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Speaker 2: For those of you out there, this is the most
Speaker 2: important conversation of the day on the hysteria of the moment.
Speaker 2: I want to do a major shout out to the
Speaker 2: coalescing that Zero Hedge does, including publishing Bloomberg, Simon White
Speaker 2: in London and publishing Michael Ball, who's with us often here.
Speaker 2: Amy wu Silverman joins us here for the key conversation
Speaker 2: for Global Wall Street. I'm short gloom Oops, I'm wrong.
Speaker 2: There's a short squeeze, and I think people get that
Speaker 2: that you're wrong. You cover the short and the market
Speaker 2: goes up, and then it shifts to option animals like you,
Speaker 2: and you're going to go I want to go long
Speaker 2: and the firm you're dealing with must buy the stock.
Speaker 2: Are firms now forced to buy the stock because of
Speaker 2: a gamma bid? And that's why we're going up.
Speaker 3: I think we're actually tom starting to anticipate it. But
Speaker 3: right now, what we're seeing happening is the beginning of
Speaker 3: the chase, and oftentimes when we get that beginning of
Speaker 3: the chase, that is a secondary effect of it. I
Speaker 3: think we're actually even earlier in terms of the positioning.
Speaker 3: So it's been this spot up volatility up market, right,
Speaker 3: you know, which is kind of the opposite of what
Speaker 3: we would expect, really big bid to call options. And
Speaker 3: then I think even down the line, we might get
Speaker 3: the mechanics of the gamma squeeze, not the short squeeze,
Speaker 3: which is why I think there is still some continuation
Speaker 3: to this momentum.
Speaker 2: Amy.
Speaker 4: All I really know about your business at derivatives is
Speaker 4: hedge when you can not when you have to what
Speaker 4: are your clients doing today? Are they buying risk? Are
Speaker 4: they buying protection? What are they doing?
Speaker 3: Yeah, you know, I wouldn't be a proper derivative strategist
Speaker 3: if I didn't say that old tagline, because you know,
Speaker 3: a few weeks ago, when everyone was complaining to us
Speaker 3: about how expensive protection was, here's your sale right here.
Speaker 3: We're in the bargain basement now for those put options.
Speaker 3: But certainly that's the issue when the FOMO kind of
Speaker 3: meets investor base. They don't want to hear that, but
Speaker 3: the reality is your cost of protection has really come down.
Speaker 3: You are starting to see folks deploy it a little
Speaker 3: bit longer term because there's still things we just don't know.
Speaker 3: We don't know how these these ceasefire talks are going
Speaker 3: to go. We don't know how the inflation mechanism is
Speaker 3: going to work its way through the system with an
Speaker 3: energy shock. And so look, if I could say one thing,
Speaker 3: it's that hedges on the downside are a lot less.
Speaker 3: And so if you were complaining to me a few
Speaker 3: weeks ago, then maybe look at the pricing.
Speaker 4: So I mean, the simple way I measure volatility in
Speaker 4: the equity market is the VIX, and boy it's spiked
Speaker 4: up to like north of thirty, but here we are
Speaker 4: below twenty. I mean, what does that tell you?
Speaker 3: You know, it's funny. A few weeks ago, I was
Speaker 3: on the road with my pal Laurie Calvsina and we're
Speaker 3: nastee so she's a joke, she's my work wife, and
Speaker 3: you know, we were out seeing a lot of clients.
Speaker 3: And if you remember a few weeks ago, like things
Speaker 3: were gloomy, that's when the VIX was spiking, and I
Speaker 3: have to tell you a lot of ministers were back
Speaker 3: then really constructive even with everything going on. And I
Speaker 3: do think there's been this kind of we've learned to
Speaker 3: look through geopolitics. We've just learned. We've looked at the
Speaker 3: twenty twenty two playbook, we've looked at all the other
Speaker 3: playbooks for geopolitics, and we just say we're going to
Speaker 3: look through it. And that's what the VIX is kind
Speaker 3: of telling you. You know that the VIX is saying,
Speaker 3: we're just looking through this and we're moving on.
