WEBVTT - Reading the Fed Tea Leaves 0:00:13.800 --> 0:00:17.360 Hello, and welcome to What Goes Up, a weekly markets podcast. 0:00:17.560 --> 0:00:19.520 My name is Mike Creagan. I'm a senior editor at 0:00:19.560 --> 0:00:22.480 Bloomberg and then well down to Park across Acid reporter 0:00:22.520 --> 0:00:25.400 with Bloomberg. And this week on the show, well, it 0:00:25.480 --> 0:00:28.240 was sort of a monumental week with two main items 0:00:28.280 --> 0:00:32.320 dominating headlines. On Wednesday, the Federal Reserve boosted interest rates 0:00:32.360 --> 0:00:35.000 by three quarters of a percentage point. But then on 0:00:35.040 --> 0:00:37.680 Thursday we learned that the economy actually shrank for a 0:00:37.760 --> 0:00:41.000 second consecutive quarter. We're not going to get into the 0:00:41.000 --> 0:00:44.680 big debate about whether this is or isn't technically a recession, 0:00:44.960 --> 0:00:47.479 or whether it's wise for the Fed to keep jacking 0:00:47.560 --> 0:00:50.000 up rates at a time like this, But what we 0:00:50.040 --> 0:00:52.400 do want to talk about is, well, what exactly should 0:00:52.440 --> 0:00:56.440 investors do in this strange environment we're in. Our guests 0:00:56.440 --> 0:00:59.320 are an investment advisor with a strong Wall Street pedigree, 0:00:59.520 --> 0:01:01.600 as well as one of our own reporters at Bloomberg 0:01:01.720 --> 0:01:04.160 who will help us get the temperature of the sentiment 0:01:04.360 --> 0:01:08.880 among investors out there. But Phil dona Uh. First off, 0:01:09.240 --> 0:01:12.480 speaking of temperature, you know, I like to tease you 0:01:12.600 --> 0:01:15.760 city slickers who live in Manhattan for your lack of 0:01:15.920 --> 0:01:19.680 major appliances. You know, you have to do your own dishes. 0:01:20.120 --> 0:01:22.559 We have to wash our clothes in our bathtubs. Yeah, 0:01:22.920 --> 0:01:25.640 no washer dryer. That's what I do. You just like 0:01:25.760 --> 0:01:29.640 get in the shower fully dressed. Basically you've got like 0:01:29.720 --> 0:01:32.440 your your shampoo, your conditioner, and some tide in there 0:01:32.480 --> 0:01:34.679 and said, and then you hang it up outside so 0:01:34.760 --> 0:01:38.240 you can dry, you know, outside your window. Fascinating. Fascinating. 0:01:38.680 --> 0:01:42.000 Although the other night it occurred to me that in 0:01:42.040 --> 0:01:44.240 the city you are missing out on one of the biggest, 0:01:44.600 --> 0:01:50.200 most annoying headaches of suburban life, especially this summer, is 0:01:50.240 --> 0:01:53.480 it's been so hot and dry. My lawn is just toast. 0:01:53.760 --> 0:01:56.960 It's just completely burnt out. And I'm not a big 0:01:57.040 --> 0:02:00.080 lawn guy. I don't have sprinklers like it used to me. 0:02:00.120 --> 0:02:02.200 I could just go out with the hose and you know, 0:02:02.520 --> 0:02:04.720 wet it down every couple of nights and be fine. 0:02:05.240 --> 0:02:07.160 Most of my neighbors have sprinklers, and I think they 0:02:07.240 --> 0:02:11.119 programmed them to turn on as I'm walking the train. Yeah, 0:02:11.200 --> 0:02:12.760 and then they get get me on the zoom camera. 0:02:12.760 --> 0:02:16.280 I'm pretty sure sure that's what's going on. But it's 0:02:16.320 --> 0:02:19.680 like it's like the dust bowl out there. And I 0:02:19.680 --> 0:02:22.040 gotta say, if you're a suburban dad, this is a 0:02:22.040 --> 0:02:24.520 big deal. This is like, I'm worried the other dads 0:02:24.560 --> 0:02:27.640 are gonna have an intervention with me soon about my lawn. 0:02:28.120 --> 0:02:31.959 I'm it's it's getting traumatic, so looking ugly. In other words, 0:02:32.160 --> 0:02:35.240 it is it is. It's so you you, Um, you've 0:02:35.240 --> 0:02:37.120 got one up on me with that. You can always 0:02:37.160 --> 0:02:39.800 if next time I teach you about um doing your 0:02:39.880 --> 0:02:43.560 laundry in the in the shower, you can get about 0:02:43.600 --> 0:02:46.480 the lawn. I will. But it also made me realize, 0:02:46.520 --> 0:02:49.960 I do think agriculture and this drought and this heat 