Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
Speaker 1: my co host Matt Miller. Every business day we bring
Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
Speaker 1: at Bloomberg dot com slash podcast. We don't drink coffee,
Speaker 1: Paul and I don't drink coffee, not a not a
Speaker 1: big coffee drinker. Um, but I know a lot of
Speaker 1: people do. And machines here Bloomberg. You know, I like
Speaker 1: to wake up in the morning with a big inch
Speaker 1: V eight. Let's talk about cars for a minute. Jeff
Speaker 1: Dyke joins us. He's a president of Sonic Automotive and UM,
Speaker 1: they had their uh Q two results out all time
Speaker 1: record quarterly revenue three point four billion dollars, up fifty
Speaker 1: eight point seven percent year over year. If that doesn't
Speaker 1: reb your engine, I don't know what does, Jeff. What's
Speaker 1: the what's the biggest problem? Is it getting inventory in
Speaker 1: the door? Yeah, so from a new car perspective, that's
Speaker 1: the big issue. UM, We've got eighty four stores across
Speaker 1: the country, and we've got about an eight to nine
Speaker 1: days supply new car inventory pre COVID, we that number
Speaker 1: would be in the fifty to sixty day range. So uh,
Speaker 1: certainly inventories are tight. That's push inflation up on the
Speaker 1: new car prices. Um. And it's also affecting used car
Speaker 1: business because you know, new car inventory drives used car inventory,
Speaker 1: and so you've seen this crazy and version of used
Speaker 1: car prices being really really high wholesale prices at some
Speaker 1: point in time during the summer, we're paying more uh
Speaker 1: for a for a car than we could you know
Speaker 1: that we could sell a new car for uh. So uh,
Speaker 1: it's just created all kinds of crazy pricing. But that's
Speaker 1: gonna alleviate. UM. The chip shortages is you know, I
Speaker 1: wouldn't say coming to an end, but certainly getting better. Um.
Speaker 1: And so between now and the year, inventory levels are
Speaker 1: gonna come back on new uh and PreO pre owned
Speaker 1: inventories will come back, and so we're looking for a
Speaker 1: great second half of the year. All right, Jeff, Hey,
Speaker 1: before we start, just give Bruton and Bill Brooks my
Speaker 1: best regards. I worked with those guys when taking that
Speaker 1: Speedway Motorsports Public Way back in the day. So some
Speaker 1: good times with those guys. I'll be happy to do
Speaker 1: that too. Fantastic guys. Yep, Jeff talked to us, you know,
Speaker 1: so the automakers, it's it's just amazing you talk to
Speaker 1: me about that inventory. And and the guy got a
Speaker 1: buddy who's who, who also is an auto business, and
Speaker 1: he says the exact same thing. I mean, when are
Speaker 1: the O E M s telling you that you can
Speaker 1: get back to a more normalized level of inventory. Yes,
Speaker 1: so I think it's gonna happen in stages. I think
Speaker 1: the highline bludgury vehicles come back first. So we have
Speaker 1: an eight day supply of BMWs and our TBMW stores
Speaker 1: across the country today, um probably October November time range.
Speaker 1: That's gonna be to thirty. I don't expect inventories to
Speaker 1: ever come back to the level that they were pre COVID, though,
Speaker 1: because it's a heck of a lot easier to manage
Speaker 1: smaller inventories. The manufacturers are not having to spend a
Speaker 1: ton of money on incentives any longer, so they're making
Speaker 1: more money. The business is just a lot more EFFICI
Speaker 1: and so what may have been a sixty to seventy
Speaker 1: days supply traditionally before COVID, I think will end up
Speaker 1: being a forty five or fifty days supply as we
Speaker 1: move forward, but certainly not the lows that we're seeing
Speaker 1: here at the end of July in August, in the
Speaker 1: eight and nine to ten day range across the country.
Speaker 1: That that's going to get better progressively as we move
Speaker 1: towards the end of the year. So first, I have
Speaker 1: an observation which just dawned on me. Uh, the four
Speaker 1: bosses that I've spoken to since I've been in New
Speaker 1: York all drive BMW's, And then I know, and then
Speaker 1: Paul does to Jeff and and Paul is he's facing
Speaker 1: a conundrum here because he needs he wants to get
Speaker 1: a new car, waants a stick with a Beamer because
Speaker 1: he likes to drive, and he wants to stick shift.
