WEBVTT - Michael Cuggino on the Markets (Radio)

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<v Speaker 1>Let's get to Michael Cogino, President and portfolio manager at

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<v Speaker 1>Permanent Portfolio family of funds. So the FED chief Michael

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<v Speaker 1>often sounds a little more devish in the in the

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<v Speaker 1>news conferences than the statement. I think his comment to

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<v Speaker 1>being sort of referring to being near neutral already really

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<v Speaker 1>juiced up the bulls. But he also said that it

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<v Speaker 1>doesn't matter if we get a negative GDP report, and

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<v Speaker 1>that tells us that he's mainly watching the jobs market,

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<v Speaker 1>and that has some implications. You can get some other

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<v Speaker 1>bad data and maybe the FED doesn't take such notice.

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<v Speaker 1>How are you playing this latest fit move? Well, the

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<v Speaker 1>comment on GDP is self serving because I think we

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<v Speaker 1>expect the number to not be that great tomorrow. And

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<v Speaker 1>depending on your definition of recessions, um, you know, it

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<v Speaker 1>either is or isn't. But it's really kind of a technicality. Uh.

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<v Speaker 1>The economy is slowing, and I think the Fed's announcement

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<v Speaker 1>today was indicative of the cross currents that are currently

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<v Speaker 1>in the marketplace. I mean, on one hand, employment strong,

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<v Speaker 1>on the other hand, we're near neutral, but on the

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<v Speaker 1>other hand we might be raising more. They just might

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<v Speaker 1>not be as big as chunks as we've seen in

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<v Speaker 1>the last couple of months. So it all adds up

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<v Speaker 1>a continuous or or it continues to add up as

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<v Speaker 1>a lot of uncertainty and unanswered questions. So I think

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<v Speaker 1>the way you play it is to be fairly diversified

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<v Speaker 1>among a broad sector of assets. Sounds like a broken

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<v Speaker 1>record for me, but but that's how you play this environment.

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<v Speaker 1>You head your bets in a number of directions, and

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<v Speaker 1>you have exposure in a number of spots, and that

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<v Speaker 1>way you minimize downside risk um and you have multiple

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<v Speaker 1>avenues to possibly make some money or stay close to

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<v Speaker 1>zero in this environment. Michael Steve Angel here, of course,

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<v Speaker 1>we just talked about how Powell doesn't think the U

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<v Speaker 1>S is currently in a recession. How do you how

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<v Speaker 1>deep do you feel the recession will will be? If

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<v Speaker 1>there is one UH during this What you admitted to

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<v Speaker 1>is a slowing US economy, Well, I I think you know,

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<v Speaker 1>if you go by the technical definition, I think we're

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<v Speaker 1>probably in one right now. I don't expect much in

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<v Speaker 1>the second quarter, and even if it's positive, it's going

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<v Speaker 1>to be marginally and probably negative year today. Um, the

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<v Speaker 1>question as to how deep, how long, how extensive, we

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<v Speaker 1>really don't know. I mean, there's arguments in a number

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<v Speaker 1>of directions on whether this recession could be pretty brief

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<v Speaker 1>and shallow given the employment picture, um or it could

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<v Speaker 1>be deep in something we're mired in a while, if

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<v Speaker 1>inflation is stubborn and we have a hard time reducing

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<v Speaker 1>that number. And again I go back to the the

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<v Speaker 1>point that we just do not have answers. It's a

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<v Speaker 1>very unique cycle, given what we've done the last couple

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<v Speaker 1>of years in terms of creating money, in terms of COVID,

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<v Speaker 1>in terms of coming out of COVID, the voluntary shutting

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<v Speaker 1>down of the economy, the unattended consequences of trying to

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<v Speaker 1>get back online, not only here but globally. Um it

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<v Speaker 1>just presents a lot of things we just don't know

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<v Speaker 1>the answer to. So I can't tell you today well

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<v Speaker 1>how deep it's gonna be or whether we're even gonna

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<v Speaker 1>be in one, but I suspect we are and the

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<v Speaker 1>jury's out as to how deep and long it'll be.

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<v Speaker 1>So of course we talked to not the FED, but

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<v Speaker 1>we also need to talk about the big tech rally.

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<v Speaker 1>Tech investors overnight kind of latching onto perhaps what they

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<v Speaker 1>wanted to hear from the fed, But Michael, does it

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<v Speaker 1>reflect the fundamentals in tech right now? Meta disappointed after

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<v Speaker 1>the bell Calalcolm gave a lackluster forecast, but again Microsoft

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<v Speaker 1>yesterday had the disappointing results, but then gave a bullets Outlook.

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<v Speaker 1>What's your take. It's always hard to predict stock directions

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<v Speaker 1>on quarterly earnings. We're long on term investors, so it

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<v Speaker 1>really whether I don't place much emphasis on immediate stock reaction.

