WEBVTT - Yen May Move to 150 Per Dollar, Shilling Says 0:00:00.120 --> 0:00:02.920 Brought you by Bank of America, Mary Lynch. Investing in 0:00:03.000 --> 0:00:07.840 local communities, economies and a sustainable future. That's the power 0:00:08.080 --> 0:00:12.360 of global connections, Mary Lynch, Pierce Fenner and Smith Incorporated 0:00:12.760 --> 0:00:27.400 member s I p C. Welcome to the Bloomberg Surveillance Podcast. 0:00:27.840 --> 0:00:31.520 I'm Tom Keene with David Gura. Daily we bring you 0:00:31.560 --> 0:00:36.600 insight from the best in economics, finance, investment, and international relations. 0:00:37.000 --> 0:00:41.600 Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot Com, and 0:00:41.680 --> 0:00:49.440 of course, on the Bloomberg Gina Martin Adams is our 0:00:49.479 --> 0:00:52.000 chief equity strategist here at Bloomberg Intelligent that she joins 0:00:52.040 --> 0:00:54.880 us here in our Bloomberg eleven three studios. Welcome. Great 0:00:54.920 --> 0:00:59.000 to have you with us. Let's start broad here looking 0:00:59.080 --> 0:01:01.080 at this market, of your market in search of of 0:01:01.080 --> 0:01:02.840 a catalyst. What are you seeing as you look at 0:01:02.920 --> 0:01:05.120 equities right now? Yeah, and in a short term, we've 0:01:05.200 --> 0:01:07.640 entered some sort of consolidation mode. You can call it 0:01:07.760 --> 0:01:10.440 the post reflation trade. I don't know what you want 0:01:10.440 --> 0:01:12.199 to call it, but since the beginning of the March, 0:01:12.280 --> 0:01:14.319 of the month of March, stocks have kind of been 0:01:14.319 --> 0:01:17.560 moving in a sideways direction and in the grand scheme 0:01:17.560 --> 0:01:20.360 of things, it's a modest consolidation within a long term 0:01:20.400 --> 0:01:24.200 up trend um. It looks like we broke out of 0:01:24.880 --> 0:01:28.399 pretty significant correction by the end of last year. We 0:01:28.480 --> 0:01:30.840 broke out. We confirmed a lot of long term up 0:01:30.840 --> 0:01:33.600 trend lines with that correction, and it's been off to 0:01:33.640 --> 0:01:35.640 the races since. So it's natural that you have these 0:01:35.640 --> 0:01:39.080 consolidations amidst the ups trend. It doesn't look like it's 0:01:39.120 --> 0:01:41.800 anything more ominous yet, but there has been some modest 0:01:41.840 --> 0:01:45.479 defensive rotation to suggest the market is is taken a pause. Here. 0:01:45.640 --> 0:01:48.760 Help us with the costliness of the expensiveness of stocks. 0:01:48.840 --> 0:01:51.600 Right now you get the most expensive since two thousand 0:01:51.840 --> 0:01:53.760 and two. I believe what are you seeing there? Yeah? 0:01:53.920 --> 0:01:56.720 From a price to earnings perspective, the index is expensive. 0:01:56.760 --> 0:01:59.200 It's really difficult to say anything else. We're looking at 0:01:59.200 --> 0:02:01.720 about eighteen times forward earnings. Are just under eighteen times 0:02:01.760 --> 0:02:04.960 forward earnings. You know. The trouble with valuations is for 0:02:05.000 --> 0:02:07.560 a timing mechanism, they're pretty poor. I mean, they tend 0:02:07.600 --> 0:02:10.920 to trend over time. A good example, we crested the 0:02:10.960 --> 0:02:14.200 eighteen times level of on price to earnings back in 0:02:14.960 --> 0:02:16.760 six and then the market continue to move higher all 0:02:16.760 --> 0:02:18.600 the way into the s peak in two thousands, So 0:02:18.600 --> 0:02:23.320 if you used valuation purely as your investment thesis in 0:02:23.400 --> 0:02:25.200 that time, you would have missed out on a tremendous 0:02:25.240 --> 0:02:28.799 amount of market gains. There are still values in the market. 0:02:28.800 --> 0:02:30.640 If you look at price to book, for example, you 0:02:30.720 --> 0:02:34.760 find energy stocks, financial stocks are still trading well below 0:02:34.960 --> 0:02:38.560 long term peaks. Long term averages as well on price 0:02:38.639 --> 0:02:44.639 to earnings. Healthcare, telecom, and financials all screen as relatively 0:02:44.720 --> 0:02:48.200 cheap compared to their long term history. So not all 0:02:48.240 --> 0:02:51.200 of the market is extremely expensive. And when you talk 0:02:51.240 --> 0:02:54.560 about price to earnings, it's really a poor timing mechanisms. 