WEBVTT - Don't Underestimate The Fed, Hooper Says 0:00:00.080 --> 0:00:13.040 Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane 0:00:13.480 --> 0:00:17.560 jay Ley. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.640 Bloomberg dot Com, and of course on The Bloomberg and 0:00:27.760 --> 0:00:29.560 The Gentleman. Jenny, I want you to jump it off 0:00:29.560 --> 0:00:32.519 here with Julian Emmanuel b t I G. And I 0:00:32.560 --> 0:00:35.320 will only say that he's one of the few that 0:00:35.520 --> 0:00:40.839 is steadfastly participated in this great bull market by writing 0:00:40.880 --> 0:00:44.000 thoughtful pieces. He's not just going own stocks, you know, 0:00:44.080 --> 0:00:48.000 go go go. He's really tried to construct a theory 0:00:48.120 --> 0:00:49.760 to stay in the stout at the year as one 0:00:49.800 --> 0:00:52.400 of the biggest equity market bulls on the street out 0:00:52.440 --> 0:00:54.960 of all the strategists. We said, and I just wonder 0:00:55.000 --> 0:00:58.000 whether we've hit his price target already. Julian and Manuel 0:00:58.040 --> 0:01:00.200 at BT I G jointing us right now, Jillian to 0:01:00.200 --> 0:01:01.480 have you with us. Just want me through that what 0:01:01.520 --> 0:01:03.240 do you cite to clients after the runny we've already 0:01:03.240 --> 0:01:06.320 had to just stout a year. Well, our theory has 0:01:06.360 --> 0:01:09.120 been that this could be a year where you know, 0:01:09.600 --> 0:01:13.080 first of all, the backdrop is twenty plus percent. Years 0:01:13.120 --> 0:01:17.800 like we had in tend to be followed by positive years. 0:01:18.040 --> 0:01:22.120 That maybe counterintuitive. The average gain is around sort of 0:01:22.280 --> 0:01:25.720 sort of twelve to fourteen So from our point of view, 0:01:25.800 --> 0:01:30.320 in an environment where as we've said numerous times, the 0:01:30.400 --> 0:01:34.200 public has not really fully engaged in the equity markets. 0:01:34.480 --> 0:01:37.240 You look at flows. Flows have been going into money 0:01:37.240 --> 0:01:40.319 market funds. Flows have been going into bond funds very 0:01:40.360 --> 0:01:44.440 consistently for the last five years. Um, this could be 0:01:44.520 --> 0:01:48.400 the year where you get upside beyond our thirty four 0:01:48.480 --> 0:01:52.000 fifty price target based on the public actually becoming an 0:01:52.040 --> 0:01:55.800 active buyer of stocks. So our messages, you know, it's 0:01:55.840 --> 0:01:58.200 it's been a very good two weeks, it's been a 0:01:58.320 --> 0:02:02.000 very good four months. A stay patient, uh, you know, 0:02:02.600 --> 0:02:08.080 don't be aggressive buyers into moves this far, this stretched, 0:02:08.120 --> 0:02:10.520 because you could have a pullback at any time, but 0:02:10.680 --> 0:02:13.480 just be patient. Well, message a retail now, Julian, let's 0:02:13.480 --> 0:02:15.480 talk about it. Tom and I started the program by 0:02:15.520 --> 0:02:18.560 discussing valuations. How much higher could they go? If you 0:02:18.600 --> 0:02:20.280 look at this market right now and you have a 0:02:20.320 --> 0:02:22.400 retail client sitting in front of you that's missed down 0:02:22.400 --> 0:02:24.320 on this rally of the last twelve months or so, 0:02:24.680 --> 0:02:27.440 and they ask you, what's the one valuation metric at 0:02:27.440 --> 0:02:29.520 the moment that you're looking at that says green light? 0:02:29.600 --> 0:02:34.560 Get back in good old fashioned price earnings. Okay to 0:02:34.680 --> 0:02:38.400 us at what we expect sort of equality eighteen and 0:02:38.480 --> 0:02:43.480 a half to nineteen times. Uh, it feels high, But 0:02:43.560 --> 0:02:45.880 if you look at the last thirty years of history, 0:02:46.440 --> 0:02:50.919 it's really only slightly above mid range UM. And in 0:02:51.000 --> 0:02:55.000 a backdrop where we do expect long end yields to 0:02:55.080 --> 0:03:00.480 gradually creep higher UM, that is not necessarily at all 0:03:00.520 --> 0:03:03.440 ahead when, And in fact we would argue it's a 0:03:03.520 --> 0:03:06.679 tail when because the absolute level of