

326
00:16:08,200 --> 00:16:10,480
Speaker 7: want to be able to take some risk out of

327
00:16:10,520 --> 00:16:13,480
Speaker 7: portfolios in the event that these growth fears do come

328
00:16:13,520 --> 00:16:14,040
Speaker 7: to pass.

329
00:16:14,680 --> 00:16:17,240
Speaker 5: So in the equity space, what screens well for you

330
00:16:17,280 --> 00:16:18,400
Speaker 5: guys these days?

331
00:16:18,640 --> 00:16:22,280
Speaker 7: So we are finding lots of opportunities within international markets,

332
00:16:22,280 --> 00:16:26,400
Speaker 7: but very selectively in that big, beautiful quality world. We're

333
00:16:26,440 --> 00:16:30,160
Speaker 7: finding opportunities within mid caps as well, and then value

334
00:16:30,360 --> 00:16:33,560
Speaker 7: lots of opportunities where you still see areas of the

335
00:16:33,600 --> 00:16:36,520
Speaker 7: market that create it, discounts that have good free cash flows,

336
00:16:36,600 --> 00:16:40,600
Speaker 7: have good balance sheets, and it's just maintaining that valuation discipline.

337
00:16:40,200 --> 00:16:42,360
Speaker 3: Which we think is absolutely critical. At one point.

338
00:16:42,480 --> 00:16:45,640
Speaker 2: What's the key attribute of those opportunities.

339
00:16:46,240 --> 00:16:48,560
Speaker 7: The key attribute is that they are not trading at

340
00:16:48,560 --> 00:16:52,160
Speaker 7: stretch valuations, and they have stable learnings through cycles, and

341
00:16:52,280 --> 00:16:55,120
Speaker 7: they have good free cash flow that is potentially seeing

342
00:16:55,120 --> 00:16:56,440
Speaker 7: better free cash flow margins.

343
00:16:56,480 --> 00:16:58,360
Speaker 3: So it's about being very picky.

344
00:16:58,520 --> 00:17:00,960
Speaker 7: We think that there's a big divert between the winners

345
00:17:01,000 --> 00:17:02,760
Speaker 7: and the losers in this kind of environment.

346
00:17:02,960 --> 00:17:06,159
Speaker 2: This guy in Shanghai, it's child abuse. He's got his

347
00:17:06,320 --> 00:17:10,240
Speaker 2: four year olds watching it. Look at that in Shanghai.

348
00:17:10,280 --> 00:17:13,000
Speaker 2: Can you see it, folks, that's cruel and unusual.

349
00:17:13,119 --> 00:17:15,359
Speaker 5: Crash man blocking shalans in the morning.

350
00:17:15,440 --> 00:17:18,960
Speaker 2: Full disclosure, folks, it's my grandchildren. We send good morning

351
00:17:19,440 --> 00:17:23,840
Speaker 2: to the rugrats in Shanghai this morning. But you know,

352
00:17:23,840 --> 00:17:26,440
Speaker 2: agatting back to the international and Pacific rim, I got

353
00:17:26,440 --> 00:17:28,879
Speaker 2: too much gloom out there. I got guest after guests

354
00:17:29,359 --> 00:17:33,639
Speaker 2: read me the uncertainty act. It clears at some point.

355
00:17:33,840 --> 00:17:37,480
Speaker 2: How do you prepare for the moment where the uncertainty

356
00:17:37,560 --> 00:17:38,200
Speaker 2: drifts away?

357
00:17:38,600 --> 00:17:41,439
Speaker 7: Well, I don't think that you can wait for necessarily

358
00:17:41,480 --> 00:17:44,679
Speaker 7: confirmation from the data. The important things is that price

359
00:17:44,720 --> 00:17:47,280
Speaker 7: will lead the data, and so as we're starting to

360
00:17:47,320 --> 00:17:50,359
Speaker 7: see some of these turns and trends, we have to

361
00:17:50,400 --> 00:17:52,399
Speaker 7: be there, which is why we move to a neutral

362
00:17:52,400 --> 00:17:55,920
Speaker 7: position within international about a year ago, saying it's going.

363
00:17:55,720 --> 00:17:57,720
Speaker 3: To happen, you know maybe this time.

364
00:17:58,720 --> 00:18:00,760
Speaker 5: So is our federal reserve to help us this year?

365
00:18:00,760 --> 00:18:02,880
Speaker 5: Are you still kind of that's a question.

366
00:18:02,960 --> 00:18:04,040
Speaker 6: A couple of cuts.

367
00:18:03,960 --> 00:18:07,000
Speaker 2: All this talk, folks, Sweeny, just to ask the money.

368
00:18:06,840 --> 00:18:09,480
Speaker 7: Question, we're not counting on the Fed for anything. We

369
00:18:09,520 --> 00:18:11,359
Speaker 7: don't think that the labor market is going to be

370
00:18:11,400 --> 00:18:14,400
Speaker 7: weak enough to justify them them cutting. We don't think

371
00:18:14,440 --> 00:18:16,879
Speaker 7: that inflation is going to move down fast enough to

372
00:18:17,000 --> 00:18:20,560
Speaker 7: give them the degrees of freedom to cut, which means

373
00:18:20,600 --> 00:18:23,159
Speaker 7: that you get used to these higher for longer rates.

374
00:18:23,200 --> 00:18:25,800
Speaker 7: And that's why we think that you have this continuous

375
00:18:25,840 --> 00:18:29,399
Speaker 7: pressure on weak balance sheet companies that you should fade

376
00:18:29,440 --> 00:18:29,959
Speaker 7: any strength.

377
00:18:30,040 --> 00:18:31,720
Speaker 2: So what's your money unemployment rate?

378
00:18:33,200 --> 00:18:35,040
Speaker 7: So we don't think that the FED will cut unless

379
00:18:35,080 --> 00:18:39,520
Speaker 7: we see mid fours on the unemployment rate four point four,

380
00:18:39,560 --> 00:18:40,400
Speaker 7: four four five.

381
00:18:42,880 --> 00:18:44,040
Speaker 2: It's not that far away.

382
00:18:44,200 --> 00:18:45,639
Speaker 3: It's not that far away.

383
00:18:45,760 --> 00:18:49,480
Speaker 7: But we don't see this sharp deterioration in the labor

384
00:18:49,520 --> 00:18:52,200
Speaker 7: market happening at this point. Yes, we see the sentiment

385
00:18:52,280 --> 00:18:56,119
Speaker 7: around labor deteriorating, but we've not seen companies move to

386
00:18:56,160 --> 00:19:00,280
Speaker 7: full out, full force layoffs that you just to just

387
00:19:00,359 --> 00:19:03,160
Speaker 7: that there still is that underlying stability for now.

388
00:19:03,640 --> 00:19:05,240
Speaker 6: Yeah, So, I mean it's interesting.

389
00:19:05,280 --> 00:19:08,119
Speaker 5: I mean one of the questions is I think for

390
00:19:08,160 --> 00:19:10,560
Speaker 5: a lot of people is do I take this pullback

391
00:19:10,600 --> 00:19:15,040
Speaker 5: to buy stocks here or do I just more uncertainty

392
00:19:15,080 --> 00:19:17,960
Speaker 5: out there, because it's just one tweet away from another

393
00:19:18,000 --> 00:19:18,879
Speaker 5: pullback in the market.