0:02:54.600 --> 0:02:58.160 You gotta be pretty careful. What are valuations contracting at. 0:02:58.560 --> 0:03:00.680 I think a lot of it is the bond market 0:03:00.680 --> 0:03:02.679 and interest rates. I mean, you know, stocks in a 0:03:02.760 --> 0:03:04.880 vacuum look expensive, but when you compare them to bonds, 0:03:04.919 --> 0:03:06.799 they look cheap. I mean, the earning zeald of five 0:03:06.800 --> 0:03:09.519 point six percent compares with a treasury yield of two 0:03:09.560 --> 0:03:12.080 point three, five, two point four somewhere in that range. 0:03:13.080 --> 0:03:16.080 That's well above long term average on a relative basis. 0:03:16.160 --> 0:03:17.920 So the earning seal you get out of stocks is 0:03:18.200 --> 0:03:21.519 extremely attractive and that keeps uh I think of floor 0:03:22.200 --> 0:03:24.960 under valuations. The other thing is that when you look 0:03:24.960 --> 0:03:28.240 at real interest rates, the rate of the tenure less inflation, 0:03:28.680 --> 0:03:31.679 we're still just above zero. It's this is still very 0:03:31.680 --> 0:03:34.720 supportive in the long term. When real and real rates 0:03:34.760 --> 0:03:38.000 are in that zero to two range, valuations rise. So 0:03:38.880 --> 0:03:41.040 you know, on a relative scale, there's still a lot 0:03:41.040 --> 0:03:44.160 of reason for stocks um to continue to move higher. 0:03:44.400 --> 0:03:47.920 Good morning everyone, Bloomberg with David Gerr and Tom Keane. 0:03:48.120 --> 0:03:50.360 Do you know help me here with equities? What's what's 0:03:50.440 --> 0:03:53.720 the actuarial assumption you have in your head? I mean, 0:03:54.080 --> 0:03:57.400 everybody that's a single digit world. You've got to be cautious. 0:03:57.480 --> 0:04:00.280 We're gonna be lucky if we make six and a 0:04:00.320 --> 0:04:03.600 cloud of dividends and the answers. It's been double digit 0:04:03.680 --> 0:04:11.040 nirvana since basically since two thousand nine. What's your what's 0:04:11.040 --> 0:04:14.240 the gena Martin Adams actually real assumption? Yeah, it's a 0:04:14.240 --> 0:04:15.920 good question, you know. I think that one of the 0:04:15.960 --> 0:04:19.080 things that strikes me in this cycle, when you look 0:04:19.120 --> 0:04:21.560 at two thousand nine to date and how well stocks 0:04:21.560 --> 0:04:25.680 have done, is that it is now um sort of 0:04:25.720 --> 0:04:31.080 consensus to be cautious it is very persistent sentiment that 0:04:31.160 --> 0:04:35.320 exists out there. UM. On a negative scale, it's everyone 0:04:35.360 --> 0:04:38.000 points out the reasons why stocks shouldn't rise instead of 0:04:38.000 --> 0:04:40.159 why stocks should continue to rise, and that in and 0:04:40.200 --> 0:04:43.279 of itself presents this wall of worry that allows for 0:04:43.320 --> 0:04:46.560 stocks to go higher. It seems very counterintuitive, but the 0:04:46.600 --> 0:04:49.960 reality is when there are few people left to sell, 0:04:50.400 --> 0:04:53.040 stocks are going to default higher. The other thing to 0:04:53.080 --> 0:04:56.320 consider is generally over time, what really matters for stocks 0:04:56.360 --> 0:04:58.479 is if the economy is growing. It doesn't matter if 0:04:58.520 --> 0:05:01.160 it's growing that slowly, it doesn matter if it's growing quickly. 0:05:01.480 --> 0:05:04.400 If the economy's growing, stocks tend to go higher. And 0:05:04.440 --> 0:05:08.320 then the really big uh massive declines and stocks tend 0:05:08.360 --> 0:05:10.960 to happen when the economy slows down substantially, and we 0:05:11.040 --> 0:05:14.040 just haven't had that experience. It's been a very slow 0:05:14.080 --> 0:05:17.920 growth scenario. But that slow growth has been manageable by companies. 