Speaker 1: Hello, and welcome to What Goes Up, a weekly market podcast.
Speaker 1: My name is Mike Reagan. I'm a senior editor at
Speaker 1: Bloomberg and I'm a donna hired across Acid Record with Bloomberg.
Speaker 1: This week on the show, well, after a rough some
Speaker 1: of last year's worst hit investments, from tech companies to
Speaker 1: meme stocks, even Bitcoin, have gotten off to a roaring
Speaker 1: start to the year. So is this rebound finally the
Speaker 1: one that's gonna stick or is it just another head fake.
Speaker 1: We'll get into it with the co chief investment officer
Speaker 1: at a wealth management firm, but Vildonna. Before we get
Speaker 1: into it, I gotta I gotta apologize for for I'm
Speaker 1: gonna be cranky for this episode because I made the
Speaker 1: mistake of stepping on a scale on Monday that I
Speaker 1: had a feeling. I can into it. You just look
Speaker 1: it at me. You could tell that stepping on a
Speaker 1: scale is not going to bring me joy. Yeah. No, no,
Speaker 1: it's not that. It's because I gave you a gift
Speaker 1: I bought. I bought you this like special heart to
Speaker 1: find dip that I really like, and I asked you
Speaker 1: if you like it and you said it's good, which
Speaker 1: means that you didn't like it, and you weren't eating it,
Speaker 1: and you tried it, there's no way you wouldn't have
Speaker 1: liked it. Well, why would I be mad at the
Speaker 1: scale if I didn't like it? Though? I got you there. Yeah,
Speaker 1: Joe Wisenthal did a like a three day fast the
Speaker 1: other day. Yeah, it's like four days. I can do
Speaker 1: like a four hour fast. Yeah, I just say five minutes.
Speaker 1: But the lesson is never stepped on a scale in January.
Speaker 1: I think just in general, who cares, don't don't step
Speaker 1: on it. Well, let's uh put the markets on the
Speaker 1: scale here? How about that? Oh that's good. That's a
Speaker 1: really good transition. I do want to bring in our guest,
Speaker 1: Keith Learner, co chief investment Officer at truest Wealth. Keith,
Speaker 1: thanks so much for joining us. Great to be with
Speaker 1: of Aldanna is so so great to be on the podcast.
Speaker 1: I know you and I have spoken for several years,
Speaker 1: so this is just a great uh you know set up.
Speaker 1: And Mike, great to meet you as well. Yeah, Keith,
Speaker 1: why don't we start off just give us a little
Speaker 1: bit about your background and the background of Truists. Now
Speaker 1: for listeners, are who aren't familiar. Truist was formed basically
Speaker 1: by the merger of sun Trust and bb and T
Speaker 1: a couple of years ago, is the right. That's right? Um,
Speaker 1: you know, right before the pandemic we merged and we're
Speaker 1: the six largest bank in the country, big presence in
Speaker 1: the southeast. Also, you might see these big purpose signs
Speaker 1: up in the Northeast as well, like New York and California.
Speaker 1: So we're really acrourse the country at this point. And
Speaker 1: we have a very vibrant and growing wealth business which
Speaker 1: I am fortunate to be the co chief investment officer
Speaker 1: and lead our you know, asset allocation, market views, economic views,
Speaker 1: and really hopping out clients. Uh navigate these complicated markets.
Speaker 1: And I think Fildonna our first guests in the city
Speaker 1: of Atlanta. How about that? Is that true? True? I
Speaker 1: don't know, eter, I love a good pun. Okay, So
Speaker 1: maybe wild or weird or crazy markets is maybe even
Speaker 1: an understatement. So Mike mentioned that we are seeing this
Speaker 1: resurgence in meme stocks, in crypto, etcetera, etcetera. Maybe can
Speaker 1: you just talk about what's behind this sudden new interest
Speaker 1: in stocks. As we turned the page onto three and
Speaker 1: as the year is getting started, sure, and I think
Speaker 1: in the at the onset you mentioned, hey, is this
Speaker 1: something the beginning of something that's sustainable, and we're skeptical.
Speaker 1: You said also turn the corner, I think, or maybe
Speaker 1: the calendar, and I think that's what's happened. If you
Speaker 1: think about late last year, we saw actually a lot
Speaker 1: of tax laws selling. We saw the market, the SNP
Speaker 1: have this kind of correction in December around five or
Speaker 1: six percent. So I think as you turned the calendar,
Speaker 1: a lot of these areas that were beat up, that
Speaker 1: was sold off late last year, or seeing this meme
Speaker 1: reverse and in January is often the time when you
Speaker 1: see that mean reversion. I would say this, Uh, you know,
Speaker 1: if you think about the meme stocks, those typically will
Speaker 1: do well in a period of you know, rising liquidity,
Speaker 1: and we're still taking away liquidity. So we just don't
Speaker 1: think it's sustainable. We think it's more of a balance,
Speaker 1: but we would be fading that balance, you know. Keith,
Speaker 1: I know in your outlook for three talk about the
Speaker 1: need to remain defensive. What does that mean in this environment?
Speaker 1: The notion of defense to me, I think it kind
Speaker 1: of changes with the times. You know, for a while
Speaker 1: there it felt like big cap tech was defensive, you know,
Speaker 1: during the pandemic. What's a good defensive strategy look like
Speaker 1: these days? Sure? And uh, you know, we moved to
Speaker 1: a an underweight position and equities at the end of October,
Speaker 1: and we went to an overweight position in fixed income.
Speaker 1: And as we're thinking about kind of big picture ASCID allocation,
Speaker 1: you know, we think that the macro risk at large,
Speaker 1: we think there's still somewhat elevated recession risk, and we
Speaker 1: look at you know, equities and and credit we just
Speaker 1: don't think you're being compensated. At best. You can say,
Speaker 1: with the correction we had last year, equities and maybe
Speaker 1: fairly valued credit markets are actually you know, to us,
Speaker 1: very expensive relative to the risk. So being defensive from
Speaker 1: a stock, bonds and cast perspective is being overweight fixed
Speaker 1: income relative to equities, and then in the fixed income component,
Speaker 1: keeping it simple, keeping with high quality fixed income and
Speaker 1: not really taking a lot of credit risk at this point,
Speaker 1: and then more kind of moving down a little bit, Mike,
Speaker 1: you know, when we think about the overall markets, I
Speaker 1: think you also have to go below the markets surface.
