WEBVTT - S&P Eyes Third Week of 3% Gain 0:00:00.040 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business app. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.240 us live on YouTube. 0:00:27.600 --> 0:00:29.600 For those of you out there, this is the most 0:00:29.600 --> 0:00:34.040 important conversation of the day on the hysteria of the moment. 0:00:34.080 --> 0:00:36.360 I want to do a major shout out to the 0:00:36.360 --> 0:00:40.960 coalescing that Zero Hedge does, including publishing Bloomberg, Simon White 0:00:40.960 --> 0:00:44.640 in London and publishing Michael Ball, who's with us often here. 0:00:44.760 --> 0:00:49.440 Amy wu Silverman joins us here for the key conversation 0:00:49.600 --> 0:00:55.240 for Global Wall Street. I'm short gloom Oops, I'm wrong. 0:00:55.760 --> 0:00:58.840 There's a short squeeze, and I think people get that 0:00:58.840 --> 0:01:02.200 that you're wrong. You cover the short and the market 0:01:02.240 --> 0:01:07.679 goes up, and then it shifts to option animals like you, 0:01:08.880 --> 0:01:11.600 and you're going to go I want to go long 0:01:12.680 --> 0:01:16.440 and the firm you're dealing with must buy the stock. 0:01:17.120 --> 0:01:20.679 Are firms now forced to buy the stock because of 0:01:20.720 --> 0:01:23.280 a gamma bid? And that's why we're going up. 0:01:24.120 --> 0:01:28.880 I think we're actually tom starting to anticipate it. But 0:01:29.160 --> 0:01:31.959 right now, what we're seeing happening is the beginning of 0:01:32.000 --> 0:01:34.920 the chase, and oftentimes when we get that beginning of 0:01:34.920 --> 0:01:37.720 the chase, that is a secondary effect of it. I 0:01:37.720 --> 0:01:41.240 think we're actually even earlier in terms of the positioning. 0:01:41.400 --> 0:01:45.920 So it's been this spot up volatility up market, right, 0:01:46.000 --> 0:01:48.120 you know, which is kind of the opposite of what 0:01:48.200 --> 0:01:51.960 we would expect, really big bid to call options. And 0:01:52.080 --> 0:01:54.560 then I think even down the line, we might get 0:01:54.560 --> 0:01:57.920 the mechanics of the gamma squeeze, not the short squeeze, 0:01:57.960 --> 0:02:00.720 which is why I think there is still some continuation 0:02:00.920 --> 0:02:01.840 to this momentum. 0:02:02.240 --> 0:02:02.520 Amy. 0:02:02.560 --> 0:02:05.480 All I really know about your business at derivatives is 0:02:05.600 --> 0:02:08.960 hedge when you can not when you have to what 0:02:09.000 --> 0:02:11.880 are your clients doing today? Are they buying risk? Are 0:02:11.880 --> 0:02:14.480 they buying protection? What are they doing? 0:02:14.880 --> 0:02:17.760 Yeah, you know, I wouldn't be a proper derivative strategist 0:02:17.760 --> 0:02:20.800 if I didn't say that old tagline, because you know, 0:02:20.880 --> 0:02:23.440 a few weeks ago, when everyone was complaining to us 0:02:23.480 --> 0:02:28.320 about how expensive protection was, here's your sale right here. 0:02:28.639 --> 0:02:31.720 We're in the bargain basement now for those put options. 0:02:31.760 --> 0:02:34.720 But certainly that's the issue when the FOMO kind of 0:02:34.760 --> 0:02:36.920 meets investor base. They don't want to hear that, but 0:02:36.960 --> 0:02:40.640 the reality is your cost of protection has really come down. 0:02:41.000 --> 0:02:43.400 You are starting to see folks deploy it a little 0:02:43.400 --> 0:02:47.000 bit longer term because there's still things we just don't know. 0:02:47.080 --> 0:02:49.560 We don't know how these these ceasefire talks are going 0:02:49.600 --> 0:02:51.440 to go. We don't know how the inflation mechanism is 0:02:51.480 --> 0:02:52.960 going to work its way through the system with an 0:02:53.040 --> 0:02:56.000 energy shock. And so look, if I could say one thing, 0:02:56.040 --> 0:03:00.520 it's that hedges on the downside are a lot less. 0:03:01.160 --> 0:03:02.760 And so if you were complaining to me a few 0:03:02.800 --> 0:03:04.520 weeks ago, then maybe look at the pricing. 