WEBVTT - A "Rip Your Face Off Rally" 0:00:02.520 --> 0:00:07.040 Bloomberg Audio Studios, Podcasts, radio News. 0:00:08.880 --> 0:00:13.240 This is Bloomberg business Week Daily reporting from the magazine 0:00:13.240 --> 0:00:17.840 that helps global leaders stay ahead with insight on the people, companies, 0:00:17.880 --> 0:00:22.760 and trends shaping today's complex economy. Plus global business, finance 0:00:22.800 --> 0:00:26.120 and tech news as it happens. The Bloomberg Business Week 0:00:26.239 --> 0:00:31.720 Daily Podcast with Carol Masser and Tim Stenebek on Bloomberg Radio. 0:00:32.280 --> 0:00:34.360 A rally is one way to put it. Maybe Vince 0:00:34.400 --> 0:00:36.560 Signerello would call it a rip your face off rally. 0:00:36.560 --> 0:00:40.120 The Nasdaq can posit higher by ten point nine percent, 0:00:40.159 --> 0:00:41.600 the S and P five hundred up by eight and 0:00:41.640 --> 0:00:44.000 a half percent, the dowd Jones Industrial average up by 0:00:44.040 --> 0:00:46.600 seven point four percent. I do want to bring in 0:00:46.680 --> 0:00:49.479 Vince Signerello. He's Bloomberg News macro strategist. He joins us 0:00:49.479 --> 0:00:52.519 this afternoon from White Plains. How do you describe the 0:00:52.560 --> 0:00:53.880 market action the tape today? 0:00:55.320 --> 0:00:58.200 I've ripping your face off a really, really good way 0:00:58.240 --> 0:01:00.959 to put it. Put it, Tim, I mean, this is 0:01:02.240 --> 0:01:04.560 you know, I've often get asked by traders, what was 0:01:04.560 --> 0:01:06.679 it like trading in the eighties? And this is about 0:01:06.720 --> 0:01:09.679 as close as I've seen it in a very very 0:01:09.760 --> 0:01:10.479 very long time. 0:01:10.800 --> 0:01:14.320 So for those who weren't around in the eighties, we 0:01:14.319 --> 0:01:17.080 were what does that mean? 0:01:18.120 --> 0:01:21.800 The volatility was fantastic. I mean you you know, you 0:01:21.840 --> 0:01:24.560 have to remember this is pre euro so you had 0:01:24.680 --> 0:01:29.080 well every country had their own currency, and there were 0:01:29.160 --> 0:01:32.200 days where you could see the German mark move ten 0:01:32.240 --> 0:01:35.840 big figures up, ten big figures down, then five or 0:01:35.880 --> 0:01:38.280 six up again, back and forth, like I mean, you 0:01:38.280 --> 0:01:41.640 could see a thirty big figure day in one day, 0:01:41.680 --> 0:01:44.280 back and forth. I was trading cable during the eighties 0:01:44.280 --> 0:01:47.960 after Maggie announced her reelection and Sterley went from this 0:01:48.200 --> 0:01:52.040 very sleepy currency to moving three, four, five big figures 0:01:52.040 --> 0:01:55.080 in a day. And to put that in perspective, just 0:01:55.120 --> 0:01:58.000 a one million pound position on five big figures is 0:01:58.000 --> 0:02:01.640 a fifty thousand dollar chain and l so when you're 0:02:01.680 --> 0:02:05.160 trading fifty to one hundred million pounds, you can imagine 0:02:05.160 --> 0:02:06.600 that if you get that wrong, you could give a 0:02:06.600 --> 0:02:10.040 bank away in a heartbeat. So you know, we haven't 0:02:10.080 --> 0:02:15.600 seen anything like that until literally this week, and I'm tired. 0:02:16.520 --> 0:02:18.600 Well it's only Wednesday, Vince. You got a couple more 0:02:18.680 --> 0:02:22.400 days to go here, hey, Gina Martin Adams said, a 0:02:22.400 --> 0:02:24.400 move such as this concerns her, whether it's to the 0:02:24.520 --> 0:02:26.840 upside or whether it is to the downside. This doesn't 0:02:26.880 --> 0:02:28.959 make her any less concerned about the direction of the 0:02:29.040 --> 0:02:31.600 US economy, about what earnings we're going to get as 0:02:31.639 --> 0:02:34.440 companies start to report. We heard from Delta earlier today, 0:02:34.440 --> 0:02:37.760 the company suspending its guidance for the year as a 0:02:37.800 --> 0:02:41.120 result of concerns over tariffs in the economy. We're going 0:02:41.160 --> 0:02:44.320 to hear from JP Morgan on Friday, among other banks. 