394
00:19:19,000 --> 00:19:20,919
Speaker 7: If you're buying stocks because you think it's going to

395
00:19:20,960 --> 00:19:23,240
Speaker 7: be a v shape recovery and is up into the

396
00:19:23,320 --> 00:19:26,040
Speaker 7: right with the volatility, it's the wrong move. But if

397
00:19:26,080 --> 00:19:28,119
Speaker 7: you're buying stocks to say I'm going to own this

398
00:19:28,160 --> 00:19:30,320
Speaker 7: for a long time, a step into volatility, we think

399
00:19:30,359 --> 00:19:31,320
Speaker 7: you can still buy weakness.

400
00:19:31,520 --> 00:19:35,280
Speaker 2: All of China's listening this morning to Cam Dawson. The

401
00:19:35,480 --> 00:19:40,040
Speaker 2: entire nation just went to cash. Cam Dawson. Thank you

402
00:19:40,119 --> 00:19:41,440
Speaker 2: so much, New Edge Wealth.

403
00:19:42,080 --> 00:19:51,520
Speaker 1: This morning, you're listening to the Bloomberg Surveillance Podcast. Catch

404
00:19:51,600 --> 00:19:54,640
Speaker 1: us live weekday afternoons from seven to ten am Eastern

405
00:19:54,840 --> 00:19:58,760
Speaker 1: Listen on Applecarplay and Android Otto with the Bloomberg Business app,

406
00:19:58,920 --> 00:20:00,680
Speaker 1: or watch us live on YouTube.

407
00:20:00,920 --> 00:20:04,159
Speaker 2: Michael Darta is with Roth Capital and years ago he

408
00:20:04,240 --> 00:20:07,320
Speaker 2: came out of the Wisconsin combine and got a job

409
00:20:07,400 --> 00:20:11,600
Speaker 2: with one of the rock stars of linking markets into economics,

410
00:20:11,720 --> 00:20:16,920
Speaker 2: Jude Waninski. And Darta just penetrated right through with brilliant

411
00:20:16,960 --> 00:20:22,520
Speaker 2: research notes melding investment into economics. Michael Darta, wonderful to

412
00:20:22,560 --> 00:20:25,960
Speaker 2: have you on the show today. I'm looking at Atlanta GDP.

413
00:20:26,119 --> 00:20:31,120
Speaker 2: Now I've got a real GDP estimate negative. Maybe it's

414
00:20:31,160 --> 00:20:34,480
Speaker 2: a little positive. I got PCE coming in with some

415
00:20:34,600 --> 00:20:37,359
Speaker 2: kind of disinflation. Are we in the middle of a

416
00:20:37,440 --> 00:20:39,160
Speaker 2: nominal GDP collapse?

417
00:20:41,080 --> 00:20:44,159
Speaker 8: Thanks for having me on, Tom. I don't think nominal

418
00:20:44,480 --> 00:20:48,720
Speaker 8: GDP is collapsing. I think what we're facing here is

419
00:20:48,760 --> 00:20:53,879
Speaker 8: a series of adverse supply side shocks that will slow

420
00:20:54,040 --> 00:21:00,080
Speaker 8: real growth and temporarily raise inflation. And you know that

421
00:21:00,440 --> 00:21:04,000
Speaker 8: is unfavorable because for any nominal growth rate. You want

422
00:21:04,040 --> 00:21:07,679
Speaker 8: most of it to be real, not inflation. And you

423
00:21:07,720 --> 00:21:11,159
Speaker 8: can see that embedded in the Fed's forecasts with the

424
00:21:11,280 --> 00:21:16,160
Speaker 8: SEP last week, where they reduced their expectation for real

425
00:21:16,240 --> 00:21:21,440
Speaker 8: GDP for the year, but they increased their expectation for inflation.

426
00:21:21,560 --> 00:21:23,320
Speaker 2: Yeah, saw that, and they reduced the.

427
00:21:23,280 --> 00:21:27,920
Speaker 8: Real growth expectation about twice as much as they increased

428
00:21:27,920 --> 00:21:33,000
Speaker 8: the inflation expectation for the year. So nominal growth expectations

429
00:21:33,359 --> 00:21:37,359
Speaker 8: didn't collapse, but they have eased implicitly. That's looking for

430
00:21:37,440 --> 00:21:41,840
Speaker 8: about four point four percent nominal growth. That's certainly below

431
00:21:41,880 --> 00:21:45,880
Speaker 8: the five percent rates that we've been seeing recently, consistent

432
00:21:45,960 --> 00:21:47,960
Speaker 8: with the soft landing, and less of it's going to

433
00:21:48,000 --> 00:21:51,200
Speaker 8: be read so it's a bit of its bag inflationary

434
00:21:51,320 --> 00:21:52,120
Speaker 8: flavor there time.

435
00:21:52,280 --> 00:21:54,320
Speaker 2: So Michael, bring it right over to the investment world.

436
00:21:54,400 --> 00:21:57,120
Speaker 2: Does that re mean reduced revenues where I've got operating

437
00:21:57,160 --> 00:22:00,000
Speaker 2: margins coming in and all of a sudden, Sweeney's getting

438
00:22:00,119 --> 00:22:02,160
Speaker 2: gray hair because earnings are coming in.

439
00:22:04,080 --> 00:22:05,600
Speaker 9: Yeah, that's exactly what it means.

440
00:22:05,600 --> 00:22:09,080
Speaker 8: So slower top line growth and higher costs, and you

441
00:22:09,080 --> 00:22:12,920
Speaker 8: know that is a risk to these very elevated expectations

442
00:22:12,920 --> 00:22:15,680
Speaker 8: for S and P five hundred earnings this year. At

443
00:22:15,680 --> 00:22:18,080
Speaker 8: the start of the year, analysts we're expecting more than

444
00:22:18,240 --> 00:22:22,639
Speaker 8: fourteen percent earnings growth. Our model that uses high yield

445
00:22:22,680 --> 00:22:26,639
Speaker 8: debt spreads in the new orders index from the ISM

446
00:22:27,280 --> 00:22:31,080
Speaker 8: data suggests that, you know, low single digits is more likely.

447
00:22:31,960 --> 00:22:36,760
Speaker 8: And you know, unfortunately, you have pretty high evaluation still

448
00:22:36,960 --> 00:22:40,360
Speaker 8: on those lofty expectations. So you know, we'll see if

449
00:22:40,400 --> 00:22:43,439
Speaker 8: markets can continue to look through this uncertainty. We've rallied

450
00:22:43,480 --> 00:22:47,000
Speaker 8: over the last few sessions, but you know, I think

451
00:22:47,040 --> 00:22:49,560
Speaker 8: we still might have some volatility ahead.

452
00:22:50,200 --> 00:22:52,240
Speaker 5: So it seems like one of the key dates coming

453
00:22:52,320 --> 00:22:55,880
Speaker 5: up here, Michael, is April second, when we get I guess.