0:05:18.000 --> 0:05:20.599 They can cost cut their way to success. Um And 0:05:20.640 --> 0:05:23.719 that's another sort of counterintuitive point. Nobody wants to own 0:05:23.720 --> 0:05:26.240 stocks because they're cutting costs, but the reality is that 0:05:26.320 --> 0:05:29.560 produces earnings growth. How long can that continue? Though, you know, 0:05:29.640 --> 0:05:31.960 we said we've been talking about how long can it 0:05:32.000 --> 0:05:35.520 continue since? Even so, it seems that it can continue 0:05:35.520 --> 0:05:38.000 for a long time because companies are driven to produce 0:05:38.040 --> 0:05:41.200 bottom line earnings results, right, that's the the entire point 0:05:41.240 --> 0:05:44.160 of share ownership is a share of that earnings result. 0:05:45.080 --> 0:05:48.040 They have to have some top line. Right. We experience 0:05:50.279 --> 0:05:53.320 energy sector correction in which the top line contracted, and 0:05:53.320 --> 0:05:55.520 we saw that what that can do to overall earnings. 0:05:55.560 --> 0:05:58.520 So so you can't do this without some top line growth. 0:05:58.839 --> 0:06:01.120 But as long as that top line growing incrementally, you 0:06:01.120 --> 0:06:03.279 can continue to cut and grow margin. David, are you 0:06:03.320 --> 0:06:06.839 with us today? I mean you're barely here yesterday rested 0:06:07.000 --> 0:06:11.120 after the Carolina post reflation post. What we do of 0:06:11.160 --> 0:06:14.080 the game? Where you do they do on Classic? The 0:06:14.279 --> 0:06:18.520 Encore presentation, Gina, I'm sorry, Mr Gurrol went to the 0:06:18.600 --> 0:06:22.880 Chapel University. Forget him. You know it's like an n 0:06:22.920 --> 0:06:25.799 C double A. I think help me here in this GENA. 0:06:25.800 --> 0:06:28.440 I wonder if what our audience may not know is 0:06:28.720 --> 0:06:32.080 you were wonderful through this bull market of saying, look, 0:06:32.120 --> 0:06:35.960 I measured, I'm conservative, I'm cautious, but I'm not going 0:06:36.000 --> 0:06:39.960 to be in cash. Yeah, what's explained to our audience? 0:06:40.080 --> 0:06:43.960 The price of saying I'm going to be in cash. 0:06:44.360 --> 0:06:46.880 Oh wow, Well you've missed out on an equity market 0:06:46.880 --> 0:06:52.720 that's reaching new highs every year except for UM It's 0:06:52.720 --> 0:06:55.880 been incredible to miss out on this bull trend. And 0:06:56.400 --> 0:06:58.960 what's really amazing is how many people have missed out 0:06:58.960 --> 0:07:01.080 on this bull trend. If you get equity ownership in 0:07:01.120 --> 0:07:04.479 the United States, despite the fact that stocks were reaching 0:07:04.480 --> 0:07:09.479 new highs, equity ownership among households actually shrank throughout this 0:07:09.600 --> 0:07:12.520 last cycle. So that tells you that most US households 0:07:12.520 --> 0:07:15.880 have completely missed this bull market. Not only have you 0:07:15.920 --> 0:07:17.960 had a bull market in stocks, but you've had a 0:07:17.960 --> 0:07:21.280 pretty strong bull market in corporate credit and high yield credit. 0:07:21.760 --> 0:07:25.600 Even the bond market. Rates have continued to go lower 0:07:25.640 --> 0:07:28.360 and lower and lower every year. So any asset you 0:07:28.440 --> 0:07:32.440 picked outside of cash would have made you money. And 0:07:32.480 --> 0:07:35.560 the FED told us in two thousand and eight two 0:07:35.560 --> 0:07:38.000 thousand nine that they were going to keep rates lower 0:07:38.080 --> 0:07:42.080 for longer, punishing anyone who kept money in cash savings 0:07:42.720 --> 0:07:44.960 and the bit that's a one big lesson of this 0:07:45.080 --> 0:07:48.280 cycle is do not fight the Fed. When the Fed 0:07:48.440 --> 0:07:50.960 says they are going to keep rates low, we have 0:07:51.000 --> 0:07:54.120 to pay attention. As painful as it is and as 0:07:54.200 --> 0:07:56.320 scary as it is to take on that risk in 0:07:56.360 --> 0:07:59.520 an environment where there is, you know, a lot of uncertainty, 0:08:00.120 --> 0:08:02.720 the reality is the FED really does have a heavy 0:08:02.760 --> 0:08:05.200 hand in driving market out. What's the FED telegraphing. Now, 0:08:05.240 --> 0:08:07.160 if you're an equities investor and you're you're listening to 0:08:07.200 --> 0:08:09.200 what Fed policy micers have to say, what's the what's 0:08:09.200 --> 0:08:10.960 the advice that they're giving that you should not ignore. 