Speaker 2: I want you to talk to our listeners and viewers
Speaker 2: who have ETFs. They're in four to oh one k's,
Speaker 2: they have not reallocated their four oh one k since
Speaker 2: Nixon was president. They're a completely different market from Amy
Speaker 2: wou Silverman. How big is your market? Trsten Slock has
Speaker 2: hedges on eight percent of treasuries this morning and its
Speaker 2: Apollo note. How big are the CTA is? How big
Speaker 2: are the hedge funds? How big is Dan Low or
Speaker 2: mister Ackman.
Speaker 3: You know, I think it's important if you're sitting there
Speaker 3: in most of what you do is very long term
Speaker 3: and an ETF. The reality is You're probably fine, but
Speaker 3: it's important to know the mechanics of what these things
Speaker 3: are doing. They are pushing things around short term and
Speaker 3: then in some cases you know, if you will, the
Speaker 3: retail crowd is the one who's doing the pushing, whether
Speaker 3: that is an options or starting to be in prediction markets.
Speaker 2: Robin Hood is pushing this line.
Speaker 3: One hundred percent. And I can guarantee you ever since
Speaker 3: kind of the meme craze, there's been reason to do it.
Speaker 3: You get they know about the Gama squeeze. This isn't
Speaker 3: kind of the feel of just institutional investors anymore. And
Speaker 3: that's one of the most fascinating things that's happened in
Speaker 3: our market in the last five years.
Speaker 4: Looking at your notes, Amen, and you say that on
Speaker 4: your desk, you've seen a dynamic called spot up vol up.
Speaker 4: So as the market rises, volatility is rising too. I
Speaker 4: thought it was supposed to be the opposite.
Speaker 3: It is one hundred percent supposed to be the opposite.
Speaker 3: But now it's happened so much that I don't even
Speaker 3: know if I can say that. I'd say one thing
Speaker 3: to keep in mind as it relates back to your
Speaker 3: question on the VIX is because spot can go up
Speaker 3: while VOLA is going up. Sometimes you might actually get
Speaker 3: a higher VIX number, but it's while the market is rallying,
Speaker 3: and so that's a little odd. And we have to
Speaker 3: remember a lot of times that goes back to this
Speaker 3: demand from call options.
Speaker 2: Futures up twenty eight now futures of four zero forty.
Speaker 2: The headline here this from Axius Mike Allen and the
Speaker 2: team over to Axius us ORN talks expected in Islamabad, Pakistan,
Speaker 2: likely on Sunday. It's definitely none of the market, no
Speaker 2: question about it. Okay, can I do an audible? Yeah,
Speaker 2: let it go. Okay. Janet Lauren out with a great
Speaker 2: look at endowments across all the different schools, and I'm sorry,
Speaker 2: Princeton basically came in last place here, the last like
Speaker 2: single digit return. What would you do? How would you
Speaker 2: use derivative strategies in a boring college endowment?
Speaker 3: Well, you know, it's funny. As a proud Princetonian, we've
Speaker 3: actually we've actually heard this on the finance side. My
Speaker 3: understanding is a lot of endowments actually had some money
Speaker 3: on the private side, and it's a little kind of
Speaker 3: you know, less transparent and I'd say the public equities,
Speaker 3: and that shift has been what has been making the
Speaker 3: dowments that happen to stop it.
Speaker 2: It's fancy people playing d one field hockey who said
Speaker 2: we're not going to own Microsoft, Amy Wu Silverman right now,
Speaker 2: help Princeton and everyone else. Do you buy the mag
Speaker 2: seven here?
Speaker 3: I actually think you do, And then I think QQQ
Speaker 3: the vaultity looks relatively inexpensive too, And I think, especially
Speaker 3: as you get these IPOs down the line, your anthropics,
Speaker 3: your SpaceX's is going to be really interesting from how
Speaker 3: much fomo and momentum that creates, which again gets us
Speaker 3: into that favorite spot up vola.