0:03:05.040 --> 0:03:08.480 So I mean, the simple way I measure volatility in 0:03:08.520 --> 0:03:10.919 the equity market is the VIX, and boy it's spiked 0:03:11.000 --> 0:03:13.960 up to like north of thirty, but here we are 0:03:14.000 --> 0:03:17.040 below twenty. I mean, what does that tell you? 0:03:16.440 --> 0:03:18.959 You know, it's funny. A few weeks ago, I was 0:03:19.000 --> 0:03:23.680 on the road with my pal Laurie Calvsina and we're 0:03:23.720 --> 0:03:26.760 nastee so she's a joke, she's my work wife, and 0:03:27.200 --> 0:03:29.320 you know, we were out seeing a lot of clients. 0:03:29.320 --> 0:03:31.000 And if you remember a few weeks ago, like things 0:03:31.000 --> 0:03:33.760 were gloomy, that's when the VIX was spiking, and I 0:03:33.840 --> 0:03:36.160 have to tell you a lot of ministers were back 0:03:36.200 --> 0:03:39.800 then really constructive even with everything going on. And I 0:03:39.920 --> 0:03:43.280 do think there's been this kind of we've learned to 0:03:43.480 --> 0:03:46.720 look through geopolitics. We've just learned. We've looked at the 0:03:46.760 --> 0:03:49.120 twenty twenty two playbook, we've looked at all the other 0:03:49.160 --> 0:03:52.080 playbooks for geopolitics, and we just say we're going to 0:03:52.160 --> 0:03:53.840 look through it. And that's what the VIX is kind 0:03:53.880 --> 0:03:55.880 of telling you. You know that the VIX is saying, 0:03:56.280 --> 0:03:58.720 we're just looking through this and we're moving on. 0:03:58.920 --> 0:04:01.520 I want you to talk to our listeners and viewers 0:04:01.720 --> 0:04:04.400 who have ETFs. They're in four to oh one k's, 0:04:04.440 --> 0:04:07.320 they have not reallocated their four oh one k since 0:04:07.400 --> 0:04:11.200 Nixon was president. They're a completely different market from Amy 0:04:11.240 --> 0:04:15.520 wou Silverman. How big is your market? Trsten Slock has 0:04:15.880 --> 0:04:19.040 hedges on eight percent of treasuries this morning and its 0:04:19.120 --> 0:04:22.320 Apollo note. How big are the CTA is? How big 0:04:22.320 --> 0:04:24.760 are the hedge funds? How big is Dan Low or 0:04:24.839 --> 0:04:25.599 mister Ackman. 0:04:26.400 --> 0:04:28.800 You know, I think it's important if you're sitting there 0:04:28.839 --> 0:04:31.000 in most of what you do is very long term 0:04:31.040 --> 0:04:34.240 and an ETF. The reality is You're probably fine, but 0:04:34.279 --> 0:04:36.960 it's important to know the mechanics of what these things 0:04:37.000 --> 0:04:39.880 are doing. They are pushing things around short term and 0:04:39.920 --> 0:04:41.920 then in some cases you know, if you will, the 0:04:42.240 --> 0:04:44.880 retail crowd is the one who's doing the pushing, whether 0:04:44.960 --> 0:04:48.160 that is an options or starting to be in prediction markets. 0:04:48.320 --> 0:04:50.800 Robin Hood is pushing this line. 0:04:50.839 --> 0:04:54.240 One hundred percent. And I can guarantee you ever since 0:04:54.360 --> 0:04:57.040 kind of the meme craze, there's been reason to do it. 0:04:57.080 --> 0:04:59.280 You get they know about the Gama squeeze. This isn't 0:04:59.320 --> 0:05:02.360 kind of the feel of just institutional investors anymore. And 0:05:02.400 --> 0:05:04.359 that's one of the most fascinating things that's happened in 0:05:04.400 --> 0:05:05.839 our market in the last five years. 0:05:06.080 --> 0:05:09.080 Looking at your notes, Amen, and you say that on 0:05:09.120 --> 0:05:13.000 your desk, you've seen a dynamic called spot up vol up. 0:05:13.200 --> 0:05:16.320 So as the market rises, volatility is rising too. I 0:05:16.320 --> 0:05:17.800 thought it was supposed to be the opposite. 0:05:18.040 --> 0:05:20.120 It is one hundred percent supposed to be the opposite. 