1 00:00:05,800 --> 00:00:08,720 Speaker 1: Welcome to the Bloomberg pim L Podcast. I'm pim Fox. 2 00:00:08,760 --> 00:00:11,520 Speaker 1: Along with my co host Lisa Abramowitz. Each day we 3 00:00:11,640 --> 00:00:15,120 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:15,200 --> 00:00:17,840 Speaker 1: you and your money, whether you're at the grocery store 5 00:00:17,960 --> 00:00:20,720 Speaker 1: or the trading floor. Find the Bloomberg p m L 6 00:00:20,840 --> 00:00:32,440 Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. Joining 7 00:00:32,479 --> 00:00:35,200 Speaker 1: us here in studio, David ko Talk, chairman and chief 8 00:00:35,200 --> 00:00:39,800 Speaker 1: investment officer for Cumberland Advisers. They are based in Sarasota, Florida, 9 00:00:39,880 --> 00:00:42,559 Speaker 1: and he helps manage more than three billion dollars of 10 00:00:42,640 --> 00:00:45,919 Speaker 1: customer assets. He is also the author co author rather 11 00:00:46,040 --> 00:00:50,159 Speaker 1: of the book Adventures in Muni Land. David Kotalk, Welcome 12 00:00:50,240 --> 00:00:54,320 Speaker 1: and Mary. One day past Christmas. Are we going to 13 00:00:54,360 --> 00:00:59,040 Speaker 1: see a recession in I don't think so, Kim. Merry 14 00:00:59,240 --> 00:01:03,360 Speaker 1: Christmas and happy holidays to all my friends here at Bloomberg. 15 00:01:03,440 --> 00:01:07,000 Speaker 1: I came up here to get cold, because in Florida 16 00:01:07,080 --> 00:01:08,920 Speaker 1: we need a little cold there to wake us up. 17 00:01:09,400 --> 00:01:12,800 Speaker 1: So delighted you provided it. Okay, but there we've woken 18 00:01:12,840 --> 00:01:14,679 Speaker 1: you up at what why do you why are you 19 00:01:14,720 --> 00:01:19,319 Speaker 1: sanguine about in terms of a potential recession of the 20 00:01:19,360 --> 00:01:25,200 Speaker 1: US economy is in services, fully employed, short, shortage of 21 00:01:25,760 --> 00:01:30,200 Speaker 1: people to fill all the jobs. Government. Who knows what 22 00:01:30,280 --> 00:01:33,679 Speaker 1: the government's ever gonna do. We already are going through 23 00:01:33,760 --> 00:01:37,920 Speaker 1: the umpty ump iteration of a shutdown. That we will 24 00:01:37,959 --> 00:01:42,160 Speaker 1: not have a permanent shutdown. That's a forecast. All forecasts 25 00:01:42,200 --> 00:01:45,600 Speaker 1: come with a guarantee. You invite me back, you give 26 00:01:45,640 --> 00:01:48,200 Speaker 1: me back the forecast. I guarantee you I'll give you 27 00:01:48,280 --> 00:01:52,240 Speaker 1: a new one. So no shutdown that's permanent. We're making 28 00:01:52,280 --> 00:01:55,720 Speaker 1: a trade deal with China. China's now going in the 29 00:01:55,800 --> 00:02:00,600 Speaker 1: right direction, cutting tariffs, stimulating. They are getting along. There 30 00:02:00,720 --> 00:02:04,880 Speaker 1: is no reason not to extend the truce. And lastly, 31 00:02:05,400 --> 00:02:08,880 Speaker 1: the oil price. Every penny a gallon is a hundred 32 00:02:08,919 --> 00:02:14,880 Speaker 1: and one and a half billion annualized tax cut to 33 00:02:15,000 --> 00:02:19,560 Speaker 1: the American consumer. Penny a gallon billion and a half annualized. Right, 34 00:02:19,919 --> 00:02:22,040 Speaker 1: We've had a few of those pennies in a row. 35 00:02:22,480 --> 00:02:25,720 Speaker 1: That's why spending is up, That's why Amazon's got good 36 00:02:25,720 --> 00:02:31,799 Speaker 1: news today. I don't see a recession. Worry, yes, recession No, Well, 37 