Speaker 2: Have you ever heard of this Polish chan?
Speaker 4: Sure?
Speaker 2: Calvaccina's not this Polish exactly, Amy.
Speaker 4: So on the RBC Capital Market's Derivatives desk, what's a
Speaker 4: typical plan for you guys? Is it a hedge fund
Speaker 4: or is it a long lonely thing. Who's typical?
Speaker 3: Yeah, I would say it depends on the region. And
Speaker 3: but it's an institutional client, so it's a good mix.
Speaker 3: It's hedge funds, it's asset managers, it's pensions. And what
Speaker 3: I really enjoy about that is we get a good
Speaker 3: look at how these people who you know, they're either
Speaker 3: moving at a glacial speed or at very quick speed,
Speaker 3: how they're all thinking about the market. And then you know,
Speaker 3: back so I had mentioned earlier with Lori, we saw
Speaker 3: a good mix a few weeks ago and the amount
Speaker 3: of constructive, very optimistic outlook was was very shocking to
Speaker 3: be back then.
Speaker 2: Amy Silberan, thank you so much for joining us. Love
Speaker 2: what you're doing. The Royal Bank, I'm sorry, Royal Bank
Speaker 2: of Canada. Do you have Canadians tickets? They're opening in Tampa?
Speaker 2: Can you get me Jermys tom RBC is on the
Speaker 2: jersey of the Montreal Canadians. Can you get me tickets
Speaker 2: for Les Abidean?
Speaker 3: You know, after us, I'll talk to my compliance officers.
Speaker 2: Really do clients on that? From New York City, Bloomberg
Speaker 2: Surveillance Stay with us. More from Bloomberg Surveillance coming up
Speaker 2: after this.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live
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Speaker 2: We should get some Transatlantic perspective Yeah, the stereotype in
Speaker 2: America right now is Europeans don't want to come to
Speaker 2: America and Americans are looking at energy prices in tickets
Speaker 2: to France or UK and saying we're not going to
Speaker 2: do it in this war is a transatlantic dialogue? Busted?
Speaker 5: It's a good question. I think Europe still matters. Europe
Speaker 5: still matters to the US and two other major economies,
Speaker 5: and it is very important to include it in the dialogue.
Speaker 5: And also when you look at the resilience of supply chain,
Speaker 5: when you look at not just a tourism destination.
Speaker 2: I want to get this in before Paul's got really
Speaker 2: better questions. Yell, how can this? Yell? And I don't
Speaker 2: want to get you in trouble at KPMG. The President
Speaker 2: on a daily basis is going after the Prime Minister.
Speaker 2: Can you explain to our American audience how the King
Speaker 2: and Queen can visit America if the president's trashing on
Speaker 2: the Prime minister on a daily basis.
Speaker 5: Okay, Well, I am an economists. I'm going to try
Speaker 5: and do it from an economist perspective. Yeah, I'd say
Speaker 5: you need to look at things from a long term perspective.
Speaker 5: What are the fundamentals, the structural themes, rather than the cycle,
Speaker 5: the economic cycle. Yeah, and ultimately the relationships that you
Speaker 5: have between the US and the UK in terms of
Speaker 5: not just the business community, but also we share language,
Speaker 5: we share history, we share very strong business connections, and
Speaker 5: we share very strong security connections as well. So I
Speaker 5: think that probably goes beyond any short term vulnerabilities or volatilities,
Speaker 5: if you like, in the political relationship between different heads
Speaker 5: of states.
Speaker 4: So, yeah, talk to us about the impact across Europe
Speaker 4: from this war in Iran. The energy shock is impacting
Speaker 4: different parts of the world in different ways. Talk to
Speaker 4: us about how it's impacting broadly across Europe.
Speaker 5: So for Europe, but the first impact is essentially an
Speaker 5: energy price shock, and as well as some of the commodities,
Speaker 5: which is actually quite similar in some ways to the
Speaker 5: twenty twenty two shocks that we had when Russia invaded Ukraine.