Speaker 1: As you mentioned, tech is still not leadership, so we've
Speaker 1: been seeing more opportunities below the markets surface, things like
Speaker 1: they equated SMP. And then lastly, more of on a
Speaker 1: sector standpoint, bar bellan kind of defensive sectors like healthcare
Speaker 1: with things like energy and industrials that have some unique circumstances,
Speaker 1: you know, in this environment. So Keith, just going with
Speaker 1: that defensive team, I think you are also for seeing
Speaker 1: you US recession this year, right, whereas we've had some
Speaker 1: people coming out recently and being maybe a bit more
Speaker 1: optimistic or saying that any potential recession is likely to
Speaker 1: be pushed back or delayed. So tell us about what
Speaker 1: you're projecting for the economy. Sure, and I think we
Speaker 1: all know if we do a recessing it will be
Speaker 1: the most called one beforehand in history. But listen, we
Speaker 1: follow the way to the evidence, and we look at
Speaker 1: some timely indicators and with those indicators, whether it's the
Speaker 1: deep and version of the yield curve, the leading economic
Speaker 1: indicators which are down more than four percent on a
Speaker 1: year over year basis, you know housing market which peaked
Speaker 1: last year, those historically suggests elevated recession risk. But you know,
Speaker 1: as we look even at the yield curve, when you say, okay,
Speaker 1: on average, once you invert, which happened last year, that
Speaker 1: would push us more into the middle to the fall
Speaker 1: of neck of this year. So you know, as far
Speaker 1: as the recession, and I would say, right now, the
Speaker 1: data suggests we are not in recession, but we still
Speaker 1: think there's risk of one happening later this year. I
Speaker 1: think the biggest reason behind that is, as we all know,
Speaker 1: as we've all been talking about the last year, we've
Speaker 1: had the most aggressive increase in monetary policy, not only
Speaker 1: domestically but also globally in the last forty years, and
Speaker 1: we just think that's gonna weigh on growth as we
Speaker 1: move further into this year. Keith, one theme I keep
Speaker 1: hearing people talk about a lot this year is UH
Speaker 1: the outperformance of the rest of the world versus the US.
Speaker 1: And I'm looking at UH some of your positioning advice here.
Speaker 1: You rank international developed equity markets and emerging markets as
Speaker 1: sort of the less attractive side there, which I find
Speaker 1: interesting because there is there does seem to be a
Speaker 1: lot of bullishness elsewhere towards you know, the rest of
Speaker 1: the world excluding the US. So walk us through what
Speaker 1: you're seeing that makes you sort of want to stay
Speaker 1: away from international equities. Sure, and maybe a little context.
Speaker 1: I mean, we've been big bows on the US for
Speaker 1: for several years. UH. Fortunately, I've benefited from the big
Speaker 1: outperformance because we've been thinking the U s is that
Speaker 1: big blue chip country. And if you look at this
Speaker 1: kind of simply, the earning trends for the US have
Speaker 1: been so much stronger than the rest of the globe.
Speaker 1: You know, international markets have done really well. And if
Speaker 1: you think about why that is, I think there's two
Speaker 1: main factors. One, the climate in Europe was much warmer
Speaker 1: than expected, so the energy crisis that a lot of
Speaker 1: folks were concerned about just didn't happen. So that's one positive.
Speaker 1: And then the second positive, which was unexpected was basically
Speaker 1: China ripping the band aid off of COVID and in
Speaker 1: europe's a big trading partners. So so with all that said,
Speaker 1: I listen, I think that's an area where focusing on
Speaker 1: right now on a short term basis. You know, if
Speaker 1: you look at the last two or three months, it's
Speaker 1: had one of the biggest outperformance periods UH in the
Speaker 1: last twenty or thirty years. So our position is things
Speaker 1: are getting more interest in there you've had a big
Speaker 1: run because of these unexpected events that have broken the
Speaker 1: right way. We would be looking more potentially to upgrade
Speaker 1: that on a consolidation or pull back after such a
Speaker 1: strong move up that we've seen. But again in the
Speaker 1: in the grand scheme the last ten years, it's really
Speaker 1: still underperformed by a wide margin. Is that part of
Speaker 1: being more defensive too, is leaning more towards US than
Speaker 1: than international traditionally. Yes, but I would say, you know,
Speaker 1: we all somewhat and and been underweight tech for several months,
Speaker 1: So it's not just as simple as saying, hey, by
Speaker 1: the SMP five hundred, we've been a big advocate over
Speaker 1: the last year and still are of the equal weated SMP,
Speaker 1: which basically is a proxy for the average stock. It's
Speaker 1: not weighed down so much by these big megacap tech stocks,
Speaker 1: and evaluations are more reasonable. If you look at a
Speaker 1: relative price chart, you're basically at a four year relative
Speaker 1: high to the overall market. So it's almost like a period.
Speaker 1: It's an echo of two thousand where you want to
Speaker 1: start looking different or and we've been doing that over
Speaker 1: the last year than just the SNP five hundred. It's
Speaker 1: not just buying that index and sitting back because we
Speaker 1: just don't see tech as leadership likely even for the
Speaker 1: next cycle. Okay, tell us more about your preference for
Speaker 1: the equal weight in next because it has been outperforming
Speaker 1: over the last couple of weeks. And basically what that
Speaker 1: shows us is that there's just the rally has been
Speaker 1: more broad based than previously, right correct, And as I mentioned,
Speaker 1: we really started a getting more interested, you know, early
Speaker 1: last year when when tech valuation has got pretty expensive.
Speaker 1: And the way to think about it is tech communications
Speaker 1: and growth or allocation within the SMP became so large.