00:02:31,840 --> 00:02:34,239 Speaker 1: you know, look, I mean we look at the fundamentals. Uh. 38 00:02:34,440 --> 00:02:37,160 Speaker 1: I think economists and market participants can all agree that 39 00:02:37,200 --> 00:02:39,440 Speaker 1: there's still some pretty sound footing here. But then I 40 00:02:39,480 --> 00:02:42,280 Speaker 1: go home for Christmas, every family member all they want 41 00:02:42,280 --> 00:02:44,400 Speaker 1: to ask about is it is the economy tanking? Is 42 00:02:44,440 --> 00:02:46,639 Speaker 1: the stock market? I'm gonna fall off a cliff, And 43 00:02:46,680 --> 00:02:50,680 Speaker 1: I wonder when the sentiment really become more of the 44 00:02:51,000 --> 00:02:53,720 Speaker 1: sort of headwind than the fundamentals themselves. Well, that's a 45 00:02:53,800 --> 00:02:58,080 Speaker 1: fundamental question we've asked ourselves since they traded stocks in 46 00:02:58,120 --> 00:03:02,320 Speaker 1: the buttonwood tree and still listen, I was not around that. 47 00:03:02,440 --> 00:03:09,440 Speaker 1: I think, Pemmy, it might have been figure Romaine. Let's 48 00:03:09,440 --> 00:03:11,880 Speaker 1: beat him up for the next twenty minutes and we'll 49 00:03:11,919 --> 00:03:15,520 Speaker 1: all get thrown out of here. You look at this 50 00:03:15,600 --> 00:03:19,360 Speaker 1: and you say, does sentiment drive the economy? Well, I 51 00:03:19,360 --> 00:03:23,160 Speaker 1: guess there's in a second derivative way it does. People 52 00:03:23,200 --> 00:03:25,359 Speaker 1: look at a four one k. They don't like what 53 00:03:25,400 --> 00:03:27,359 Speaker 1: they see when they look at the four one Kay. 54 00:03:27,400 --> 00:03:30,760 Speaker 1: We call it the wealth effect. You've talked about it. 55 00:03:30,840 --> 00:03:36,000 Speaker 1: Does it stop somebody from buying something if their income 56 00:03:36,040 --> 00:03:39,000 Speaker 1: permits it. Well, most of the people in the United 57 00:03:39,040 --> 00:03:42,760 Speaker 1: States are not impacted by this big wealth effect shift. 58 00:03:43,040 --> 00:03:45,840 Speaker 1: Now they read about in the newspaper, but they're not 59 00:03:46,040 --> 00:03:49,120 Speaker 1: impacted by it. Now, I notice, for example, there's a 60 00:03:49,200 --> 00:03:53,080 Speaker 1: terrible crisis in the news this morning. The seventy million 61 00:03:53,160 --> 00:03:57,080 Speaker 1: dollar apartment in New York City is now being sold 62 00:03:57,120 --> 00:04:01,760 Speaker 1: for fifty million, a markdown of price. You're a good negotiator, 63 00:04:02,800 --> 00:04:06,080 Speaker 1: got it down. Always wait to after Christmas to buy things, 64 00:04:06,080 --> 00:04:09,320 Speaker 1: because well that's it. So you know, do you do 65 00:04:09,400 --> 00:04:13,680 Speaker 1: you see the negative wealth effect of peaking prices of 66 00:04:13,720 --> 00:04:18,280 Speaker 1: these phenomenally priced departments in New York affecting the other 67 00:04:18,480 --> 00:04:21,560 Speaker 1: ten or fifteen million people in the neighborhood. I'm not 68 00:04:21,640 --> 00:04:24,920 Speaker 1: so sure it does. Okay, But having said that, to 69 00:04:25,120 --> 00:04:30,360 Speaker 1: what do you ascribe the sell off in stock prices, 70 00:04:30,400 --> 00:04:33,400 Speaker 1: Because it's not as if the entire ecout I mean, 71 00:04:33,440 --> 00:04:35,600 Speaker 1: it's not as e boeing has changed. It's not as 72 00:04:35,600 --> 00:04:38,960 Speaker 1: if Apple has changed dramatically in the last three