454
00:22:55,640 --> 00:22:57,720
Speaker 6: A clear picture of some of these tariffs here.

455
00:22:58,920 --> 00:23:03,320
Speaker 5: Just stepping back and thinking about tariffs, is it a

456
00:23:03,760 --> 00:23:07,359
Speaker 5: good thing to bring more manufacturing back to the US.

457
00:23:07,480 --> 00:23:11,320
Speaker 5: Is that a realistic and a meaningful goal of tariffs?

458
00:23:11,320 --> 00:23:12,480
Speaker 6: Do you think?

459
00:23:13,480 --> 00:23:13,640
Speaker 2: Well?

460
00:23:13,680 --> 00:23:17,960
Speaker 8: The administration certainly thinks it, seems to think so. They

461
00:23:18,000 --> 00:23:20,760
Speaker 8: want to do it for so called critical industry of

462
00:23:20,840 --> 00:23:23,679
Speaker 8: the US as an emergency or goes to war. You know,

463
00:23:23,680 --> 00:23:27,560
Speaker 8: they want those critical industries here and able to fire

464
00:23:27,640 --> 00:23:31,880
Speaker 8: up at a moment's notice. But in economics, everything comes

465
00:23:31,920 --> 00:23:35,879
Speaker 8: with a trade off, and so if we're deploying capital

466
00:23:36,160 --> 00:23:40,919
Speaker 8: and labor into industries that were less efficient at than

467
00:23:40,960 --> 00:23:44,360
Speaker 8: they would be in other places, then those same resources

468
00:23:44,400 --> 00:23:47,639
Speaker 8: can't go into making other export goods. So there is

469
00:23:47,680 --> 00:23:52,600
Speaker 8: a second and third order drag on efficiency productivity. So

470
00:23:52,680 --> 00:23:55,000
Speaker 8: the question is, you know, is it worth it to

471
00:23:55,080 --> 00:23:58,640
Speaker 8: give that up? And that's what markets are grappling with now.

472
00:24:00,480 --> 00:24:02,640
Speaker 5: One of the I guess the concerns here, I guess

473
00:24:02,640 --> 00:24:06,000
Speaker 5: the media concerns Michael, this marketplace is the thoughts of

474
00:24:06,520 --> 00:24:10,160
Speaker 5: stagflation where the growth is kind of slowing, inflation's kind

475
00:24:10,160 --> 00:24:13,560
Speaker 5: of creeping back up, maybe due to some.

476
00:24:13,560 --> 00:24:14,760
Speaker 6: Of these tariffs. Who knows.

477
00:24:15,640 --> 00:24:17,440
Speaker 5: Is stagflation something we should be worried about?

478
00:24:19,040 --> 00:24:23,919
Speaker 8: Yeah, it certainly has that flavor because I think after

479
00:24:23,960 --> 00:24:26,679
Speaker 8: the election there was a lot of optimism that whatever

480
00:24:26,800 --> 00:24:32,680
Speaker 8: happened on trade would be offset by fiscal policy and deregulation,

481
00:24:33,600 --> 00:24:35,960
Speaker 8: and so far we don't really know. You know, the

482
00:24:36,000 --> 00:24:40,159
Speaker 8: deregulation piece is kind of a question mark. You know,

483
00:24:40,200 --> 00:24:44,520
Speaker 8: the administration's going very hard and fast with the tariffs,

484
00:24:44,680 --> 00:24:47,400
Speaker 8: a bit of an on again, off again, on again approach,

485
00:24:48,280 --> 00:24:51,600
Speaker 8: But I think that really challenges some of the assumptions

486
00:24:51,600 --> 00:24:53,760
Speaker 8: coming into the year, which were that the tears were

487
00:24:53,800 --> 00:24:57,240
Speaker 8: simply a bluff or that would be offset by deregulation

488
00:24:57,520 --> 00:25:01,720
Speaker 8: and potential tax reform. Very difficult to see any kind

489
00:25:01,720 --> 00:25:05,080
Speaker 8: of a big eating a physical policy considering the constraints

490
00:25:05,119 --> 00:25:10,440
Speaker 8: and deregulating crypto, I think is highly unlikely to offset

491
00:25:10,560 --> 00:25:12,200
Speaker 8: Moot Hawley two point zero.

492
00:25:12,720 --> 00:25:17,680
Speaker 2: Torsten Slack apologlobal management channeling Paul Sweeney, I say puts

493
00:25:17,680 --> 00:25:21,240
Speaker 2: out a note moments ago stagflation risk rising. Michael Dharta

494
00:25:21,280 --> 00:25:24,680
Speaker 2: giving us some good knowledge and good morning. An extended

495
00:25:24,680 --> 00:25:27,679
Speaker 2: discussion with Michael Darda Jim Bianco coming up in at

496
00:25:27,720 --> 00:25:31,600
Speaker 2: nine o'clock. Our mister Darty, are on the markets, linking

497
00:25:31,640 --> 00:25:35,280
Speaker 2: in to our economy. And now, folks, the Darta rabbit

498
00:25:35,359 --> 00:25:40,080
Speaker 2: hole does M one M two m O money supply

499
00:25:40,720 --> 00:25:43,880
Speaker 2: monetorism Michael Darta doesn't matter anymore.

500
00:25:45,320 --> 00:25:48,440
Speaker 8: Oh, I love that question, Tom. You know, I'm one

501
00:25:48,440 --> 00:25:51,439
Speaker 8: of the few that still watches those indicators, right, and

502
00:25:51,520 --> 00:25:54,960
Speaker 8: so we had a huge explosion in the monetary aggregates

503
00:25:55,000 --> 00:25:57,800
Speaker 8: going into the high inflation period in twenty twenty one.

504
00:25:57,840 --> 00:26:00,640
Speaker 2: Twenty stimulus come on, we still you.

505
00:26:00,600 --> 00:26:02,840
Speaker 9: Know, yeah, we did massive you.

506
00:26:02,800 --> 00:26:07,200
Speaker 8: Know, stimula was plural, Okay, Yeah, So they were good

507
00:26:07,280 --> 00:26:11,840
Speaker 8: proxies for massive stimulus and a huge ramp and nominal

508
00:26:13,040 --> 00:26:16,000
Speaker 8: relative to the productive capacity of the economy, which was

509
00:26:16,080 --> 00:26:20,760
Speaker 8: constrained during the pandemic. Right, Productivity basically was frozen for

510
00:26:20,840 --> 00:26:23,600
Speaker 8: two years, and we had double digit increases in nominal

511
00:26:23,640 --> 00:26:25,880
Speaker 8: demand on the back of all that stimulus. So that's

512
00:26:25,920 --> 00:26:29,080
Speaker 8: your inflation story. And in the wake of the FED

513
00:26:29,119 --> 00:26:34,240
Speaker 8: tightening five hundred and thirty plus basis points, those aggregates

514
00:26:34,280 --> 00:26:37,440
Speaker 8: slowed very sharply. It turns out, you know, the FED

515
00:26:37,560 --> 00:26:40,560
Speaker 8: was able to preside over this once in a lifetime

516
00:26:40,680 --> 00:26:44,320
Speaker 8: soft landing. So nominal slowed, but it didn't crash. This

517
00:26:44,680 --> 00:26:47,680
Speaker 8: bly side of the economy picked up after twenty twenty two.