Speaker 1: What can he do? Called Jeff dyke Ye, but but
Speaker 1: but manual transmissions are difficult to get these days, aren't
Speaker 1: they They are? But we certainly can make that happen.
Speaker 1: And and um, you know, there there's that option for
Speaker 1: all of their model lines, um in particularly supporting or
Speaker 1: of the luxury model lines. And so that's easy to do.
Speaker 1: We we can certainly make that happen. And sounds like
Speaker 1: a lot of as well. You got three M three
Speaker 1: or an M four I'd saying, which, so you can
Speaker 1: handle that very easily. So Jeff, it's interesting. I mean
Speaker 1: for you at the dealer level, these are you know,
Speaker 1: good times because you really can drive hard bargains, right.
Speaker 1: I mean, it's definitely a seller's market, isn't it. Everything
Speaker 1: is selling an M s r P. I don't care
Speaker 1: if that's a twilet camera or Honda a chord which
Speaker 1: never does that all the way up the line. Um,
Speaker 1: everything is selling an ms RP. People have to have cars.
Speaker 1: We don't have to discount the manufacturers aren't discounting, so
Speaker 1: there's really no discounts out there to give. Um. And
Speaker 1: and I think as we move forward it lightens up
Speaker 1: a little bit. But again, um, I think we'll be
Speaker 1: selling closer to M s RP than as far away
Speaker 1: from M s r P as we were selling prior
Speaker 1: to COVID had really kind of gotten a way of
Speaker 1: the world. It's the first thing you learn in economics,
Speaker 1: right is supply and demands. And um, they're going to
Speaker 1: control the supply a whole lot better than manufacturers are. Um.
Speaker 1: As we move forward, which is a huge blessing for everybody. Well,
Speaker 1: how long does does the demand hold up? I mean,
Speaker 1: I know a lot of you know, kids that said
Speaker 1: they were never going to get cars, city dwellers that
Speaker 1: maybe thought they didn't need them, and they all have
Speaker 1: gone out and bought automobiles. But you know that can't last. Well,
Speaker 1: I don't think it can last. But short supply does
Speaker 1: create demand. Um, that's just how our country works, right.
Speaker 1: And so when anything, remember toilet paper last year. Luxury
Speaker 1: cars with the toilet paper this year, right, Um, you
Speaker 1: couldn't you couldn't buy a roll of toilet paper last
Speaker 1: year to save your life, and you did. It was
Speaker 1: fifteen bucks. Um. And and that's what's going on in
Speaker 1: the car industry this year. I think it. I mean,
Speaker 1: it's certainly going to get better, um, you know as
Speaker 1: we move forward, But the government's got a quit paying everybody,
Speaker 1: um and to stay home. I mean the labor market.
Speaker 1: You feel it. In the labor market, we certainly do.
Speaker 1: The manufacturers certainly do. And I think as people get
Speaker 1: back to work, the demand you know, comes down a bit.
Speaker 1: But I don't see that happening this year and may
Speaker 1: not even to the first six months of next year.
Speaker 1: That the demand is just so high. We've sold all
Speaker 1: the cars on our law everything in our pipeline and
Speaker 1: have customers. They're still coming, and so the business is
Speaker 1: just amazing at this point in time. I've been in
Speaker 1: the business for twenty five years and I have never
Speaker 1: seen it like this. Wow. Interesting, alright, really interesting, Jeff,
Speaker 1: thanks so much for joining us. Really appreciate it. Jeff Dykes,
Speaker 1: President Sonic Automotive UH symbol s a H. The stock
Speaker 1: is up about three quarters of one percent today, up
Speaker 1: thirty nine percent for the year, and they posted some
Speaker 1: really strong results last night and the business, as Jeff said, UH,
Speaker 1: stronger than ever under ninety four billion with a B.