0:05:20.200 --> 0:05:21.960 But now it's happened so much that I don't even 0:05:21.960 --> 0:05:23.560 know if I can say that. I'd say one thing 0:05:23.600 --> 0:05:25.680 to keep in mind as it relates back to your 0:05:25.760 --> 0:05:28.800 question on the VIX is because spot can go up 0:05:28.920 --> 0:05:31.440 while VOLA is going up. Sometimes you might actually get 0:05:31.440 --> 0:05:34.680 a higher VIX number, but it's while the market is rallying, 0:05:34.720 --> 0:05:36.680 and so that's a little odd. And we have to 0:05:36.720 --> 0:05:38.600 remember a lot of times that goes back to this 0:05:38.680 --> 0:05:40.560 demand from call options. 0:05:40.680 --> 0:05:43.919 Futures up twenty eight now futures of four zero forty. 0:05:44.320 --> 0:05:46.720 The headline here this from Axius Mike Allen and the 0:05:46.800 --> 0:05:52.320 team over to Axius us ORN talks expected in Islamabad, Pakistan, 0:05:52.880 --> 0:05:55.320 likely on Sunday. It's definitely none of the market, no 0:05:55.480 --> 0:05:58.120 question about it. Okay, can I do an audible? Yeah, 0:05:58.200 --> 0:06:00.640 let it go. Okay. Janet Lauren out with a great 0:06:00.640 --> 0:06:04.360 look at endowments across all the different schools, and I'm sorry, 0:06:04.440 --> 0:06:08.400 Princeton basically came in last place here, the last like 0:06:08.520 --> 0:06:12.440 single digit return. What would you do? How would you 0:06:12.640 --> 0:06:16.680 use derivative strategies in a boring college endowment? 0:06:17.200 --> 0:06:20.599 Well, you know, it's funny. As a proud Princetonian, we've 0:06:20.720 --> 0:06:23.800 actually we've actually heard this on the finance side. My 0:06:23.880 --> 0:06:27.119 understanding is a lot of endowments actually had some money 0:06:27.160 --> 0:06:30.200 on the private side, and it's a little kind of 0:06:30.839 --> 0:06:36.440 you know, less transparent and I'd say the public equities, 0:06:36.680 --> 0:06:39.080 and that shift has been what has been making the 0:06:39.120 --> 0:06:41.000 dowments that happen to stop it. 0:06:41.000 --> 0:06:43.960 It's fancy people playing d one field hockey who said 0:06:43.960 --> 0:06:47.120 we're not going to own Microsoft, Amy Wu Silverman right now, 0:06:47.240 --> 0:06:50.279 help Princeton and everyone else. Do you buy the mag 0:06:50.440 --> 0:06:50.960 seven here? 0:06:51.440 --> 0:06:53.960 I actually think you do, And then I think QQQ 0:06:54.880 --> 0:06:59.400 the vaultity looks relatively inexpensive too, And I think, especially 0:06:59.440 --> 0:07:02.920 as you get these IPOs down the line, your anthropics, 0:07:02.960 --> 0:07:05.760 your SpaceX's is going to be really interesting from how 0:07:05.839 --> 0:07:08.920 much fomo and momentum that creates, which again gets us 0:07:08.920 --> 0:07:10.640 into that favorite spot up vola. 0:07:10.760 --> 0:07:13.720 Have you ever heard of this Polish chan? 0:07:14.120 --> 0:07:14.400 Sure? 0:07:14.840 --> 0:07:17.760 Calvaccina's not this Polish exactly, Amy. 0:07:17.960 --> 0:07:20.760 So on the RBC Capital Market's Derivatives desk, what's a 0:07:20.760 --> 0:07:22.560 typical plan for you guys? Is it a hedge fund 0:07:22.680 --> 0:07:25.400 or is it a long lonely thing. Who's typical? 0:07:25.600 --> 0:07:28.080 Yeah, I would say it depends on the region. And 0:07:28.360 --> 0:07:31.160 but it's an institutional client, so it's a good mix. 0:07:31.240 --> 0:07:36.160 It's hedge funds, it's asset managers, it's pensions. And what 0:07:36.240 --> 0:07:38.640 I really enjoy about that is we get a good 0:07:38.800 --> 0:07:41.480 look at how these people who you know, they're either 0:07:41.640 --> 0:07:44.640 moving at a glacial speed or at very quick speed, 0:07:44.840 --> 0:07:47.000 how they're all thinking about the market. And then you know, 0:07:47.040 --> 0:07:49.080 back so I had mentioned earlier with Lori, we saw 0:07:49.120 --> 0:07:50.920 a good mix a few weeks ago and the amount 0:07:50.960 --> 0:07:55.560 of constructive, very optimistic outlook was was very shocking to 0:07:55.640 --> 0:07:56.160 be back then. 0:07:56.440 --> 0:07:59.080 Amy Silberan, thank you so much for joining us. Love 0:07:59.120 --> 0:08:01.920 what you're doing. The Royal Bank, I'm sorry, Royal Bank 0:08:01.960 --> 0:08:05.760 of Canada. Do you have Canadians tickets? They're opening in Tampa? 