months, 73 00:04:39,080 --> 00:04:42,680 Speaker 1: or have have they changed that much? Well, that's that's 74 00:04:42,680 --> 00:04:44,760 Speaker 1: a debate. We're going to find that out another three 75 00:04:44,839 --> 00:04:46,960 Speaker 1: or six months. If we see reports that say there 76 00:04:46,960 --> 00:04:50,560 Speaker 1: are major changes. There's interesting. You know, the cliche right 77 00:04:50,600 --> 00:04:54,120 Speaker 1: stock market forecast nine in the last five recessions is 78 00:04:54,160 --> 00:04:57,080 Speaker 1: just one of the half that is forecasting incorrectly. Are 79 00:04:57,080 --> 00:04:59,880 Speaker 1: we going to have a recession. The stock marker got 80 00:05:00,040 --> 00:05:05,799 Speaker 1: gitimate worries about maddis, about Trump, about policies, about chaos 81 00:05:05,839 --> 00:05:10,440 Speaker 1: in the White House. That's fair game. It reacted with 82 00:05:10,560 --> 00:05:15,640 Speaker 1: the credit default spy swap spike last week on the 83 00:05:15,720 --> 00:05:20,880 Speaker 1: United States. It trades in euro, it's in a different exchange. 84 00:05:21,240 --> 00:05:24,760 Speaker 1: Most American investors don't see it. This is pretty technical stuff. 85 00:05:25,040 --> 00:05:28,880 Speaker 1: But the fact is it's a reaction to chaos in Washington. 86 00:05:29,360 --> 00:05:33,080 Speaker 1: And what's the reaction. You bit up the price, you 87 00:05:33,160 --> 00:05:35,719 Speaker 1: take a position to the credit default swap on the 88 00:05:35,800 --> 00:05:38,599 Speaker 1: United States, you do it in EU row. Now you 89 00:05:38,640 --> 00:05:40,760 Speaker 1: take the other side of the trade and you sell 90 00:05:41,040 --> 00:05:44,320 Speaker 1: or short the US stock market in dollar, and you 91 00:05:44,400 --> 00:05:47,680 Speaker 1: saw the result happen in the foreign exchange market dollar 92 00:05:48,160 --> 00:05:51,160 Speaker 1: versus euro. And you saw it in gold. Gold went up. 93 00:05:51,480 --> 00:05:55,920 Speaker 1: All those trades are tied. Those are very technical trades. 94 00:05:56,120 --> 00:05:59,159 Speaker 1: They are fair game when you have chaos. We have 95 00:05:59,440 --> 00:06:03,839 Speaker 1: Washington in chaos. That's the cause. Our guest is David Kotak. 96 00:06:03,960 --> 00:06:06,960 Speaker 1: He is the chairman and chief investment officer for Cumberland 97 00:06:07,000 --> 00:06:10,240 Speaker 1: Advisers based in Sarasota, Florida, but he joins us here 98 00:06:10,320 --> 00:06:13,440 Speaker 1: in the Studio David Kotak. I'm wondering if there's a 99 00:06:13,480 --> 00:06:17,000 Speaker 1: case to be made for bonds and yield for the 100 00:06:17,080 --> 00:06:21,120 Speaker 1: thirty year bond at three percent, who would buy such 101 00:06:21,240 --> 00:06:26,600 Speaker 1: a debt? Only a preferred habitat that's a technical term 102 00:06:26,800 --> 00:06:31,000 Speaker 1: buyer of an institutional type that needs to have very 103 00:06:31,040 --> 00:06:35,520 Speaker 1: long duration, no risk. But there's a case to be made. 104 00:06:35,920 --> 00:06:39,280 Speaker 1: You know, I've made it here with you before for 105 00:06:39,360 --> 00:06:43,240 Speaker 1: a four percent tax free bund. It's sitting out there 106 00:06:43,240 --> 00:06:46,599 Speaker 1: in the marketplace right now. So you say to yourself 107 00:06:48,720 --> 00:06:53,080 Speaker 1: taxable thirty years, I don't want to touch it. Four 108 00:06:54,279 --> 00:06:59,600 Speaker 1: tax free, high grade. I'm