0:02:50.240 --> 0:02:52.840 um is a big story. And I think we need 0:02:52.880 --> 0:02:56.880 to get a agg trader on the show. Um, maybe 0:02:56.919 --> 0:03:02.359 someone who trades. We were swayed beans lean hog lear 0:03:02.520 --> 0:03:05.160 Hoggs trader on because lean Hoggs are killing it this year. 0:03:05.160 --> 0:03:09.320 They're they're up. Yeah. So if any listeners have ideas, 0:03:09.680 --> 0:03:13.080 uh for some good hog traders for us, by all means, 0:03:13.520 --> 0:03:16.760 tweeted us in the normal places and we'll try to 0:03:16.800 --> 0:03:20.799 get one on. Yes, all recommendations welcome. That's a great idea, Mike, 0:03:21.120 --> 0:03:29.600 all right, My first I think finally ever your first yes, finally, 0:03:30.960 --> 0:03:33.560 but I do want to introduce our guests for this week. 0:03:33.720 --> 0:03:36.440 We have Emily Grafo, she's a Cross Acid reporter with 0:03:36.560 --> 0:03:39.920 us joining us this week. And we also have Mimi Duff. 0:03:40.760 --> 0:03:45.120 She's the managing director and Senior Client Advisor at gen Trust. 0:03:45.400 --> 0:03:48.520 So welcome to both of you. Thank you, thank you, 0:03:48.880 --> 0:03:50.840 And maybe I want to start with you. Maybe you 0:03:50.840 --> 0:03:52.640 can just tell us a little bit about you know, 0:03:52.760 --> 0:03:55.480 Mike mentioned your your Wall Street pedige, tell us a 0:03:55.520 --> 0:03:58.080 little bit about your background, and tell us a little 0:03:58.080 --> 0:04:01.360 bit about what gen Trust is. But but me me first, 0:04:01.400 --> 0:04:05.400 most importantly, how's your law on doing right? Mike? I'm 0:04:05.440 --> 0:04:07.840 now going to be on the lookout for you because 0:04:07.840 --> 0:04:10.840 I don't know where your your property is, but I've 0:04:10.880 --> 0:04:14.640 seen some folks that are in in dire need. Um. 0:04:14.680 --> 0:04:17.479 I'm just glad that my lawn people left about ten 0:04:17.520 --> 0:04:21.320 minutes before this podcast. That's the truth, because it was 0:04:21.320 --> 0:04:26.160 a little loud no law intervention for you. I'm worried. 0:04:26.360 --> 0:04:28.360 I know all the dads in my town are gonna 0:04:28.680 --> 0:04:31.760 show up at my house one night, you know, in 0:04:31.839 --> 0:04:34.040 crisis mode, like what are we going to do about this? Guys? 0:04:34.320 --> 0:04:38.360 But carry on lines point tell us about your background 0:04:38.480 --> 0:04:42.960 and about interruest. Yeah, so your listeners can't see me today, 0:04:43.040 --> 0:04:46.640 but I'm I look a lot younger than I am. 0:04:46.760 --> 0:04:50.599 I have my start on Wall Street in ninety three UM, 0:04:50.640 --> 0:04:54.440 after studying engineering. At that time, they were hiring a 0:04:54.440 --> 0:04:56.760 lot of math and quanti people to go to Wall Street. 0:04:57.160 --> 0:04:59.840 So I was lucky enough to land at Goldman and 0:05:00.000 --> 0:05:03.400 I spent my first eleven years their, first in research 0:05:03.440 --> 0:05:07.279 and then in bond trading, where I traded most types 0:05:07.320 --> 0:05:11.599 of interest rate fixed income products. I spent four years 0:05:11.640 --> 0:05:14.520 in London there and then I joined Barclays to run 0:05:14.560 --> 0:05:18.560 their interest rate swap trading desk. I was there for 0:05:18.560 --> 0:05:21.120 for many years, and then I was at Tutor, which 0:05:21.160 --> 0:05:23.720 is a global macro shop. Then I did a bit 0:05:23.760 --> 0:05:28.360 of consulting and then rejoined some former colleagues at gen Trust. 