0:08:06.120 --> 0:08:10.520 Can you get me Jermys tom RBC is on the 0:08:10.640 --> 0:08:14.080 jersey of the Montreal Canadians. Can you get me tickets 0:08:14.080 --> 0:08:14.960 for Les Abidean? 0:08:15.160 --> 0:08:17.640 You know, after us, I'll talk to my compliance officers. 0:08:17.880 --> 0:08:22.440 Really do clients on that? From New York City, Bloomberg 0:08:22.520 --> 0:08:28.160 Surveillance Stay with us. More from Bloomberg Surveillance coming up 0:08:28.400 --> 0:08:28.960 after this. 0:08:36.200 --> 0:08:39.800 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:08:39.880 --> 0:08:43.000 weekday afternoons from seven to ten am Eastern Listen on 0:08:43.120 --> 0:08:46.760 Applecarplay and Android Otto with the Bloomberg Business app, or 0:08:46.920 --> 0:08:48.520 watch us live on YouTube. 0:08:48.760 --> 0:08:53.280 We should get some Transatlantic perspective Yeah, the stereotype in 0:08:53.320 --> 0:08:56.800 America right now is Europeans don't want to come to 0:08:56.880 --> 0:09:01.280 America and Americans are looking at energy prices in tickets 0:09:01.280 --> 0:09:04.280 to France or UK and saying we're not going to 0:09:04.360 --> 0:09:08.439 do it in this war is a transatlantic dialogue? Busted? 0:09:10.800 --> 0:09:15.680 It's a good question. I think Europe still matters. Europe 0:09:15.800 --> 0:09:20.000 still matters to the US and two other major economies, 0:09:20.240 --> 0:09:23.479 and it is very important to include it in the dialogue. 0:09:24.160 --> 0:09:27.520 And also when you look at the resilience of supply chain, 0:09:27.600 --> 0:09:30.520 when you look at not just a tourism destination. 0:09:31.960 --> 0:09:36.040 I want to get this in before Paul's got really 0:09:36.200 --> 0:09:40.480 better questions. Yell, how can this? Yell? And I don't 0:09:40.480 --> 0:09:43.479 want to get you in trouble at KPMG. The President 0:09:43.640 --> 0:09:47.160 on a daily basis is going after the Prime Minister. 0:09:47.800 --> 0:09:50.280 Can you explain to our American audience how the King 0:09:50.320 --> 0:09:54.640 and Queen can visit America if the president's trashing on 0:09:54.679 --> 0:09:57.120 the Prime minister on a daily basis. 0:09:58.400 --> 0:10:01.600 Okay, Well, I am an economists. I'm going to try 0:10:01.640 --> 0:10:05.760 and do it from an economist perspective. Yeah, I'd say 0:10:06.240 --> 0:10:09.719 you need to look at things from a long term perspective. 0:10:10.120 --> 0:10:19.720 What are the fundamentals, the structural themes, rather than the cycle, 0:10:20.000 --> 0:10:25.800 the economic cycle. Yeah, and ultimately the relationships that you 0:10:25.920 --> 0:10:30.720 have between the US and the UK in terms of 0:10:30.800 --> 0:10:34.360 not just the business community, but also we share language, 0:10:34.400 --> 0:10:40.400 we share history, we share very strong business connections, and 0:10:40.440 --> 0:10:46.800 we share very strong security connections as well. So I 0:10:46.840 --> 0:10:58.760 think that probably goes beyond any short term vulnerabilities or volatilities, 0:10:58.800 --> 0:11:03.400 if you like, in the political relationship between different heads 0:11:03.440 --> 0:11:04.400 of states. 0:11:05.120 --> 0:11:08.520 So, yeah, talk to us about the impact across Europe 0:11:08.559 --> 0:11:12.480 from this war in Iran. The energy shock is impacting 0:11:12.480 --> 0:11:14.640 different parts of the world in different ways. Talk to 0:11:14.720 --> 0:11:19.000 us about how it's impacting broadly across Europe. 