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<v Speaker 1>I think you know, tech generally has gone up the

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<v Speaker 1>last month or so, um from an oversold condition. And

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<v Speaker 1>if if the market is right, or people in the

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<v Speaker 1>market or right and thinking that we're near the end

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<v Speaker 1>of rate increases and might even be looking at rate

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<v Speaker 1>cuts because of a recession down the road, then the

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<v Speaker 1>migration towards growth stocks makes a lot of sense. Um. Well,

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<v Speaker 1>I don't know if that's going to be the case

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<v Speaker 1>or not, but but buying them now is a lot

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<v Speaker 1>cheaper than several months ago. So um, you know you

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<v Speaker 1>want to have it to versified portfolio, and generally speaking,

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<v Speaker 1>that's where the growth is in the market. Um, But

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<v Speaker 1>you have to look at those in conjunction with the

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<v Speaker 1>macro economic environment, and just because they performed that way

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<v Speaker 1>in the past, doesn't mean they will again. So all

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<v Speaker 1>were sold a nice bounce that we need to learn

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<v Speaker 1>more as to whether it's sustainable and moves further from here.

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<v Speaker 1>So you're not a big believer in the fundamentals indicating

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<v Speaker 1>that things will get better. And I think people generally

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<v Speaker 1>in America probably share your thoughts. UM. I'm curious why

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<v Speaker 1>if people have jobs they feel like they're either already

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<v Speaker 1>in reflation or heading into it. Is it mainly inflation? Well,

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<v Speaker 1>employment numbers are lagging indicator UM, and we're starting to

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<v Speaker 1>hear announcements of companies restructuring laying people off. Jobless claims

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<v Speaker 1>was a higher number UM than recent over the last

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<v Speaker 1>week or so, So I mean, you know that that

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<v Speaker 1>number could flip. But I think what you have, or

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<v Speaker 1>what you've add in the last couple of years is UM.

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<v Speaker 1>You had a lot of money put in people's pockets

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<v Speaker 1>that went into savings accounts. It bought stocks and bonds

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<v Speaker 1>in real estate. People were spending it. They felt good

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<v Speaker 1>because they had that money, and those that could work

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<v Speaker 1>or wanted to work, we're working in conjunction with that, UM.

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<v Speaker 1>To the extent you're working, you still have that although

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<v Speaker 1>prices are getting higher, So it's making you more nervous

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<v Speaker 1>as to how you're going to spend. And for those

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<v Speaker 1>that didn't work and they're spending their savings, at some

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<v Speaker 1>point that's going to run out. The question is what

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<v Speaker 1>if the job market turns and what if you deplete

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<v Speaker 1>all those savings and assets, what are you going to spend?

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<v Speaker 1>And that would be a tail win to a deeper

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<v Speaker 1>recession if if that were to occur. So it does

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<v Speaker 1>make sense to pay closer attention to jobs and job trends,

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<v Speaker 1>um and underlying demand as to what would drive those

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<v Speaker 1>jobs one way or the other. Hey, Michael, do you

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<v Speaker 1>have a hot take on what's happening with the Chinese

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<v Speaker 1>economy as it relates to its contribution to global growth

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<v Speaker 1>or perhaps not global growth. Obviously we have Biden and

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<v Speaker 1>see they're gonna be talking soon I think later today,

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<v Speaker 1>But we're also getting you know, lots of words out

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<v Speaker 1>of like the SEC sing U s and Chinese officials.

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<v Speaker 1>They must reach an agreement very soon on access to

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<v Speaker 1>audits to avoid any delisting of Chinese stocks. Do you

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<v Speaker 1>see a decoupling as as kind of inevitable? Uh, that's

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<v Speaker 1>a broad, broad question on a number of areas. I mean,

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<v Speaker 1>you know, using accounting standards and and having common standards

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<v Speaker 1>would make a lot of common sense for investors. We've

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<v Speaker 1>we've allowed when you look at the overall terms of

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<v Speaker 1>trade between the United States and China, UM, we've given

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<v Speaker 1>up a lot more than we've received over the years,

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<v Speaker 1>in my view, in terms of we let a lot

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<v Speaker 1>of things slide. The markets are not even competitive, um,

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<v Speaker 1>U S companies have a lot harder time getting traction

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<v Speaker 1>over there than Chinese companies have here. It's also two

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<v Speaker 1>are raising capital opportunities. The amount of privacy that we

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<v Speaker 1>have to give up when we're over there versus what

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<v Speaker 1>they're allowed to do here. That's that's above my pay grade.

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<v Speaker 1>But the point is, UM, you know, you do need

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<v Speaker 1>to have accounting standards to properly assess financial condition and

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<v Speaker 1>financial statements that if you don't have it, that is

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<v Speaker 1>a risk factor that I would say investor beware, UM

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<v Speaker 1>And some investors are comfortable with that risk, others or not.

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<v Speaker 1>We're a little less comfortable with that risk. Alright, Michael,

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<v Speaker 1>thanks very much. Up against the clock. Michael Cogino, President

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<v Speaker 1>and portfolio manager at permanent portfolio family of funds