518
00:26:47,840 --> 00:26:51,919
Speaker 8: That's a critical piece of the soft landing and why

519
00:26:52,000 --> 00:26:55,160
Speaker 8: the slowdown in those aggregates I think did not foreshadow

520
00:26:55,200 --> 00:26:58,680
Speaker 8: or recession this time. And now we're putting that at

521
00:26:58,840 --> 00:27:04,119
Speaker 8: risk with apply side disturbances, which are frankly series of

522
00:27:04,160 --> 00:27:05,440
Speaker 8: self inflicted blows.

523
00:27:06,359 --> 00:27:09,639
Speaker 5: Michael, you know we're going to get you miss sentiment data.

524
00:27:09,920 --> 00:27:10,479
Speaker 5: This fraudiya.

525
00:27:10,480 --> 00:27:11,359
Speaker 6: A couple of weeks ago, the.

526
00:27:11,400 --> 00:27:14,720
Speaker 5: University of Michigan data really suggested that people are concerned.

527
00:27:15,480 --> 00:27:19,159
Speaker 5: The current sentiments are really took a hit here. Inflation

528
00:27:19,320 --> 00:27:24,760
Speaker 5: expectations moved decidedly higher. When you see soft data like that,

529
00:27:24,880 --> 00:27:25,760
Speaker 5: does that get your attention?

530
00:27:27,840 --> 00:27:30,680
Speaker 8: Yeah, it's you know, the survey data is really a

531
00:27:30,720 --> 00:27:35,240
Speaker 8: set of inauspicious recent outcomes, with confidence pulling back and

532
00:27:35,359 --> 00:27:38,760
Speaker 8: inflation expectations shooting up. So that's not really what you

533
00:27:38,840 --> 00:27:41,880
Speaker 8: want to see. Obviously, we're going to get some Conference

534
00:27:41,960 --> 00:27:45,960
Speaker 8: Board data today for March, and that data has also

535
00:27:46,080 --> 00:27:49,560
Speaker 8: been soft, not quite as you know weak as the

536
00:27:49,640 --> 00:27:53,840
Speaker 8: you mish data. But the key question is is this

537
00:27:54,160 --> 00:27:58,320
Speaker 8: soft data a harbinger of much weaker hard data coming

538
00:27:58,359 --> 00:28:00,679
Speaker 8: down the pike. And we just don't have the answer

539
00:28:00,680 --> 00:28:03,400
Speaker 8: to that yet, and we won't even this week. We've

540
00:28:03,440 --> 00:28:06,520
Speaker 8: got some February data coming up on Friday on personal

541
00:28:06,520 --> 00:28:09,960
Speaker 8: income and consumption and the deflators. The FED watch is

542
00:28:10,040 --> 00:28:13,040
Speaker 8: but still a little bit stable on some of this

543
00:28:13,160 --> 00:28:16,320
Speaker 8: hard data, and that's really the risk that markets face.

544
00:28:16,760 --> 00:28:20,000
Speaker 8: We know the soft data doesn't always translate one for

545
00:28:20,119 --> 00:28:23,320
Speaker 8: one into hard data, but obviously the risks of the

546
00:28:23,359 --> 00:28:27,800
Speaker 8: hard data rolling over with this hit to confidence that increased.

547
00:28:27,680 --> 00:28:30,760
Speaker 2: I mean Michael. Right now we've cratered on the standard

548
00:28:30,800 --> 00:28:33,800
Speaker 2: and pours five hundred. I think're down seven percent or

549
00:28:33,800 --> 00:28:37,920
Speaker 2: some silly number like that. David Constant and the crew

550
00:28:37,960 --> 00:28:41,160
Speaker 2: at Gold and Sacks might just splash with some fancy

551
00:28:41,200 --> 00:28:44,480
Speaker 2: mathematics to put the regression trend of earnings down to

552
00:28:44,760 --> 00:28:48,959
Speaker 2: be polite low single digit. Do you have an almost

553
00:28:49,040 --> 00:28:54,440
Speaker 2: a data assumption of a single digit stock market forward

554
00:28:54,920 --> 00:28:59,960
Speaker 2: or do you maintain double digit growth with operating leverage?

555
00:28:59,800 --> 00:29:02,240
Speaker 8: I think it's going to be really hard to maintain

556
00:29:02,320 --> 00:29:04,520
Speaker 8: that double digit growth. I mean, if you just do

557
00:29:04,800 --> 00:29:10,320
Speaker 8: a super basic Tom Keen scatterplot regression on forward pes

558
00:29:10,720 --> 00:29:13,800
Speaker 8: in ten year future returns, you know, coming into the

559
00:29:13,880 --> 00:29:18,280
Speaker 8: year with the forward pe twenty two x, you know,

560
00:29:18,400 --> 00:29:21,960
Speaker 8: typically that's a level where you see very weak, potentially

561
00:29:22,080 --> 00:29:26,920
Speaker 8: even negative ten year forward returns. So the higher the valuations,

562
00:29:26,960 --> 00:29:31,560
Speaker 8: the lower the longer term forward returns are. And you know,

563
00:29:31,600 --> 00:29:33,960
Speaker 8: that's a little bit of a different game than the

564
00:29:34,280 --> 00:29:36,560
Speaker 8: you know, than the chase that's been on with momentum.

565
00:29:37,160 --> 00:29:40,080
Speaker 8: And then more broadly, I do think that these disruptions

566
00:29:40,080 --> 00:29:44,440
Speaker 8: to the supply side eat away at the earnings expectations,

567
00:29:44,480 --> 00:29:47,440
Speaker 8: and so the high valuations are pricing in good you know,

568
00:29:47,520 --> 00:29:50,880
Speaker 8: good times continuing, and now we're starting to question that,

569
00:29:51,000 --> 00:29:53,360
Speaker 8: which is, you know, why we've seen more volatility in

570
00:29:53,360 --> 00:29:56,880
Speaker 8: this pullback, which frankly has been pretty minimal so far

571
00:29:57,200 --> 00:29:59,040
Speaker 8: in the s and P five hundred, Even at the

572
00:29:59,080 --> 00:30:01,920
Speaker 8: lows on the thirteen, the march was still above a

573
00:30:02,360 --> 00:30:07,040
Speaker 8: twenty forward multiple, and you know that's that's still ten

574
00:30:07,120 --> 00:30:10,800
Speaker 8: twelve percent above the ten year moving average, which you know,

575
00:30:10,960 --> 00:30:13,880
Speaker 8: I think is very generous because the tenure moving average

576
00:30:13,920 --> 00:30:17,320
Speaker 8: is well above longer term historical averages. So these this

577
00:30:17,400 --> 00:30:21,360
Speaker 8: is a high valuation market still, and I think investors

578
00:30:21,360 --> 00:30:23,320
Speaker 8: that are going to just jump right back in and

579
00:30:23,400 --> 00:30:25,520
Speaker 8: chase what was working for most of the last two

580
00:30:25,600 --> 00:30:27,960
Speaker 8: years could be a bit disappointed.