0:11:19.320 --> 0:11:23.839 So for Europe, but the first impact is essentially an 0:11:23.960 --> 0:11:29.040 energy price shock, and as well as some of the commodities, 0:11:29.040 --> 0:11:33.960 which is actually quite similar in some ways to the 0:11:34.080 --> 0:11:39.720 twenty twenty two shocks that we had when Russia invaded Ukraine. 0:11:40.320 --> 0:11:44.000 So you have higher energy costs, you also have higher 0:11:44.040 --> 0:11:50.160 costs of certain food items and fertilizers and certain commodities. 0:11:50.520 --> 0:11:53.000 And what it means is that we've already seen inflation. 0:11:53.080 --> 0:11:57.280 We've got the March prints that's already higher. We're expecting 0:11:57.360 --> 0:12:00.319 more of that to come. On the one hand, the 0:12:00.360 --> 0:12:05.120 other hand, we're seeing much tighter financial conditions, with markets 0:12:05.480 --> 0:12:09.880 going ahead of the central banks and expecting central banks 0:12:09.920 --> 0:12:13.480 to high CRIDs potentially by more than what they would 0:12:13.520 --> 0:12:17.000 actually do, causing very tight financial conditions. 0:12:17.360 --> 0:12:19.760 Do you, and this is your work at LSE, I 0:12:19.840 --> 0:12:23.000 think we can use currency a litmus paper. Do you 0:12:23.120 --> 0:12:27.120 see a general constraint to the economy and strong euro 0:12:27.720 --> 0:12:30.160 like if it pops off one twenty or dare I 0:12:30.200 --> 0:12:33.640 say stronger euro than that? Does that gum up the 0:12:33.679 --> 0:12:35.680 economic works of the system over there? 0:12:37.440 --> 0:12:40.960 I mean, I'm less worried about the strength of the 0:12:41.040 --> 0:12:44.080 Europe to some degree. I mean, especially if that means 0:12:44.120 --> 0:12:47.319 that the Euro becomes more of an international currency in 0:12:48.160 --> 0:12:49.880 that sense that it is used more. I think that 0:12:50.040 --> 0:12:54.320 some advantages. There's other economies, like for example, Switzerland, where 0:12:54.440 --> 0:12:58.160 we've seen the Swiss frank going up significantly. We're a 0:12:58.240 --> 0:13:01.520 sually more damage in the short and medium term. 0:13:02.400 --> 0:13:02.559 Yeah. 0:13:02.760 --> 0:13:06.800 Here in the US, we've had a very resilient consumer 0:13:07.720 --> 0:13:10.679 propping up this economy time and time again. Talk to 0:13:10.760 --> 0:13:13.320 us about how the consumer is doing across across Europe 0:13:13.360 --> 0:13:14.000 these days. 0:13:14.880 --> 0:13:18.480 Sure, I mean Europe as you know, is a medical 0:13:18.640 --> 0:13:23.600 of different economies, and there's a different a different mobile 0:13:23.600 --> 0:13:25.720 in Germany. But I'd say if you compare it to 0:13:25.760 --> 0:13:30.840 thes generally it is weaker. We had some strong spots, 0:13:31.000 --> 0:13:35.440 especially in Italy and Spain for some time, driven by 0:13:35.440 --> 0:13:36.800 a stronger. 0:13:38.000 --> 0:13:38.959 Labor market. 0:13:39.120 --> 0:13:41.840 But overall, the other thing that we've seen in Europe 0:13:42.559 --> 0:13:47.920 is higher saving and the more i'd say almost permanent 0:13:48.080 --> 0:13:52.080 new tern of higher propensity to save, an that is 0:13:52.120 --> 0:13:58.880 putting download pressure on consumer spending above the confidence issue 0:13:58.960 --> 0:14:00.480 that we encounter everyone. 0:14:00.960 --> 0:14:03.520 YEA, thank you so much for your perspective today. Love 0:14:03.559 --> 0:14:05.400 to get you into our studios next time you're in 0:14:05.600 --> 0:14:08.959 York in New York, please please come in. Yell Selfrom 0:14:09.400 --> 0:14:14.920 with his vice chair Chief Economist KPMG the United Kingdom. 