Speaker 1: That's some serious What would you do just tax problems
Speaker 1: and who needs that issue there? What a lot of
Speaker 1: folks are trying to do in the market places? Um,
Speaker 1: you know, think about do I plow back into those
Speaker 1: growth stocks which have been such good stories over the
Speaker 1: last decade plus, or do I stick with my rotation trade,
Speaker 1: the reopening trade. Our next guest has an opinion there,
Speaker 1: Mike Lucas principle and CEO of True Mark Investments, Mike,
Speaker 1: I seem to recall that you are certainly in that
Speaker 1: growth stock camp. Give us your thoughts. Definitely in the
Speaker 1: growth stock camp. I mean, look, the reality is we've
Speaker 1: we've pigeonholed a couple of different trends rightly, right, the
Speaker 1: work from home trade and the the Great rotation. I
Speaker 1: think both are dead right, and if if we waited
Speaker 1: ten years, so the Great rotation of value that was
Speaker 1: purely model driven and kind of floated for a bit there,
Speaker 1: and now we're seeing it dissipate. The work from home trade.
Speaker 1: It's funny everyone punished some of the secular growth stocks
Speaker 1: when the the lockdown started to end. But reality is,
Speaker 1: when you see earnings results come through those secular growth
Speaker 1: stocks that are part of the broader digitalization, the global
Speaker 1: economy continued. Yeah, they're showing acceleration, and Amazon's getting beat up, right,
Speaker 1: So maybe we're looking at the wrong trade for the
Speaker 1: work from home trade. So it's you know, I think
Speaker 1: there's a there's a nice pocket of secular growth out
Speaker 1: there that's going to continue to accelerate. It it was
Speaker 1: accelerating prior to the lockdown in the pandemic, accelerating through it,
Speaker 1: and now it's accelerating out of it. And sometimes it
Speaker 1: takes one too even three yearning cycles to separate the
Speaker 1: you know, the story stocks from the real secular growth stocks.
Speaker 1: But they're there and there, they've got tail winds, and
Speaker 1: you know, regardless of what the macroeconomic environment is, these
Speaker 1: are industries and companies that aren't going away. But Mike,
Speaker 1: are you saying, you know, you don't believe in value
Speaker 1: rising up over growth or that we're just framing it
Speaker 1: the wrong way in terms of what these stocks, what
Speaker 1: these companies are, Well, I think we're framing it the
Speaker 1: wrong way. First and foremost, we're looking at it as
Speaker 1: a binary outcome. Uh do I think value is going
Speaker 1: to rise up over growth? No? I don't. Long term,
Speaker 1: I don't. I think this whole thing is now geared
Speaker 1: towards growth. You know, if we look at the last
Speaker 1: ten years, quite frankly, most of the growth was concentrated
Speaker 1: and saying, you know, if we take that out of
Speaker 1: the equation, really what happened there? But if you if
Speaker 1: you look at a holistic view of this and understand
Speaker 1: that we've got right now, I mean essentially to really
Speaker 1: strong wealth creators in this in this country and globally
Speaker 1: real estate and equities. So you know, how long is
Speaker 1: that value trading to last. I think you see great
Speaker 1: opportunities in value and some different end producers. You see
Speaker 1: tremendous opportunities and secular growth. It doesn't have to be binary.
Speaker 1: So you know, when we talk about work from home,
Speaker 1: we talked about great rotation, we're falling into that track.
Speaker 1: You know, we're falling into the idea that it has
Speaker 1: to be one or the other. It's not. It's it's
Speaker 1: never been that way. It's always been sort of what's
Speaker 1: going on in the gray area, and that will continue
Speaker 1: because as we can see like reopening or we're not reopening,
Speaker 1: or the masks you guys earlier mask mandates are recommendations,
Speaker 1: you know, the nuances in the language or throwing people
Speaker 1: into a tail spin right now and we don't know
Speaker 1: what's going to happen in the next week, the next month.
Speaker 1: And we saw inflation signals go off the chart. Now
Speaker 1: their team again, volatilities down, and the market that you know,
Speaker 1: the equity market keeps grinding higher, and uh so you know,
Speaker 1: I wouldn't call it uncertainty but I'd call it confusion
Speaker 1: right now. And you know, I'd think the best thing
Speaker 1: to do is look for stocks that maybe a part
Speaker 1: of the or beneficiaries of the new paradigm shift. Where
Speaker 1: there are secular growth stocks, particularly intact that I've become,
Speaker 1: we'll we'll call them defensive for lack of a better term. Uh.
Speaker 1: When we've all been running around staring at work from
Speaker 1: home and thinking about the great rotation, and it's time
Speaker 1: to shift off thinking a little bit, Mike, what do
Speaker 1: you think about inflation has certainly been a worry concern
Speaker 1: from market participants. How do you think about it with
Speaker 1: your UH strategies? Well, you know, inflation t here. You know,
Speaker 1: anybody's gone to the gas pump, or or gone to
Speaker 1: the grocery store, or I guess less six weeks tried
Speaker 1: to get lumber, you know, as realized get inflations definitely here,
Speaker 1: that was a transitory I guess that's that's the real question.