0:02:44.880 --> 0:02:46.720 Are you concerned about a move higher like this? 0:02:47.800 --> 0:02:47.880 No? 0:02:48.040 --> 0:02:52.760 I And I'm sure what Gina was referring to whose 0:02:52.760 --> 0:02:56.200 analysis is brilliant by the way that the difference between 0:02:56.240 --> 0:02:57.920 Main Street and Wall Street. I mean, this is just 0:02:57.960 --> 0:03:01.480 Wall Street. Main Street is it needs to react in 0:03:01.480 --> 0:03:04.000 a completely different way to this, what the tariffs really 0:03:04.000 --> 0:03:06.200 mean to them, what it's going to mean for earnings. 0:03:07.040 --> 0:03:09.280 Move down or move up in the stock market doesn't 0:03:09.320 --> 0:03:12.480 necessarily change the scope of what it does. If you're 0:03:12.560 --> 0:03:15.520 the CEO or CFL of a company trying to source 0:03:15.560 --> 0:03:19.640 trade and look at what your cost price analysis is 0:03:19.639 --> 0:03:22.800 going to be going forward, and again, obviously earnings are 0:03:22.840 --> 0:03:26.280 a big picture. I think it's going to be interesting 0:03:26.360 --> 0:03:29.200 is to see what sentiment indicators look like on Friday, 0:03:29.240 --> 0:03:32.200 and of course we've got inflation in terms of CPI 0:03:32.280 --> 0:03:34.640 PPI coming up in the next couple of days as well. 0:03:35.840 --> 0:03:38.760 I wouldn't worry so much about the stock market. This 0:03:38.920 --> 0:03:42.320 is just a lot of you know, a lot of 0:03:42.320 --> 0:03:45.560 back and forth on headlines. It is completely separate from 0:03:45.600 --> 0:03:49.440 what the real economy is going to be doing. I 0:03:49.480 --> 0:03:53.120 was encouraged though by Besson's comment earlier this morning where 0:03:53.120 --> 0:03:55.800 he said he was going to take sort of front 0:03:55.800 --> 0:03:58.400 and center of the trade negotiations, and that seemed to 0:03:58.400 --> 0:04:01.280 put both Naviro and but Nick on the backbench, which 0:04:01.400 --> 0:04:03.400 I think that was the real encouragement I think for 0:04:03.480 --> 0:04:06.680 investors in that sort of the sound mind, the sound 0:04:08.800 --> 0:04:12.840 voice coming from Washington is going to speak. And then 0:04:12.920 --> 0:04:15.200 later today basically saying he was going to try to 0:04:15.200 --> 0:04:18.120 get an alliance together if you will try to make 0:04:18.160 --> 0:04:22.120 individual trade agreements with all different allies and then form 0:04:22.160 --> 0:04:25.240 a consortium of sorts against China, which really would put 0:04:25.320 --> 0:04:27.320 China in a box if you were able to do that, 0:04:28.120 --> 0:04:30.880 because that would be a really really strong negotiating power. 0:04:30.920 --> 0:04:33.680 You're not just talking about sort of NATO or Canada 0:04:33.720 --> 0:04:36.599 and Mexico you're talking about Latin America, you're talking about Japan, 0:04:36.960 --> 0:04:41.279 talking about Asia, Europe a whole lot. Now facing China 0:04:41.320 --> 0:04:44.359 and saying this is where we stand. We're tired of, 0:04:44.600 --> 0:04:47.719 you know, patent infringement, We're tired of the non monetary 0:04:47.760 --> 0:04:50.760 tariff situation. We're standing up to you. Now, what are 0:04:50.760 --> 0:04:53.599 you going to do? And if you don't capitulate, we're 0:04:53.640 --> 0:04:55.359 all just going to play nice with each other. And 0:04:55.400 --> 0:04:57.839 that's going to put China, I think in an extraordinarily 0:04:57.839 --> 0:05:00.560 difficult situation. I know what ended was saying about, it's 0:05:00.560 --> 0:05:02.680 not an all one way street, but I think I 0:05:02.720 --> 0:05:05.400 think in this particular trade war, if Beuston pulls off 0:05:05.400 --> 0:05:07.480 what he's trying to do, it puts China in an 0:05:07.480 --> 0:05:10.159 incredibly difficult situation and one they can't win. 0:05:10.640 --> 0:05:13.640 You know, yeah, exactly. And I keep thinking of the 0:05:13.680 --> 0:05:18.800 interview that Shanelli had with Boas Weinstein and the whole 0:05:18.800 --> 0:05:22.599 idea of the one thing that's difficult is