0:05:28.560 --> 0:05:31.440 So what is gen Trust. It was founded by my 0:05:31.600 --> 0:05:36.720 former colleague about ten years ago UM from Barclays and 0:05:37.320 --> 0:05:40.040 gen Trust is a multi family office r I A 0:05:40.800 --> 0:05:46.599 with the goal of providing sophisticated and importantly independent financial 0:05:46.640 --> 0:05:52.200 management for for wealthy families and small institutions. So the 0:05:52.240 --> 0:05:55.960 difference that we can provide our clients is that we 0:05:56.080 --> 0:05:58.679 bring an institutional approach. We have more than a hundred 0:05:58.680 --> 0:06:03.640 and fifty years of instant tutional trading experience at both 0:06:03.680 --> 0:06:07.719 the major Wall Street firms and hedge funds. And we 0:06:07.839 --> 0:06:12.080 also are transparent and accountable. So that's kind of ore 0:06:12.360 --> 0:06:15.160 the key point. And we managed three billion under management 0:06:15.279 --> 0:06:19.560 right now. Okay, Mimi. Obviously the big news this week 0:06:19.720 --> 0:06:21.680 was the FED. I'm hoping you can just lay out 0:06:21.720 --> 0:06:24.880 for our listeners what exactly we saw from Powell and 0:06:24.920 --> 0:06:29.080 then what you are expecting we see going forward. Yeah, 0:06:29.160 --> 0:06:31.720 so the FED is on the most aggressive rate path 0:06:31.800 --> 0:06:37.200 that we've seen in since easily. UM. Coming into the year, 0:06:37.760 --> 0:06:41.359 people were expecting three rate hikes or seventy five basis 0:06:41.400 --> 0:06:45.479 points for the whole year UM FED funds. We've already 0:06:45.520 --> 0:06:50.000 seen three significant rate heights, the last two seventy five clips. 0:06:50.120 --> 0:06:54.360 Those are that's three quarters of a percentage point each UM. 0:06:54.800 --> 0:06:58.960 And what we're dealing with is a very strong inflationary environment. 0:06:59.000 --> 0:07:02.160 I think most most listeners know that the groceries cost 0:07:02.200 --> 0:07:04.159 a lot more and the gas costs a lot more. 0:07:04.800 --> 0:07:06.760 And at the end of the day, the Federal Reserve, 0:07:06.960 --> 0:07:10.640 the US Federal Reserve has a dual mandate of maintaining 0:07:10.720 --> 0:07:16.200 maximum employment but also maintaining price stability, and their inflation 0:07:16.240 --> 0:07:20.680 goal is two percent. So cp I all items is 0:07:20.760 --> 0:07:25.560 running at nine point one percent UM for PC which 0:07:25.600 --> 0:07:29.480 is another key metric that they watch. And we we 0:07:29.600 --> 0:07:33.040 have that data print tomorrow. That's way you know. I 0:07:33.040 --> 0:07:35.440 think it was four point seven percent last month, but 0:07:35.520 --> 0:07:39.400 we'll we'll wait for tomorrow's data points. So inflation is 0:07:39.400 --> 0:07:43.000 is missing on the top side, so demonstrably that the 0:07:43.000 --> 0:07:45.960 FED is putting that front and foremost. And I would 0:07:46.000 --> 0:07:48.680 add also that it's not a US problem, right the 0:07:48.720 --> 0:07:52.760 Europeans are also dealing with very high inflation. European central 0:07:52.760 --> 0:07:58.200 Bank is a single mandate central bank inflation for instance. So, um, 0:07:58.400 --> 0:08:01.840 we're going through a lot out of supply constraints. Are 0:08:02.480 --> 0:08:05.160 are contributing to the problem. I don't think it's the 0:08:05.240 --> 0:08:09.640 single contribution there, But the FET is really putting this 0:08:09.800 --> 0:08:15.080 for first and foremost, and um, they're putting it first rightly. 0:08:15.160 --> 0:08:18.240 So and I think, you know, somebody asked Powell a 0:08:18.360 --> 0:08:21.360 question yesterday basically do you think it started too late? 0:08:22.000 --> 0:08:26.000 And he said he probably would have done things differently 0:08:26.080 --> 0:08:30.480 knowing what he knows. Now, Um, the you know, at 0:08:30.520 --> 0:08:32.120 the start of the year, we weren't looking at the 0:08:32.160 --> 0:08:37.480 Russia Ukraine situation. But he you know, he also added, 0:08:37.520 --> 0:08:40.600 would it have helped if he started three months earlier? 0:08:40.920 --> 0:08:43.440 Not clear. They're on the job right now. I think 0:08:43.480 --> 0:08:47.080 that markets recognize that. Yeah, maybe I wanted to lean 0:08:47.160 --> 0:08:51.480 into your background in the fixed income markets a little bit, um, 0:08:51.559 --> 0:08:54.160 because one thing that's called my attention is these break 0:08:54.240 --> 0:08:57.800 even rates UM, which for you know, the unfamiliar basically 0:08:58.160 --> 0:09:01.360 the bond market's best guests out where inflation will be 0:09:01.600 --> 0:09:04.200 over the next five or ten or or however many years. 