Speaker 1: The FED handling it correctly, that's a whole another question. Um.
Speaker 1: So in the end for us, I'll I'll parent poward
Speaker 1: marks here and say that it's quite possible the best
Speaker 1: inflation hedge out there is is a strong secular growth story.
Speaker 1: And even if we do see yields start to creep up,
Speaker 1: we're still in a historically low yield environment. Even if
Speaker 1: we get back to pre pandemic levels. Uh, if inflations
Speaker 1: doubling that up, where do you go? Right? And so
Speaker 1: you know, I think the need for growth in in
Speaker 1: the equity space is still going to persist. And I
Speaker 1: think inflations here, it's just a matter of how long
Speaker 1: it's gonna last. And what I'm not the set is
Speaker 1: tackling it correctly well, as long as it's less than growth, right,
Speaker 1: I mean substantially less. I heard the term growth growth
Speaker 1: flation the other day and I thought it made perfect sense. Yeah, No,
Speaker 1: I think that's I think it's a great way to
Speaker 1: coin it. Um. The reality is that again, if we
Speaker 1: can if we can absorb inflation, uh, then you know
Speaker 1: people are going to co exist with it, right, Not
Speaker 1: that we have a choice anyway, but I think the
Speaker 1: ability to account for inflation with different asset classes is
Speaker 1: really going to dictate how this is digested, you know,
Speaker 1: in the in the markets and in particularly on main street. Mike,
Speaker 1: thanks so much for joining us. Great to get your
Speaker 1: insight today. Mike, Lucas is principal and CEO at Truemark Investments,
Speaker 1: x On Mobile, Chevron. They reported earnings today and I
Speaker 1: think about this big energy names. I think about you know,
Speaker 1: big oil rigs in the middle of West Texas and
Speaker 1: out in the North Sea. But folks are increasingly thinking
Speaker 1: about sustainable investing and just across the board, not just
Speaker 1: on these energy companies. Let's dig into that a little bit.
Speaker 1: Carrie Dugan, advisor for Rock Creek, also a former deputy
Speaker 1: policy director to then Vice President Biden and White House
Speaker 1: Climate Energy advisor. Carrie, give us a sense for it's
Speaker 1: seems like these big energy companies, at least the US ones,
Speaker 1: are making efforts at becoming more sustainable in their operations.
Speaker 1: Give us your view. Well, first, thanks for having me on,
Speaker 1: Paul and Matt. It's it's a real treat to be
Speaker 1: on with you today. I heard what you open there with,
Speaker 1: and if you if you read a little bit closer,
Speaker 1: you guys are going to notice that in addition to
Speaker 1: that their earnings, they're also reporting on their investment in
Speaker 1: the low carbon solution space. And and lately I've heard
Speaker 1: a lot of talk one of my favorite perhaps it's
Speaker 1: because I'm from Michigan and cold cold weather states. You
Speaker 1: hear a lot of people talking about ice hockey, and
Speaker 1: I was listening to both Secretary Granham as well as
Speaker 1: they and the steer talking about skating to where the
Speaker 1: puck is going. So I think that, you know, we
Speaker 1: could observe that with the oil and gas companies, they
Speaker 1: they kind of see the future. They're tracking what's happening
Speaker 1: in Washington with a new by partisan fielding. They know
Speaker 1: what's coming. So I think it's a really exciting time
Speaker 1: on top of a really uh let's call it scary time.