that President 0:05:22.640 --> 0:05:25.680 Trump presumably will be in the White House for four 0:05:25.760 --> 0:05:28.880 years in total, and that the uncertainty genie is out 0:05:28.920 --> 0:05:31.760 of the bottle and we have seen that this is 0:05:31.800 --> 0:05:34.040 a president and I think it's fair to say this 0:05:34.120 --> 0:05:37.720 is truthful, is that he can change his mind on 0:05:37.839 --> 0:05:42.280 things and that level of uncertainty and it's ramped up 0:05:42.480 --> 0:05:44.880 more than maybe we saw in the first administration, and 0:05:45.120 --> 0:05:47.400 there are not the guardrails necessarily. I know you talk 0:05:47.440 --> 0:05:50.200 about the Treasury Secretary, but it's taken a while I 0:05:50.240 --> 0:05:53.520 feel like for maybe a potential guardrail to come forward. 0:05:53.839 --> 0:05:58.040 So I just wonder, you know, Vince, traders like volatility, 0:05:58.120 --> 0:06:01.680 but CEOs don't, right, and can consumers don't. They need 0:06:01.720 --> 0:06:04.960 things to be certain at this point to make decisions 0:06:05.000 --> 0:06:08.159 and to spend money. So I am just curious that 0:06:08.520 --> 0:06:11.839 this trade we could see another sell off tomorrow. I mean, 0:06:12.200 --> 0:06:14.080 are there any guarantees at this point? 0:06:14.839 --> 0:06:17.400 No, I don't think there are any guarantees whatsoever. And 0:06:17.480 --> 0:06:20.480 I think you make a really really good point. Corporation 0:06:20.680 --> 0:06:24.400 ceo CFOs do not like this. Consumers certainly don't like this. 0:06:25.440 --> 0:06:28.320 I think what you're going to see is probably a 0:06:28.320 --> 0:06:32.920 little pulled back in investment, particularly capex from corporations, particularly 0:06:33.000 --> 0:06:35.400 the larger corporations. You're going to see mid sized small 0:06:35.440 --> 0:06:38.839 businesses be very very cautious about how they spend money. 0:06:39.400 --> 0:06:41.440 One of the big things that you know, I ran 0:06:41.480 --> 0:06:43.360 a small business, and one of the key things about 0:06:43.400 --> 0:06:45.880 running a small business is cash flow. And the last 0:06:45.960 --> 0:06:48.680 thing you want to do is put yourself in a situation. 0:06:49.040 --> 0:06:51.320 You know, it's a difficult situation. You want to spend 0:06:51.360 --> 0:06:55.080 money on inventory anticipating you know, price increases, but at 0:06:55.120 --> 0:06:57.360 the same time you need to preserve cash flow because 0:06:57.520 --> 0:06:59.719 you could buy all this inventory and then nobody comes 0:06:59.720 --> 0:07:02.480 into by it from you, correct just they're worried about 0:07:02.600 --> 0:07:05.919 the future. And so now you're stuck with shelves that 0:07:05.960 --> 0:07:09.920 are full of lower price items, but still nobody wants them. So, 0:07:10.320 --> 0:07:12.559 you know, for a smaller business, it's a really really 0:07:12.560 --> 0:07:15.320 tough situation. You know, for mid sized businesses as well. 0:07:15.400 --> 0:07:17.880 You know, the big, big companies, you know, Pepsicos of 0:07:17.920 --> 0:07:20.240 the World and such. You know, they can withstand this 0:07:20.320 --> 0:07:22.040 for a while, Apples of the world. They've got the 0:07:22.080 --> 0:07:26.080 balance sheet to to eat that inventory for quite a 0:07:26.080 --> 0:07:29.560 long time. But other businesses do not, and that is 0:07:29.880 --> 0:07:34.000 probably going to weigh on both sentiment spending and the economy. 0:07:34.120 --> 0:07:36.880 We're still looking at We're still looking at first quarter 0:07:36.960 --> 0:07:39.880 growth pen from the Atlanta GDP at minus two point 0:07:39.920 --> 0:07:40.720 four percent. 0:07:40.760 --> 0:07:42.760 Right down, but not as bad as it was, but 0:07:42.800 --> 0:07:43.400 still down. 0:07:43.920 --> 0:07:45.440 It does have it from two point eight to two 0:07:45.480 --> 0:07:47.040 point FOURY, you're absolutely right, but we did. 0:07:47.160 --> 0:07:49.600 We just have a headline crossing Goldman Sachs rescinding its 0:07:49.640 --> 0:07:54.120 recession call after this move by the President on tariffs. 