581
00:30:28,640 --> 00:30:31,560
Speaker 5: We're hearing more and more potentially a better recession. Michael,

582
00:30:31,640 --> 00:30:33,480
Speaker 5: Is that kind of in your six and twelve month

583
00:30:33,520 --> 00:30:35,000
Speaker 5: forecast at all?

584
00:30:35,120 --> 00:30:38,320
Speaker 8: Well, I mean, obviously, Paul, I think that the risks

585
00:30:38,320 --> 00:30:41,760
Speaker 8: have gone up, you know, relating to the soft data

586
00:30:41,840 --> 00:30:46,000
Speaker 8: really weakening. If that was not underway, then obviously the

587
00:30:46,320 --> 00:30:49,680
Speaker 8: risks would be lower. It's sort of a shame because

588
00:30:49,880 --> 00:30:52,040
Speaker 8: you know, the FED has been able to preside over

589
00:30:52,080 --> 00:30:56,760
Speaker 8: this immaculate disinflation and soft landing that's been underway for

590
00:30:57,000 --> 00:30:59,400
Speaker 8: you know, the greater part of nearly two years now,

591
00:30:59,640 --> 00:31:04,080
Speaker 8: and that is a very rare historical event against all odds.

592
00:31:04,560 --> 00:31:06,400
Speaker 8: And we've had, you know, we've had a lot of

593
00:31:06,440 --> 00:31:10,239
Speaker 8: excitement about the AI story. Productivity has been picking up

594
00:31:10,280 --> 00:31:12,640
Speaker 8: over the last two years. I don't think that's really AI,

595
00:31:12,840 --> 00:31:16,920
Speaker 8: but you know, the reversal of pandemic oriented diortions, all

596
00:31:16,960 --> 00:31:18,840
Speaker 8: of that could be put at risk now.

597
00:31:19,480 --> 00:31:22,280
Speaker 2: So yeah, one final question, Michael, we're out of time.

598
00:31:22,440 --> 00:31:26,960
Speaker 2: Critical is Nantucket and Martha's Vineyard real estate gonna crack?

599
00:31:30,080 --> 00:31:32,520
Speaker 8: It's softening. You know, a lot of these super hot

600
00:31:32,560 --> 00:31:36,560
Speaker 8: markets are softening. But the gains that were seen from

601
00:31:36,600 --> 00:31:40,960
Speaker 8: twenty twenty through twenty twenty two into twenty three we're historic.

602
00:31:41,320 --> 00:31:45,640
Speaker 8: So we do have an affordability problem, and not just

603
00:31:45,680 --> 00:31:47,360
Speaker 8: in those super hot markets.

604
00:31:47,840 --> 00:31:50,920
Speaker 2: May or Man's not fall into the Atlantic Michael Darta,

605
00:31:50,960 --> 00:31:53,640
Speaker 2: thank you so much. With Roth greatly appreciate it. This

606
00:31:53,760 --> 00:31:55,080
Speaker 2: warning a terrific brief there.

607
00:31:55,400 --> 00:31:59,280
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

608
00:31:59,320 --> 00:32:02,840
Speaker 1: starting at seven Eastern on Applecarplay and Android Auto with

609
00:32:02,920 --> 00:32:05,880
Speaker 1: the Bloomberg Business app. You can also listen live on

610
00:32:05,960 --> 00:32:10,360
Speaker 1: Amazon Alexa from our flagship New York station. Just say Alexa,

611
00:32:10,400 --> 00:32:11,960
Speaker 1: play Bloomberg eleven thirty.

612
00:32:12,440 --> 00:32:15,760
Speaker 2: Today we celebrate Phil Tazuou come in here and we

613
00:32:15,800 --> 00:32:19,040
Speaker 2: would talk to him about the market, and he would

614
00:32:19,040 --> 00:32:23,240
Speaker 2: mention the word uncertainty fourteen times Tay's Asset Management. Today

615
00:32:23,280 --> 00:32:27,400
Speaker 2: we celebrate a really challenging book, and it's a particularly

616
00:32:27,480 --> 00:32:33,880
Speaker 2: important book if you're missing the retirement Ballet, The Behavioral Portfolio,

617
00:32:34,000 --> 00:32:42,120
Speaker 2: Managing portfolios and investor behavior given a complex economy. Congratulations

618
00:32:42,120 --> 00:32:44,880
Speaker 2: on well timing here to have the amount of uncertainty

619
00:32:44,960 --> 00:32:49,080
Speaker 2: we have. On the release of the Behavioral Portfolio, You've

620
00:32:49,080 --> 00:32:52,360
Speaker 2: got a whole section on the great dilemma of a

621
00:32:52,440 --> 00:33:00,480
Speaker 2: retirement undershoot. Are we investing too cautiously because we're scared stiff? Yeah?

622
00:33:00,640 --> 00:33:03,200
Speaker 10: So what we're doing is we're ignoring a significant chunk

623
00:33:03,240 --> 00:33:06,920
Speaker 10: of history, Tom. I mean the two episodes I point out,

624
00:33:07,040 --> 00:33:09,880
Speaker 10: number one, the thirty six year bond bear market that

625
00:33:09,880 --> 00:33:12,680
Speaker 10: happened between forty five and eighty one. It's completely not

626
00:33:12,800 --> 00:33:15,800
Speaker 10: excluded from people's planning when they're planning for portfolios. But

627
00:33:15,880 --> 00:33:18,959
Speaker 10: obviously the big one is the Great Depression. And what

628
00:33:19,000 --> 00:33:20,800
Speaker 10: I do in the book is I do a visual

629
00:33:20,920 --> 00:33:24,280
Speaker 10: is what I call it visualization of what a balanced

630
00:33:24,320 --> 00:33:26,720
Speaker 10: portfolio would look like during the Great Depression. In the

631
00:33:26,760 --> 00:33:30,239
Speaker 10: first three years, it's down seventy two percent. If you're

632
00:33:30,280 --> 00:33:33,040
Speaker 10: taking distributions, then we have a five year bowl market,

633
00:33:33,080 --> 00:33:35,520
Speaker 10: but then another five year bear market.

634
00:33:35,800 --> 00:33:36,760
Speaker 9: It's unnavigable.

635
00:33:37,160 --> 00:33:40,880
Speaker 10: So what the entire investment community is doing, as brilliant

636
00:33:40,920 --> 00:33:44,000
Speaker 10: as it is, and it is brilliant, is deciding we're

637
00:33:44,000 --> 00:33:45,560
Speaker 10: going to look back fifty years and we're going to

638
00:33:45,560 --> 00:33:47,400
Speaker 10: base all of our planning based on that, and we're

639
00:33:47,400 --> 00:33:49,480
Speaker 10: going to exclude anything before that that looks like it

640
00:33:49,560 --> 00:33:50,560
Speaker 10: might be a nuclear.