rates are low. 0:03:06.760 --> 0:03:09.920 And again we do think there could be this psychology 0:03:10.000 --> 0:03:12.920 shift to the extent that you start poking above two 0:03:12.919 --> 0:03:15.600 percent in the ten year yield in the US and 0:03:15.600 --> 0:03:19.360 and and zero above zero in in the German tenure yield, 0:03:19.639 --> 0:03:22.880 that the psychology becomes even more pro Would you know, I 0:03:22.840 --> 0:03:24.520 I want to pick you up on the forward multiple 0:03:24.560 --> 0:03:27.240 If you take the thirty year history as an example, 0:03:27.320 --> 0:03:29.720 isn't that skewed by the excesses of two thousand, Bio 0:03:29.880 --> 0:03:31.760 six Bio seven as well? And if you look at 0:03:31.760 --> 0:03:34.480 the last ten years in this bull market. Eighteen and 0:03:34.480 --> 0:03:37.160 a half times forward earnings is the upper range of evaluations, 0:03:37.200 --> 0:03:41.840 isn't it based on the last ten years. But again 0:03:41.880 --> 0:03:45.480 I think for us we've looked at it sort of 0:03:45.880 --> 0:03:51.120 Cold War essentially, the thirty years prior to nine and 0:03:51.240 --> 0:03:54.200 post Cold War UM and and you can sort of 0:03:54.280 --> 0:03:56.960 best fit the data. But from our point of view, 0:03:57.120 --> 0:04:00.840 sort of Night nine onwards really repre sense the time 0:04:01.240 --> 0:04:06.400 when the embracing of equity investing is something that's permeated 0:04:06.560 --> 0:04:11.680 popular culture and permeated the average person's portfolio. That sort 0:04:11.720 --> 0:04:14.440 of justifies where we're thinking. You're just joining us now, 0:04:14.520 --> 0:04:16.720 Julian Emmanuel with his b T I G. He's in 0:04:16.760 --> 0:04:20.200 the interactive broker studios at our world headquarters, Lectington and 0:04:20.279 --> 0:04:23.200 fifty nine John fare and I asconced, I say it 0:04:23.320 --> 0:04:27.200 investsco our annual visit to the good offices of Investo 0:04:27.360 --> 0:04:31.640 here in a vibrant downtown Manhattan, Lower Manhattan. We're thrilled 0:04:31.680 --> 0:04:34.960 to with us coast to coast and worldwide as well. Julian, 0:04:35.240 --> 0:04:37.919 I want to go back to March of nine. This 0:04:38.000 --> 0:04:41.719 is a few years ago and in Barns, Tom Gelvin, 0:04:41.880 --> 0:04:44.600 the legend of d LJ talking a price to sells. 0:04:45.160 --> 0:04:50.080 I love the article dowst sixteen thousand question mark. I mean, 0:04:50.440 --> 0:04:54.440 explain the punditry of the market and the strategy of 0:04:54.480 --> 0:04:58.719 the market versus just being in the market and participating 0:04:59.320 --> 0:05:01.599 in nineteen ninety nine, what is that twenty I can't 0:05:01.680 --> 0:05:05.400 keep you twenty one years ago, twenty one years ago down? 0:05:07.440 --> 0:05:10.960 Thank you and Galvin And Galvin nails it by saying, 0:05:11.400 --> 0:05:14.600 you know, extrapolate out they're gonna get the sixteen thousand 0:05:14.600 --> 0:05:18.880 by two thousand six with Bony bullis absolutely nailed the call. 0:05:19.080 --> 0:05:21.240 Should we just throw all this away, Julian and just 0:05:21.400 --> 0:05:26.080 own stocks for the long term? Well, we will go 0:05:26.320 --> 0:05:29.120 with that tried and true saying it is never different 0:05:29.200 --> 0:05:32.200 this time. And part of what we're looking at is 0:05:32.320 --> 0:05:34.800 if we do get to a point of you know, 0:05:35.560 --> 0:05:41.200 real public enthusiasm sort of you know, that irrational exuberance 0:05:41.440 --> 0:05:44.800 that clearly we saw at the end of in the 0:05:44.839 --> 0:05:47.800 beginning of two thousand and you'll know if there is 0:05:47.920 --> 0:05:52.680 significant multiple expansion um that would be a caution sign 0:05:52.760 --> 0:05:55.400 to us. Okay, what's a bt I G exuberance meter 0:05:55.560 --> 0:05:58.039 this morning? I mean, is the irrational out there are 0:05:58.040 --> 0:06:01.400 we are we rationally bullish, So in the short term 0:06:01.400 --> 0:06:03.839 there is definitely a little bit of froth. But when 0:06:03.880 --> 0:06:05.880 we look at the medium and the long term, what's 0:06:05.920 --> 0:06:10.240 fascinating to us is the options market is actually telling 0:06:10.279 --> 0:06:15.960 you that the degree of caution, particularly over the election term, 0:06:16.120 --> 0:06:19.040 is very, very high. This is really important. What you 0:06:19.120 --> 0:06:21.360 just heard from Julian Emmanuel there, thank you so much. 0:06:21.640 --> 0:06:24.159 Julian Emmanuel would be t I g to get thank you, 0:06:24.480 --> 0:06:26.840 and I've lost on on the screen here. I can't 0:06:26.880 --> 0:06:31.960 see it through the plates of avocado. I I lost there. 