0:07:54.160 --> 0:07:56.080 I feel like it's like bing bing bing, you know, 0:07:56.200 --> 0:07:59.320 ricochet rabbit, Like you are just seeing people who just 0:07:59.440 --> 0:08:03.320 see I know who that is, Google it everybody, No, 0:08:03.440 --> 0:08:07.360 but it's just right, like, so that's that's the world 0:08:07.560 --> 0:08:11.640 we live in, right, and so that's a difficult environment. 0:08:12.600 --> 0:08:15.800 It's totally I mean, Goldman made this call literally before 0:08:16.280 --> 0:08:18.760 the announcement, so they couldn't have found it any worse. 0:08:18.800 --> 0:08:21.120 I mean, not that you know, it was their fault. 0:08:22.200 --> 0:08:24.160 And so of course they're coming pulling it back now 0:08:24.240 --> 0:08:26.520 and it goes. It speaks exactly to what you say 0:08:26.520 --> 0:08:29.320 as to how businesses are trying to find their way 0:08:29.360 --> 0:08:32.199 in this world and they're constantly changing their mind. And 0:08:32.280 --> 0:08:35.040 when you have that uncertainty, if you're running a business, 0:08:35.040 --> 0:08:38.480 you're going to basically say, full stop, we're not investing, 0:08:38.559 --> 0:08:41.800 we're not hiring, we're not we're not moving forward with 0:08:41.960 --> 0:08:45.199 plans at the moment. Let's shelve everything. We're going to 0:08:45.320 --> 0:08:47.960 keep looking at the situation. We're going to wait and 0:08:48.000 --> 0:08:50.319 see and then more likely they're not. They're going to 0:08:50.400 --> 0:08:52.960 wait and see for things to really develop before they 0:08:53.000 --> 0:08:55.240 step in. You don't want to step in on day one, 0:08:55.320 --> 0:08:58.480 thinking again, maybe somebody changes their mind. You're going to 0:08:58.520 --> 0:09:01.720 want to see this developed. I think in the long run, 0:09:01.920 --> 0:09:05.640 this will develop positively. I think that you know, China 0:09:05.640 --> 0:09:08.560 will eventually Trump is going to need to look for 0:09:08.600 --> 0:09:11.520 a way to give President she Away a face saving 0:09:11.559 --> 0:09:14.200 way out, to give him an opportunity to come to 0:09:14.240 --> 0:09:18.160 the table to have this conversation. If that happens, I 0:09:18.200 --> 0:09:20.840 think you can just you know, wipe all of this away. 0:09:21.120 --> 0:09:24.640 Starting from you know, the beginning, things are going to 0:09:24.679 --> 0:09:27.160 move positive. I think you'll see a lot freer trade, 0:09:27.880 --> 0:09:30.320 a different form of globalization, if you will. 0:09:30.480 --> 0:09:32.080 Vince to the point that Carol just brought up this 0:09:32.120 --> 0:09:35.080 headline crossing that says Goldman Sachs rescinds its recession call 0:09:35.480 --> 0:09:39.480 after the Trump tariff pause. I'm confused about what fundamentally 0:09:39.559 --> 0:09:43.160 changes here, because as we heard from the Treasury Secretary, 0:09:43.200 --> 0:09:46.719 as we saw in that post from the President, this 0:09:46.760 --> 0:09:50.800 is a ninety day pause on countries that are not 0:09:50.920 --> 0:09:54.600 retaliating right now, this doesn't seem like a fundamental shift 0:09:55.040 --> 0:09:58.680 in the way the president is thinking about tariffs. Why 0:09:58.720 --> 0:10:02.960 does the recession risk rem then, at least according to Goldman. 0:10:03.400 --> 0:10:05.920 Yeah, but if you think about the countries that are retaliating, 0:10:06.040 --> 0:10:09.559 it's really just the European Union, Canada and China. 0:10:09.559 --> 0:10:10.800 Those are big trading partners. 0:10:11.360 --> 0:10:13.959 Yeah no, but Canada, Canada is in a different situation. 0:10:14.040 --> 0:10:16.760 Cartney's running for reelection, so you expect him to talk tough. 0:10:17.080 --> 0:10:20.240 One would assume he is the the the front runner 0:10:20.280 --> 0:10:22.760 at this point. He is the odds on a favorite. 