Speaker 5: So you have higher energy costs, you also have higher
Speaker 5: costs of certain food items and fertilizers and certain commodities.
Speaker 5: And what it means is that we've already seen inflation.
Speaker 5: We've got the March prints that's already higher. We're expecting
Speaker 5: more of that to come. On the one hand, the
Speaker 5: other hand, we're seeing much tighter financial conditions, with markets
Speaker 5: going ahead of the central banks and expecting central banks
Speaker 5: to high CRIDs potentially by more than what they would
Speaker 5: actually do, causing very tight financial conditions.
Speaker 2: Do you, and this is your work at LSE, I
Speaker 2: think we can use currency a litmus paper. Do you
Speaker 2: see a general constraint to the economy and strong euro
Speaker 2: like if it pops off one twenty or dare I
Speaker 2: say stronger euro than that? Does that gum up the
Speaker 2: economic works of the system over there?
Speaker 5: I mean, I'm less worried about the strength of the
Speaker 5: Europe to some degree. I mean, especially if that means
Speaker 5: that the Euro becomes more of an international currency in
Speaker 5: that sense that it is used more. I think that
Speaker 5: some advantages. There's other economies, like for example, Switzerland, where
Speaker 5: we've seen the Swiss frank going up significantly. We're a
Speaker 5: sually more damage in the short and medium term.
Speaker 2: Yeah.
Speaker 4: Here in the US, we've had a very resilient consumer
Speaker 4: propping up this economy time and time again. Talk to
Speaker 4: us about how the consumer is doing across across Europe
Speaker 4: these days.
Speaker 5: Sure, I mean Europe as you know, is a medical
Speaker 5: of different economies, and there's a different a different mobile
Speaker 5: in Germany. But I'd say if you compare it to
Speaker 5: thes generally it is weaker. We had some strong spots,
Speaker 5: especially in Italy and Spain for some time, driven by
Speaker 5: a stronger.
Speaker 2: Labor market.
Speaker 5: But overall, the other thing that we've seen in Europe
Speaker 5: is higher saving and the more i'd say almost permanent
Speaker 5: new tern of higher propensity to save, an that is
Speaker 5: putting download pressure on consumer spending above the confidence issue
Speaker 5: that we encounter everyone.
Speaker 2: YEA, thank you so much for your perspective today. Love
Speaker 2: to get you into our studios next time you're in
Speaker 2: York in New York, please please come in. Yell Selfrom
Speaker 2: with his vice chair Chief Economist KPMG the United Kingdom.
Speaker 2: Stay with us. More from Bloomberg Surveillance coming up after this.
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Speaker 1: weekday afternoons from seven to ten am Eastern Listen on
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Speaker 2: You need to look ahead into the tech earning season,
Speaker 2: look ahead into the late spring, and of course across
Speaker 2: all of this twenty twenty six, no one better to
Speaker 2: do that. And Darryl current president Wills Fargo Investment Institute,
Speaker 2: he survives V. Body at Boston. You were you in
Speaker 2: class with Professor Body? I was, well, he was one
Speaker 2: of my first supporters. He called me up and said,
Speaker 2: you know where'd you get the act and all that
Speaker 2: tell us about finance was V. Body.
Speaker 6: Phenomenal mind right and believed in the quantitative way to
Speaker 6: approach the topic day in and day out. So's he's
Speaker 6: the He's the right person to fundamentally learn the trade from.
Speaker 2: Then you're a kid and you think you know all
Speaker 2: the answers and boys wed Wells Farga, you apply this
Speaker 2: each and every day. I'm going to go audible here.
Speaker 2: I got eighteen questions, Paul's got twelve, and we don't
Speaker 2: have a time. But my number one question now is
Speaker 2: a sophomoric idea that big tech bond issue INCE is
Speaker 2: somehow a negative thing. You and I studied Merton and Medigliani,
Speaker 2: yous V. Body, and the answer is one portion of
Speaker 2: that bond issue Ince is a huge plus plus plus
Speaker 2: to the company.