0:06:31.960 --> 0:06:48.600 We are futures up, eight down, futures up seventy, Ellen 0:06:48.760 --> 0:06:53.360 may and go away, which means you've got to get 0:06:53.440 --> 0:06:55.360 back in at some point. Do you want to sound 0:06:55.560 --> 0:06:59.400 generally go away and go away and maybe look things 0:06:59.440 --> 0:07:02.640 down for a little What I mean? These are important decisions, 0:07:02.640 --> 0:07:04.520 and I would suggest that research shows it's not the 0:07:04.560 --> 0:07:07.359 selling action, it's a getting back into the market action. 0:07:07.400 --> 0:07:09.800 If you've missed this, Ronny, I think it's really difficult 0:07:09.840 --> 0:07:12.400 to find a point in entry right now. See see 0:07:12.480 --> 0:07:14.480 Christina how he says that with meanness because he knows 0:07:14.480 --> 0:07:16.720 I'm in the triple leverage all cash fund. Shall we 0:07:16.760 --> 0:07:19.960 introduce Christina Probably we're in her house. Okay, we're Christina 0:07:20.040 --> 0:07:24.240 Hooper welcoming us today at Invesco. We're thrilled to be here. 0:07:24.280 --> 0:07:26.000 She is the head of it all, the chief global 0:07:26.080 --> 0:07:29.160 market strategists. And she has one of the coolest degrees 0:07:29.280 --> 0:07:32.480 in America, which is if you are minted in labor 0:07:32.520 --> 0:07:36.560 economics high above Cayugas rotters. That is really really cool. 0:07:37.160 --> 0:07:39.760 It's one of the most prestigious degrees in America to 0:07:39.800 --> 0:07:44.240 have a master's and labor economics from Cornell. We take 0:07:44.320 --> 0:07:47.680 that academics to the full and imployed America right now, 0:07:48.000 --> 0:07:50.640 knowing that John and I are number one emails and 0:07:50.760 --> 0:07:54.320 messages and handwritten letters from people is no, it's not 0:07:54.440 --> 0:07:58.760 fully employed. Well, I think what we're seeing is the 0:07:58.760 --> 0:08:03.120 effects of having a very week job recovery for so long. UM. 0:08:03.160 --> 0:08:06.680 When we think about the post global financial crisis environment, 0:08:06.760 --> 0:08:10.600 it's one in which really the job recovery lagged everything else. 0:08:11.080 --> 0:08:13.680 And so yes, now we're at full employment, but we're 0:08:13.680 --> 0:08:17.640 in a different kind of employment environment, one in which 0:08:17.760 --> 0:08:21.920 there are more UM folks who are deriving income from 0:08:22.000 --> 0:08:28.080 multiple areas of employment, you know, pulling together, you know, 0:08:28.120 --> 0:08:31.320 sort of a task grab at economy. And so of 0:08:31.360 --> 0:08:35.560 course we've seen really unimpressive wage growth for years now. 0:08:36.000 --> 0:08:38.280 So so this is a very different environment than a 0:08:38.320 --> 0:08:42.200 typical um labor recovers. More wank economic questions, John's joint 0:08:42.240 --> 0:08:45.960 to ask you about, you know, the market of nine 0:08:46.160 --> 0:08:50.560 seven on the delt. We're on the delta. I don't 0:08:50.600 --> 0:08:54.800 do that, okay, I'm on one more question in debt? 0:08:54.840 --> 0:08:58.000 Does tepid wage growth go right over to inflation? Is 0:08:58.000 --> 0:09:01.880 the reason Chairman Paul struggling within relations simply because of 0:09:01.920 --> 0:09:05.040 an odd labor economy with tepid wage growth. I think 0:09:05.080 --> 0:09:07.800 that's certainly part of the problem. I know that for 0:09:07.920 --> 0:09:11.440 Janet Yellen it was a very big focus, right, She 0:09:11.520 --> 0:09:16.360 had that uh you know, nineteen point labor conditions indicator 0:09:16.440 --> 0:09:19.599 that she would use because there is, you know, a 0:09:19.640 --> 0:09:22.080 school of thought that believes that wage growth has so 0:09:22.200 --> 0:09:24.280 much to do with inflation. So what's the basic argument 0:09:24.280 --> 0:09:26.120 I hear from you at the moment, Because the recovery 0:09:26.120 --> 0:09:27.920 has been shallow, it can go on a whole lot longer. 