0:08:11.240 --> 0:08:13.200 They are saying that they are going to move the 0:08:13.280 --> 0:08:17.320 rate incredibly slowly in a very measured pace, and keep 0:08:17.440 --> 0:08:22.000 rates very accommodative. That's what they're saying to me until 0:08:22.080 --> 0:08:26.360 they start really seriously considering contracting that balance sheet, really 0:08:26.400 --> 0:08:30.400 seriously considering moving that policy rate rapidly higher. The FED 0:08:30.480 --> 0:08:32.560 is still on your side. The Fed's got your box. 0:08:32.640 --> 0:08:35.080 So to say, as an equity investor, I want to 0:08:35.080 --> 0:08:37.560 come back and dive into the actual Bloomberg intelligence work 0:08:37.559 --> 0:08:40.920 you're doing, particularly on sector analysis as well. Gina Martin adds, 0:08:40.960 --> 0:08:45.040 with this Bloomberg intelligence running all the equity strategy product 0:08:45.320 --> 0:08:47.880 and as I said earlier on television, what's what's magical 0:08:47.920 --> 0:08:52.760 about Gina combining an economic analysis with fundamental analysis and 0:08:52.960 --> 0:08:56.440 technical analysis as well as Michael bar knows. That's the 0:08:56.760 --> 0:08:59.440 kool aid I sip every day. Again, Michael Barr, you 0:08:59.480 --> 0:09:02.600 ken't doing a vacuum and and the kool aid with 0:09:02.600 --> 0:09:07.800 with good sugar man ingredients. And I put I put 0:09:07.840 --> 0:09:10.360 on the headphones and I listened to that great band 0:09:10.440 --> 0:09:15.400 DuPont Ratio. It's absolutely phenomenal for this. Gina Martin Adams 0:09:15.400 --> 0:09:19.400 Bloomberg Intelligences who look at the equity uh markets. You've 0:09:19.440 --> 0:09:22.520 met John Butler, I'm sure a great Apple analyst, and 0:09:23.000 --> 0:09:24.960 you know he doesn't do bi hold Cell and Apple, 0:09:25.000 --> 0:09:28.480 but he's been brilliant when the gloom and the gloom comes, 0:09:28.480 --> 0:09:31.719 it happen. Jim Cook is evil when that comes in. 0:09:31.800 --> 0:09:35.400 He goes maybe not so help us here away from 0:09:35.440 --> 0:09:40.040 bi hold Cell with the different sector calls, which sector 0:09:40.200 --> 0:09:45.760 right now seems rational and seems like an opportunity to 0:09:46.040 --> 0:09:49.320 prosper when you look at the balance sheet and that 0:09:49.840 --> 0:09:55.320 strange thing capital allocation? Which sector works? So we actually 0:09:55.400 --> 0:09:57.120 this will be near and dear to your heart given 0:09:57.120 --> 0:10:00.000 you like the effusion of so many different disciplines. Were 0:10:00.000 --> 0:10:05.680 on a sector model that combines current technicals with valuations 0:10:05.880 --> 0:10:11.959 with estimate achievability on the atball record. Yeah, and this 0:10:12.000 --> 0:10:14.880 guy spits out for us, what sectors have the best 0:10:14.880 --> 0:10:17.960 combination of all of these trends right now and right now? 0:10:18.040 --> 0:10:25.000 Those are very defensive consumer staples, utilities, healthcare, but also technology. 0:10:25.040 --> 0:10:27.679 So technology is the one cyclical that sort of sticks 0:10:27.760 --> 0:10:31.079 in with the defensive sectors as as looking like having 0:10:31.280 --> 0:10:32.480 you know, it looks it looks like it has a 0:10:32.480 --> 0:10:36.559 pretty good combination of of trends. What role is energy 0:10:36.640 --> 0:10:41.240 playing right now? Inequities were about how it played role historically. Uh, now, 0:10:41.280 --> 0:10:43.440 when you look at energy, what effect does it happen? Well, 0:10:43.440 --> 0:10:45.640 it's it's only six and a half percent of the index, 0:10:45.679 --> 0:10:49.079 so it's extremely small, which is really interesting. It's a 0:10:49.160 --> 0:10:52.000 very small share of of the index. But nonetheless it 0:10:52.480 --> 0:10:57.000 plays the role of most volatile player. You know, it 0:10:57.040 --> 0:10:59.240 moves a lot in one direction or another. But you 0:10:59.280 --> 0:11:02.160 can have period of time now where energy stocks are 0:11:02.160 --> 0:11:04.400 outright falling in the market. Is not because it is 0:11:04.440 --> 0:11:05.920 so small. I don't want to get you in trouble 0:11:05.960 --> 0:11:10.080 with