0:10:23.040 --> 0:10:25.480 Will he change his tune after he is elected? I 0:10:25.600 --> 0:10:28.040 think he will. I think he's going to look to 0:10:28.120 --> 0:10:31.880 do something something positive for Canada, and that's going to 0:10:31.920 --> 0:10:35.160 be Yeah. You know, listen, we're allies. Let's let's let's 0:10:35.160 --> 0:10:37.840 cut this out. You know, where we're enemies, we're allies. 0:10:38.040 --> 0:10:40.200 Let's let's put this aside and let's figure out what 0:10:40.200 --> 0:10:42.880 our differences are similar to what Shine Maam is doing 0:10:42.920 --> 0:10:43.480 in Mexico. 0:10:43.640 --> 0:10:45.079 Right, Yeah, that's a good viewing. 0:10:45.160 --> 0:10:47.360 It's definitely. I think the EU is definitely going to 0:10:47.400 --> 0:10:49.679 come around again because they're not in great shape right now. 0:10:49.720 --> 0:10:52.120 There was a question shouted at the Treasury Secretary as 0:10:52.120 --> 0:10:54.280 he was walking away, what about the EU? What about 0:10:54.280 --> 0:10:56.920 the EU? Because they have retaliated. So we'll expect to 0:10:56.920 --> 0:10:58.880 hear maybe something on that and we will bring it 0:10:58.880 --> 0:11:01.000 to you when we do get an answer. Vince, thank 0:11:01.040 --> 0:11:03.720 you for jumping in today. Vince SIGMREALI. He's a global 0:11:03.760 --> 0:11:04.839 macro strategist. 0:11:05.360 --> 0:11:09.040 You're listening to the Bloomberg Business Week Podcast. Catch us 0:11:09.160 --> 0:11:12.120 live weekday afternoons from two to five d's during Listen 0:11:12.200 --> 0:11:15.760 on Applecarplay and Android Auto with the Bloomberg Business app, 0:11:15.920 --> 0:11:18.680 or watch us live on YouTube. 0:11:20.760 --> 0:11:23.040 Let's drive to the clothes with a brand Shooty, Chief 0:11:23.040 --> 0:11:26.880 investment officer at Northwestern Mutual Wealth Management. The firm has 0:11:26.920 --> 0:11:29.440 more than three hundred billion dollars in assets under management. 0:11:29.520 --> 0:11:33.080 The division that Brent oversees has about ninety billion dollars 0:11:33.080 --> 0:11:36.679 in AUM. He joins us from Milwaukee. We got to 0:11:36.720 --> 0:11:42.360 start with just today's trade and what we're seeing. Superlatives abound. Brent, 0:11:44.160 --> 0:11:46.760 is this the environment people should be buying? 0:11:48.520 --> 0:11:48.720 Well? 0:11:48.760 --> 0:11:50.680 I think if your time arising is longer term, I 0:11:50.679 --> 0:11:52.880 think usually any day is a good opportunity to buy. 0:11:53.240 --> 0:11:54.880 I think in the near term, I still think there's 0:11:55.040 --> 0:11:58.079 tremendous volatility still out there. I don't think we've learned 0:11:58.200 --> 0:12:00.240 too much new We have a reprieve, but certain we 0:12:00.280 --> 0:12:02.040 still have ninety days of uncertainty. As you and your 0:12:02.040 --> 0:12:04.520 previous guests were talking about, and during that time period, 0:12:04.520 --> 0:12:06.760 I think anything's on the table, and so to me, 0:12:06.880 --> 0:12:08.520 you still want to make sure that you're careful. You 0:12:08.520 --> 0:12:10.440 want to make sure that you're at your allocation and 0:12:10.440 --> 0:12:12.679 not overweight, and that you're prepared in case the market 0:12:12.679 --> 0:12:14.960 does go down again, that you will stay through to 0:12:15.000 --> 0:12:16.800 the other side to get to the higher returns that 0:12:16.800 --> 0:12:18.040 are somewhere off in the future. 0:12:18.120 --> 0:12:20.120 When you say prepared, when you say prepared, do you 0:12:20.160 --> 0:12:23.440 just mean like, have the stomach for it to stay 0:12:23.480 --> 0:12:24.800 the course? Is that what you mean? 0:12:25.559 --> 0:12:27.439 Yeah, stay the course and have the stomach for it. Look, 0:12:27.440 --> 0:12:29.719 I think unfortunately a lot of investors are still concentrated. 