641
00:33:50,400 --> 00:33:54,880
Speaker 2: My mother and my father classic depression babies kept waiting

642
00:33:54,920 --> 00:33:58,480
Speaker 2: every five years for the next depression. That's, as a

643
00:33:58,560 --> 00:34:01,840
Speaker 2: general sense, say it didn't come because of credit expansion,

644
00:34:02,200 --> 00:34:05,600
Speaker 2: whatever the reason. Maybe World War two. Who knows? Are

645
00:34:05,640 --> 00:34:11,439
Speaker 2: you predicting a nineteen thirties We're not predicting it.

646
00:34:11,520 --> 00:34:14,840
Speaker 10: But the one thing I'll say is that if you

647
00:34:14,840 --> 00:34:17,640
Speaker 10: look at certain elements, so for example, when's the last

648
00:34:17,680 --> 00:34:19,240
Speaker 10: time we had one hundred percent death of the GDP

649
00:34:19,400 --> 00:34:22,719
Speaker 10: and every developed nation in the world. Essentially, when's the

650
00:34:22,760 --> 00:34:25,560
Speaker 10: last time we had a declining demographic population in every

651
00:34:25,560 --> 00:34:29,239
Speaker 10: developed country in the world. And also, you know when

652
00:34:29,400 --> 00:34:31,719
Speaker 10: we've been at sort of record price to book like

653
00:34:31,719 --> 00:34:33,759
Speaker 10: we were in the Internet bubble burst. So I think

654
00:34:33,800 --> 00:34:35,960
Speaker 10: what you need to do is like say, look, we're

655
00:34:35,960 --> 00:34:37,840
Speaker 10: going to go ahead and include this history, and instead

656
00:34:37,840 --> 00:34:39,840
Speaker 10: of making a prediction for down markets, we're going to

657
00:34:39,880 --> 00:34:43,080
Speaker 10: say this could happen again. And by the way, based

658
00:34:43,160 --> 00:34:45,719
Speaker 10: on where all the data is right now, it might

659
00:34:45,760 --> 00:34:47,200
Speaker 10: actually be more probable than not.

660
00:34:48,640 --> 00:34:51,320
Speaker 5: Talk to us about the sixty forty portfolio.

661
00:34:51,640 --> 00:34:52,680
Speaker 6: I'm teeing up here, bro.

662
00:34:55,000 --> 00:34:58,800
Speaker 10: Well, so you know the sixty forty portfolio is in

663
00:34:58,960 --> 00:35:02,480
Speaker 10: historical accident. Bonds were created to fund governments and later

664
00:35:02,560 --> 00:35:05,120
Speaker 10: fund companies. Stocks were created to share ownership. At some

665
00:35:05,160 --> 00:35:07,040
Speaker 10: point someone came along and said, let's put these two

666
00:35:07,040 --> 00:35:11,440
Speaker 10: things together. And sometimes it's an effective diversifier. Sometimes it's not.

667
00:35:12,000 --> 00:35:14,359
Speaker 10: But I think what's interesting is that, you know, Warren

668
00:35:14,360 --> 00:35:18,640
Speaker 10: Buffett said derivatives were a weapon of mass financial destruction.

669
00:35:18,840 --> 00:35:22,440
Speaker 10: Actually you can use derivatives, option contracts and things like

670
00:35:22,480 --> 00:35:27,279
Speaker 10: that to create real negative diversification. So our strategy is

671
00:35:27,280 --> 00:35:29,200
Speaker 10: what we call a behavioral portfolio. It's what I lay

672
00:35:29,200 --> 00:35:31,399
Speaker 10: out in the book. And what it does is it says,

673
00:35:31,440 --> 00:35:33,359
Speaker 10: take half of your equities and put it into hedge

674
00:35:33,360 --> 00:35:36,680
Speaker 10: equity strategies so that it can uncorrelate from negative economic

675
00:35:36,719 --> 00:35:39,880
Speaker 10: activity like the Great Depression. Yeah, and for the fixed

676
00:35:39,880 --> 00:35:41,360
Speaker 10: income side, be adaptive.

677
00:35:41,920 --> 00:35:44,759
Speaker 2: Everyone listening worldwide is saying, okay, So this is the

678
00:35:44,760 --> 00:35:48,400
Speaker 2: fill T's gold exercise where I got right now a

679
00:35:48,440 --> 00:35:53,399
Speaker 2: linear extrapolation and gold, which is eighty ish nineteen eighty ish,

680
00:35:53,840 --> 00:35:57,319
Speaker 2: is gold part of the behavioral portfolio. It's not.

681
00:35:58,000 --> 00:36:00,399
Speaker 9: You know, gold can be a great diverse fire.

682
00:36:00,440 --> 00:36:02,880
Speaker 10: The problem is over the very long term it just

683
00:36:02,920 --> 00:36:06,799
Speaker 10: produces uh, you know CPI right, So you can have

684
00:36:06,840 --> 00:36:09,839
Speaker 10: moments in time when you get some appreciation, but if

685
00:36:10,080 --> 00:36:13,040
Speaker 10: what you need to have are instruments in the portfolio

686
00:36:13,040 --> 00:36:16,880
Speaker 10: that can produce verifiable, reliable, long term above inflation.

687
00:36:17,160 --> 00:36:19,480
Speaker 2: Is that Apple? Is that Apple? I mean I got

688
00:36:19,520 --> 00:36:22,360
Speaker 2: a use of cash and free cash flow with Apple

689
00:36:22,520 --> 00:36:26,680
Speaker 2: that at least x X depression. I mean, Paul, if

690
00:36:26,680 --> 00:36:29,319
Speaker 2: we have a depression, we're still buying six toys a year.

691
00:36:30,600 --> 00:36:36,320
Speaker 2: But our big free cash flow quality stocks appropriate and

692
00:36:36,520 --> 00:36:38,439
Speaker 2: in a portfolio of gloom yeah.

693
00:36:38,480 --> 00:36:40,520
Speaker 9: Absolutely, so I by the way, I'm not a doom

694
00:36:40,560 --> 00:36:41,560
Speaker 9: in gloomer.

695
00:36:41,600 --> 00:36:43,960
Speaker 10: I'm a boom boom kaboomer. So you got to embrace

696
00:36:43,960 --> 00:36:47,080
Speaker 10: the boom A boom boom kaboomer. You embrace the boom,

697
00:36:47,120 --> 00:36:48,840
Speaker 10: you acknowledge the possibility of the kaboom.

698
00:36:48,880 --> 00:36:51,680
Speaker 9: I want to create a kaboomometer boometer.

699
00:36:51,960 --> 00:36:54,200
Speaker 10: But look, half of the equity's portfolio needs to be

700
00:36:54,200 --> 00:36:56,960
Speaker 10: in conventional stuff, and so the things that have done

701
00:36:57,040 --> 00:36:59,640
Speaker 10: so well, if you're positioned in that, plus your position

702
00:36:59,719 --> 00:37:02,120
Speaker 10: in it hedges on the other side too, you've still

703
00:37:02,120 --> 00:37:05,160
Speaker 10: got your sixty percent equity allocation just half of its

704
00:37:05,200 --> 00:37:05,960
Speaker 10: hedge in case.