0:14:15.280 --> 0:14:19.480 Stay with us. More from Bloomberg Surveillance coming up after this. 0:14:26.720 --> 0:14:30.320 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:14:30.360 --> 0:14:33.520 weekday afternoons from seven to ten am Eastern Listen on 0:14:33.600 --> 0:14:37.040 Apple Karplay and Android Auto with the Bloomberg Business app, 0:14:37.200 --> 0:14:38.880 or watch us live on YouTube. 0:14:39.240 --> 0:14:41.640 You need to look ahead into the tech earning season, 0:14:41.960 --> 0:14:44.920 look ahead into the late spring, and of course across 0:14:45.000 --> 0:14:47.880 all of this twenty twenty six, no one better to 0:14:47.920 --> 0:14:52.200 do that. And Darryl current president Wills Fargo Investment Institute, 0:14:52.280 --> 0:14:55.040 he survives V. Body at Boston. You were you in 0:14:55.080 --> 0:14:58.360 class with Professor Body? I was, well, he was one 0:14:58.400 --> 0:15:00.560 of my first supporters. He called me up and said, 0:15:00.920 --> 0:15:02.880 you know where'd you get the act and all that 0:15:02.920 --> 0:15:05.640 tell us about finance was V. Body. 0:15:06.400 --> 0:15:10.920 Phenomenal mind right and believed in the quantitative way to 0:15:11.320 --> 0:15:15.640 approach the topic day in and day out. So's he's 0:15:15.720 --> 0:15:19.040 the He's the right person to fundamentally learn the trade from. 0:15:19.120 --> 0:15:20.920 Then you're a kid and you think you know all 0:15:20.920 --> 0:15:25.720 the answers and boys wed Wells Farga, you apply this 0:15:25.760 --> 0:15:27.560 each and every day. I'm going to go audible here. 0:15:28.200 --> 0:15:30.640 I got eighteen questions, Paul's got twelve, and we don't 0:15:30.640 --> 0:15:33.560 have a time. But my number one question now is 0:15:33.600 --> 0:15:38.680 a sophomoric idea that big tech bond issue INCE is 0:15:38.720 --> 0:15:43.280 somehow a negative thing. You and I studied Merton and Medigliani, 0:15:43.400 --> 0:15:47.080 yous V. Body, and the answer is one portion of 0:15:47.120 --> 0:15:50.600 that bond issue Ince is a huge plus plus plus 0:15:51.080 --> 0:15:52.280 to the company. 0:15:51.920 --> 0:15:55.120 Right absolutely, I mean in the capital stack, being able 0:15:55.120 --> 0:15:58.320 to go up in quality, right, and and look, those 0:15:58.360 --> 0:16:02.120 balance sheets in the tech world are right, plenty of 0:16:02.160 --> 0:16:06.080 cash on them. Credit quality is good. They just keep 0:16:06.200 --> 0:16:09.360 charging ahead and they're using that cash wisely. I think 0:16:09.400 --> 0:16:12.480 if you look at what we call shareholder yield, which 0:16:12.520 --> 0:16:17.000 is dividends plus share buybox together, tech leads at about 0:16:17.000 --> 0:16:19.720 five and a half percent right there with its financials. 0:16:19.960 --> 0:16:22.320 My book of the summer book of the year ages ago. 0:16:22.560 --> 0:16:28.080 You just heard it from Darryl Krok William Priest shareholder yield. 0:16:28.120 --> 0:16:30.440 I'll get it out on Twitter and linked today. It 0:16:30.520 --> 0:16:32.800 is the Bible and it's short. Paul, you could pop 0:16:32.840 --> 0:16:34.160 it off of that. You know, you could do the 0:16:34.240 --> 0:16:36.320 vest but of the coffee shop and pop that off 0:16:36.360 --> 0:16:37.320 in three moments. 0:16:37.320 --> 0:16:40.200 When train ride home talk to us about earnings, Darrey mentioned, 0:16:40.240 --> 0:16:41.920 we're just kind of getting into the teeth of it 0:16:42.000 --> 0:16:44.680 right now. What do we need to see? What does 0:16:44.680 --> 0:16:46.600 this market need to see in this earning cycle? Because 0:16:46.600 --> 0:16:49.000 it's a lot of companies could probably fall back and say, listen, 0:16:49.000 --> 0:16:50.320 there's a war out there. We don't know what's going 0:16:50.360 --> 0:16:52.240 on with our business. What do you think the companies 0:16:52.440 --> 0:16:53.320 what we need to see? 0:16:53.400 --> 0:16:57.400 Well, you absolutely need to see. To be candid and direct. 