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Speaker 1: Let's get to our guest. It's Michael Cogno. Has mentioned

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Speaker 1: president and PM at the Permanent Portfolio family of funds.

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Speaker 1: So it's a double headed dragon, or perhaps we should

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Speaker 1: say a two headed bull here, Michael. The two massive

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Speaker 1: positives the FED signaling that slower pace of rate hikes

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Speaker 1: and China moving away from COVID zero. As I mentioned

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Speaker 1: in all but name now, we all know there are qualifications.

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Speaker 1: Many people will fight the conclusions here, but investors seem

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Speaker 1: on board. Should they be in? Are you yeah? Good morning,

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Speaker 1: Brian Um. On the first point, I think J. Powell

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Speaker 1: gave the market's exactly what they were hoping to hear. Um.

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Speaker 1: It was pretty clear and concise. So I think anything

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Speaker 1: other than what was said today will really surprise the

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Speaker 1: markets on the point with China, and probably surprised to

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Speaker 1: the negative if rate increases are higher than than what

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Speaker 1: he communicated today. On the China front. I mean, I

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Speaker 1: don't know what to think zero, COVID moving away from it,

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Speaker 1: moving towards it law down to mean. What I probably believe,

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Speaker 1: since I don't trust a lot of verbiage coming out

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Speaker 1: of there, is what I see in the news, Um,

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Speaker 1: and I see a lot of people in the streets

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Speaker 1: protesting something, and it's likely that they have had their

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Speaker 1: lives taken away from them for the last couple of years.

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Speaker 1: And I'm not sure what happens there. Um it's one

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Speaker 1: of the big political risks in China. Um. If that

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Speaker 1: population cannot be controlled or revolts against the form of

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Speaker 1: government that they have over there, that has big And

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Speaker 1: I'm not putting the cart before the horse. They have

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Speaker 1: a way of, you know, clamping down on these things.

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Speaker 1: But to the extent there's unrest in China that affects

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Speaker 1: the global economy tremendously and the U S economy tremendously. Yeah, Michael,

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Speaker 1: the it does seem as that it's very just have

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Speaker 1: died down at the time being given the police presidents.

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Speaker 1: But I want to get to you comments about j

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Speaker 1: Powell here. I mean, surely people did and did anticipate

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Speaker 1: he was going to say a moderation in in the increase,

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Speaker 1: a moderate rate of increases. I should say here as well,

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Speaker 1: coming up for the cost of barring there in the US,

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Speaker 1: why didn't markets actually positivity I'm talking about the equity

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Speaker 1: market in particular, given that that was already factored in. Well,

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Speaker 1: that was the market's belief, that was conventional wisdom. But

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Speaker 1: you also had people that was a fit governor I believe,

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Speaker 1: talking about a week and a half two weeks ago,

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Speaker 1: saying that the terminal rate could go between five and

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Speaker 1: seven percent UM. And so there was enough uncertainty really

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Speaker 1: to keep everybody on edge. And this this speech today

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Speaker 1: and subsequent Q and A really took some of the

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Speaker 1: mystery out of at least what they expect to do

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Speaker 1: in this month or so. Michael tell us about Gobel

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Speaker 1: growth at a reasonable price. How well, that's so difficult

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Speaker 1: to just get right, it is, especially in an environment

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Speaker 1: like this. Um, you know, the equity market is certainly

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Speaker 1: cheaper than it has been previously. Uh, this this rally notwithstanding,

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Speaker 1: but there's also a reason for it. Earning estimates have

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Speaker 1: come down. There was some frop in some of the valuations,

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Speaker 1: especially higher price you know, price to sales type stocks

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Speaker 1: in certain industries and so um, you know, it's more attractive,

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Speaker 1: but there's also macro concerns out there that still really

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Speaker 1: haven't gone away despite this rally. I mean, this rally

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Speaker 1: is not really one based on fundamentals. It's based on Uh,

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Speaker 1: monetary policy or potential monetary policy and expected effects from

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Speaker 1: that policy. Um, more than anything fundamental I I and

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Speaker 1: the economy is is running into some some headwinds. I think, Um,

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Speaker 1: so this may be short lived with more pain to

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Speaker 1: come next year. We just don't know. Um, but we

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Speaker 1: still haven't seen the impact of all these rate hikes.