0:09:28.280 --> 0:09:31.199 I think, so, um, it's certainly going to be a 0:09:31.240 --> 0:09:34.200 somewhat modest recovery. I think we're going to see a 0:09:34.200 --> 0:09:37.040 little steam loss this year, but we'll probably at the 0:09:37.120 --> 0:09:40.040 end of the year, uh see growth at about two 0:09:40.920 --> 0:09:43.040 in the United States. I think this is a time 0:09:43.040 --> 0:09:46.280 where we're going to see uh, you know, an improving 0:09:46.360 --> 0:09:50.000 growth environment in Asia e M, especially China. I think 0:09:50.040 --> 0:09:52.280 people comfortable this year in a way they weren't twelve 0:09:52.280 --> 0:09:54.080 months ago. That the biggest risk this year is not 0:09:54.160 --> 0:09:57.520 economic risk, it's market risk because of valuations. Coming into 0:09:57.559 --> 0:09:59.319 a year where we've already had a massive rally and 0:09:59.360 --> 0:10:02.280 we tried to eight seen plus times forward earnings. Your 0:10:02.320 --> 0:10:03.839 message to people at the moment, Tom and I have 0:10:03.920 --> 0:10:06.040 asked multiple people about it over the last week and 0:10:06.080 --> 0:10:08.680 already this morning. If people missed now on this rally 0:10:08.720 --> 0:10:10.920 over the last twelve months, was the one metric you 0:10:10.960 --> 0:10:13.760 look at right now that says green light come back 0:10:13.800 --> 0:10:17.160 in Well, I think it's looking at long term returns. 0:10:17.200 --> 0:10:20.000 That we know that, especially when we look at valuations, 0:10:20.040 --> 0:10:22.840 they are not predictive over the shorter term. Yes, over 0:10:22.880 --> 0:10:27.560 the long run, valuations are predictive of performance, but you 0:10:27.640 --> 0:10:31.600 can have extended valuations for an extended period of time. 0:10:32.120 --> 0:10:36.000 Uh And And the reality is that the biggest issue 0:10:36.080 --> 0:10:39.960 that most of the investors face is not participating in 0:10:40.000 --> 0:10:42.520 the equity market. But this is really really important. When 0:10:42.600 --> 0:10:44.240 you said it goes to the heart of all of 0:10:44.320 --> 0:10:50.400 financial study and academics. Ratios don't matter short term, then 0:10:50.559 --> 0:10:54.960 what does? So? What does? Certainly what we're seeing in 0:10:55.000 --> 0:10:58.200 this environment, the dominant factor has been and continues to 0:10:58.240 --> 0:11:01.760 be central banks, particularly the FAT. I think we can't 0:11:01.960 --> 0:11:05.840 underestimate the power of the FED, especially when it came 0:11:05.880 --> 0:11:07.880 out and made very clear in the fourth quarter of 0:11:08.960 --> 0:11:13.840 that the bar is extremely high on raising rates after 0:11:14.320 --> 0:11:19.280 giving markets three insurance cuts uh in environment when many 0:11:19.280 --> 0:11:21.800 where many could argue that there were they weren't necessary. 0:11:21.800 --> 0:11:23.600 I'm going to ask you this question because your General 0:11:23.679 --> 0:11:25.280 Council is going to get angry at me and cut 0:11:25.280 --> 0:11:29.199 off the avocad of toast. John Ferrell instead said, I'm 0:11:29.200 --> 0:11:31.720 going to ask you, since what is it the job 0:11:31.720 --> 0:11:36.120 of the Central bank to support equity markets? For the 0:11:36.200 --> 0:11:39.360 last ten years, they've decided that financial conditions matter a 0:11:39.360 --> 0:11:41.360 whole lot more and that they're in the driving seat 0:11:41.360 --> 0:11:43.880 for financial conditions. Let's have some sympathy with the idea 0:11:43.960 --> 0:11:47.120 back end of in December of that year, of the 0:11:47.120 --> 0:11:49.760 primary market for credit in the United States completely seizes 0:11:49.880 --> 0:11:52.160 up because people are worried about the economy and the Fed. 0:11:52.360 --> 0:11:54.040 Fed's got a job to do. They've got to get 0:11:54.040 --> 0:11:56.840 the money markets back open, and that was the job 0:11:56.840 --> 0:11:58.760 they had to do that in the financial crisis. And 0:11:58.760 --> 0:12:00.200 I'm not saying things we were as bad as that 0:12:00.440 --> 0:12:02.760 twelve months ago. I'm sutadly not even going there, Christina. 