0:09:04.720 --> 0:09:06.920 And if looking at them at least looking at five 0:09:07.000 --> 0:09:11.040 years especially UM, they've come down quite a bit um. 0:09:11.120 --> 0:09:13.719 And when you combine it with stuff like the University 0:09:13.720 --> 0:09:17.959 of Michigan uh sentiment and their question about inflation, and 0:09:18.080 --> 0:09:22.360 just you know, the price action we've seen in commodities 0:09:22.640 --> 0:09:26.160 in the last month or two UM, it does sort 0:09:26.200 --> 0:09:28.440 of all add up to the idea that maybe the 0:09:28.520 --> 0:09:32.480 fever has broken with inflation figures crossed, knock on wood, 0:09:32.800 --> 0:09:36.400 you know, and everything else. How are you thinking about that, especially, 0:09:36.520 --> 0:09:38.599 you know, viewing it through the lens of of a 0:09:38.800 --> 0:09:42.319 sort of a bond market expert, yeah, So I think 0:09:42.360 --> 0:09:44.200 your point is a good one, that the market at 0:09:44.280 --> 0:09:48.360 least is perceiving that longer term inflation is more under 0:09:48.360 --> 0:09:53.920 control and UM, just to put it in perspective, we 0:09:53.920 --> 0:09:57.240 were long something called TIPS, which is, you know, an 0:09:57.240 --> 0:10:03.320 inflationary bond UM early last year, throughout most of last year, 0:10:03.520 --> 0:10:08.120 ten year break evens got to three and we felt like, wow, 0:10:08.200 --> 0:10:12.240 that means the market is implying that the average inflation 0:10:12.440 --> 0:10:15.120 over the next ten years is going to be three percent, 0:10:15.360 --> 0:10:18.400 knowing that the Fed's mandate is two percent. So we 0:10:18.480 --> 0:10:21.200 felt like at that point the market had really woken 0:10:21.320 --> 0:10:24.760 up to the inflationary pressures. Since then, we've come way 0:10:24.800 --> 0:10:29.960 down UM to you know, lower two handles really and 0:10:30.200 --> 0:10:35.120 to your point, even the one year inflation break events 0:10:35.440 --> 0:10:42.840 show market decreases in expectations at least for UH for 0:10:43.240 --> 0:10:48.240 overall inflation. Now, these break evens, they're based off of 0:10:48.400 --> 0:10:52.480 TIPS pricing, which is an all items cp I. It 0:10:52.600 --> 0:10:58.320 does include all the volatile components of of UM, food 0:10:58.400 --> 0:11:02.680 and energy. And to your point that we are off 0:11:02.720 --> 0:11:05.839 the boil on some of the energy sectors, but food 0:11:05.840 --> 0:11:09.320 and inflation is still carrying on. So I guess on 0:11:09.400 --> 0:11:13.040 the margin, I would say that maybe even the market 0:11:13.080 --> 0:11:16.520 has almost too much confidence that everything's gonna come right 0:11:16.520 --> 0:11:20.560 back down into control in the next year. Having said that, 0:11:21.320 --> 0:11:24.080 we know that their recession risks are a little higher 0:11:24.120 --> 0:11:27.720 than any other day of the of your lifetime, let's say. 0:11:27.760 --> 0:11:30.120 And the truth is, tips don't trade so well in 0:11:30.200 --> 0:11:35.560 recessionary environments, so we don't have a strong opinion they're 0:11:35.600 --> 0:11:38.199 out of our benchmark. We had them in the portfolios 0:11:38.240 --> 0:11:40.960 for a long time, and we took them off when 0:11:41.000 --> 0:11:43.920 those tenure break events got to three percent. We felt 0:11:43.960 --> 0:11:47.040 like okay. But on the margin, I would say maybe 0:11:47.720 --> 0:11:52.000 the market perception of the Fed's ability to control inflation 0:11:52.080 --> 0:11:54.400 over the very near term one or two years is 0:11:55.240 --> 0:11:59.160 could be a little over optimistic, but there is this 0:11:59.280 --> 0:12:02.360 risk of RECESSI then out there and Emily, I want 0:12:02.400 --> 0:12:04.720 to bring you in. You and I obviously spent a 0:12:04.760 --> 0:12:07.640 lot of time talking to people like Mimi, talking to 0:12:07.720 --> 0:12:10.120 strategies and money managers, and I want to get a 0:12:10.160 --> 0:12:12.839 sense from you of the sense you're