Speaker 1: You've got record heat and you also have record investments
Speaker 1: in this space. Um in terms of you know, the
Speaker 1: oil companies, can they ever be sustainable or it always
Speaker 1: strikes me as odd when um, when you know green
Speaker 1: investors go into big oil. But on the other hand,
Speaker 1: we have seen them now infiltrate in terms of activists
Speaker 1: on the board. That was another big, big moment, let's
Speaker 1: just call it that. But let me point you guys
Speaker 1: back to last week. I was at in Washington, my
Speaker 1: first pandemic trip, I might add, for a summit that
Speaker 1: we put together at Rock Creek with Asani Beschloss and
Speaker 1: about twenty global leaders in this space, and um, you know,
Speaker 1: maybe if you take nothing away from that h series
Speaker 1: of really important interviews, um Asani sat down with Brett Harris,
Speaker 1: whose president CEO of the University of Texas, Texas A
Speaker 1: and M University investment management company, and he was talking
Speaker 1: about how the the you know, previous era was a
Speaker 1: hydrocarbon era and this era that we're in now is
Speaker 1: moving away from hydrocarbons into more renewable, sustainable sources. I
Speaker 1: don't know about you, but that message coming out of UH,
Speaker 1: you know, a huge UH an importantly placed investment management company,
Speaker 1: was a big signal to me. And I think that's
Speaker 1: really um that's that was a huge takeaway. And you know,
Speaker 1: there's all sorts of interesting other nuggets that came out
Speaker 1: of the summit. I mean, we had Gina McCarthy, who
Speaker 1: is in a really important role right now talking about
Speaker 1: following these investments that you're talking about, and and you
Speaker 1: know the role of government and buying down the risk
Speaker 1: um and the down payment that this new biprice and
Speaker 1: plan is going to be really means that the investment
Speaker 1: investment community in your audience has a big huge role
Speaker 1: to play going forward. How about the role of government.
Speaker 1: I'm thinking about President Biden's infrastructure bill, climate commitments. Give
Speaker 1: us your thoughts as to where this administration is going. Yeah,
Speaker 1: I mean you you mentioned in your lovely introduction that
Speaker 1: I've had some history here, UM, and so I do
Speaker 1: know that because I worked very close to with the
Speaker 1: President when who was vice president. You know, these these
Speaker 1: issues around jobs and equity, UM and climate are near
Speaker 1: and jured to his heart. And I think you see
Speaker 1: that re selected in UM, both the person and in
Speaker 1: the policy. UM. Back back then we were working on
Speaker 1: the Recovery Act and we called that a down payment
Speaker 1: and clean energy future. And now we're working on a
Speaker 1: bipartisan infrastructure bill. I mean, there's just been a huge
Speaker 1: shift in the landscape. Uh, that sort of thing. One
Speaker 1: thing too, is definitely what's going on in real time,
Speaker 1: the real impacts that we're all seeing with our own eyes, UM,
Speaker 1: from Germany to China. I'm here in Detroit, guys. I mean,
Speaker 1: we're experiencing this in real time. So I think the
Speaker 1: policy has met the moment um and the investment community.
Speaker 1: You know, there's there's trends now, there's more money in
Speaker 1: this space. You're seeing new and big, huge funds in
Speaker 1: this space and climate, which is exciting. But you know
Speaker 1: these investments aren't limited to climate when of what needs
Speaker 1: to happen. There's other issues, of course that I view
Speaker 1: as quality of life issues, and so does the President.
Speaker 1: Um when you think about food scarcity and and other
Speaker 1: mitigation issues, air quality issues. UM. So I'm excited by
Speaker 1: what's going on in Washington, but I also know that
Speaker 1: it's it's just it's another down payment and there's a
Speaker 1: real role for the investment community to come in. Yeah,
Speaker 1: and the investment community where I want to go. Now
Speaker 1: you're advising Rock Creek, and people want to make returns
Speaker 1: on investments. It's not just about all truism, um are
Speaker 1: They are investors willing to accept lower returns if they
Speaker 1: can do good. Um. I'm not going to even go
Speaker 1: down that road. I'm going to talk to you about
Speaker 1: what I know from working as an advisor to Rock Creek. Gapstane.
Speaker 1: You know she's came. You know, she's probably been on
Speaker 1: your show and you'll have her back. Uh. You know,
Speaker 1: this is a former Treasure of the World Banks. So
Speaker 1: she's been doing in my view, E. S. G. And
Speaker 1: d E. I started to use acronyms, but I know
Speaker 1: your audience knows them well. Uh investing before in fashion
Speaker 1: and now it's very much in fashion, and she's been
Speaker 1: doing it with returns for our clients, including major foundations
Speaker 1: and pensions fun So there's there is proof there, and
Speaker 1: I think, UM, what's what's more telling right now is
Speaker 1: you know the appetite for the data to support that.