0:12:03.200 --> 0:12:06.319 But the FED season is their job to support financial conditions. 0:12:06.480 --> 0:12:08.280 The argument I would make at this point is that 0:12:08.320 --> 0:12:10.920 do they really need to be supporting financial conditions to 0:12:10.960 --> 0:12:14.600 the extent they are at the moment. Well, that's a 0:12:14.640 --> 0:12:18.439 great question. Uh, they believe it is, and it's within 0:12:18.520 --> 0:12:20.840 their purview. You know, one could argue that if you 0:12:21.000 --> 0:12:23.840 poorted J. Powell to the Bank of England there would 0:12:23.840 --> 0:12:26.480 be a few insurance cuts there too, just given the 0:12:26.559 --> 0:12:29.760 high level of economic policy uncertainty. But it is certainly 0:12:29.760 --> 0:12:32.080 within the purview of the FED to define its role 0:12:32.160 --> 0:12:34.600 and and focus on financial conditions. And there's a good 0:12:34.679 --> 0:12:37.480 argument for it in that in the United States, at least, 0:12:37.720 --> 0:12:40.600 the fortunes of the stock market tend to be somewhat 0:12:40.600 --> 0:12:42.760 correlated with the fortunes of the economy. If you're just 0:12:42.840 --> 0:12:44.920 joining us, John Fair on time, Keene. One of our 0:12:45.120 --> 0:12:48.400 favorite efforts of the year to wander downtown and the 0:12:48.480 --> 0:12:51.520 dark frozen warning, it is cold, it is cold. It's 0:12:51.520 --> 0:12:55.200 always find it colored downtown. Then in midtown that's the 0:12:55.200 --> 0:12:59.120 wind water, just Hudson River, you know, Washington across the 0:12:59.400 --> 0:13:07.240 downtown the college. Is this the second time? Police? The 0:13:07.280 --> 0:13:10.320 police picked up the entourage your on the Bentley and said, 0:13:10.360 --> 0:13:13.360 why is he downtown? Christina Huper here, she is our 0:13:13.600 --> 0:13:16.560 chief global market strategist in Investco and we're thrilled to 0:13:16.559 --> 0:13:20.319 be with investco this morning. What are the fist fights 0:13:20.400 --> 0:13:22.880 right now in your strategy meetings in Investco? What's the 0:13:22.920 --> 0:13:26.319 biggest point of debate? Because one of the hallmarks of Investco. 0:13:26.600 --> 0:13:29.600 She get in the room and everybody argues some houses 0:13:29.679 --> 0:13:33.679 do that, but Investco is codified constructive argument. What's a 0:13:33.720 --> 0:13:36.960 single argument right now at Investco. Well, one of the 0:13:36.960 --> 0:13:40.280 conversations that we've had, um uh, you know, quite frequently 0:13:40.320 --> 0:13:43.839 sort of an extended debate has been about where are 0:13:43.880 --> 0:13:47.160 we going to see strong growth this year? And certainly 0:13:47.200 --> 0:13:50.480 the US there have been question marks. We've even debated 0:13:50.640 --> 0:13:54.040 how much volatility we expect to see this year. How 0:13:54.120 --> 0:13:58.080 much economic policy uncertainty we'll see. Keep in mind we've 0:13:58.120 --> 0:14:02.640 got US presidential election where there is just no no 0:14:02.840 --> 0:14:05.480 visibility on who the Democratic candidate is going to be, 0:14:06.000 --> 0:14:08.600 so uh, you know, some of us expect a fair 0:14:08.640 --> 0:14:12.200 amount of volatility this year, especially if we see um 0:14:12.280 --> 0:14:16.200 more progressive candidates. When high profile primaries, you could see 0:14:16.240 --> 0:14:20.600 short term sell offs in particular industries that are expected 0:14:20.640 --> 0:14:23.840 to be more heavily regulated. UM. But I think there's 0:14:23.920 --> 0:14:27.600 general consensus and and a lot of excitement around Asia 0:14:27.680 --> 0:14:31.720 e M, particularly China that that's a really important topic. 