Speaker 1: Joining US now is Chris Alman, chief investment officer over
Speaker 1: at Cawsts.
Speaker 2: Hey, Chris, it is in Vida's world.
Speaker 1: We're just living in it, and we just keep saying
Speaker 1: that every time we seem to talk.
Speaker 2: Does that make you nervous or does that make you
Speaker 2: feel good?
Speaker 3: Oh, it always makes you nervous.
Speaker 4: Think of the fact that it's grown the size of Microsoft.
Speaker 4: That's crazy. And you know, I have to say, Alex,
Speaker 4: it reminds me a lot of Intel in the nineties,
Speaker 4: where you had Intel millionaires. My neighbor had Intel, and
Speaker 4: you know, suddenly it was going to retire rich. It
Speaker 4: is amazing, but the story can't grow forever. Right now,
Speaker 4: it's just pure optimism. And that's okay. It is the
Speaker 4: new future. But let's remember there are two nine and
Speaker 4: ninety nine other stocks in the US market, and those
Speaker 4: are the ones that matter. The economy is what matters.
Speaker 4: We don't eat in Nvidia for dinner. We don't fly
Speaker 4: on Nvidia airplanes. So there are other things that matter
Speaker 4: a ton when you're a long term investor and you
Speaker 4: own the USA.
Speaker 2: I mean, we don't fly in Vida airplanes. Yet. Let's
Speaker 2: just keep that in mind.
Speaker 1: So if we wind up coming off the boil here
Speaker 1: when it comes to say chips and tech, do you
Speaker 1: feel like that money just drains out of the market
Speaker 1: all together or is it a rotation play.
Speaker 4: I think right now we're due for the summer doldrums. Frankly,
Speaker 4: you know tech can continue. But look at what we're
Speaker 4: seeing today, a record new high, but by a centimeter
Speaker 4: or a millimeter, I mean just tiny fractions higher.
Speaker 3: I think that we'll still see that.
Speaker 4: I want this market to continue on for a little
Speaker 4: bit period of time, But look at the consumer. Boy,
Speaker 4: we're seeing signs of cracks in the average consumer, especially
Speaker 4: middle and low income. We're getting those warning signs months
Speaker 4: ago from Dollar General and Walmart, different stores like that.
Speaker 4: Now we're seeing numbers in terms of auto loans and
Speaker 4: just credit cards. Not the sign of a recession, but
Speaker 4: the sign the consumer is tapped out. And boy, consumer optimism,
Speaker 4: as we've seen, is close to turning to pessimism.
Speaker 3: And that's a concern. So I'm worried about this market
Speaker 3: having legs.
Speaker 4: But I think you and I love bonds, and I
Speaker 4: think people really need to pay attention to bonds. That
Speaker 4: auction was a good sign people have an interest in
Speaker 4: our debt.
Speaker 3: That's important because.
Speaker 4: We're going to be borrowing a lot more money the
Speaker 4: USA next year whoever is president and at all time records,
Speaker 4: so those auctions are really something to watch.
Speaker 1: Yeah, and we keep waiting for, you know, investors to
Speaker 1: drop out.
Speaker 2: We get the tick data later.
Speaker 1: On today, and that's sort of what overseas investors are
Speaker 1: doing here with US investments, and it hasn't happened, Like
Speaker 1: the demand is still there. Do you like duration? Do
Speaker 1: you like short duration? Do you like the belly? What's
Speaker 1: the best way to capitalize?
Speaker 4: You know, I'm a thirty year investor, Alex, so I
Speaker 4: like the curve. I'm going to extend out When the
Speaker 4: curve is is inverted and almost flat as it is,
Speaker 4: a lot of people I've been talking to are using
Speaker 4: short term CDs.
Speaker 3: Well that's okay, but this.
Speaker 4: The rates will drop eventually, and so you do want
Speaker 4: to extend out a little bit in duration. I would
Speaker 4: make a duration bet. I don't think the long bond's
Speaker 4: coming down dramatically. I think the Fed's proven the US
Speaker 4: economy can do okay with rates in the four to five.
Speaker 2: Range, And so yeah, go ahead, Chris, Sorry.
Speaker 4: No, the pressures off them to make this cut. They
Speaker 4: want a job, own the market, to be optimistic, but
Speaker 4: they don't have to make a cut right here.
Speaker 1: Well, and then to that point, we had I think
Speaker 1: seven FED officials that blackout period is no longer all
Speaker 1: talking today, and the general message was not yet, not yet,
Speaker 1: like be patient, it might be even quarters, not months,
Speaker 1: until we get confident on inflation data. What kind of
Speaker 1: cycle do you think we're going to see a shallow
Speaker 1: cutting cycle?
Speaker 2: What do you think?
Speaker 3: Oh, very shallow.
Speaker 4: There should not be a reason for them to cut dramatically.
Speaker 4: If it is, then the economy's in bad shape and
Speaker 4: we're heading for a recession. They should be able to
Speaker 4: ease off a quarter of a point at a time,
Speaker 4: very slowly. And then for long term investors back to
Speaker 4: fixed income, I think they should extend out into the curve.
Speaker 4: I think you should look at credit, look at how
Speaker 4: well high yield has done in the last couple of years.
Speaker 4: It's remarkable. All of that points alex to diversification. And
Speaker 4: when you know every mutual fund now owns in Nvidia,
Speaker 4: almost always in the top five.
Speaker 3: Some of the value.
Speaker 4: Mutual funds are even creeping into in Vidia because it's
Speaker 4: driving everything that tells you you need to diversify because
Speaker 4: it's not going to grow to the moon and you
Speaker 4: need to be in bonds in your portfolio.
Speaker 1: Where else within the market you mentioned credit was also interesting.
Speaker 2: Where else provides that diversification.
Speaker 4: Well, For a long term institutional investor like us, we
Speaker 4: can be in real estate, and obviously there are very
Speaker 4: different segments in real estate. I've got the office background on.
Speaker 4: You don't want to be in office right now. But
Speaker 4: data centers another tech play, are huge, but as well
Speaker 4: as the warehouses, So there are opportunities and just good
Speaker 4: old stable real estate. Remember real estate pays a nice,
Speaker 4: steady operating income. Don't investor capital gains investor operating income.
Speaker 4: That's where most of your return comes as an institutional investor.
Speaker 4: And there's value in the private markets infrastructure. There's a
Speaker 4: lot of money in the Chips Act that they really
Speaker 4: want to see go to work, and especially in the
Speaker 4: IRA that is going to be pushed out in the
Speaker 4: next six months for long term projects and those are
Speaker 4: long term, stable returns. If you're a retirement investor in
Speaker 4: your four oh one K, you're looking for long term
Speaker 4: patient capital and I hate to say it, but in
Speaker 4: Nvidia is not long term patient. Nvidia is a short
Speaker 4: term flare rocket. It's fun to write it, but what
Speaker 4: are you going to do next year, in the year
Speaker 4: after and the year after that. So I think you
Speaker 4: need to diversify and have a balanced portfolio.
Speaker 1: Hey, Chris, we love getting you on. It's a good
Speaker 1: perspective to have Chris Ahman Cio over at Caulsors