your general counsel, Paul Sweeney, but can you buy 0:11:10.559 --> 0:11:13.000 take a historical level of a sector as a percent 0:11:13.360 --> 0:11:17.520 of the standard. Can you go long energy because it's 0:11:17.600 --> 0:11:21.240 low single digit sector knowing someday you're gonna sell it 0:11:21.240 --> 0:11:24.319 when it's I mean, can you do that? I mean, 0:11:24.360 --> 0:11:26.960 is that a scrap? It could be if you have 0:11:27.040 --> 0:11:30.080 an extremely long person, long term perspective, and you look 0:11:30.120 --> 0:11:37.120 for the major shifted shifts in market cap share, you'd 0:11:37.160 --> 0:11:40.199 find that energy is certainly the most depressed sector in 0:11:40.240 --> 0:11:42.559 the index right now. After the recession that the energy 0:11:42.600 --> 0:11:47.480 companies went through in in fifteen sixteen, valuations um still 0:11:47.480 --> 0:11:50.520 screen attractively. You know, sometimes valuations are low for a reason. 0:11:50.760 --> 0:11:54.800 That may be the case with energy, but it's certainly 0:11:55.120 --> 0:11:57.680 screens as having the lowest price to book, lowest price 0:11:57.720 --> 0:12:01.080 to earnings ratio in the index because of the distress 0:12:01.120 --> 0:12:04.360 that it went through. So you know, can I say that, 0:12:04.480 --> 0:12:07.440 you know, I would advise against if you have a 0:12:07.480 --> 0:12:11.560 long term holding period. Sometimes these are great ideas. This 0:12:11.640 --> 0:12:14.480 is what deep value is all about, is finding those 0:12:14.480 --> 0:12:18.560 sort of fallen angels who have been left for nothing. 0:12:19.320 --> 0:12:22.040 Um So, so maybe that's that's not a bad strategy. 0:12:22.400 --> 0:12:26.520 Talk about valuations. Something ask about just macroeconomics and politics 0:12:26.559 --> 0:12:28.840 and the degree to which that's driving the market right now. 0:12:28.880 --> 0:12:30.680 How much attention, how much credence do you give to 0:12:30.720 --> 0:12:33.800 those when you're looking at stocks. Well, I definitely look 0:12:33.880 --> 0:12:42.200 at um policy. I try to really rationalize politics. So 0:12:42.720 --> 0:12:46.520 with policy, monetary policy means a lot for stocks, and 0:12:46.520 --> 0:12:49.880 and monetary policy is something we've focus a lot on. 0:12:50.000 --> 0:12:52.719 We've got some research out today focused on sort of 0:12:52.720 --> 0:12:54.840 the current state of monetary policy and how it might 0:12:54.880 --> 0:12:58.560 impact the equity market. For example, for fiscal policy, we 0:12:58.640 --> 0:13:02.200 try to narrow it down you actual policies that could 0:13:02.200 --> 0:13:04.719 have an impact on earnings growth on the SMP five 0:13:05.240 --> 0:13:07.400 because you know, the truth is that we've had a 0:13:07.400 --> 0:13:10.320 lot of political events over the last several years, none 0:13:10.320 --> 0:13:13.920 of which have truly derailed the path for stocks. So 0:13:13.960 --> 0:13:16.400 you want to be pretty careful regarding your assumptions for 0:13:16.440 --> 0:13:20.400 how much politicians can actually matter for the equity market. 0:13:20.720 --> 0:13:23.920 Um but a couple of fiscal policy issues right now 0:13:23.960 --> 0:13:26.880 do come to the forefront. One is this outright reduction 0:13:26.880 --> 0:13:30.280 in corporate tax possibility that could actually have a meaningful 0:13:30.320 --> 0:13:33.280 impact on earnings growth should it manifest within the next 0:13:33.320 --> 0:13:35.480 few years. So we did some research on that. We 0:13:35.559 --> 0:13:38.960 found that a twenty drop or a drop to corporate 0:13:38.960 --> 0:13:42.160 tax rate could actually increase SMP five hundred earnings growth 0:13:42.200 --> 0:13:45.600 by about seven percent in ten should it occur now, 0:13:45.679 --> 0:13:47.000 I don't know if it will occur. I don't know 0:13:47.040 --> 0:13:49.160 if it will occur by twenty eighteen, but it could occur. 