Speaker 1: We all know about the famoustocks and how large each
Speaker 1: of those individual companies. So what we're seeing is it's
Speaker 1: kind of reallocation from these really heavyweight growth areas to
Speaker 1: these smaller weight you know, value cyclical areas of the
Speaker 1: market and even some of the defensive areas. So we
Speaker 1: we're seeing this rotation and we just expect that's likely
Speaker 1: to continue. And unlike you know, big cap Tech, which
Speaker 1: has corrected a lot, but still I would say is
Speaker 1: not cheap from a historical standpoint, the average stock is
Speaker 1: training close to to about a fifteen times multiple. Again,
Speaker 1: I'm not saying that's deeply cheap, but it's it's more
Speaker 1: reasonable also from that perspective as well. Yeah, Keith, one
Speaker 1: note of yours that cut my eye. You called the
Speaker 1: reverse portrayed presumably David Tepper, is this betting against the
Speaker 1: Carolina Panthers? Is that what this straight is all about?
Speaker 1: Against them? I assume that's not it, but to talk
Speaker 1: to us what it really is. Yeah, I have some
Speaker 1: I have some relativis in uh Charlotte and in laws
Speaker 1: and also now our headquarters for druous is in Charlotte.
Speaker 1: So I'm not going to be rooting against them, but
Speaker 1: that's not the gave me any uh anything client exactly.
Speaker 1: So the way we put this out a note out
Speaker 1: mid last year, which is interesting. I saw him about
Speaker 1: it probably about a week after we put this note out,
Speaker 1: and he basically validated of you. I did send an
Speaker 1: email to David and said, hey, if I always send
Speaker 1: this out, I haven't heard back, so maybe he'll listen
Speaker 1: to your podcast an email. But the way we're thinking
Speaker 1: about it is this. If you remember back, you know,
Speaker 1: coming out of the financial crisis around I think it
Speaker 1: was around two thousand and ten. Back then, David made
Speaker 1: a very cojin point. It was very simple. He said, basically,
Speaker 1: either the economy is going to get better and that's
Speaker 1: gonna help stocks out, or the economy has the weekend
Speaker 1: and the FED is going to step in and support
Speaker 1: the market. So it's almost like a wind win proposition.
Speaker 1: So in some ways you have almost the polar opposite
Speaker 1: of that today and next goes back to the whole
Speaker 1: question about recession or not. Is one either the economy
Speaker 1: is going to stay somewhat strong and that's gonna force
Speaker 1: the FED to continue to be somewhat tight, or the
Speaker 1: economy is going to weaken, which is gonna hit corporate profits,
Speaker 1: and if you're training out of seventeen and a half multiple,
Speaker 1: there's some downside risk. To be fair, there there is
Speaker 1: a third scenario, which the market has started to buy
Speaker 1: into a little bit. Is this kind of soft landing
Speaker 1: where the economy, you know, slows down but doesn't go
Speaker 1: into recession. Inflation is coming down rapidly, and there is
Speaker 1: some probability. We just don't think it's high probability. And
Speaker 1: that's one of the reasons over all, while we still
Speaker 1: remain defensive, because you're just not being compensated for the
Speaker 1: macro risk that we're seeing, at least not today. I
Speaker 1: wanted to ask you, speaking of the FED, how the
Speaker 1: recent rally in stocks actually works against the Fed's goals. Right,
Speaker 1: So we have a loosening of financial conditions and it's
Speaker 1: not exactly like the FED wants to be seeing stocks rallying,
Speaker 1: That's right, And I mean it's it's not just the
Speaker 1: equity market. Also, you look at the credit markets. I mean,
Speaker 1: look how yield spreads are back to where where they
Speaker 1: were several months ago. So we're not embedding any uh,
Speaker 1: you know, recession risks as a whole. And I think
Speaker 1: if you're the FED and you're focused on financial conditions
Speaker 1: which you can impact, I think at some point they're
Speaker 1: gonna start jaw boarding the market again. So I think
Speaker 1: that's that's a challenge. And then also you know the
Speaker 1: unemployment rate. You know, if you're in the soft landing camp,
Speaker 1: the unemployment rate is still at three and a half percent.
Speaker 1: I mean, that's not a place where even if you
Speaker 1: see disinflationary trends that we think the Fed's going to
Speaker 1: take their foot off the pedal, at least on the
Speaker 1: jaw boarding side. And we also think the FED has
Speaker 1: some scard tissue from what's happened over the last year,
Speaker 1: which will make them maybe not as aggressive when they
Speaker 1: do eventually pin. So talk us through what you're thinking
Speaker 1: from the Fed. You know, this week we did get
Speaker 1: some some new inflation data. The p p I index, Uh,
Speaker 1: it was down half a percentage point month over month
Speaker 1: UM at the same time we saw downward surprise and
Speaker 1: retail sales uh, you know, down more than one percent.
Speaker 1: Some of the regional FED indexes have been pretty bad.
Speaker 1: You know, is this enough to make the FED at
Speaker 1: least pause after maybe another fifty basis points or or
Speaker 1: what we're we're how do you see it all playing
Speaker 1: out in in sort of the first half of the
Speaker 1: year with the Fed? Yeah, I think in general they
Speaker 1: probably should be somewhat happy. Looking does look like we're
Speaker 1: seeing this inflation any precious CPI looks like it it
Speaker 1: did come down, you know, the rents we all know
Speaker 1: is going to work with the lag. So I think
Speaker 1: they should be you know, probably the p p I
Speaker 1: as you mentioned, I think, well, they'll be happy that
Speaker 1: things I'm moving in the right directions. And but you know,
Speaker 1: even if they all go into pivot I don't think
Speaker 1: they're gonna let you know that. I mean, there's no
Speaker 1: reason for them to really, you know, talk too too
Speaker 1: much about taking their their foot off the pedal, even
Speaker 1: though it's more likely to the point is probably another
Speaker 1: fifty basis points or so to go and then just
Speaker 1: to pause and then just to hold. And going back
Speaker 1: to the premise of scar tissue, this is when we
Speaker 1: started talking about a lot last year. Is that you know,
Speaker 1: for for over you know, two decades, the Fed really
Speaker 1: didn't have to worry about inflation, right if you think
Speaker 1: about coming out of the financial crisis or the printing
Speaker 1: back then, which actually looks small relative to the last
Speaker 1: couple of years, There was all this discussion about inflation, inflation, inflation,
Speaker 1: it never came, so that really gave the Fed the
Speaker 1: green light to come in at any point to support
Speaker 1: the market. Well, this is the first time in decades
Speaker 1: they've had to worry about inflation. So we think that
Speaker 1: scar tissue of what's happened over the last year is
Speaker 1: going to make them, you know, more reluctant to be aggressive.