Speaker 1: I know that you all have talked about this on
Speaker 1: the show. If something, we're without playing all my cards today,
Speaker 1: Paul and Matt, I'll just tell you that we're going
Speaker 1: to come back and talk again about the data that
Speaker 1: UM Rock Creek is UM has at its fingertips and
Speaker 1: in ways that we can UM make that more readily
Speaker 1: available so that investors can actually see these returns. So
Speaker 1: I think that UM premise that you mentioned your question
Speaker 1: is packed tense. I think the investments are here and now.
Speaker 1: So Sarah, give us a sense here, I mean E
Speaker 1: s G investing. I first heard about it maybe fifteen
Speaker 1: years ago from European institutional investors, but now more and
Speaker 1: more here in the US. Where are we in terms
Speaker 1: of really embracing it? Would you say, well, I think
Speaker 1: there's there's interesting in creating of a new um opportunities.
Speaker 1: We had on the summit last week. He had the
Speaker 1: founder of appeal ape l, which is a company that
Speaker 1: uses uh, you know what I was just called generally
Speaker 1: new technology to make you know, your fruits and vegetables
Speaker 1: last longer. And that's really important, as I mentioned in
Speaker 1: terms of like food scarcity. But the what's interesting to
Speaker 1: me about that as an investment is they consider nature
Speaker 1: as the end user, not sort of a human as
Speaker 1: the end user. And so in in my world, you know,
Speaker 1: I come out of the sort of energy, environment, science
Speaker 1: and tech. You know, we call that life cycle analysis,
Speaker 1: and they think I think that's an interesting trend. I
Speaker 1: think that's one that there's a real appetite particularly along
Speaker 1: uh millennials, millennial age investors are looking for that type
Speaker 1: of information and and uh you know these closed loops,
Speaker 1: I think UM watching uh Andrew Spires ted talk the
Speaker 1: other day and I thought it was so interesting. He
Speaker 1: talked about going from a take make waste economy to
Speaker 1: a circular economy, and I think that that is the
Speaker 1: trend that in the investors need to be watching the
Speaker 1: more right now as a more circular opportunity. Carry, Thanks
Speaker 1: so much. Carry Dougan there, she's an adviser to Rock Creek,
Speaker 1: former deputy policy director for then Vice President Biden. This
Speaker 1: is Bloomberg Amazon. Notwithstanding, we're getting some really really good
Speaker 1: earnings this quarter. Um, and that's alleviating concerns from some
Speaker 1: investors are worried about market valuations. Let's check in with
Speaker 1: one of those market participants, Phil Orlando, chief equity market
Speaker 1: strategists ahead of the Client portfolio Management at Federated at Hermes. Uh.
Speaker 1: These guys are big. I mean it's like six hundred
Speaker 1: billion dollars assets under management worldwide. Uh, so they have
Speaker 1: more than their toe dipped into this investment pool. Phil,
Speaker 1: thanks so much for for joining us here. Give us
Speaker 1: your thirty thousand foot view of this earnings cycle and
Speaker 1: and maybe more importantly, the outlot we're getting from some
Speaker 1: of some in corporate America. Well IT awards. The earning
Speaker 1: season has been terrific. You know, we're roughly two thirds
Speaker 1: of the way through SMP five. Earnings are double what
Speaker 1: they were a year ago. Uh. The revenues are very strong.
Speaker 1: Earnings are very strong. I think that the most important
Speaker 1: story are the splits that the growth companies, the technology
Speaker 1: names are doing fine. Earnings are up fifty to sixty
Speaker 1: percent year on year, but the really outsize gains are
Speaker 1: coming from the economically sensitive categories like financials, industrials, consumer
Speaker 1: discretionary energy. That those numbers are cartoon like. They're up
Speaker 1: you know, two three four percent year on year um
Speaker 1: because remember those companies, you know, we basically shut down
Speaker 1: and left for dad a year ago second quarter. Uh
Speaker 1: So the numbers, you know, are strong. As we've come
Speaker 1: back to life. We now know that the recession ended
Speaker 1: in April of last year, based upon the National Bureau
Speaker 1: of Economic Research making that announcement last week. So we're
Speaker 1: getting terrific news out of earnings and the guidance I
Speaker 1: think has been constructed. Companies are saying they've got better visibility.