0:14:31.800 --> 0:14:34.480 We'll cover that with Investco this morning. Are you still 0:14:34.720 --> 0:14:38.000 very quickly here, are you still international based overweight international 0:14:38.040 --> 0:14:42.640 with your expertise, Well, we are definitely UM more bullish 0:14:42.720 --> 0:14:46.440 on asia EM. We're we're very selective outside of the 0:14:46.560 --> 0:14:50.000 US UM modestly bullish on the US UM, but where 0:14:50.040 --> 0:14:54.200 we would focus is Asia EM, especially China. Christina Christina 0:14:54.640 --> 0:14:58.440 Christina Hooper, she is chief global market strategist And let's 0:14:58.520 --> 0:15:16.239 go question of the moment. George Evans is exceptionally qualified 0:15:16.760 --> 0:15:19.280 to answer the question. His world has been asleep for 0:15:19.360 --> 0:15:21.520 ten years. It woke up in Q four. Now what 0:15:22.200 --> 0:15:24.920 which is his head of global equities and portfolio manager 0:15:24.960 --> 0:15:28.560 for Investco, and I have your international growth fund. We 0:15:28.680 --> 0:15:34.200 simply asked him about finally international investment has come to like, 0:15:34.360 --> 0:15:36.840 let's look back quickly here, George, with all your decades 0:15:36.840 --> 0:15:41.600 of experience, how far behind was the international investment in 0:15:41.640 --> 0:15:44.840 the last two, five, even seven years. What if you 0:15:44.880 --> 0:15:48.160 go back to the early seventies, that was a basically 0:15:48.160 --> 0:15:52.120 flip flopped every two to four years between between US 0:15:52.240 --> 0:15:56.520 leadership and non US leadership. The last uh twelve years 0:15:56.560 --> 0:16:00.080 has been absolutely exceptional, with the SMP leading the a 0:16:01.080 --> 0:16:04.160 every year but one. So we are way due for 0:16:04.280 --> 0:16:07.160 a sort of an inflection point to turn towards international. 0:16:07.240 --> 0:16:09.840 Why did that happen, What effected the change, and what 0:16:09.920 --> 0:16:12.800 was in all the textbooks you and I read about 0:16:13.200 --> 0:16:17.560 a cyclic field to it to a structural shift to 0:16:17.760 --> 0:16:21.880 buy US or a structural shift to not choose to 0:16:21.960 --> 0:16:26.000 buy international. Well, I think the first thing to point 0:16:26.000 --> 0:16:30.000 out is that the the US sort of had leadership 0:16:30.000 --> 0:16:32.800 and a lot of the key global sectors over the 0:16:32.840 --> 0:16:36.280 last ten years, so I think the fangs by attach 0:16:36.560 --> 0:16:39.480 things of that nature. The other thing was the US 0:16:39.720 --> 0:16:42.520 did a much better job in grappling the problems with 0:16:42.560 --> 0:16:46.440 the financial system post global financial crisis, which the Europeans 0:16:46.440 --> 0:16:49.760 really failed to do. I think the third thing to 0:16:49.800 --> 0:16:52.600 point out would be that the emerging markets, A lot 0:16:52.600 --> 0:16:55.040 of the emerging markets are very much led by commodities. 0:16:55.520 --> 0:16:57.640 We had that huge commodity boom two thousand two to 0:16:58.080 --> 0:17:01.920 the end in two Chinaman. But also you know, all 0:17:01.960 --> 0:17:04.440 of Latin America, all of Africa, a lot of Southeast 0:17:04.440 --> 0:17:07.000 Asia's commodity oriented. So you just can't get away from that. 0:17:07.080 --> 0:17:09.040 So where are we now after a queue for was 0:17:09.040 --> 0:17:11.080 it a pup that will fade away or is there 0:17:11.160 --> 0:17:16.560 something substantial here to allocating more to international versus wheld 0:17:16.560 --> 0:17:18.480 we've been for a decade. Well, I think there are 0:17:18.520 --> 0:17:20.560 a few things that are very supportive. The first thing 0:17:20.680 --> 0:17:24.320 is that if you look at the dials of risk, 0:17:24.760 --> 0:17:27.680 a lot of those risk dials that were up through 0:17:28.040 --> 0:17:31.560 the basically the third quarter of last year have come down. 0:17:31.640 --> 0:17:35.520 So Europe is much more oriented towards global trade, and 0:17:35.560 --> 0:17:39.439 global trade was clearly negatively affected by the trade spat 0:17:39.920 --> 0:17:41.840 which lasted a year and a half. So global trade 0:17:41.840 --> 0:17:45.800 getting better is really good for more open economies Europe 0:17:46.040 --> 0:17:49.520 and Asia. Uh, the second thing is that you've got 0:17:49.560 --> 0:17:54.520 really good valuations. We've got risks that everyone's been aware of, 0:17:54.560 --> 0:17:58.199 particularly around Brexit, which are likely to be resolved in 0:17:58.400 --> 0:18:02.560 very short order. So risk down valuations are good, and 0:18:02.960 --> 0:18:05.840 you've got the potential for an acceleration of g d 0:18:05.960 --> 0:18:08.000 P in a lot of these more open economies. Can 0:18:08.040 --> 0:18:12.560 I buy the George Evans world by buying multinationals? That 0:18:12.720 --> 0:18:15.840 used to be a game in itself. So, I mean, 0:18:16.040 --> 0:18:18.440 the thing that everyone's got to realize is that pretty 0:18:18.520 --> 0:18:22.600 much every index is a multinational index now. So about 0:18:22.640 --> 0:18:25.320 more than fifty of the revenues and earnings of the 0:18:25.400 --> 0:18:29.520 SMP come from outside, more than I did not know 0:18:29.600 --> 0:18:32.960 that I thought it was less. So you have very 0:18:33.000 --> 0:18:36.800 much an international orientation of most of the big companies. 0:18:36.840 --> 0:18:40.320 Extra financials um in most of the world. So the 0:18:40.400 --> 0:18:45.040 US has many excellent global companies that are addressing global 0:18:45.160 --> 0:18:49.600 growth opportunities. There are excellent global companies that happen to 0:18:49.640 --> 0:18:51.680 be based in Europe and Japan. So if you want 0:18:51.680 --> 0:18:54.280 to buy luxury goods, which is a really good sector, 0:18:54.800 --> 0:18:57.720 you've basically got to be in Europe. Now. Loui Viton 0:18:57.880 --> 0:19:01.200 is European. I didn't reached more as European Louis vite 0:19:01.320 --> 0:19:06.159 is buying Tiffany really, um so there's a huge opportunity 0:19:06.200 --> 0:19:09.359 for uplift there. What is it about luxury which explained 0:19:09.359 --> 0:19:10.760 to me the mob, I mean, I mean we talk 0:19:10.840 --> 0:19:13.119 about Apple and the rest. Do you look at the 0:19:13.240 --> 0:19:17.000 ratios of luxury is out of kilter? Is what we 0:19:17.040 --> 0:19:21.240 see in selected thing and tech stocks. Luxury is a 0:19:21.359 --> 0:19:25.000 very very good area to invest because there's incredible growth 0:19:25.040 --> 0:19:27.160 dynamic which is like to last a long time, and 0:19:27.240 --> 0:19:30.800 they are really profitable because in many cases the prices 0:19:30.840 --> 0:19:33.199 the product, so they're able. You know, if you go 0:19:33.240 --> 0:19:36.000 into an air Miss store, No, that would never happen 0:19:38.160 --> 0:19:42.679 wearing about Boti folks. Okay, if you went into an 0:19:42.680 --> 0:19:46.440 air Miss store today, five years ago, ten years ago, 0:19:47.119 --> 0:19:49.919 they're all lots of very expensive goods and really the 0:19:49.960 --> 0:19:52.360 only thing that really changes is the price. So they 0:19:52.400 --> 0:19:54.800 just moved the price up about two to every year. 0:19:55.080 --> 0:19:58.520 No fashion risk, fantastic. George Evans with us with Investco 0:19:58.720 --> 0:20:01.159 is a creator into Friday and the weekend and what 0:20:01.200 --> 0:20:03.200 I'm going to do this week into salvage going away 0:20:03.240 --> 0:20:07.080 to Switzerland for one week. I'll talk Gucci Garden in Florence. 