getting from them, 0:12:12.880 --> 0:12:15.440 of how how you know what they're seeing in in 0:12:15.760 --> 0:12:20.959 markets generally speaking, I mean certainly generally speaking, this has 0:12:21.080 --> 0:12:24.480 absolutely been a very tough year to navigate. But some 0:12:24.600 --> 0:12:27.920 of the portfolio managers that I speak with are now saying, 0:12:28.559 --> 0:12:31.320 you know, while we don't, we haven't hit a stock 0:12:31.440 --> 0:12:34.400 bottom yet. This is maybe a good time for investors 0:12:34.400 --> 0:12:38.280 with a longer term time horizon to start adding to 0:12:38.440 --> 0:12:41.640 some positions in names that have been beaten down so much, 0:12:41.960 --> 0:12:45.920 particularly in mega cat tech. And there's some other strategists 0:12:45.920 --> 0:12:48.520 who say maybe fixed income, now that yields are rising, 0:12:48.559 --> 0:12:51.240 there warming up to that sector just a little bit. 0:12:51.640 --> 0:12:55.360 But by and large, there's still uncertainty regarding what in 0:12:55.520 --> 0:12:59.040 economic recession would mean for risk assets. And if we 0:12:59.160 --> 0:13:01.560 get that recess shin, is it going to be a 0:13:01.600 --> 0:13:04.160 short lived one or is it going to be something 0:13:04.200 --> 0:13:07.640 more painful and longer. How about you, Mimi, what are 0:13:07.679 --> 0:13:09.560 what are you warming up to? I mean, it's been 0:13:09.600 --> 0:13:12.960 a year where everything's been down, stocks, bonds, credit, everything 0:13:13.000 --> 0:13:19.000 but oil obviously. Uh, when everything's down, it seems to 0:13:19.000 --> 0:13:22.400 me a trick environment to pick a bottom and anything 0:13:22.480 --> 0:13:24.720 is Is there any asset class or any sectors that 0:13:24.760 --> 0:13:26.960 are standing out to you as as the place to 0:13:26.960 --> 0:13:29.560 overweight these days? Maybe maybe you and I need to 0:13:29.679 --> 0:13:34.320 rename the podcast Mike to What Goes Down? That will 0:13:34.360 --> 0:13:41.120 be too confusing. Well, when everything's down, we see opportunity 0:13:41.160 --> 0:13:45.080 because we really, at our heart a bunch of you know, 0:13:45.720 --> 0:13:50.080 risk takers from Wall Street, although we're managing long term, 0:13:50.200 --> 0:13:54.520 long only money. So these entry points are so much 0:13:54.559 --> 0:13:59.160 better than less falls entry points for somebody with a 0:13:59.160 --> 0:14:03.120 tenure horizon, and um baskets of bonds can be bought 0:14:03.240 --> 0:14:06.280 for yields. You know, with the ten year yield just 0:14:06.440 --> 0:14:09.560 south of to seventy. Now, you know, you could probably 0:14:09.600 --> 0:14:14.080 buy a basket of diversified bonds closer to three seventy yield. 0:14:14.240 --> 0:14:16.200 That's a heck of a lot better than it was 0:14:16.280 --> 0:14:20.640 when spreads were so much tighter outright, Treasury base yields 0:14:20.680 --> 0:14:24.120 were so much lower last summer. On the equity side, 0:14:24.480 --> 0:14:28.600 these draw downs that we've seen, like we saw earlier 0:14:28.640 --> 0:14:32.560 this year, they're fairly common every three or four years, right, 0:14:32.640 --> 0:14:35.760 The bigger draw downs in the zip code of thirty 0:14:35.880 --> 0:14:39.320 or more percent, those typically come with the recession or 0:14:39.400 --> 0:14:44.080 something a bit more existential. Right, So we've squared up. 0:14:44.160 --> 0:14:50.640 We came into the year very um convicted towards higher rates. 