Speaker 1: And I think one of the things, you know, if
Speaker 1: we do have a recession, which again is that based
Speaker 1: case I think there's a lot of discussion is this
Speaker 1: gonna be harder soft? I think a lot of the
Speaker 1: things like the labor market load, delinquency rates suggests maybe,
Speaker 1: you know, somewhat short and shallow. But at the risk
Speaker 1: is this is not much of a you know, much
Speaker 1: of a policy response relatives to the past if we
Speaker 1: have some type of outlier event, and that's the risk.
Speaker 1: What about this idea that the reopening in China can
Speaker 1: complicate what the feed is trying to do in that
Speaker 1: with their reopening, we could maybe see a resurgence in
Speaker 1: inflation numbers here in the US. I'm wondering about that,
Speaker 1: and also how maybe whatever is going on with China
Speaker 1: might complicate your outlook as well. Yeah, no, it's I mean,
Speaker 1: and that's the thing. You can look back at history.
Speaker 1: There's a historical playbook, but you know, the historical playbooks
Speaker 1: likely challenged because, I mean, how many times that we
Speaker 1: have the most of the global slowering and then the
Speaker 1: second largest economy actually stimulating and also showing um economic
Speaker 1: growth which is certainly likely to be much higher than
Speaker 1: the past year in China with the stimulus. So to
Speaker 1: your point, I do think if you know, as China reopens,
Speaker 1: that likely put some upward pressure on commodities at least
Speaker 1: support maybe what won't go down as much as as typical.
Speaker 1: And that's where I think that the main translation could
Speaker 1: be for the fad is if some of these commodity
Speaker 1: prices stay higher for longer because of that, I will say,
Speaker 1: just like what we experienced here in the US, a
Speaker 1: lot of I think what you're gonna see is more
Speaker 1: of kind of this pent up consuming spending, especially on
Speaker 1: the service side. Um. But then I saw a stat
Speaker 1: this week, Um, you think about them reopening. I haven't
Speaker 1: verified it, but it came from a legitimate sources. Every
Speaker 1: call is that in twenty nine, tourism from China to Europe,
Speaker 1: I want to say it was or the amount of
Speaker 1: nights UM stayed from Chinese tourists and Europe was like
Speaker 1: twenty million, and then one that fell to about one
Speaker 1: and a half million, again million plus to one point
Speaker 1: five million, And that wasn't at the end of one
Speaker 1: We don't even have the stats for the last year.
Speaker 1: So if they just you know, go back to half
Speaker 1: and start traveling, and I'm sure there's a lot of
Speaker 1: folks that are antsy to to to start traveling again. Um,
Speaker 1: that's that's huge, that's huge demand and probably one of
Speaker 1: the reasons going back to the question about the Nascal,
Speaker 1: you've seen this this really v shaped rebound and international markets. Yeah,
Speaker 1: probably good for the Euro too, I would assume gets
Speaker 1: get a rebound there too. Keith, I know one thing
Speaker 1: you said in your outlook is you need to remain
Speaker 1: tactical this year. So I'm curious what sort of signs
Speaker 1: it would take or what sort of market action you
Speaker 1: would need to see to get you in the bullish
Speaker 1: camp of things. You know, what is there any sort
Speaker 1: of target you have for the market or or something
Speaker 1: that would make you go, you know, now now is
Speaker 1: the time to really jump in with both feet into
Speaker 1: the stocks, into growth, into you know, all these things
Speaker 1: were kind of shirking at the moment. Sure, and you know,
Speaker 1: we don't have a specific price targets. We will find
Speaker 1: it more helpful to have kind of conditions and then
Speaker 1: you know, use the way of the evidence. So a
Speaker 1: lot of times when we say be tactical, like last year,
Speaker 1: as I mentioned, we've had we had six moves of
Speaker 1: at least ten percent in the market right three to
Speaker 1: the downside three to the up side. So I think
Speaker 1: as this whole debate rages on about hard landings, soft landing, China,
Speaker 1: reopening Europe, I think we don't have those toctical opportunities
Speaker 1: as well. So things that we would be looking for,
Speaker 1: I guess to take money off the table, like maybe
Speaker 1: start there is you know, we combine you know, valuations.
Speaker 1: So like if you think about this market, you know
Speaker 1: as an eighteen p has been kind of a you know,
Speaker 1: top end of the range even before the pandemic around
Speaker 1: eighteen and a half. And then you look at some
Speaker 1: technical things like even with the recent rally, we were
Speaker 1: now the most overboard we've been for a few months.
Speaker 1: To us, the risky ward is not the compelling as
Speaker 1: you kind of moved from you know, four thousand, forty
Speaker 1: one hundred to the other side. More direct to your question,
Speaker 1: you know what gives more positive fire lower prices and
Speaker 1: and sentiment that gets a bit washed out, more and
Speaker 1: cheap evaluations. So and when we think of back around
Speaker 1: um October, we were around you know, thirty five hundred
Speaker 1: or so trading around the fifteen multiple sentiment very negative,
Speaker 1: and we saw our technical indicator is very oversold. That's
Speaker 1: the same thing that we're looking for. And I think, listen,
Speaker 1: you're not gonna we're not trying to top bomb ticking
Speaker 1: to this. It's in possible, But I'll focus is there's
Speaker 1: gonna be these extremes. And when we start to see
Speaker 1: those conditions moved an extreme, we want to be a
Speaker 1: tactical to add risk or take risk off. So I
Speaker 1: would say maybe the point now, I mean, if we
Speaker 1: get back closer to those loads, to us, that would
Speaker 1: be more interesting, where today we just don't th think
Speaker 1: things are that compelling relative to the risk. So you
Speaker 1: mentioned the overbought conditions, and you are somebody who pays
Speaker 1: a lot of attention to technical indicators and technical signals.