0:13:49.760 --> 0:13:52.880 The other thing that we think is potentially meaningful for 0:13:52.880 --> 0:13:55.240 stocks right now is repatriation. If we do get a 0:13:55.240 --> 0:14:00.280 repatriation effort passed through UM legislation, we could see a 0:14:00.320 --> 0:14:03.199 meaningful impact to certain components of the equity market. The 0:14:03.280 --> 0:14:06.599 last time we had repatriation, we saw a very significant 0:14:06.640 --> 0:14:10.040 acceleration and share by backs. Right if we see that again, 0:14:10.120 --> 0:14:13.320 that will have a meaningful impact on SMP five hundreds. 0:14:13.320 --> 0:14:14.680 So there are a couple of things that I think 0:14:14.679 --> 0:14:16.960 do matter, but you really have to sift through a 0:14:16.960 --> 0:14:19.280 lot of noise to find those things. The Gina Marne Adams, 0:14:19.280 --> 0:14:34.000 thank you so much. With Bloomberg Intelligence on Equity Strategy, 0:14:35.600 --> 0:14:40.000 David Gura, Tom Keane, Bloomberg Surveillance, Gary Shilling with US. 0:14:40.320 --> 0:14:42.320 I don't think it needs an introduction to our audience. 0:14:42.400 --> 0:14:44.680 People don't on inflation. Let me get out of the 0:14:44.680 --> 0:14:48.720 way to call where's the tenure yield in twelve months time? Gary, 0:14:49.560 --> 0:14:51.640 I think it will be a lot closer to one percent. 0:14:51.760 --> 0:14:57.360 And where it is now, let's go down. Yeah, Why, well, 0:14:57.640 --> 0:15:00.320 I think there's a very very good chance that we're 0:15:00.400 --> 0:15:04.520 gonna see a lower, lower race of inflation, maybe even deflation. 0:15:05.080 --> 0:15:08.880 It's also secondly, it's a safe haven. And third, if 0:15:08.920 --> 0:15:12.720 you look at the yields on US ten your treasuries 0:15:12.880 --> 0:15:17.080 versus the sovereigns of almost every other developed country, our 0:15:17.160 --> 0:15:20.920 yields are higher and and and that gives an advantage 0:15:20.960 --> 0:15:23.520 to a foreign investor. And if the dollar rises, they 0:15:23.520 --> 0:15:25.880 get a double win and they get a translation gain 0:15:25.960 --> 0:15:29.280 to boot. So the divergence and the end of the 0:15:29.320 --> 0:15:33.760 divergence is going to be our yields normalized back to 0:15:33.800 --> 0:15:38.120 where their yields are. Does Janet Yelling have the shilling memo? 0:15:38.240 --> 0:15:43.000 Did you send you your monthly newsletter? Well, she gets it, 0:15:43.080 --> 0:15:44.760 I don't know if she don't know if she follows 0:15:44.760 --> 0:15:47.000 it or not. Next to no one agrees with you. 0:15:47.320 --> 0:15:50.360 I mean they just think either stable rates or the 0:15:50.480 --> 0:15:54.440 vectors are pointing to higher inflation toime for thirty seven years, 0:15:54.480 --> 0:15:57.240 ever since nineteen eighty one, when that when the thirty 0:15:57.320 --> 0:15:59.480 year was fifteen point two percent. And I said we're 0:15:59.560 --> 0:16:02.720 entering the bond rally a lifetime. That's what the chorus 0:16:02.760 --> 0:16:06.200 has been saying. It's always there's never been a period 0:16:06.200 --> 0:16:08.160 in there. And you've you've you've noted us for many, 0:16:08.160 --> 0:16:11.000 many years. There's never been a period in there when 0:16:11.000 --> 0:16:14.080 the majority, the consensus said that race are going down. 0:16:14.120 --> 0:16:17.080 It's always up. Inflation is up, race are up. Yeah, 0:16:17.120 --> 0:16:18.880 it's gonna end at some point, but I don't think 0:16:18.880 --> 0:16:21.320 we're there yet. What's the role of cash in a 0:16:21.400 --> 0:16:24.240 portfolio right now? How do you regard cash? How important 0:16:24.320 --> 0:16:26.840 is it to keep cash? Well? I I think I 0:16:26.880 --> 0:16:29.600 mean in portfolio's remanaged, we have a very high component 0:16:29.640 --> 0:16:32.880 of cash because the markets are basically been moving sideways 0:16:32.920 --> 0:16:36.800 and sideways movement markets are the ones that kill you. Uh. 0:16:36.840 --> 0:16:40.440 But but you know cash is uh uh. Cash is cheap. 0:16:40.680 --> 0:16:43.720 With interest rates low, there's not much advantage in not 0:16:43.840 --> 0:16:46.560 being in cash, so um, I think high. And if 0:16:46.560 --> 0:16:48.480 you look at mutual funds they hire, they have a 0:16:48.480 --> 0:16:51.280 lot of higher cash position than they normally do. So 0:16:51.480 --> 0:16:54.040 you know, cash is cash is not trash. What do 0:16:54.080 --> 0:16:55.920 you what do you say to those like Gina Martin Adams. 