0:14:51.160 --> 0:14:55.120 We didn't like equity valuations. We hated tech valuations because 0:14:55.120 --> 0:14:58.840 we felt like the higher both crowded positioning and higher 0:14:58.920 --> 0:15:02.440 rates really could a number on them. So uh, and 0:15:02.640 --> 0:15:07.080 long real assets overweight real assets, which we typically have 0:15:07.360 --> 0:15:12.000 some baseline percentage of real assets and everybody's portfolios, and 0:15:12.040 --> 0:15:16.160 we've really squared up to neutral across the board now. Um, 0:15:16.200 --> 0:15:20.680 in terms of pockets of really interesting stuff. Biotech got 0:15:20.920 --> 0:15:25.120 so cheap that more than of the names in the 0:15:25.200 --> 0:15:29.320 index were training they had more cash on their balance 0:15:29.360 --> 0:15:32.960 sheets than their market cap. So in terms of like 0:15:33.120 --> 0:15:37.280 cheap sectors, we really think that the biotech definitely fulfilled 0:15:37.440 --> 0:15:42.080 that that UM goal. Um, we've you know, we like 0:15:42.200 --> 0:15:46.680 some other thematic trades over a longer term, uh, like 0:15:47.000 --> 0:15:51.480 a clean energy theme. We really feel like, um, there 0:15:51.520 --> 0:15:56.240 was an energy transition going on, albeit slowly before the 0:15:56.320 --> 0:16:00.520 Russia Ukraine UM conflict, But of any thing, it's just 0:16:00.600 --> 0:16:05.680 accelerated the need for further clean energy and energy diversification. 0:16:06.280 --> 0:16:09.960 But overall, we love Entry now for putting money to 0:16:10.040 --> 0:16:12.720 work over a longer term horizon. Our job is so 0:16:12.800 --> 0:16:17.960 much easier to navigate these longer term themes. And speaking 0:16:18.000 --> 0:16:22.360 to your question about recessionary fears, yes, risk of recession 0:16:22.480 --> 0:16:26.400 is absolutely higher given that the FED is going through 0:16:26.480 --> 0:16:30.600 one of the most aggressive rate hike campaigns that we've 0:16:30.640 --> 0:16:34.960 seen in our lifetime. Having said that, you know, the 0:16:35.680 --> 0:16:39.960 labor markets coming from a super strong place, the balance 0:16:40.000 --> 0:16:43.560 sheets from households and corporates are are really short up, 0:16:43.920 --> 0:16:47.680 and so we do feel like if we get a recession, 0:16:47.720 --> 0:16:57.880 it doesn't have to necessarily be a deep one. Yeah. 0:16:58.000 --> 0:17:00.440 I'd love to unpack that idea about by O tech 0:17:00.560 --> 0:17:03.600 a little bit because it's kind of a fascinating sector, 0:17:03.720 --> 0:17:07.240 especially when you drill down to the smaller, sort of 0:17:07.320 --> 0:17:11.040 unproven experimental companies in this space. You know, I feel 0:17:11.080 --> 0:17:13.680 like you can wake up one day and and one 0:17:13.680 --> 0:17:18.359 of these random biotechs has a release out on on 0:17:18.400 --> 0:17:22.120 the phase whatever trial, and you know, the stock either 0:17:22.119 --> 0:17:25.520 goes up. So how you know is it a matter 0:17:25.640 --> 0:17:28.800 of just sort of buying them all or buying a 0:17:28.800 --> 0:17:31.880 big basket of them or there are certain names, um 0:17:32.359 --> 0:17:34.200 they stick out. You do you stick with this sort 0:17:34.240 --> 0:17:36.760 of tried and true leaders of the industry or just 0:17:37.400 --> 0:17:40.600 kind of play the lottery and buy them all at once. Yeah, 0:17:40.680 --> 0:17:42.920 So I'm glad you asked that question because I want 0:17:42.920 --> 0:17:46.000 to clear something up that we're not stock pickers um 0:17:46.640 --> 0:17:51.240 and most stock pickers don't outperform their indsease. So uh 0:17:51.400 --> 0:17:53.560 Steva has a great report on that if you want 0:17:53.560 --> 0:17:56.240 to see some interesting pie charts of like the narrow 0:17:56.280 --> 0:17:59.200 sliver of the folks that actually can outperform their in disease. 0:17:59.760 --> 0:18:04.760 So we really do believe in assets selection UM at 0:18:04.760 --> 0:18:10.040 a broad level, diversification UM, and and primarily we invest 0:18:10.119 --> 0:18:13.159 in e t s which for individual investors are so 0:18:13.240 --> 0:18:17.040 much more tax advantaged. So UM. Now I do want 0:18:17.040 --> 0:18:20.320 to add another feature to what's going on in the 0:18:20.400 --> 0:18:25.920 overall technology sector. Rates are so far off their highs, right, 0:18:26.040 --> 0:18:28.800 So ten year rates were up a three fifty. Now 0:18:28.800 --> 0:18:31.479 we're south to seventy and that's really been a global 0:18:31.520 --> 0:18:33.920 phenomenon to I want to I want to make that 0:18:34.040 --> 0:18:37.719 point as well. But more stable rates can help these 0:18:37.920 --> 0:18:42.879 kind of higher growth names stabilize as well. Right, like 0:18:43.000 --> 0:18:45.159 some of the stuff that we saw earlier in the 0:18:45.240 --> 0:18:48.639 year with some of the single name tex stocks down 0:18:49.160 --> 0:18:54.040 you know, ten to really from their peaks accelerating to 0:18:54.080 --> 0:18:56.880 the downside with the rate moves. I think that that 0:18:56.960 --> 0:19:00.399 chapter's kind of behind us right now, at least in 0:19:00.440 --> 0:19:03.639 the very near term. And then we me in the 0:19:03.720 --> 0:19:06.960 notes you had sent over before we started the podcast. 