Speaker 1: So I want to ask you what what specifically you're
Speaker 1: paying attention to these days, given the rally that we've
Speaker 1: seen broadly speaking, and how important maybe something like the
Speaker 1: two hundred day moving averages for the SMP five, which
Speaker 1: I believe we failed to break out above once again.
Speaker 1: I think it was the fourth or fifth time over
Speaker 1: the past year that we failed to do that. Sure,
Speaker 1: And sometimes you know, as we look at fundamentals and
Speaker 1: technical sometimes they conflict and sometimes they're in alignment obviously
Speaker 1: the high probability outcomes and when they're more aligned, I
Speaker 1: would say this kind of mixed readings. UM. You know,
Speaker 1: the tun to day movement average, it's it's more just
Speaker 1: a reflection of trend, and we've seen that the market
Speaker 1: got above it below it. I really think the level
Speaker 1: is probably the more key level near term from a
Speaker 1: technical level. If you were able to get above that,
Speaker 1: I think that would you know, the technical trends would improve. UM.
Speaker 1: But so far we've been able to we failed there,
Speaker 1: So that's something to kind of keep an eye on.
Speaker 1: And then you know, again, if we can come on
Speaker 1: level and we say okay, what multiple are you at
Speaker 1: that level and say okay, you'd be around almost an eighteen,
Speaker 1: you kind of combine those things. To me, that's more powerful.
Speaker 1: You know. It's something that in the technical community community
Speaker 1: in which I follow a lot, is we we saw
Speaker 1: you've gotten some things that what's called these kind of
Speaker 1: breath through us between we've had earlier this year, we've
Speaker 1: had a lot of participation, and when you have a
Speaker 1: lot of participation, especially over a ten day period, historically
Speaker 1: you have these signals that are called breath for us
Speaker 1: where you know, you have more of a like a
Speaker 1: two to one ratio of advancing into the client stocks
Speaker 1: over a period, and when you test that out looking
Speaker 1: at a year, they have a high probability of success.
Speaker 1: And actually, as you come out of our market downturn,
Speaker 1: you want to see really strong breath. You want to
Speaker 1: see the market getting very extended overboard. But I will
Speaker 1: say what's tricky this time is we had a couple
Speaker 1: of thrust last year that failed. And this is in
Speaker 1: the case I've been using since the nineteen uh you know,
Speaker 1: the nineties, and it's plus beat rate or positive rate,
Speaker 1: and we had to that fail. So at this point,
Speaker 1: I think it's encouraging that we've seen some of that.
Speaker 1: Because of the macro condition, because of where the valuations are,
Speaker 1: keeps us somewhat more skeptical. The other thing that I
Speaker 1: think you want to look at is just you know,
Speaker 1: where's the leadership And right now, if you if you
Speaker 1: go sector by sector in this market, it's hard really
Speaker 1: to see where the leadership is. Tech made a relative
Speaker 1: low at the end of last year. It's bounced back,
Speaker 1: you know, so okay, communications bounce back from an over
Speaker 1: soul condition. You know, finances were doing a bit better,
Speaker 1: but now kind of given some of that back. Defensive
Speaker 1: which we've been more positive on, their kind of mixed.
Speaker 1: So what I'm looking for is will the will sector
Speaker 1: leadership please stand up because you just have a lack
Speaker 1: of that right now. Broadly, as far as what I'm
Speaker 1: looking at, do you think it would be more of
Speaker 1: a factor leadership, you know, value over growth something like that. Yeah,
Speaker 1: I mean, I do think it makes sense. It seemed
Speaker 1: like there's more of a consensus view that values should
Speaker 1: have perform were we are overweight value and part of
Speaker 1: the reason why a world word value is you had also,
Speaker 1: you know, a decade of underperformance and we were skeptical
Speaker 1: that technology, after the big gains has had over the
Speaker 1: last decade, regains leadership. So we just we still like
Speaker 1: areas that have some unique things like industrials thinking about
Speaker 1: restoring there's a lot of discussion about the defense spending domestically,
Speaker 1: but think about over in Europe as far as a
Speaker 1: rising defense spending over time or even our strategic you know,
Speaker 1: battle with China, like but it's probably going to be
Speaker 1: more you know, the defense spending over time. Secondly, so
Speaker 1: we still like that yeah, so again that would kind
Speaker 1: of lead you more towards a value tilt relatives to growth. Mike,
Speaker 1: I have to call you out about overweight. No, oh
Speaker 1: my gosh, no, you just talking about being overweight. I
Speaker 1: am skipped right over Keith's eminem reference. Yeah, I hoping
Speaker 1: that was good. I caught it, of course I did.
Speaker 1: But I want to share something with you what I
Speaker 1: did today and chat GPT, which is I guess the
Speaker 1: buzz right now right, Yeah. I did a search for
Speaker 1: eight style rap with the Federal Reserve and I was
Speaker 1: very impressed with what it came back, so put together
Speaker 1: a rap song for me. I just need a chorus,
Speaker 1: and I was gonna ask, uh, since you are also
Speaker 1: good on these podcasts, maybe Mike and you could join
Speaker 1: the chorus with me. Oh my gosh, you need to
Speaker 1: send Yeah, whatever lyrics that came up with, you need
Speaker 1: to send them to us. I think Keith wants to rap.
Speaker 1: I think I think he does. You'll have to. You'll
Speaker 1: have to come back next week with the whole like
Speaker 1: song wrap time. Okay, Yeah, you need to. You need
Speaker 1: to share this with us, absolutely, we'll tweet it. I
Speaker 1: didn't know chat GBT when gangster like that. That's interesting. Yeah,
Speaker 1: it's funny. Even the rappers are in trouble. I guess well,
Speaker 1: you know, honestly, I would be a little bit nervous
Speaker 1: if you saw this, uh, the lyrics that he came
Speaker 1: up with. Because over the weekend, um, you know, I
Speaker 1: was talking to one of my colleagues and I was
Speaker 1: like saying, let's see if chat GPT can tell me
Speaker 1: what happens to the market after it's down, you know,
Speaker 1: and he's like, oh, you're using it wrong. You can
Speaker 1: you know, you can basically ask it to develop a
Speaker 1: poem or I love let it to your significant other.