0:16:55.960 --> 0:16:57.400 We're just talking to her a moment to go our 0:16:57.440 --> 0:17:00.360 our chief equity strategst here at Blomberg Intelligence. You say, Uh, 0:17:00.440 --> 0:17:01.800 if you just held on to cash, if you didn't 0:17:01.800 --> 0:17:04.560 put in equities, you missed out. You are missing out. Indeed, 0:17:04.680 --> 0:17:08.240 what's your response to to that? Well, Uh, you can 0:17:08.280 --> 0:17:10.199 pick any time thing you know you you can. You 0:17:10.240 --> 0:17:14.159 can prove anything by picking the right commnsions. Economists used 0:17:14.200 --> 0:17:17.440 to call that growth wanship and and sure if you pick, 0:17:17.560 --> 0:17:19.879 if you pick the last h if you like the 0:17:19.960 --> 0:17:23.040 last couple of months you look past since the election, 0:17:23.119 --> 0:17:25.440 that's true. If you look on the last couple of weeks, 0:17:25.480 --> 0:17:28.159 not really do you see an end to this, to 0:17:28.240 --> 0:17:30.480 this bull market? You note here that bull market doesn't 0:17:30.480 --> 0:17:34.000 dive old age. They don't dive old age evenual. You know, 0:17:34.600 --> 0:17:36.320 in a post World War two period they've been in 0:17:36.440 --> 0:17:39.440 with on two reasons. One is the FED jacks up 0:17:39.480 --> 0:17:42.680 interest rates enough they try to cool the economy. They 0:17:42.720 --> 0:17:44.840 say they don't want to precipitate a recession, But in 0:17:44.920 --> 0:17:48.800 eleven of twelve tries, by my reckonding, they've gotten a recession. 0:17:48.840 --> 0:17:51.600 The only soft landing was in the mid nineties. The other, 0:17:51.800 --> 0:17:55.159 the other killer, is some kind of a shock like 0:17:55.320 --> 0:17:57.440 the like the dot com blow off in the late 0:17:57.520 --> 0:18:00.720 nineties or the housing subprime mortgage collapse in the mid 0:18:00.760 --> 0:18:03.960 two thousand's. Now, I don't see anything right on the 0:18:03.960 --> 0:18:07.280 horizon that could qualify as a shock. Uh. Yeah, you 0:18:07.280 --> 0:18:08.840 could get a blow up in the Middle East. You 0:18:08.840 --> 0:18:12.760 could have China major problems with their financials. But I 0:18:12.760 --> 0:18:15.679 don't see anything that's really cruising for a bruising. But 0:18:15.800 --> 0:18:18.120 I don't see the FED jacking uprates that high either. 0:18:18.240 --> 0:18:19.959 I think they're going to move very cautious. You and 0:18:19.960 --> 0:18:22.080 I talked to her this morning about yen one fifty. 0:18:22.160 --> 0:18:24.960 That's a huge move from the one ten level. That 0:18:25.119 --> 0:18:29.600 is ultimate or steroidal obianomics. What does the one fifty 0:18:29.720 --> 0:18:33.520 yen do to Mr Abby in the nation of Japan, Well, 0:18:33.560 --> 0:18:36.440 it would make him a big hero because it would 0:18:36.520 --> 0:18:39.200 mean that he had achieved, he had achieved an objective. 0:18:39.680 --> 0:18:42.320 And more importantly, it wouldn't be just the number, because 0:18:42.359 --> 0:18:45.520 I don't know the average Japanese every morning wakes up 0:18:45.560 --> 0:18:47.200 and the first thing you said, where is the yen 0:18:47.280 --> 0:18:49.680 against the dollar. I think they look at the state 0:18:49.680 --> 0:18:51.920 of the economy and they would like to see a 0:18:52.000 --> 0:18:55.399 more rapidly growing economy. But bear in mind that Japan 0:18:55.520 --> 0:18:59.320 is a very high living standard and unlike unlike Europe 0:18:59.400 --> 0:19:02.120 and North of America where voters are mad as hell 0:19:02.240 --> 0:19:04.200 and they've turned to the left and right fringers that 0:19:04.240 --> 0:19:08.320 you're talking about marial Japan, you haven't seen that. It's 0:19:08.359 --> 0:19:11.640 a different culture. But I believe correct me if I'm 0:19:11.680 --> 0:19:15.320 wronging Dr Schilling that if you have that devaluation of 0:19:15.359 --> 0:19:19.800 a currency, you have a wealth destruction. Whose wealth is 0:19:19.880 --> 0:19:24.680 destroyed migrating from one ten