0:19:07.000 --> 0:19:09.840 I think you also said you like commodities, and I'm 0:19:09.840 --> 0:19:12.840 hoping you can tell us a little bit more about that. Yeah, 0:19:12.880 --> 0:19:15.959 so we like real assets and commodities in general and 0:19:16.000 --> 0:19:20.160 portfolios just because we think it provides a longer term 0:19:20.160 --> 0:19:23.600 inflation hedge. Again back to the thematic, were long term 0:19:23.800 --> 0:19:28.240 long only investors. UM. We did take off. We had 0:19:28.359 --> 0:19:31.760 overweights on coming into the year because we think that 0:19:31.840 --> 0:19:36.080 in addition to this Russia Ukraine crisis and addition to 0:19:36.400 --> 0:19:42.159 the some of the supply constraints that are going on, 0:19:42.320 --> 0:19:46.840 there's some other factors under the surface, UM shifts in 0:19:46.960 --> 0:19:51.760 labor supply, UM, that sort of thing that really are 0:19:51.840 --> 0:19:57.320 driving kind of a more longer term inflationary backdrop. So 0:19:57.400 --> 0:20:01.119 we had those on. Prices got to pretty crazy levels. 0:20:01.160 --> 0:20:04.800 We've taken overweights off. We're not prepared to go underweight 0:20:04.840 --> 0:20:08.040 here because some of these structural factors, like is the 0:20:08.080 --> 0:20:11.280 workforce going all the folks that left the workforce, are 0:20:11.320 --> 0:20:14.760 they coming back? I don't know. Like the market, the 0:20:14.880 --> 0:20:18.480 labor market is super super tight right now, and you'd 0:20:18.480 --> 0:20:23.960 think with payrolls with with UM employment cost index also 0:20:24.000 --> 0:20:27.520 has been continuing to rise. We'll see that data point tomorrow. 0:20:28.400 --> 0:20:31.120 But are these folks coming back? We have we need 0:20:31.240 --> 0:20:34.680 time defend needs time to I'll add right like the chair, 0:20:34.680 --> 0:20:38.159 Powell made it really clear that he's got eight weeks 0:20:38.200 --> 0:20:40.399 of data in between this meeting and the next meeting 0:20:40.400 --> 0:20:43.600 and he doesn't want to commit to anything. So that's 0:20:44.000 --> 0:20:46.600 on back to your actual question that you asked. We 0:20:46.680 --> 0:20:50.520 do think that real assets are an important part of 0:20:50.880 --> 0:20:55.359 long term portfolios. Having said that, we don't UM. We 0:20:55.440 --> 0:20:57.600 don't go and buy a bunch of front month oil 0:20:57.760 --> 0:21:00.399 for our clients. It's just not the business that in 0:21:01.560 --> 0:21:09.320 We're choosing some investments in agrabusiness, in precious metals, in UM, 0:21:09.359 --> 0:21:13.960 in the producers of energy. Uh, just a broader set 0:21:14.240 --> 0:21:20.960 of um of assets that frankly don't exhibit the volatility 0:21:21.000 --> 0:21:23.960 of say the G s c I, which is the 0:21:24.000 --> 0:21:27.720 primary index in the commodities, but is heavily driven to 0:21:27.840 --> 0:21:32.440 front month oil contracts and massive swings. So it's more 0:21:32.680 --> 0:21:39.520 of an appropriateness to hedge against longer term inflation MENI. 0:21:39.880 --> 0:21:42.440 On the commodities front, I know one of the commodities 0:21:42.440 --> 0:21:45.000 you like is uranium, and I'd love for you to 0:21:45.040 --> 0:21:47.520 talk a little bit more about why you like uranium 0:21:47.600 --> 0:21:50.760 and then how you're allocating to it. Is it through 0:21:51.400 --> 0:21:54.680 uranium linked equities or some of these vehicles out there 0:21:54.720 --> 0:21:57.320 that are a little bit more directly tied to the 0:21:57.359 --> 0:22:00.960 price of the commodity itself. Yea. So we're in a 0:22:01.119 --> 0:22:05.800 uranium E TA and UM and the idea behind that 0:22:05.960 --> 0:22:10.200 is it goes along the lines of the energy independence theme. 