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Speaker 1: But the geo you know, the geo political environment globally

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Speaker 1: is not good right now. UM, and you have likely

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Speaker 1: recessions in a lot of places, including possibly the US.

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Speaker 1: UM And so uh, actual investors need to be a

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Speaker 1: full So Michael, is the real bet still? Then? Uh?

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Speaker 1: Does the FED pull this off? You know, they've made

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Speaker 1: a lot of rate hikes and there's a lot that's

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Speaker 1: you know, kind of in the channel. If they went

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Speaker 1: too far and we have a recession, then these rallies

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Speaker 1: now will go away. Uh. Is that what you've been on?

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Speaker 1: Or do you bet on? Do you get opportunistic here? Well,

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Speaker 1: I mean you're always opportunistic, but I think it really

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Speaker 1: depends on what they're after. UM. You know, I still

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Speaker 1: hear two percent inflation being thrown around and maybe a

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Speaker 1: terminal rate of five percent or four and a half

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Speaker 1: and maybe we'll sit there for a while. Um, it

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Speaker 1: certainly makes sense to scale back a little bit and

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Speaker 1: wait and see what happens. As as the effect of

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Speaker 1: this very aggressive raising rate campaign occurred this year, we

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Speaker 1: still don't know the impact of that. However, my own

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Speaker 1: view is that inflation should come down, yes, because we're

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Speaker 1: not flooding the economy with money anymore, and uh, supply

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Speaker 1: chain issues are getting resolved, and uh, you know, material

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Speaker 1: inflation is coming down a little bit. Labor labor, we

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Speaker 1: just don't know based on the inconsistent you know, numbers

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Speaker 1: between jobs available and and you know, people working in

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Speaker 1: the mobility of labor, etcetera, etcetera. So we don't know

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Speaker 1: what's happening there. But I suspect that inflation may come

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Speaker 1: down more stubbornly and it may not go down to

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Speaker 1: two percent and maybe you know, five six, in which case, um,

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Speaker 1: depending on what you want your money monetary policy to be,

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Speaker 1: is four and a half to five and funds appropriate

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Speaker 1: or it's still too loose. We just don't know yet.

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Speaker 1: So I think there's a lot of uncertainty there that

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Speaker 1: still needs to be ironed out. UM. But certainly the market,

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Speaker 1: especially equity investors and bron investors today, UM took this

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Speaker 1: as good news that maybe the aggressive nature of the

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Speaker 1: hikes is slowing down and we're gonna adopt more wait

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Speaker 1: and see. Um, I think they'd be crazy to cut,

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Speaker 1: and I hope they're not cutting anytime soon. UM. That

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Speaker 1: gets herkey jerky and it reminds me of the nineteen seventies,

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Speaker 1: So I really not want to see that. Well, you

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Speaker 1: must be finding, you know, with the uncertain there is

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Speaker 1: out there that there are probably some very good investment

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Speaker 1: grade or perhaps just at the top end of the

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Speaker 1: high yield space opportunities. Well, there certainly is in the

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Speaker 1: bond market. We've been looking at our We run very

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Speaker 1: low duration in the last couple of years, UM, so

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Speaker 1: we've been able to take advantage of the higher rates

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Speaker 1: quicker than maybe some other people on the bond side

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Speaker 1: and would paid attention to balance sheets that we're all

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Speaker 1: investment grade. So you know, we're certainly seen opportunities all

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Speaker 1: over the map in terms of corporate credits. The question

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Speaker 1: there will be at what point do you start to

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Speaker 1: lengthen duration? And I think anybody that's involved in bonds

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Speaker 1: is looking at that issue. On the equity side. UM,

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Speaker 1: there's always opportunities, and I think it's just more stop specific,

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Speaker 1: it's more industry specific. There are areas that we're long

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Speaker 1: term investors, so we think, you know, more broadly and

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Speaker 1: multiply year periods. So I see some industry groups like

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Speaker 1: the energy, like the materials and commodities that really have

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Speaker 1: a great macro story out there. But you're gonna to

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Speaker 1: be patient, UM and lived through some volatility and maybe

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Speaker 1: not you know, things going in one direction. Financials, I

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Speaker 1: think we're good at some of the industrial Michael Kagina,

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Speaker 1: their president and the portfolio manager the Permanent Portfolio family

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Speaker 1: of funds