705
00:37:05,760 --> 00:37:08,520
Speaker 9: Things move down. But absolutely you need companies like Apple.

706
00:37:09,719 --> 00:37:10,920
Speaker 6: How about alternatives?

707
00:37:11,400 --> 00:37:14,800
Speaker 5: Where does where do alternatives fit into an investor's SPORTFOLI

708
00:37:14,840 --> 00:37:15,640
Speaker 5: is so one.

709
00:37:15,480 --> 00:37:17,399
Speaker 10: Of the criteria in the book that I lay out

710
00:37:17,480 --> 00:37:19,080
Speaker 10: is what I said before. It needs to be a

711
00:37:19,120 --> 00:37:23,560
Speaker 10: reliable provider of growth or inflation. So think about one alternative,

712
00:37:23,560 --> 00:37:26,600
Speaker 10: which is managed futures. Managed futures is essentially just a

713
00:37:27,560 --> 00:37:30,560
Speaker 10: zero less than zero sum game with a group potentially

714
00:37:30,600 --> 00:37:33,239
Speaker 10: really good manager. So I would say that would not qualify.

715
00:37:33,480 --> 00:37:34,920
Speaker 10: So if you look under the hood and see what's

716
00:37:34,920 --> 00:37:37,120
Speaker 10: the engine of growth. If it could be something like

717
00:37:37,160 --> 00:37:40,400
Speaker 10: stocks or some other source of reliable growth, then you

718
00:37:40,440 --> 00:37:41,799
Speaker 10: go there, Phil.

719
00:37:41,600 --> 00:37:43,960
Speaker 2: Thank you so much. Congratulations Phil, Tas there a lot

720
00:37:43,960 --> 00:37:48,160
Speaker 2: of work Tas asset management, the behavioral portfolio. I'll put

721
00:37:48,160 --> 00:37:51,560
Speaker 2: it out on Twitter and LinkedIn a very nice concise

722
00:37:51,920 --> 00:37:55,680
Speaker 2: read on something that I've talked about enough, which is

723
00:37:56,160 --> 00:37:56,680
Speaker 2: what if.

724
00:38:02,520 --> 00:38:06,440
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

725
00:38:06,440 --> 00:38:09,440
Speaker 1: starting at seven am Eastern on Apple, Cocklay and Android

726
00:38:09,480 --> 00:38:12,479
Speaker 1: Auto with the Bloomberg Business app. You can also watch

727
00:38:12,560 --> 00:38:15,520
Speaker 1: us live every weekday on YouTube and always on the

728
00:38:15,520 --> 00:38:16,600
Speaker 1: Bloomberg terminal.

729
00:38:16,880 --> 00:38:19,520
Speaker 2: The newspapers this morning just too much. What can we

730
00:38:19,680 --> 00:38:22,000
Speaker 2: say here? It goes on and on. What's going to

731
00:38:22,080 --> 00:38:23,920
Speaker 2: be a twenty five minute block, but we'll do it

732
00:38:24,000 --> 00:38:26,000
Speaker 2: right now, too quick. Lisa Manteo, what do you have?

733
00:38:26,160 --> 00:38:28,640
Speaker 11: We have the condensed version for you. Okay, We've been

734
00:38:28,640 --> 00:38:31,400
Speaker 11: talking about retailers right bulking up their inventory so to

735
00:38:31,440 --> 00:38:34,560
Speaker 11: get ahead of President Trump's tariffs. So imagine companies like

736
00:38:34,640 --> 00:38:39,080
Speaker 11: Mike Beloved, Costco, Yes, Williams Sonoma. They are stockpiling goods.

737
00:38:39,480 --> 00:38:41,320
Speaker 11: But here's the difference to Wall Street Journal talk to

738
00:38:41,360 --> 00:38:43,080
Speaker 11: a couple experts, and they're saying, you know what, this

739
00:38:43,239 --> 00:38:46,239
Speaker 11: is risky because consumer spending has slowed, and now your

740
00:38:46,320 --> 00:38:49,799
Speaker 11: risk getting stuck with a ton of goods that are

741
00:38:49,840 --> 00:38:53,719
Speaker 11: just stocking up in an inventory. The ports in Los Angeles,

742
00:38:53,840 --> 00:38:56,360
Speaker 11: Long Beach, California. They're starting to see the influx already

743
00:38:56,400 --> 00:38:59,200
Speaker 11: from this. But the thing is, it's not just the tariffs.

744
00:38:59,280 --> 00:39:02,160
Speaker 11: They were all ready stocking up on the merchandise because

745
00:39:02,160 --> 00:39:04,040
Speaker 11: you had them, you know, worrying about the strike at

746
00:39:04,080 --> 00:39:06,759
Speaker 11: the at the port. Yes, and they were also worried about,

747
00:39:06,800 --> 00:39:08,480
Speaker 11: you know, trying to get ahead of the lunar New

748
00:39:08,560 --> 00:39:11,760
Speaker 11: Year before the factories closed across aged for like two weeks.

749
00:39:11,800 --> 00:39:14,719
Speaker 11: So it's this continuing like stockpile of things.

750
00:39:14,840 --> 00:39:17,120
Speaker 2: See uncertainty to April second. I mean that's all those

751
00:39:17,200 --> 00:39:19,240
Speaker 2: Curt correct Sophie, who was stuck.

752
00:39:19,520 --> 00:39:20,759
Speaker 6: So that inventory risk.

753
00:39:20,840 --> 00:39:23,319
Speaker 11: Okay, So they're saying, you know what, it's not the

754
00:39:23,360 --> 00:39:25,799
Speaker 11: best idea. You know, they're taking a risk when they're

755
00:39:25,840 --> 00:39:28,560
Speaker 11: doing this, But I couldn't imagine stockpiling Costco goods. That's

756
00:39:28,560 --> 00:39:30,319
Speaker 11: a lot of stockpile.

757
00:39:31,520 --> 00:39:35,040
Speaker 2: The eggs. Is the egg thing solved?

758
00:39:35,200 --> 00:39:37,520
Speaker 11: Yeah, the prices are starting to go down, so that

759
00:39:37,640 --> 00:39:38,360
Speaker 11: is the good news.

760
00:39:38,400 --> 00:39:43,799
Speaker 2: So, yeah, I paid twelve dollars. Everything was gone, Yeah,

761
00:39:44,000 --> 00:39:46,440
Speaker 2: sold except for the twelve dollar eggs.

762
00:39:46,520 --> 00:39:48,400
Speaker 11: I'll give you the update. I'm heading to Costco.

763
00:39:49,040 --> 00:39:53,040
Speaker 5: In the US D a large eggs prices paid to

764
00:39:53,080 --> 00:39:56,440
Speaker 5: producers Midwest. So we've had a big, big pullback.

765
00:39:56,520 --> 00:39:57,919
Speaker 2: Here do you do this at home?

766
00:39:57,960 --> 00:39:58,640
Speaker 6: I've got it here.

767
00:39:58,680 --> 00:39:59,160
Speaker 2: You look the.

768
00:40:00,800 --> 00:40:03,080
Speaker 5: It's down fifty five percent, just in like in the

769
00:40:03,160 --> 00:40:03,880
Speaker 5: last month.