0:22:10.760 --> 0:22:15.959 Uranium is UM is an important in uh instrument in 0:22:16.520 --> 0:22:21.879 nuclear energy and UM. We also we sort of picked 0:22:21.880 --> 0:22:24.040 it up on the cheap, I'll tell you that, Like 0:22:24.080 --> 0:22:26.480 we've it's been in our portfolios for some time. But 0:22:26.600 --> 0:22:29.919 we like the clean energy and energy independence themes and 0:22:30.000 --> 0:22:32.520 that really ties in there. And in terms of how 0:22:32.560 --> 0:22:35.440 we're allocating, like we're just again going back to the 0:22:35.800 --> 0:22:38.760 idea of diversification. We don't really bet the farm on 0:22:38.800 --> 0:22:41.159 any one thing. It's just not the business we're in. 0:22:41.720 --> 0:22:44.320 So what we will try to do is express a 0:22:44.400 --> 0:22:48.879 theme through several different ways. And like for instance, in 0:22:48.960 --> 0:22:53.720 the higher rates theme, we were long regional banks as 0:22:53.800 --> 0:22:56.200 one of the as one of the ways to express 0:22:56.280 --> 0:22:59.760 that theme. And while if you look at a chart 0:22:59.800 --> 0:23:03.840 of reasonal banks doesn't look also grand, it actually has 0:23:03.920 --> 0:23:08.600 been outperforming some of the broader in disease. So it's 0:23:08.640 --> 0:23:12.480 done less poorly, if you will. So what we try 0:23:12.560 --> 0:23:16.240 to try to pick up a theme in several ways. 0:23:17.240 --> 0:23:19.600 Yeah wait, So so you're telling me you're not willing 0:23:19.640 --> 0:23:23.080 to take except physical delivery of uranium, that that would 0:23:23.080 --> 0:23:25.359 really be bad for your law And I think I 0:23:25.840 --> 0:23:28.520 was going to suggest we dropped some off for you, Mike, Well, 0:23:28.600 --> 0:23:33.000 thank you, a little thank you. Note. Well, I, you know, 0:23:33.119 --> 0:23:38.320 energy is such an important theme this year, and energy independence. Um, 0:23:38.359 --> 0:23:41.400 I guess part of the thesis there's that maybe countries 0:23:41.440 --> 0:23:45.399 like Germany will will restart those those power plants that 0:23:45.440 --> 0:23:48.840 they shut down years ago, and maybe other countries as 0:23:48.880 --> 0:23:51.800 will too. But I can't help thinking there's sort of 0:23:51.800 --> 0:23:55.119 this race against the clock right now in Europe. Um 0:23:55.160 --> 0:24:00.840 as far as uh you know, winner is approaching, uh, 0:24:00.880 --> 0:24:05.560 you know, very quickly. Vladimir Putin basically can turn the 0:24:05.640 --> 0:24:08.760 spec ITTs on and off with the natural gas. How 0:24:08.800 --> 0:24:14.040 big of a risk, um is an intensifying energy crunch 0:24:14.160 --> 0:24:16.520 in Europe? Do you think to to not just Europe, 0:24:16.640 --> 0:24:18.800 to our own economy, in the US and really the 0:24:18.920 --> 0:24:23.200 entire world. It's a big risk. It's a big risk. 0:24:23.440 --> 0:24:25.560 I mean, we've just seen what a hot summer looks like. 0:24:25.600 --> 0:24:29.360 What if we see what a really cold winter looks like? Um? 0:24:29.960 --> 0:24:35.080 And uh, the Europeans reliance on natural gas is massive 0:24:35.800 --> 0:24:42.200 and putin is unpredictable, so UM, I know, I think 0:24:42.280 --> 0:24:44.920 that's a it is a bit of a race against time. 0:24:44.960 --> 0:24:49.520 But there's the short term, near term pressures, and then 0:24:49.560 --> 0:24:54.760 I think that there's the longer term um thesis as well, 0:24:54.840 --> 0:24:59.239 with summers continuing to get hotter and natural disasters, you know, 0:24:59.320 --> 0:25:03.760 popping up more and more often forest fires. So I 0:25:04.200 --> 0:25:07.320 think I think we have both a short term and 0:25:07.680 --> 0:25:10.040 a longer term dynamic at play here, and I think 0:25:10.040 --> 0:25:12.800