Speaker 6: Right absolutely, I mean in the capital stack, being able
Speaker 6: to go up in quality, right, and and look, those
Speaker 6: balance sheets in the tech world are right, plenty of
Speaker 6: cash on them. Credit quality is good. They just keep
Speaker 6: charging ahead and they're using that cash wisely. I think
Speaker 6: if you look at what we call shareholder yield, which
Speaker 6: is dividends plus share buybox together, tech leads at about
Speaker 6: five and a half percent right there with its financials.
Speaker 2: My book of the summer book of the year ages ago.
Speaker 2: You just heard it from Darryl Krok William Priest shareholder yield.
Speaker 2: I'll get it out on Twitter and linked today. It
Speaker 2: is the Bible and it's short. Paul, you could pop
Speaker 2: it off of that. You know, you could do the
Speaker 2: vest but of the coffee shop and pop that off
Speaker 2: in three moments.
Speaker 4: When train ride home talk to us about earnings, Darrey mentioned,
Speaker 4: we're just kind of getting into the teeth of it
Speaker 4: right now. What do we need to see? What does
Speaker 4: this market need to see in this earning cycle? Because
Speaker 4: it's a lot of companies could probably fall back and say, listen,
Speaker 4: there's a war out there. We don't know what's going
Speaker 4: on with our business. What do you think the companies
Speaker 4: what we need to see?
Speaker 2: Well, you absolutely need to see. To be candid and direct.
Speaker 6: They don't care that much about this quarter and what's
Speaker 6: actually reported. We know it's going to be good, right.
Speaker 6: The quarter is going to be up thirteen percent on
Speaker 6: Q one. Forward twelve month earnings are going to be
Speaker 6: up seventeen to eighteen percent, which is unheard of. This
Speaker 6: is the sixth straight quarter in a row we've had
Speaker 6: double digit earnings growth, right, So it's all about forward guidance.
Speaker 6: It's all about what they say out into Q two
Speaker 6: and Q three. That's what's going to separate the winners
Speaker 6: from the losers here as we go.
Speaker 2: And remember we.
Speaker 6: Got big banks and financials. Between financials and tech, they're
Speaker 6: forty six percent of the market cap of the SMP so.
Speaker 2: They matter, right.
Speaker 6: What they do is going to drive where we go.
Speaker 4: Down Towards the end of last year, we had a
Speaker 4: rotation out of some of those tech names, higher growth,
Speaker 4: higher value rotation, maybe a little bit of a broadening
Speaker 4: out looking for some value, maybe smaller mid cap stocks.
Speaker 4: But boy, we've seen the tech stocks come ripping back
Speaker 4: here this month. How do you think about that allocation?
Speaker 6: So we actually got a little lucky here to be
Speaker 6: Candidabaul so we downgraded Tech on October thirtieth last year.
Speaker 6: We just upgraded it again two weeks ago on April sixth.
Speaker 6: From that October thirty ath through April six it basically
Speaker 6: effectively traded sideways to your point, right, in the last
Speaker 6: two weeks, it's up eleven percent, right, And we funded
Speaker 6: it with energy because at the moment when we did
Speaker 6: that trade on April six oil was still at one
Speaker 6: hundred and five hundred and ten dollars a barrel. Energy
Speaker 6: socks were clear up. So energy is down about six
Speaker 6: percent since that time. So from a pairs trade, boy,
Speaker 6: you know, positive tech minus energy has just been really
Speaker 6: accreative to the portfolio.
Speaker 4: To what extent are you concerned about maybe some impacts
Speaker 4: on the economic growth inflation stemming from what might be
Speaker 4: higher for longer energy prices.
Speaker 6: Yeah, I think that's I mean, look, the equity market
Speaker 6: to me is a reaction function right now, and it's
Speaker 6: a reaction function to oil prices.
Speaker 2: Right.