0:16:57.440 --> 0:16:59.360 They don't care that much about this quarter and what's 0:16:59.360 --> 0:17:01.320 actually reported. We know it's going to be good, right. 0:17:01.320 --> 0:17:03.400 The quarter is going to be up thirteen percent on 0:17:03.520 --> 0:17:06.639 Q one. Forward twelve month earnings are going to be 0:17:06.720 --> 0:17:09.480 up seventeen to eighteen percent, which is unheard of. This 0:17:09.520 --> 0:17:11.679 is the sixth straight quarter in a row we've had 0:17:11.720 --> 0:17:15.680 double digit earnings growth, right, So it's all about forward guidance. 0:17:15.760 --> 0:17:18.000 It's all about what they say out into Q two 0:17:18.040 --> 0:17:20.760 and Q three. That's what's going to separate the winners 0:17:20.760 --> 0:17:22.040 from the losers here as we go. 0:17:22.080 --> 0:17:23.119 And remember we. 0:17:23.160 --> 0:17:26.760 Got big banks and financials. Between financials and tech, they're 0:17:26.800 --> 0:17:29.560 forty six percent of the market cap of the SMP so. 0:17:29.480 --> 0:17:30.239 They matter, right. 0:17:30.280 --> 0:17:32.000 What they do is going to drive where we go. 0:17:32.920 --> 0:17:35.159 Down Towards the end of last year, we had a 0:17:35.240 --> 0:17:38.359 rotation out of some of those tech names, higher growth, 0:17:38.440 --> 0:17:41.120 higher value rotation, maybe a little bit of a broadening 0:17:41.119 --> 0:17:43.760 out looking for some value, maybe smaller mid cap stocks. 0:17:44.880 --> 0:17:47.160 But boy, we've seen the tech stocks come ripping back 0:17:47.200 --> 0:17:50.480 here this month. How do you think about that allocation? 0:17:50.920 --> 0:17:52.639 So we actually got a little lucky here to be 0:17:52.680 --> 0:17:58.400 Candidabaul so we downgraded Tech on October thirtieth last year. 0:17:58.840 --> 0:18:02.560 We just upgraded it again two weeks ago on April sixth. 0:18:03.520 --> 0:18:05.800 From that October thirty ath through April six it basically 0:18:05.840 --> 0:18:09.119 effectively traded sideways to your point, right, in the last 0:18:09.320 --> 0:18:12.880 two weeks, it's up eleven percent, right, And we funded 0:18:12.920 --> 0:18:16.080 it with energy because at the moment when we did 0:18:16.080 --> 0:18:18.479 that trade on April six oil was still at one 0:18:18.560 --> 0:18:21.480 hundred and five hundred and ten dollars a barrel. Energy 0:18:21.520 --> 0:18:23.640 socks were clear up. So energy is down about six 0:18:23.680 --> 0:18:26.520 percent since that time. So from a pairs trade, boy, 0:18:26.760 --> 0:18:30.080 you know, positive tech minus energy has just been really 0:18:30.119 --> 0:18:31.320 accreative to the portfolio. 0:18:31.920 --> 0:18:35.960 To what extent are you concerned about maybe some impacts 0:18:36.000 --> 0:18:40.239 on the economic growth inflation stemming from what might be 0:18:40.400 --> 0:18:42.160 higher for longer energy prices. 0:18:42.400 --> 0:18:45.560 Yeah, I think that's I mean, look, the equity market 0:18:45.560 --> 0:18:47.479 to me is a reaction function right now, and it's 0:18:47.520 --> 0:18:49.360 a reaction function to oil prices. 0:18:49.600 --> 0:18:49.760 Right. 0:18:49.760 --> 0:18:52.480 We see it every day up down or to Tom's 0:18:52.480 --> 0:18:55.720 earlier point, and then and then where interest rates go. 0:18:55.760 --> 0:18:58.719 I think interestrates are the most underappreciated thing here. The 0:18:58.760 --> 0:19:01.600 tenure at four point thirty, like at four point thirty 0:19:01.880 --> 0:19:04.320 needs to be higher. Right, Remember the old rule of 0:19:04.359 --> 0:19:09.880 thumb that the ten year should equal nominal GDP, Right, 0:19:09.920 --> 0:19:11.760 I mean the years if you go back years ago, well, 0:19:11.800 --> 0:19:14.760 nominal GDPs easily got a five in front of it. 0:19:15.160 --> 0:19:15.360 Right. 