Speaker 1: I'm like, okay, so it's it's pretty impressive. I can't
Speaker 1: wait to see. It's impressive and scary for people in
Speaker 1: our business. It's very scary if market stories can be
Speaker 1: uh written by k let's um, let's move over to
Speaker 1: the fundamental side for a minute. Be because I feel
Speaker 1: like just about everyone I've talked to recently does not
Speaker 1: believe the earnings estimates that we're looking after three Almost
Speaker 1: to a person, especially top down people such as yourself, think, uh,
Speaker 1: no way do we get you know, any sort of
Speaker 1: positive earnings growth this year? I think Sevita Subramanian last
Speaker 1: week on the show talking about a ten percent drop
Speaker 1: in earnings UH, which I I feel like would be
Speaker 1: a pretty ugly outcome for this market if they if
Speaker 1: they sniff that type of outcome coming UH for the
Speaker 1: whole year. How are you thinking about earnings? You know,
Speaker 1: we've gotten that first trickle of earnings, a lot of
Speaker 1: the banks, a few other companies, UH starting to get
Speaker 1: more into the industrials and whatnot, anything pop out for
Speaker 1: this reporting season, and especially how you're thinking about the
Speaker 1: whole year as far as earnings growth were lack thereof
Speaker 1: sure And maybe before I go specifically to earnings, I
Speaker 1: think even if you have a view that earnings are
Speaker 1: going to be stable and that the void earing estimates
Speaker 1: for this year, which is around two thirty for the SNP,
Speaker 1: is the right earning estimates, which which we're a skeptical of.
Speaker 1: Even at that, you're still treating at you know, around
Speaker 1: the seventeen and a half multiple. So and now if
Speaker 1: you think that there's earnings risk, which we do, then
Speaker 1: the the PE multiple is actually above that. So that's
Speaker 1: so I think at this point again, thinking about risk reward,
Speaker 1: I think right now even using that it's just not
Speaker 1: that favorable on them that But going to specifically to
Speaker 1: your question, one thing we look at is trend earnings
Speaker 1: over a cycle. And when we do that and we
Speaker 1: look at trend earnings, that does bring us to a number,
Speaker 1: you know, closer to two hundred for the SMP. Whether
Speaker 1: that happens you know, by the end of this year
Speaker 1: or early into next year, you know, is debatable. But
Speaker 1: I think there's more downside and and you know, historically
Speaker 1: around recessions, as most of us know, is that earnings
Speaker 1: go down about I think that's a bit severe. I
Speaker 1: think companies have done a tremendous job of handling this downturn,
Speaker 1: and you know, so I think something in the ten
Speaker 1: percent um you know, hairdcut is more reasonable to expect.
Speaker 1: But again, if you if you apply that haircut and
Speaker 1: you look at market valuations, you're just not that attractive,
Speaker 1: especially relative to where yields are. You know, the yields
Speaker 1: are about um well not anymore. They were almost double
Speaker 1: the tenure average, but they've obviously pulled back here, uh
Speaker 1: in the last last few weeks. And Mike mentioned we've
Speaker 1: already heard from some of the banks and the some
Speaker 1: of the earning s reports have started to trickle out.
Speaker 1: So what from what we've seen so far has stood
Speaker 1: out to you and in terms of any big themes
Speaker 1: or any worrying signals you Honestly, it's it's a bit premature.
Speaker 1: I mean, we had the financials, it was mixed. You
Speaker 1: saw you know, differences from you know, if if folks
Speaker 1: businesses that that depend on investment, banking, um and trading
Speaker 1: versus wealth management. So I don't know if there's a
Speaker 1: big read there. I will say going into the earnings
Speaker 1: this earning season, there were a lot of estimate cuts. Um,
Speaker 1: what I'm gonna really be focused on as we get
Speaker 1: you know, more broader earnings that get a better tells
Speaker 1: you know, what's happening on the inflation side, and also
Speaker 1: what's honestly, consumers pushed back a bit more, right, so
Speaker 1: that's gonna hurt margines. Margins are still near record levels,
Speaker 1: have come down some, but also where those margins are.
Speaker 1: But again, I think it's a bit premature to have
Speaker 1: a good feel. I expect that it will be somewhat
Speaker 1: of a mixed earnings period and we're going to start
Speaker 1: this show more weakness in the courts ahead as the
Speaker 1: economy shows more substantial weakening that way we've seen because
Speaker 1: well if you look at Atlanta GDP now and some
Speaker 1: of these things, the the overall economy is still held
Speaker 1: in there pretty decently into the fourth quarter. That's what
Speaker 1: guys in Atlanta. Look at the Atlanta GDP now. Yes,
Speaker 1: I think, if I'm not mistaken, your bills might play
Speaker 1: a playoff game in Atlanta? Isn't that true? If all
Speaker 1: goes right? Hello, knock on all the wood all around you,
Speaker 1: so you'll get a playoff game after all? Keith that
Speaker 1: we look forward to it. But a diplomatic answer. Yeah. Um.
Speaker 1: Just to wrap things up here, Uh, one thing about
Speaker 1: the end. It's not necessarily earning season itself that's bringing
Speaker 1: it out, but just coincidentally, is um seeing some really
Speaker 1: sort of alarming uh job layoff announcements? Uh you know
Speaker 1: we're recording here. On Wednesday. Microsoft just announced ten thousand layoffs. Amazon,
Speaker 1: I think announce something like eighteen thousand. We've seen the
Speaker 1: banks a lot of some layoffs, you know, more than
Speaker 1: your typical uh calling of the flocket goldman that sort
Speaker 1: of thing. Yet we still have this just off the
Speaker 1: charts number of job openings, uh near record low unemployment. Um,
Speaker 1: how do you see that all playing out? You know,
Speaker 1: is it a matter of there's you know, people losing
Speaker 1: good high end tech jobs and picking up the slack
Speaker 1: on the low end the service jobs that are available,
Speaker 1: and and it sort of becomes a wash but a
Speaker 1: much lower paying uh sort of job for some of
Speaker 1: these people that that got laid off, or or how
Speaker 1: do you see it playing out from a macro perspective?