0:12:29.760 --> 0:12:31.640 I see it when I travel around the country. They 0:12:31.679 --> 0:12:33.480 only want to own US large cap stocks, and they 0:12:33.480 --> 0:12:35.080 want to own a narrow swath of the US large 0:12:35.120 --> 0:12:38.120 cap stocks. To me, the trend has changed, the environment 0:12:38.160 --> 0:12:40.920 has changed, whether or not the tariffs go through. I 0:12:40.960 --> 0:12:43.920 think some form of them still do. The tariffs are 0:12:43.960 --> 0:12:46.560 still something that I think the President has an affinity 0:12:46.600 --> 0:12:48.960 for and believes are the right thing to do. I 0:12:48.960 --> 0:12:51.679 don't think he really is in love with trade altogether. 0:12:52.200 --> 0:12:54.800 He just decided today that the market damage was probably 0:12:54.800 --> 0:12:56.920 more than he wanted in the near term, and so 0:12:56.960 --> 0:13:00.480 therefore pulled them back. I want people to diversify every 0:13:00.520 --> 0:13:03.240 economic cycle. Whether or not this cause of the recession 0:13:03.280 --> 0:13:06.079 or not will find out, but every cycle has new leadership. 0:13:06.600 --> 0:13:08.719 And to me, the S and P five hundred is 0:13:08.720 --> 0:13:11.400 still trading at twenty times, even though it's off its 0:13:11.440 --> 0:13:13.760 highs by quite a bit. Twenty times forward earnings, there 0:13:13.760 --> 0:13:16.360 are opportunities other places that are trading at thirteen or 0:13:16.360 --> 0:13:19.200 fourteen times, where I think there are better opportunities for 0:13:19.280 --> 0:13:21.400 those people willing to think intermediate to longer term, which 0:13:21.440 --> 0:13:22.959 is what you're supposed to do when you buy equities. 0:13:22.960 --> 0:13:25.280 All right, So you're saying, Brent at this point that 0:13:25.920 --> 0:13:30.240 the S and P five hundred is still overpriced over values, and. 0:13:30.160 --> 0:13:32.000 That's where I think, Yeah, no one cares about No 0:13:32.000 --> 0:13:34.240 one cares about valuation on the upside. But when people 0:13:34.320 --> 0:13:36.079 like me start thinking about when they're going to dip 0:13:36.120 --> 0:13:39.000 their toe in or potentially buy more OVERVOT stocks. On 0:13:39.040 --> 0:13:43.040 the downside, they start doing valuation exercises because that's marginal safety. 0:13:43.640 --> 0:13:45.520 And to me, that's where I think people need to 0:13:45.520 --> 0:13:47.760 think about the next side of this. You know, if 0:13:47.760 --> 0:13:50.080 it's up, up, and a way, then we truly have 0:13:50.200 --> 0:13:51.880 those areas of the market that are cheaper that I 0:13:51.880 --> 0:13:54.200 would expect to do better if it's not some other 0:13:54.280 --> 0:13:57.679 those other parts of the market have evaluation you know, 0:13:58.000 --> 0:14:00.360 floor to them, And so that's where I I just 0:14:00.400 --> 0:14:02.920 want people to diversify because no one knows exactly how 0:14:02.960 --> 0:14:05.120 that's going to play out, and today the anadote for 0:14:05.200 --> 0:14:07.800 that is diversification, not concentration, all. 0:14:07.800 --> 0:14:09.320 Right, So that's where I want to go to because 0:14:09.360 --> 0:14:11.720 I'm curious if no one knows where this is going 0:14:11.760 --> 0:14:13.880 to play out, and if it might be another ninety 0:14:13.960 --> 0:14:17.880 days before we really know maybe what the next sequence is, 0:14:19.360 --> 0:14:23.640 you know, uncertainty continues to rain. You said, trade has changed, 0:14:23.720 --> 0:14:27.920 environment has changed. So what is exactly diversification in this environment? 0:14:28.080 --> 0:14:31.680 How do you see it? What's the equity fixed income mix, 0:14:31.800 --> 0:14:34.960 what's the US versus global mix? What is the do 0:14:35.040 --> 0:14:36.560 I just kind of throw it in some kind of 0:14:36.560 --> 0:14:39.240 cash like investment. What do you do here? We are 0:14:39.320 --> 0:14:41.080 like over the last three days, you got beaten up. 0:14:41.080 --> 0:14:43.760 If you had a lot of equity exposure, just got 0:14:43.760 --> 0:14:45.920 a bounce. Do we sell at the end of this 0:14:46.320 --> 0:14:48.600 and put it into something safer for I don't know, 0:14:48.760 --> 0:14:50.760 six months, twelve months, who knows? 