770
00:40:04,680 --> 00:40:05,160
Speaker 6: So we're down.

771
00:40:05,400 --> 00:40:07,400
Speaker 2: You have a can of Budweiser in your head and

772
00:40:07,440 --> 00:40:11,439
Speaker 2: you're on the deck watching the tournamental on the deck.

773
00:40:11,680 --> 00:40:12,600
Speaker 2: It's waterproof.

774
00:40:12,760 --> 00:40:13,080
Speaker 1: Next.

775
00:40:13,960 --> 00:40:16,200
Speaker 11: Okay, I'm not sure what everyone at home with their

776
00:40:16,320 --> 00:40:18,759
Speaker 11: high schoolers are doing for spring break. My daughter is

777
00:40:18,800 --> 00:40:21,759
Speaker 11: playing softball. That's got she's spending her spring break. But

778
00:40:22,040 --> 00:40:25,760
Speaker 11: last week, hundreds of wealthy New York City high schoolers,

779
00:40:25,960 --> 00:40:29,200
Speaker 11: a dozen private elite schools, they had their annual retreat.

780
00:40:29,239 --> 00:40:32,919
Speaker 11: And their annual retreat is Paradise Island in the Bahamas. Yes,

781
00:40:33,000 --> 00:40:36,160
Speaker 11: you know, the luxury Atlantis resort. Yes, I've been there once.

782
00:40:36,520 --> 00:40:37,160
Speaker 4: It's amazing.

783
00:40:38,239 --> 00:40:43,279
Speaker 11: Gambling drinking age is eighteen also good. But they dined

784
00:40:43,360 --> 00:40:45,840
Speaker 11: it like they have no Boo restaurant, thirty four dollars,

785
00:40:45,840 --> 00:40:50,319
Speaker 11: shashimi sixty five dollars lobster salad. They get these networking

786
00:40:50,480 --> 00:40:53,600
Speaker 11: opportunities right, and the parents are dishing out nearly three

787
00:40:53,600 --> 00:40:58,560
Speaker 11: thousand dollars for five days networking opportunity. Because of the

788
00:40:58,600 --> 00:41:03,239
Speaker 11: alumni who went to the school, they get to intermingle

789
00:41:03,320 --> 00:41:03,680
Speaker 11: with them.

790
00:41:03,960 --> 00:41:05,840
Speaker 2: This came up at the dining room tables.

791
00:41:06,160 --> 00:41:09,040
Speaker 11: I did not know this existed because.

792
00:41:08,800 --> 00:41:11,640
Speaker 2: We're not doing this. We had to get our hair rainbow.

793
00:41:12,640 --> 00:41:14,600
Speaker 2: You don't get your hair diet anymore. You get it

794
00:41:14,680 --> 00:41:15,480
Speaker 2: rainbow rainbow.

795
00:41:15,560 --> 00:41:17,040
Speaker 11: Do you do the nose ring too?

796
00:41:17,760 --> 00:41:20,720
Speaker 2: I wasn't allowed to see what it costs next. It's

797
00:41:20,800 --> 00:41:21,160
Speaker 2: a lot.

798
00:41:21,280 --> 00:41:25,120
Speaker 11: It's a lot. Yeah, so okay, so we'll stick with luxury.

799
00:41:25,160 --> 00:41:27,319
Speaker 11: Here we go to more airlines. We talked about Air

800
00:41:27,360 --> 00:41:30,440
Speaker 11: France last week, like beefing up their new first class

801
00:41:30,440 --> 00:41:34,080
Speaker 11: we let premiere. So now we have British airlines joining

802
00:41:34,120 --> 00:41:36,600
Speaker 11: in the financial time say they're trying to regain like

803
00:41:36,600 --> 00:41:38,640
Speaker 11: the status, so they want to put in more than

804
00:41:38,680 --> 00:41:41,480
Speaker 11: seven billion dollars they're investing in this program. So they

805
00:41:41,520 --> 00:41:45,879
Speaker 11: have this commitment to luxury. Now first class passengers, they

806
00:41:45,920 --> 00:41:47,799
Speaker 11: have this suite that they can go to more than

807
00:41:47,880 --> 00:41:52,040
Speaker 11: six foot long bed. They enjoying the six foot long bed.

808
00:41:52,360 --> 00:41:57,160
Speaker 11: You can certainly fit in that stretch out. Enjoy the

809
00:41:57,239 --> 00:41:59,040
Speaker 11: trip from New York to London.

810
00:41:59,239 --> 00:41:59,919
Speaker 5: How does that sound?

811
00:42:00,080 --> 00:42:01,160
Speaker 2: It's a short trip though.

812
00:42:01,160 --> 00:42:02,160
Speaker 7: The thing they don't.

813
00:42:02,000 --> 00:42:03,600
Speaker 6: Get you get the way behind you.

814
00:42:04,080 --> 00:42:06,120
Speaker 2: I can get, you know, your roll in the Singapore

815
00:42:06,239 --> 00:42:09,080
Speaker 2: or whatever. It's like five hours if the winds right,

816
00:42:09,400 --> 00:42:13,440
Speaker 2: It's like yeah, it's like it feels like, I mean,

817
00:42:13,440 --> 00:42:15,279
Speaker 2: do you want to spend that kind of money? I

818
00:42:15,320 --> 00:42:19,520
Speaker 2: read the premiere to Paris. I'm sorry, it's ten eleven

819
00:42:19,560 --> 00:42:23,440
Speaker 2: twelve grand round trip. That's a lot of that. You

820
00:42:23,480 --> 00:42:25,319
Speaker 2: get a next hour to Paris.

821
00:42:25,640 --> 00:42:27,560
Speaker 6: Okay, it's not like going.

822
00:42:27,360 --> 00:42:29,440
Speaker 2: You know, it's not like going to New York to

823
00:42:30,400 --> 00:42:31,520
Speaker 2: you knows.

824
00:42:31,800 --> 00:42:35,080
Speaker 5: I can get the doubling faster exactly.

825
00:42:34,680 --> 00:42:37,239
Speaker 2: Like your lingus is like you and over there, you're there.

826
00:42:37,480 --> 00:42:37,920
Speaker 6: You love me?

827
00:42:38,320 --> 00:42:42,680
Speaker 2: Okay, Lisa Mateo, thank you so much on the newspapers.

828
00:42:42,680 --> 00:42:43,920
Speaker 2: We'll see you in the Bahamas.

829
00:42:44,160 --> 00:42:49,000
Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify,

830
00:42:49,120 --> 00:42:52,879
Speaker 1: and anywhere else you get your podcasts. Listen live each

831
00:42:52,920 --> 00:42:56,760
Speaker 1: weekday seven to ten am. Easter and on Bloomberg dot com,

832
00:42:56,880 --> 00:43:00,680
Speaker 1: the iHeartRadio app tune In, and the Bloomberg Business app.

833
00:43:01,000 --> 00:43:04,120
Speaker 1: You can also watch us live every weekday on YouTube

834
00:43:04,400 --> 00:43:06,440
Speaker 1: and always on the Bloomberg terminal