Speaker 1: It it's certainly job cuts can be uh sadly be
Speaker 1: good news for the company's individual share price, But I
Speaker 1: wonder at what point we have to start worrying about
Speaker 1: it from the macro level as far as the signal
Speaker 1: it's sending. Sure, any right, I Mean this just goes
Speaker 1: to the kind of the complexity of the not only market,
Speaker 1: but the economy. I think the high profile tech job
Speaker 1: layoffs that you're seeing, I think that's a function that
Speaker 1: there was so much demand that was brought forward. If
Speaker 1: you look at you know, Microsoftics and Meta and Amazon,
Speaker 1: look at where their job levels, employment levels were in
Speaker 1: two thousand nineteen, and then compare where it is now.
Speaker 1: I mean, we're in some of these areas were forty above,
Speaker 1: so they you know, if you look back now based
Speaker 1: on you know, that kind of pull forward the oversupplied
Speaker 1: of workers. So I still think we'll see a reallocation.
Speaker 1: You know, there was I think there was a Wallhreet
Speaker 1: Journal article last week that discussed that these tech folks
Speaker 1: are being laid off. The good news is they're finding
Speaker 1: other jobs relatively quickly. The service side still seems relatively
Speaker 1: strong with seeing that some of the airlines and if
Speaker 1: anyone goes through a restaurant out it still seems somewhat buoyant.
Speaker 1: But I do think as we move later in the year,
Speaker 1: probably by mid year, I think you'll start to see
Speaker 1: that pick up to more levels. I mean more it's
Speaker 1: the somewhat high levels, I should say, because initial job
Speaker 1: as claims, even though we see these big headlines, has
Speaker 1: still been you know, pretty pretty low by historical standards.
Speaker 1: But we do think that's going to eventually start to
Speaker 1: move up and at some point to remember that the
Speaker 1: job market is one of its like the most lagging
Speaker 1: indicator that we have, right it's one of the last
Speaker 1: things that turned before a recession um as well. So
Speaker 1: that's also I think coursing some confusion, Keith Learner of
Speaker 1: Truest great to get your thoughts on the market. I
Speaker 1: hope we can have you back again one day. But
Speaker 1: with your rap. Yeah yeah, we needs a rap name.
Speaker 1: We've got to get him a rep name. Let me think,
Speaker 1: help meat. You you're all good at you know, making
Speaker 1: something sound better than it is. Right, that's that's that's
Speaker 1: why she's my partner. You're up to the challenge. I
Speaker 1: think a lot of good rap out of Atlanta. So
Speaker 1: he's he's he's coming from it's coming from a good
Speaker 1: pedigree down there. But Keith, we can't let you go
Speaker 1: until we hear the craziest thing you heard from markets
Speaker 1: this week. But since Phildon is bragging about having three
Speaker 1: or two or however, why don't you start? I have to.
Speaker 1: I'm melding them together into one theme, which is that
Speaker 1: formerly maybe we can call them disgrace crypto people making
Speaker 1: a comeback. Another rapper, crypto comeback, Yes, another rapper. So
Speaker 1: one is Heather Morgan, also known as the Crocodile of
Speaker 1: Wall Street Razzle Razzle con Yes that's right, is her
Speaker 1: rap name. So she she was infamous for her for
Speaker 1: her rap videos and wrap and for and for stealing
Speaker 1: a lot bitcoin four point five billion worth of bitcoin
Speaker 1: from bitin x. So the story this week is that
Speaker 1: she was offered a job at a tech company in
Speaker 1: the role this This is quote from the story in
Speaker 1: the role of growth marketing and business development specialists. So
Speaker 1: how bad can the tech job market really be? When
Speaker 1: someone out on bail for allegedly having a few billion
Speaker 1: and stolen bits on house arrest and I think that
Speaker 1: they asked the judge to okay her going to the office.
Speaker 1: I would love to hear her bosses explain me too.
Speaker 1: We don't know which tech company. I have another one though, Okay,
Speaker 1: you remember the two co founders of three A C.
Speaker 1: So that's the crypto hedge fund that blew up last May,
Speaker 1: last June. So the two of them, Suzu and Kyle Davies.
Speaker 1: They're looking to raise twenty five million dollars for a
Speaker 1: new venture, which is a crypto exchange. They're looking to
Speaker 1: do it a SAP and the name that they had
Speaker 1: on the pitch decks was g t X, which sounds
Speaker 1: very very similar to f t X g t X.
Speaker 1: What's its sent today? Comes after? It's just the next
Speaker 1: next next episode as they said plus one. I bet
Speaker 1: they got it too. I'm gonna go out on them
Speaker 1: and say that they raised that money probably from razzle
Speaker 1: con herself. All right, Keith Vildonna came prepared. But how
Speaker 1: about you you see anything crazy recently in markets? I
Speaker 1: don't think it's as fun as Orville Donna has, but
Speaker 1: I was thinking more kind of interesting from our market perspective,
Speaker 1: which we touched on, is that, you know, the European
Speaker 1: banks have ripped up, and we have you know a
Speaker 1: lot of these fang and technology stocks down forty and
Speaker 1: as you think about the last you know, decade before,
Speaker 1: you know, before the pandemic, it was all about low rates,
Speaker 1: you know, paying a premium for growth, and probably the
Speaker 1: most hated asset out there was these European banks that
Speaker 1: got hurt from all those things. So it's interesting that
Speaker 1: we're seeing now, you know, a period of QT somewhat
Speaker 1: higher interest rates, somewhat higher inflation, and these European banks,
Speaker 1: the the unloved asset, which I have a lot of problems,
Speaker 1: by the way, still UM ripping an out performance. So
Speaker 1: that was that was one not as cool as Danna's
Speaker 1: UM and thenb just one follow up to because I
Speaker 1: need to to have and this is not that fun.