0:14:51.600 --> 0:14:54.080 Hopefully today shows you that you shouldn't put anything into cash, 0:14:54.120 --> 0:14:57.120 and cash only whens in so many different circumstances, not many, actually, 0:14:57.680 --> 0:14:59.960 And that's where if you put your assets in one 0:15:00.120 --> 0:15:02.480 asset class such as cash, you're telling me that you 0:15:02.520 --> 0:15:04.280 know exactly what's going to happen. And I'm telling you, 0:15:04.440 --> 0:15:06.880 after doing this for thirty years, I don't, and I 0:15:06.920 --> 0:15:10.000 don't especially know with what's happening today, given the back 0:15:10.000 --> 0:15:12.320 and forth that can occur and these huge swings that 0:15:12.320 --> 0:15:15.200 can occur. Look, we've been cautious for a little while. 0:15:15.760 --> 0:15:17.880 We're towards the end of an economic cycle. The market 0:15:17.920 --> 0:15:20.960 is fully valued and there is the tariff uncertainty out 0:15:20.960 --> 0:15:23.400 there that's more of the near term. That doesn't mean 0:15:23.400 --> 0:15:25.800 that you abandon your equity ratio and what's in your 0:15:25.840 --> 0:15:28.000 financial plan, but that means you're at your target are 0:15:28.000 --> 0:15:30.720 just a bit below and you're cautious about what could happen, 0:15:30.720 --> 0:15:33.280 and you're ready to hold through whatever occurs. On the 0:15:33.360 --> 0:15:35.640 other side of this, I think of valuation becoming much 0:15:35.680 --> 0:15:37.840 much more important once again in the future, and I 0:15:37.880 --> 0:15:40.000 think about a three, five, seven, ten year time holding 0:15:40.040 --> 0:15:42.720 period where valuation does matter, and that's where I think 0:15:42.720 --> 0:15:45.120 there's opportunities in people that have in parts of the 0:15:45.120 --> 0:15:47.520 market that people have decided to move out of because 0:15:47.560 --> 0:15:49.200 they haven't done well for the prior a few years. 0:15:49.400 --> 0:15:51.200 That's where I think their opportunity is going forward. And 0:15:51.240 --> 0:15:53.760 if you're not diversified, hopefully today is a wake up 0:15:53.800 --> 0:15:55.320 call that it's time to do so. 0:15:55.320 --> 0:15:58.160 So are you know thinking about this from the perspective 0:15:58.160 --> 0:16:01.080 of valuations, which you just mentioned, If people are thinking 0:16:01.080 --> 0:16:04.160 about dipping their toes back in, what is a valuation 0:16:04.240 --> 0:16:05.800 that you would want to see on the S and 0:16:05.800 --> 0:16:07.720 P five hundreds, It's say, okay, now's the time. 0:16:09.200 --> 0:16:11.240 It's not twenty times for darrings that expected to go 0:16:11.280 --> 0:16:11.760 ten days. 0:16:11.920 --> 0:16:12.560 Is it eighteen? 0:16:14.240 --> 0:16:16.640 I think perhaps it's somewhere lower than eighteen, maybe sixteen, 0:16:16.680 --> 0:16:18.520 maybe fifteen, depending on if we have a recession or 0:16:18.520 --> 0:16:21.600 now that's certainly important, but maybe eighteen's more reasonable, and 0:16:21.640 --> 0:16:23.240 if you do the math on that with the earnings, 0:16:23.240 --> 0:16:25.720 you're a lower number than what you are today. That's 0:16:25.760 --> 0:16:27.400 not to say that you should be selling that. It's 0:16:27.440 --> 0:16:29.160 just saying that there are better opportunities than things like 0:16:29.200 --> 0:16:32.200 small midcaps, which I know are economically sensitive and so 0:16:32.280 --> 0:16:35.680 does everyone else. They traded thirteen to fourteen times earnings. 0:16:35.880 --> 0:16:38.400 That's historically more normal, and that gives them more of 0:16:38.440 --> 0:16:40.400 a margin of safety, and that gives them more opportunity 0:16:40.400 --> 0:16:44.120 for upside when valuation matters in the longer term. 0:16:44.200 --> 0:16:47.560 Yeah, it's okay, Okay, that makes sense. Okay, from the 0:16:47.600 --> 0:16:50.120 perspective of if we drill down a little bit beyond 0:16:50.200 --> 0:16:54.360 in disease and sort of regionally. You said that you 0:16:54.440 --> 0:16:56.200 still go around the world and you hear people want 0:16:56.200 --> 0:17:01.120 to buy megacap us companies. Do you see that changing 0:17:01.160 --> 0:17:03.160 at all in the near term. There's a lot of 0:17:03.240 --> 0:17:07.000 questions right now about this idea of US exceptionalism. 