0:19:15.960 --> 0:19:17.720 I think the ten year and the long side of 0:19:17.720 --> 0:19:20.120 the old curve, because of inflation premiums because of growth, 0:19:20.160 --> 0:19:22.520 dams has to go higher. When it does, it causes 0:19:22.560 --> 0:19:23.080 them indigestion. 0:19:23.240 --> 0:19:25.639 So I want to call that the pos and Rzegg theory. 0:19:25.440 --> 0:19:28.920 They suggest it was simplifying that the way we will 0:19:29.040 --> 0:19:33.879 drive price down yield up is a surprising productivity and 0:19:34.040 --> 0:19:38.920 wage growth does wells Fargo. Can you be optimistic given 0:19:39.000 --> 0:19:41.600 our inflation, that we're going to see a genuine positive 0:19:41.920 --> 0:19:45.800 real wage growth and a nominal wage growth that affects 0:19:45.920 --> 0:19:47.320 yields like that? Yes? 0:19:47.680 --> 0:19:50.560 I mean simple answer is we saw it already. Even 0:19:50.640 --> 0:19:54.720 the Iran you know Israel US conflict hasn't dented that. 0:19:55.200 --> 0:19:57.000 You know, we were going to run this economy hot 0:19:57.040 --> 0:19:59.280 coming into the beginning of March, and part of that 0:19:59.320 --> 0:20:01.040 was getting getting by wage growth. 0:20:01.119 --> 0:20:03.520 Deal. Crocker this wells far I can't say enough about 0:20:03.520 --> 0:20:07.240 his underlying academics and trying to get a belief construct 0:20:08.040 --> 0:20:11.560 going on ownership of equity markets and particularly those of 0:20:11.600 --> 0:20:15.240 you that are not participating, how to get courage. Okay, 0:20:15.240 --> 0:20:17.399 so let's go back to v You've got, you know, 0:20:17.480 --> 0:20:21.359 dividend discount model. You've got the Gordon growth model as well, 0:20:21.680 --> 0:20:24.960 and never, never, never talked about is the oddity of 0:20:25.080 --> 0:20:29.080 big tech residual income model. They don't have a dividend, 0:20:29.800 --> 0:20:34.160 there's nothing to count. Maybe there's some teensweens dividend growth, 0:20:34.640 --> 0:20:37.640 so you have to summ in all their cash flows 0:20:37.640 --> 0:20:39.800 and the oddities of it. That's right, how do you 0:20:39.840 --> 0:20:43.400 account Let's take Microsoft just as the talking point, it's 0:20:43.440 --> 0:20:47.520 an earnings juggernaut. Correct, Do we price that in at 0:20:47.520 --> 0:20:50.440 a twenty one multiple or is it just way way 0:20:50.440 --> 0:20:52.440 more valuable than what we're saying right now. 0:20:52.640 --> 0:20:55.240 The latter, it's way more valuable than what we see now, right. 0:20:55.240 --> 0:20:58.760 I mean, obviously Microsoft's got indented with the software SaaS 0:20:58.800 --> 0:20:59.680 apocalypse thing. 0:21:00.440 --> 0:21:01.560 But when you look at. 0:21:01.440 --> 0:21:03.879 Them, yes, you're right, You've got to value them on 0:21:03.920 --> 0:21:06.680 that free cash flow generation and they're just a machine 0:21:06.840 --> 0:21:09.239 along with a lot of the other tech companies. The 0:21:09.280 --> 0:21:13.280 reality is, to me, tech is a free lunch. And 0:21:13.320 --> 0:21:15.399 you don't get this in Wall Street very often. But 0:21:15.440 --> 0:21:18.440 if I'm paying a market multiple twenty to twenty one times, 0:21:18.440 --> 0:21:21.200 which is exactly for tech today, which is exactly where 0:21:21.240 --> 0:21:24.119 the market is, the SMP's at twenty one times, but 0:21:24.160 --> 0:21:26.440 I'm getting double the earnings growth. I'm getting thirty five 0:21:26.440 --> 0:21:29.680 percent earnings growth versus seventeen percent earnings growth. I'll take 0:21:29.680 --> 0:21:32.040 that all day long. Like that's a free lunch, right, 0:21:32.080 --> 0:21:36.560 It's a free option basically on that. So the valuations 0:21:36.680 --> 0:21:38.960 I don't think are even remotely stretched here at twenty 0:21:39.000 --> 0:21:41.840 twenty one times on tech, that's what I'm paying for 0:21:41.880 --> 0:21:42.240 the market. 0:21:42.320 --> 0:21:44.160 Paul, one more quickly, bond market. 0:21:44.160 --> 0:21:45.520