Speaker 1: But I just I think another thing that came out recently,
Speaker 1: and I think what we saw this with the U
Speaker 1: n UM talking about China's population over the next century
Speaker 1: will decline by about six hundred million, and I think
Speaker 1: we most of us probably saw that headline. But to
Speaker 1: put that in perspective, that's two times the population of
Speaker 1: the US. Almost you know that that decline. So those
Speaker 1: are my my two. But again, I really feel like
Speaker 1: that was a tough follow up to that. Mine are better.
Speaker 1: Don't tell yourself. Rally and European banks, if you had
Speaker 1: told anyone that a few years ago, I think they
Speaker 1: would degree it's that that's the craziest thing anyone's seen.
Speaker 1: Pretty good. All right, I'll give you mine. I'm dipping
Speaker 1: back into the alternative asset class that I love so much. Uh.
Speaker 1: Kobe Bryant's jersey listing on Southby's up for auction. So
Speaker 1: this is one of the jerseys he wore in the
Speaker 1: two thousand and seven two thousand and eight season he
Speaker 1: was m v P. They went to the finals and
Speaker 1: I think they got beat by Boston. I'd have to
Speaker 1: I'd have to double check that UH, and I got
Speaker 1: the story. It's a c NBC story courtesy of the
Speaker 1: Twitter handle at Zalvani. At Salvanni a new UH contributor
Speaker 1: to the Craziest Thing, so we thank thank him. To me,
Speaker 1: what the expected price for this jersey is not the
Speaker 1: interesting part of it. They think it will go for
Speaker 1: as much as seven million dollars. That's what I was
Speaker 1: going to guess. Of course you were, of course, which
Speaker 1: they say will be the highest priced piece of Kobe
Speaker 1: Bryant memorabilia ever ever to go up to me, The
Speaker 1: interesting thing is how many times be Brian were this
Speaker 1: jersey in a game? So to play the prices precise, Keith,
Speaker 1: you two are gonna have to tell me how many
Speaker 1: times you think he wore this jersey. It's a home jersey,
Speaker 1: and I'll give you some stats here that that might
Speaker 1: help you out. Eighty two games regular season games in
Speaker 1: the NBA, plus another about playoff and and finals games,
Speaker 1: so call it hundred and change games home jersey. So
Speaker 1: he'd be wearing a her home jersey at approximately called
Speaker 1: fifty games in the season. How many times do you
Speaker 1: think he were this particular jersey in a game? And
Speaker 1: it's surprising to me. Do you want to have Keith
Speaker 1: go first? Keith, what do you think we're playing by
Speaker 1: the price is right? Because then she gets the advantage. Yes,
Speaker 1: but it's but it's called the price is precisely Okay,
Speaker 1: I'll happily go first because I haven't answer you. Go,
Speaker 1: I'm gonna say once, because he wore it once, like
Speaker 1: why would he wear it again? He's just he's a million, right,
Speaker 1: He's not like some journeyman signed from the EuroLeague. He
Speaker 1: has so many he had so many jersey, new jersey
Speaker 1: every night. Yeah, exactly right. I'm going with once. I'm
Speaker 1: gonna going to the side. Then I'm gonna go I'm
Speaker 1: gonna go fifty. I'm gonna say what I said every
Speaker 1: single day. She's gonna say once. I'm gonna say every
Speaker 1: single day he slept with that. I think we gotta push.
Speaker 1: It's twenty five times he were this jersey wow, which
Speaker 1: to me was surprising. On the high side, I'm with you,
Speaker 1: I would think one I'm going to wear a new
Speaker 1: jersey every night, I'm gonna auction the used jersey off
Speaker 1: so or throw it in the stands. Half the games
Speaker 1: he were the same jersey. I think that's crazy. I
Speaker 1: don't know. Sure do I win? I think I win?
Speaker 1: Keith went over Keith. He could have won. You knew
Speaker 1: the traces right roles too. You know if I figured,
Speaker 1: if I, if I gave that, maybe maybe you all
Speaker 1: will have me back on. Well, we have to have
Speaker 1: you back on for the wrap. Yeah. Well, and Vldon
Speaker 1: is never gonna let you live this down. But never.
Speaker 1: Every time we talk going forward, I'm gonna be Kobe Bright.
Speaker 1: I'm not wearing the same jersey times. You think there'd
Speaker 1: be blood on it and be all sweaty. I don't, Mike,
Speaker 1: you are no Kobe Bryant. That's true. That's true. Maybe
Speaker 1: that explains it. It It was his lucky jersey. That's funny.
Speaker 1: He's seen me play, Unfortunately I did. I grew up
Speaker 1: right down the street from him. Basically he was Laura
Speaker 1: Marry and I was Westchester. Really I didn't know that. Yeah,
Speaker 1: that's about where the comparisons. Keith Learner, great to have you.
Speaker 1: You could have won that one. Man. I don't know.
Speaker 1: Learn your lesson. Always always go for the jugular learner
Speaker 1: your lesson. I'm gonna hear that from my friends now
Speaker 1: thanks a lot. Great to catch up with you, Keith.
Speaker 1: Will you hope we can get you back. Yeah, it's
Speaker 1: been a lot of fun. Thanks so much for having me.
Speaker 1: Thanks Keith, What Goes Up. We'll be back next week
Speaker 1: and so then you can find us on the Bloomberg
Speaker 1: Terminal website and app or wherever you get your podcasts.
Speaker 1: We'd love it if you took the time to rate
Speaker 1: and review the show on Apple Podcasts so more listeners
Speaker 1: can find us. And you can find us on Twitter
Speaker 1: follow me at Rea Anonymous. Well, Donna Hirich is at
Speaker 1: bil Donna Hirich. You can also follow Bloomberg Podcasts at podcasts.
Speaker 1: What Goes Up is produced by Stacy Wong. Thanks for listening,
Speaker 1: See you next time. The FO