Speaker 1: Obviously there's some uncertainty in terms of fiscal and monetary
Speaker 1: policy and where are we at the delta variant, But
Speaker 1: but I think we're in a lot better shape today
Speaker 1: than we were a year ago at this time. Do
Speaker 1: you think those two things? I mean, David Couston was
Speaker 1: on a couple of weeks ago from Goldman Sax has
Speaker 1: had his worries are about rates and about tax policy,
Speaker 1: but the delta variant hadn't reared its ugly head, uh,
Speaker 1: you know, to this extent at that point, are those
Speaker 1: the biggest headwinds? I think absolutely. Um. You know, David's
Speaker 1: a smart guy. He was spot on with his concerns
Speaker 1: about fiscal and monetary policy. A month later, the delta variant, um,
Speaker 1: you know, is now accounting for something like eight or
Speaker 1: eighty five percent of all new infections. If you're vaccinated,
Speaker 1: you're you're in pretty good shape. But the reality is
Speaker 1: that there are parts of the country, mostly in the Southeast,
Speaker 1: where the vaccination rates are not where they should be.
Speaker 1: You know, we're probably or so here in the New
Speaker 1: York area. We're probably half that down in Mississippi, Alabama, Georgia,
Speaker 1: et cetera. So I think we've got to do a
Speaker 1: better job of getting those folks vaccinated. It up to speed,
Speaker 1: because the you know, what the doctors are telling us
Speaker 1: is that that you're vaccinated, you're you're not going to
Speaker 1: die from the delta variant, and and that's the objective
Speaker 1: that we're trying to achieve. Try to stay alive here,
Speaker 1: all right, Phil, We've we've got this delta variant. It's
Speaker 1: kind of maybe causing some folks to rethink the reopening
Speaker 1: trade as opposed to maybe focusing on some of the
Speaker 1: core growth stories, some of the tech names. Where are
Speaker 1: you guys focusing on right now in terms of sectors. So, um,
Speaker 1: there's absolutely been a resurgence in in the growth and
Speaker 1: the technology names since let's say Memorial Day. So over
Speaker 1: the course of the last couple of months, growth and
Speaker 1: tech has done better. UM. But because we are producing
Speaker 1: these these outsized earnings games in uh in the cyclicals
Speaker 1: uh and and those stocks have underperformed the growth in
Speaker 1: tech names over the last couple of months. That's where
Speaker 1: we're placing our bet. Um. We believe that we will
Speaker 1: get through this delta variant uh and and the reopening
Speaker 1: trade is as we get into the fall, the last
Speaker 1: you know, three months of the year or so, uh,
Speaker 1: we're going to get that rotation back into value. UH. So,
Speaker 1: what we'd be doing is taking a look at at
Speaker 1: those companies that are that are doing great, that are
Speaker 1: getting good guidance, the earnings and revenue numbers are strong,
Speaker 1: perhaps they've underperformed from a relative valuation standpoint. That's where
Speaker 1: we think is the outsized opportunity is going to be
Speaker 1: to end the year. Are you concerned at all that
Speaker 1: we may have that we may hit a fiscal cliff? Um?
Speaker 1: You know, if we don't pass the bigger of the
Speaker 1: legislation that the Democrats want to cram through, are we
Speaker 1: gonna you know, fall off in terms of spending. I'm
Speaker 1: very concerned about the fiscal cliff. If you've been reading
Speaker 1: any of my weekly market commentaries over the last I
Speaker 1: don't know, three or four weeks, uh that the the
Speaker 1: the debt feeling expires tomorrow. UM. I believe Treasury Secretary
Speaker 1: Yellen has enough money to in the couch cushions to
Speaker 1: keep things solvent into about October and November. But we're
Speaker 1: gonna have to address that issue. And I suspect it's
Speaker 1: going to be an issue that that Congress will work
Speaker 1: into either this one point two trillion dollar infrastructure plan
Speaker 1: or this you know, three or four or five trillion
Speaker 1: dollar UH social spending plan that that seems to be
Speaker 1: more along party lines. But somewhere within one or both
Speaker 1: of those packages, we're going to have to address the
Speaker 1: deficit ceiling and and uh, you know, and and and
Speaker 1: and lifted. Phil thanks so much for joining us. Philo Orlando,
Speaker 1: their chief equity market strategist and head of client portfolio
Speaker 1: management over Federated Hermon's. They've got eighty billion dollars in equity.
Speaker 1: He's got firm wide six billion dollars of assets under management.
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