0:20:07.160 --> 0:20:10.879 I mean you look at luxury goods and the branding 0:20:11.040 --> 0:20:13.560 of it in those valuations. You mentioned Tiffany in the 0:20:13.560 --> 0:20:16.600 takeout in Van Cleave at fifty seventh and fifth Avenue 0:20:16.600 --> 0:20:20.320 and all that. The branding seems to be exquisite and 0:20:20.359 --> 0:20:24.440 on the revenue stream there do we underestimate the persistency 0:20:24.520 --> 0:20:27.560 of the revenue stream whether it's Gucci Garden or Tiffany 0:20:27.560 --> 0:20:30.639 at Fifth Avenue. Well, Uh, the the amazing thing with 0:20:30.720 --> 0:20:33.840 luxury goods is the degree to which emerging market consumers 0:20:34.040 --> 0:20:37.720 are buying luxury its. So over fifty percent hasn't abbed 0:20:37.720 --> 0:20:40.600 with the China slowdown thet There was a there was 0:20:40.640 --> 0:20:42.480 a bit of an ad when they had that Austarity 0:20:42.480 --> 0:20:45.880 package when people weren't allowed to gift each other ten 0:20:45.920 --> 0:20:48.720 and twenty thousand, thirty thousand dollar watches and things like that. 0:20:49.840 --> 0:20:54.359 But there's a relentless growth in the addressable market as 0:20:54.640 --> 0:20:58.040 emerging market consumers get wealthy. So over fifty of the 0:20:58.040 --> 0:21:03.480 sales of luxury goods emerging market consumers. The more unequal 0:21:03.800 --> 0:21:06.879 the incomes are in any country, the more people like 0:21:07.080 --> 0:21:11.920 to signal where they are on the TOTEM Pole, So Scandinavians, 0:21:12.480 --> 0:21:15.639 you know, lower lower propensity to buy luxury goods. People 0:21:15.640 --> 0:21:19.760 from Brazil, Russia, China, very high propensity to buy luxury goods. 0:21:19.800 --> 0:21:23.760 So there has been, as it's been an incredible sort 0:21:23.760 --> 0:21:26.320 of revenue growth over the last ten twenty years, which 0:21:26.359 --> 0:21:31.120 we think is going to go on. Uh, the returns 0:21:31.119 --> 0:21:35.680 on capital employed are very very high. Is this sector 0:21:35.760 --> 0:21:38.720 over or under owned by institutions? I mean, this is 0:21:38.720 --> 0:21:41.920 a raging debate on ample and the rest right now, 0:21:41.960 --> 0:21:46.359 but but is it over owned? I haven't sort of 0:21:46.400 --> 0:21:48.600 looked at the top ownership, but I you know, I 0:21:48.600 --> 0:21:52.440 think that you know, this is clearly a sector which 0:21:52.520 --> 0:21:58.000 has on a global basis, it is fantastically profitable, great 0:21:58.000 --> 0:22:00.720 growth dynamic, and I think there's going to be you know, 0:22:00.760 --> 0:22:02.440 it's one of those sectors where there's going to be 0:22:02.640 --> 0:22:06.280 consistent buying pressure. Okay, one final question, and we're going 0:22:06.359 --> 0:22:07.960 to have you back here to really go into some 0:22:08.000 --> 0:22:11.560 of the idiosyncrasies that we see at worldwide. Is the 0:22:11.680 --> 0:22:15.480 United States of America part of international investing? If you 0:22:15.600 --> 0:22:18.600 buy international, do you bring in the United States? You 0:22:18.680 --> 0:22:21.879 to really stay discreet from that. So international investing world 0:22:21.920 --> 0:22:26.520 means everything but the US. So the term global is everywhere. 0:22:26.520 --> 0:22:31.159 So our global funds have forty two in the US. 0:22:31.640 --> 0:22:37.119 The international funds are completion. So that's anywhere, but the US. 0:22:37.480 --> 0:22:40.000 George Evansworth, US is fascinating. We're gonna come back and 0:22:40.040 --> 0:22:43.400 some of the indiosyncrasies, I know Paul Sweeney's got questions, 0:22:43.400 --> 0:22:47.560 and some of the unique and eleven and economies as well. 0:22:59.680 --> 0:23:03.160 Is it wy to speak to Margaret Brennan the history 0:23:03.400 --> 0:23:05.800 that we have observed in the last forty eight hours. 0:23:05.880 --> 0:23:09.040 I could do it one hour conversation Margaret with you. 0:23:09.040 --> 0:23:11.600 You're going to enjoy a one hour discussion face the nation. 0:23:12.119 --> 0:23:15.199 See it on CBS Sunday morning. You could hear it 0:23:15.200 --> 0:23:19.200 on Bloomberg Radio Sunday afternoon. Margaret, I'm going to cut 0:23:19.240 --> 0:23:22.879 to the chase four inch headlines in the Times, in 0:23:22.960 --> 0:23:27.879 the Post. As a certain elite riveted. Is the rest 0:23:28.000 --> 0:23:31.680 of the nation engaged in what we're seeing in Washington? 0:23:33.000 --> 0:23:35.520 You know, I think when you see John Roberts, Chief 0:23:35.600 --> 0:23:38.800