Speaker 6: We see it every day up down or to Tom's
Speaker 6: earlier point, and then and then where interest rates go.
Speaker 6: I think interestrates are the most underappreciated thing here. The
Speaker 6: tenure at four point thirty, like at four point thirty
Speaker 6: needs to be higher. Right, Remember the old rule of
Speaker 6: thumb that the ten year should equal nominal GDP, Right,
Speaker 6: I mean the years if you go back years ago, well,
Speaker 6: nominal GDPs easily got a five in front of it.
Speaker 2: Right.
Speaker 6: I think the ten year and the long side of
Speaker 6: the old curve, because of inflation premiums because of growth,
Speaker 6: dams has to go higher. When it does, it causes
Speaker 6: them indigestion.
Speaker 2: So I want to call that the pos and Rzegg theory.
Speaker 2: They suggest it was simplifying that the way we will
Speaker 2: drive price down yield up is a surprising productivity and
Speaker 2: wage growth does wells Fargo. Can you be optimistic given
Speaker 2: our inflation, that we're going to see a genuine positive
Speaker 2: real wage growth and a nominal wage growth that affects
Speaker 2: yields like that? Yes?
Speaker 6: I mean simple answer is we saw it already. Even
Speaker 6: the Iran you know Israel US conflict hasn't dented that.
Speaker 6: You know, we were going to run this economy hot
Speaker 6: coming into the beginning of March, and part of that
Speaker 6: was getting getting by wage growth.
Speaker 2: Deal. Crocker this wells far I can't say enough about
Speaker 2: his underlying academics and trying to get a belief construct
Speaker 2: going on ownership of equity markets and particularly those of
Speaker 2: you that are not participating, how to get courage. Okay,
Speaker 2: so let's go back to v You've got, you know,
Speaker 2: dividend discount model. You've got the Gordon growth model as well,
Speaker 2: and never, never, never talked about is the oddity of
Speaker 2: big tech residual income model. They don't have a dividend,
Speaker 2: there's nothing to count. Maybe there's some teensweens dividend growth,
Speaker 2: so you have to summ in all their cash flows
Speaker 2: and the oddities of it. That's right, how do you
Speaker 2: account Let's take Microsoft just as the talking point, it's
Speaker 2: an earnings juggernaut. Correct, Do we price that in at
Speaker 2: a twenty one multiple or is it just way way
Speaker 2: more valuable than what we're saying right now.
Speaker 6: The latter, it's way more valuable than what we see now, right.
Speaker 6: I mean, obviously Microsoft's got indented with the software SaaS
Speaker 6: apocalypse thing.
Speaker 2: But when you look at.
Speaker 6: Them, yes, you're right, You've got to value them on
Speaker 6: that free cash flow generation and they're just a machine
Speaker 6: along with a lot of the other tech companies. The
Speaker 6: reality is, to me, tech is a free lunch. And
Speaker 6: you don't get this in Wall Street very often. But
Speaker 6: if I'm paying a market multiple twenty to twenty one times,
Speaker 6: which is exactly for tech today, which is exactly where
Speaker 6: the market is, the SMP's at twenty one times, but
Speaker 6: I'm getting double the earnings growth. I'm getting thirty five
Speaker 6: percent earnings growth versus seventeen percent earnings growth. I'll take
Speaker 6: that all day long. Like that's a free lunch, right,
Speaker 6: It's a free option basically on that. So the valuations
Speaker 6: I don't think are even remotely stretched here at twenty
Speaker 6: twenty one times on tech, that's what I'm paying for
Speaker 6: the market.
Speaker 2: Paul, one more quickly, bond market.
Speaker 4: What are we doing here in the bond market? Are
Speaker 4: we taking credit risk here?
Speaker 6: No, you stay up on credit quality. I don't think
Speaker 6: you're getting compensated on spreads wide enough. On high yield.
Speaker 6: It doesn't make sense here. I mean, if the economy
Speaker 6: runs hot, you'll be okay down the credit stack in hyold,
Speaker 6: But it's not going to be any big trade that's.