0:17:07.640 --> 0:17:11.040 If history is any guide, look historically and tell me 0:17:11.080 --> 0:17:13.920 how long one trend has lasted. Has it lasted forever? 0:17:13.960 --> 0:17:15.640 I think back to the late nineteen ninety nine period, 0:17:15.680 --> 0:17:17.960 which is exactly what this reminds me of, and that 0:17:18.080 --> 0:17:20.760 was a period of American exceptionalism. That was a period 0:17:20.800 --> 0:17:23.400 when everyone only wanted to own large cap, mega tech 0:17:23.720 --> 0:17:27.399 tech stocks and then they were essentially didn't make a 0:17:27.400 --> 0:17:29.280 new high for seventeen years, while every other part that 0:17:29.280 --> 0:17:32.240 they didn't want to own did make new highs. And 0:17:32.320 --> 0:17:35.479 so no one theme has dominated forever. I think the 0:17:35.520 --> 0:17:38.000 backdrop has changed. The backdrop of the prior three or 0:17:38.000 --> 0:17:40.960 four or five years has been American exceptionalism driven by 0:17:41.080 --> 0:17:44.040 a lot of debt, which is a bipartisan thing. Now 0:17:44.040 --> 0:17:45.960 you're seeing places like Europe where they're waking up to 0:17:45.960 --> 0:17:48.080 the reality that they have to spend money on defense 0:17:48.080 --> 0:17:51.520 and infrastructure. Places like Germany haven't issued a lot of debt, 0:17:51.960 --> 0:17:53.879 and so I think you're seeing a definite trend change. 0:17:53.880 --> 0:17:56.359 And it's not to say that those companies in the 0:17:56.440 --> 0:17:58.439 US are companies that you should have known. I just 0:17:58.480 --> 0:18:00.000 want people to admit they don't know what's going on 0:18:00.119 --> 0:18:03.000 to happen and not concentrate, because when you concentrate, you 0:18:03.000 --> 0:18:05.879 have to make difficult decisions like do you sell something 0:18:05.960 --> 0:18:07.600 now or do you think that one part of the 0:18:07.600 --> 0:18:09.639 market is what's going to be going forward, and no 0:18:09.640 --> 0:18:10.800 one knows that answer, Bret. 0:18:10.840 --> 0:18:12.679 What I really keep thinking about is what are the 0:18:12.720 --> 0:18:15.639 long term implications for investors, for the world at large, 0:18:15.680 --> 0:18:18.840 for trade at large. Maybe we don't have clarity on 0:18:18.920 --> 0:18:22.040 that too. But are you assuming that on the other 0:18:22.160 --> 0:18:25.639 side things are changed dramatically and that means the growth 0:18:25.680 --> 0:18:28.280 outlook for US companies has changed, the growth for the 0:18:28.400 --> 0:18:31.000 US economy has changed. I'm just curious if you can 0:18:31.040 --> 0:18:32.120 go that far out here. 0:18:33.440 --> 0:18:36.320 I think the administration, the president most likely once a 0:18:36.359 --> 0:18:39.680 currency that's lower. I think that's a tailwind towards international stocks. 0:18:40.560 --> 0:18:43.120 I mentioned Europe spending more money, possibly in other parts 0:18:43.119 --> 0:18:45.840 of the world spending more money, which is something that 0:18:45.880 --> 0:18:48.640 they probably need to do on defense. Anyway, I think 0:18:48.640 --> 0:18:52.920 about perhaps even more domestic US. Does that benefit small caps? 0:18:52.920 --> 0:18:56.600 What about deregulation going forward? Certainly there are different things 0:18:56.600 --> 0:18:59.720 that happen during every economic cycle. They're probably similar and 0:18:59.720 --> 0:19:02.080 how play out, But I think the backdrop for the 0:19:02.080 --> 0:19:04.240 next one had shifted, and that's where I think there 0:19:04.240 --> 0:19:06.359 are other opportunities. Plus, if you think about the opposite 0:19:06.400 --> 0:19:08.919 side of our trade deficit, that is a financial account 0:19:08.920 --> 0:19:11.440 surplus where foreigners have put a lot of money into 0:19:11.480 --> 0:19:14.000