to one fifty, Well, it isn't. 0:19:24.680 --> 0:19:28.080 The Japanese holdings abroad. They've got the biggest holdings overseas 0:19:28.119 --> 0:19:30.440 of anybody, and it means that the value in the 0:19:30.600 --> 0:19:33.399 end terms of the dollar holdings overseas go up. And 0:19:33.440 --> 0:19:36.439 by the way, that's a very important source of money 0:19:36.760 --> 0:19:41.200 for them to support their aging population. They could transfer 0:19:41.240 --> 0:19:45.960 a lot of those foreign assets into imports to support 0:19:46.240 --> 0:19:49.720 not only those Asian people, because they're not going to 0:19:49.800 --> 0:19:52.800 have enough people working to support not only themselves but 0:19:52.880 --> 0:19:56.720 all those retirees. Let's talk a little bit about China. 0:19:56.800 --> 0:19:58.760 What you're seeing there as we head to this meeting 0:19:58.920 --> 0:20:02.000 in Florida tomorrow, uh and and Friday? Are you going? 0:20:02.440 --> 0:20:06.920 I'm not going it. The weather is getting better up here. 0:20:07.119 --> 0:20:10.640 You can't afford to stake well well China. China's growth 0:20:10.760 --> 0:20:13.160 is slowing. And what's interesting there. It's a top down 0:20:13.480 --> 0:20:16.760 it's a top down regime, and we're seeing what she lately, 0:20:17.040 --> 0:20:22.000 he is becoming a big brother in the Orwellian nine cents. 0:20:22.000 --> 0:20:25.600 In other words, they now have an effect people Uh, 0:20:25.800 --> 0:20:28.520 looking even at the local level, contrary to make sure 0:20:28.560 --> 0:20:31.560 that they're thinking right. Uh, it's it's it's it's a 0:20:31.560 --> 0:20:34.960 typical reaction of a top down machime when it's worried 0:20:34.960 --> 0:20:39.440 about delivering on his promises. In China, the government basically 0:20:39.440 --> 0:20:43.080 promises the populace that they'll have reasonable growth, little higher 0:20:43.119 --> 0:20:46.560 living standards and return the populace UH says, we'll keep 0:20:46.600 --> 0:20:49.400 our nose out of politics. That's that's a social contract 0:20:49.720 --> 0:20:52.719 that's being challenged now because Chinese growth, they say now 0:20:52.800 --> 0:20:55.120 six and a half per cent real GDP growth this year, 0:20:55.600 --> 0:20:59.119 that's probably about twice reality. Uh. And and and they 0:20:59.160 --> 0:21:01.239 are they are really scrambling. And I think they are 0:21:01.280 --> 0:21:05.280 worried about what's tossed out a lot of previous Chinese dynasties. 0:21:05.320 --> 0:21:07.520 And I call this the Maaeo dynasty and that a 0:21:07.600 --> 0:21:12.640 social unrest caused by high unemployment. On the issue of currency, Uh, 0:21:12.720 --> 0:21:14.240 do you think it's going to be high on the 0:21:14.280 --> 0:21:16.679 agenda at this meeting in Florida? And you look at 0:21:16.720 --> 0:21:18.800 just the reporting ahead of ahead of this meeting, there 0:21:18.880 --> 0:21:22.920 is uh a lot of a sense of confusion surrounding 0:21:22.960 --> 0:21:24.760 what role the Chinese currency is playing in the world 0:21:24.760 --> 0:21:27.400 economy right now. Well, you don't you know, of course, 0:21:27.400 --> 0:21:29.439 you don't really know, but there hasn't been a lot 0:21:29.480 --> 0:21:33.120 of rhetoric out of Trump lately on the currency manipulation 0:21:33.160 --> 0:21:36.040 of the yuan, and it has actually gone up a 0:21:36.080 --> 0:21:39.160 bit recently. Of course, they they moved back and forth 0:21:39.200 --> 0:21:41.760 there between linking to the dollar and linking to this 0:21:41.880 --> 0:21:45.359 back basket of currencies to their advantage, and they always 0:21:45.359 --> 0:21:48.320 wanted their doing this for manipulation purposes. And they also 0:21:48.359 --> 0:21:51.760 are trying to stand the outflow of money from China 0:21:52.119 --> 0:21:54.959 which has forced them to reduce their reserves from four 0:21:55.040 --> 0:21:58.080 tray into three troy and too accommodate the the outflow. 0:21:58.400 --> 0:22:01.000 But I think it will probably more enter on on 0:22:01.160 --> 0:22:05.200 trying to reduce the trade imbalance there and the idea 0:22:05.280 --> 0:22:09.640