Speaker 2: Going to make you a lot of money. Dividend growth model.
Speaker 2: This is a toothpaste company. Will leave the name out
Speaker 2: of it. To two point five percent yield, The dividend
Speaker 2: five year growth rate is three point four percent puny
Speaker 2: single digit yield, and the ten year total return per
Speaker 2: year is a whopping four point two four percent. You go,
Speaker 2: that's what you get looking at statics. Statics.
Speaker 6: That's why you got to look at the shareholder yield, right,
Speaker 6: which is the total capital return to sholders through buybacks,
Speaker 6: through dividends, everything.
Speaker 2: I'll get Bill Priest out here, so well, maybe I'll
Speaker 2: find his v Bode textbook as well. This has been brilliant,
Speaker 2: Daryl Krack, thank you so much with wells and stay
Speaker 2: with us. More from Bloomberg Surveillance coming up after this.
Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live
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Speaker 2: Another view in the equity markets, we're setting up for
Speaker 2: Friday and the look ahead into April and May. Mark
Speaker 2: las Sheena joins us, Jenny Montgomery, Scott Mark. What do
Speaker 2: you do with double digit earnings growth in a war? Interesting?
Speaker 7: Just the position, but you stay long because, as we know,
Speaker 7: typically Marcus discount well in advance at the end of
Speaker 7: the war, typically fairly early on in the guns going off,
Speaker 7: And so as a consequence, I think we've already seen
Speaker 7: what appears to be that the bottom here, and investors
Speaker 7: are looking forward and through the end of the escalation.
Speaker 7: Not so much that we've necessarily seen a complete precision
Speaker 7: of the risk associated with a renewed flare up in
Speaker 7: the Iranian crisis, but at the same time, I think
Speaker 7: we've seen peak escalation.
Speaker 4: So talk to us about the rotation markers. We had
Speaker 4: a rotation out of tech late last year, but now
Speaker 4: now it seems like the rotations are going back into
Speaker 4: tech and tech adjacent companies here. How do you guys
Speaker 4: think about that?
Speaker 7: Yeah, it's actually pretty remarkable how quickly this rally up
Speaker 7: eleven percent plus from the bottom that we had here
Speaker 7: just a few weeks ago has not only been somewhat
Speaker 7: impetuous in terms of its strength, which is remarkable, you know,
Speaker 7: usurping the previous high that we had put in at
Speaker 7: in late January, But the fact is you've seen this
Speaker 7: massive rotation out of those late cycle industrials, materials, even
Speaker 7: the defensive sectors like utilities, real estate and back into
Speaker 7: those tech and tech adjacent companies, and they've renewed their
Speaker 7: leadership status, which I think is justified given the fact
Speaker 7: that the selloff that we had had was really felt
Speaker 7: most bruntly by some of those big cap tech and
Speaker 7: tech adjacent companies, And as a consequence of that, and
Speaker 7: really without significant diminution in terms of their earnings expectations,
Speaker 7: they've actually become relatively cheap. When you look at tech
Speaker 7: on a peg ratio basis, it's the cheapest of the
Speaker 7: eleven gig sector. So I think investors basically rewhetted their
Speaker 7: appetites for some of these tech stocks that were beaten
Speaker 7: down and offered pretty good upside potential, particularly in the
Speaker 7: semi space, even though at the same time we're seeing
Speaker 7: a counter trend rally developed in earnest in some of
Speaker 7: the software names that have been actually slayed.
Speaker 4: So, what's screening well for you guys right now? Mark
Speaker 4: to the extent you can look past this war, assuming
Speaker 4: it's going to be shorter rather than longer. Here, what's
Speaker 4: screening well for you guys?
Speaker 2: Well, A couple of things.
Speaker 7: One, you know, with the economy itself continues to motor
Speaker 7: along at a pretty heavy pace. I mean, in spite
Speaker 7: of the fact that we're still waiting for data that
Speaker 7: may accumulate showing some evidence of some deterioration and growth
Speaker 7: as a consequence of elevated energy prices. Still the resilience
Speaker 7: in the economy primarily primed by the consumer, of course,
Speaker 7: but even some of the manufacturing and services industries. The
Speaker 7: regional FED surveys all suggest the continuation of pretty good
Speaker 7: economic growth, and therefore we're still long some of those
Speaker 7: against cyclical value sectors like industrials. Certainly, defense stocks continue
Speaker 7: to look well, especially given the tailwind obviously from the
Speaker 7: potential budget expansion of some fifty percent to be spent
Speaker 7: on tech. In addition, material stocks look attractive in here,
Speaker 7: and of course some of the semiconductors, which again we
Speaker 7: think the AI ecosystem is far from it being fully
Speaker 7: developed at this juncture, and therefore even the copious amounts
Speaker 7: of spending that's being dedicated to this space, we expect
Speaker 7: to continue.
Speaker 2: Mark two questions there quickly. Awesome the arc of Jenny
Speaker 2: Montgomery Scott in Philadelphia out to your Pittsburgh. What's your
Speaker 2: economy look like? Is there a buoyancy that we underestimate
Speaker 2: within the fancy climbs of Manhattan. Well, you know, it's interesting, Tom.
Speaker 7: You know, obviously you can be a little myopic and say,
Speaker 7: well it looks good here and try to extrapolate from
Speaker 7: that on a national basis. But at the same time,
Speaker 7: in fact, it does look fairly healthy. You know, when
Speaker 7: you move around, whether you're driving or attending you know,
Speaker 7: some you know, entertainment function or going out to restaurants,
Speaker 7: or just general activity. Even in downtown Pittsburgh, relative to
Speaker 7: people coming into work, you can see really a pretty
Speaker 7: steady flow of activity that showed real no signs of
Speaker 7: any kind of deterioration that would you know, be associated
Speaker 7: with either some you know, cautiousness with regard to driving
Speaker 7: behavior and or that we're seeing any kind of crimping
Speaker 7: up spending by households.
Speaker 2: Mark, I don't care. The reason we had you on
Speaker 2: is I will tune in to Pittsburgh Penguins, Philadelphia Flyers hockey,
Speaker 2: the playoff coming up, folks. This is the best for
Speaker 2: those of you worldwide. This is the eastern and western
Speaker 2: end of Pennsylvania and the hatred is off the chart.
Speaker 2: You guys have been doing this for years now. How
Speaker 2: are you who are you going to root for? You're
Speaker 2: gonna go with Sydney Crosby and the Penguins, or do
Speaker 2: you got to look at these upstart Flyers.
Speaker 7: Well, indeed, it is probably one of the most you know,
Speaker 7: hatred rivalries that exists, certainly in hockey, if not even.
Speaker 2: In all of sports. To some extent, of course, I'm
Speaker 2: going to.
Speaker 7: Root for the Penguins and Sidney Crosby is going to
Speaker 7: get us through the Flyers and go on to the
Speaker 7: next step in the playoffs.
Speaker 2: Is he healthy?
Speaker 7: By all accounts, he is. He sat up the last
Speaker 7: couple of games of the season. But I think nonetheless
Speaker 7: it's a set up for him and obviously the big
Speaker 7: three of Ginny Belkin as well as Crystal Tang and
Speaker 7: others who have been mailed to contributors to Guy off
Speaker 7: run that was highly unexpected.
Speaker 2: Lucini could come out again. Let's get him going here.
Speaker 2: If he knows who Crystal Tang is awesome. He's like
Speaker 2: eighty years old and he's still skating like his twenty
Speaker 2: three years old Mark. Thank you, thank you so much.
Speaker 2: For those of you that don't know hockey. From the
Speaker 2: moment they dropped the Puck Pittsburgh, Philadelphia. I could care less.
Speaker 2: I will watch just because of the tension and that rivalry.
Speaker 2: Mark Lashini with Jenny Montgomery Scott.
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