going to get paid. Gross 109 00:06:59,640 --> 00:07:02,279 Speaker 1: it up. It's over six or seven, depending on what 110 00:07:02,400 --> 00:07:05,479 Speaker 1: state you're in. It's liquid. I can get out of 111 00:07:05,520 --> 00:07:09,440 Speaker 1: it in a few days. I'm talking MUNI said, Look, 112 00:07:09,800 --> 00:07:12,360 Speaker 1: there's a I didn't write. You know, I get accused 113 00:07:12,400 --> 00:07:15,400 Speaker 1: of a hammer looking for a nail because I say 114 00:07:15,400 --> 00:07:20,000 Speaker 1: good things about munis. Let the MUNI yield get to 115 00:07:20,120 --> 00:07:23,280 Speaker 1: the same level as the treasury doesn't have to go under. 116 00:07:24,320 --> 00:07:27,720 Speaker 1: Get it to the same level a hundred and I'll 117 00:07:27,760 --> 00:07:30,480 Speaker 1: put the hammer in the in the shed and wait 118 00:07:30,520 --> 00:07:33,360 Speaker 1: for the next round. But when the munis a hundred 119 00:07:33,400 --> 00:07:39,880 Speaker 1: and thirty of the treasury. It's up by Americans don't 120 00:07:39,920 --> 00:07:42,800 Speaker 1: want to buy these bonds. They are afraid the rates 121 00:07:42,840 --> 00:07:46,720 Speaker 1: are going up. They're afraid of everything. So they're immobilized. 122 00:07:47,240 --> 00:07:50,360 Speaker 1: And the only buyers in the MUNI space are the 123 00:07:50,440 --> 00:07:53,560 Speaker 1: banks in the middle of the yield curve, and they 124 00:07:53,720 --> 00:07:57,520 Speaker 1: use ladders, which is a non thinker's way of doing 125 00:07:57,560 --> 00:08:02,000 Speaker 1: a MUNI. So they stagger. They stagger so much for 126 00:08:02,120 --> 00:08:05,080 Speaker 1: the fifth year, six year, seven, eight nine, And what 127 00:08:05,240 --> 00:08:08,080 Speaker 1: they've done is bit up the prices in the middle 128 00:08:08,160 --> 00:08:11,560 Speaker 1: of the yield curve and they've left either end at 129 00:08:11,560 --> 00:08:14,040 Speaker 1: the bargain. So what do you do. We do something 130 00:08:14,080 --> 00:08:16,680 Speaker 1: it's called a barbel. We go a piece for the 131 00:08:16,760 --> 00:08:20,120 Speaker 1: front and piece for the back. We avoid the overpriced 132 00:08:20,160 --> 00:08:24,080 Speaker 1: middle and use the barbell instead of a flat type 133 00:08:24,120 --> 00:08:27,400 Speaker 1: of distribution. When you look at the bond market, though, 134 00:08:27,400 --> 00:08:29,240 Speaker 1: I mean one area that sort of jumped out of 135 00:08:29,280 --> 00:08:30,840 Speaker 1: me as we've seen like a lot of the asset 136 00:08:30,880 --> 00:08:33,679 Speaker 1: backed UH security is performing well. I mean, so we've 137 00:08:33,679 --> 00:08:35,200 Speaker 1: seen people move out of me and he's we've seen 138 00:08:35,200 --> 00:08:37,600 Speaker 1: people move out of government debt and they're starting to 139 00:08:37,640 --> 00:08:40,040 Speaker 1: embrace a lot more at least. You know, for most 140 00:08:40,040 --> 00:08:42,480 Speaker 1: of the year they were embracing uh, you know, the 141 00:08:42,520 --> 00:08:45,719 Speaker 1: home the mortgage back dead as well as auto loane 142 00:08:45,760 --> 00:08:47,080 Speaker 1: back debt. And I wonder are we going to see 143 00:08:47,080 --> 00:08:49,440 Speaker 1: that continue because I see a lot of advisors sort 144 00:08:49,440 --> 00:08:52,679 Speaker 1: of trying to push more people into that sector. Well, 145 00:08:52,760 --> 00:08:55,679 Speaker 1: you get people who chase yield because they can't stand 146 00:08:55,640 --> 00:08:58,320 Speaker 1: in the low yield and they've had ten years of chasing, 147 00:08:58,880 --> 00:09:02,600 Speaker 1: so they chase high yield, or they chase structures they 148 00:09:02,640 --> 00:09:05,920 Speaker 1: don't understand and they bid up the price down comes. Ye, 149 00:09:06,040 --> 00:09:10,160 Speaker 1: we now have a situation with collateralized loans. Where's that 150 00:09:10,240 --> 00:09:13,200 Speaker 1: going to end up? The high yield spread to high 151 00:09:13,240 --> 00:09:16,480 Speaker 1: grade has widened in the last little bit of time 152 00:09:16,559 --> 00:09:19,439 Speaker 1: a few weeks. Where does that end up? Well, how 153 00:09:19,440 --> 00:09:22,120 Speaker 1: did it get to where it was if people chased 154 00:09:22,240 --> 00:09:26,640 Speaker 1: yield didn't understand where they were. I don't agree with 155 00:09:26,760 --> 00:09:30,640 Speaker 1: chasing yield. In fact, the tighter the spreads, the more 156 00:09:30,960 --> 00:09:36,920 Speaker 1: important the high grade becomes, because you're not getting paid 157 00:09:37,040 --> 00:09:39,800 Speaker 1: for the incremental risk to get a few basis points 158 00:09:39,800 --> 00:09:41,880 Speaker 1: of yield. Some on the other side of that trade 159 00:09:41,960 --> 00:09:45,480 Speaker 1: romain and have been for some time. A little bit 160 00:09:45,480 --> 00:09:48,200 Speaker 1: more on munis. Do it through an e t F 161 00:09:48,360 --> 00:09:52,439 Speaker 1: structure or a fund structure, or go out and buy 162 00:09:52,600 --> 00:09:58,600 Speaker 1: the actual bond, because that in a way enforces discipline. Well, 163 00:09:59,040 --> 00:10:02,600 Speaker 1: if you know how to research community by the actual bond. 164 00:10:03,040 --> 00:10:06,320 Speaker 1: If you're not sure, read the paperwork on the e 165 00:10:06,440 --> 00:10:08,880 Speaker 1: t F very carefully. We manage an e t F 166 00:10:09,040 --> 00:10:13,120 Speaker 1: I communities, and I say to people, understand the structure 167 00:10:13,120 --> 00:10:15,439 Speaker 1: of the e t F we're managing. Don't go by 168 00:10:15,480 --> 00:10:20,320 Speaker 1: it just because we're managing it. Dig understand. I would 169 00:10:20,320 --> 00:10:24,840 Speaker 1: add one quick thing. There is great transparency in the 170 00:10:24,920 --> 00:10:29,880 Speaker 1: state and local government space. Your school board passes a budget, 171 00:10:29,920 --> 00:10:32,319 Speaker 1: you can go to the meeting, you can read the budget. 172 00:10:32,440 --> 00:10:37,120 Speaker 1: Maybe technical. The sewerage authority has to collect the sewer bills. 173 00:10:37,160 --> 00:10:41,720 Speaker 1: The airport has certain planes landing that all the data 174 00:10:42,200 --> 00:10:46,520 Speaker 1: is reliable, it's transparent, it's our government at work. People 175 00:10:46,640 --> 00:10:49,360 Speaker 1: don't want to spend the time to find out about it, 176 00:10:49,679 --> 00:10:53,360 Speaker 1: so they wring their hands about bonds generally, but they 177 00:10:53,400 --> 00:10:56,360 Speaker 1: don't do the work. And the work is easy to do. 178 00:10:56,920 --> 00:11:02,720 Speaker 1: It's not complex. You can find information. It's also easy 179 00:11:02,800 --> 00:11:05,400 Speaker 1: when it comes to record keeping. Do you find that 180 00:11:05,679 --> 00:11:10,480 Speaker 1: those investors individual investors perhaps that seek out municipal bonds 181 00:11:11,120 --> 00:11:14,800 Speaker 1: like it because it is very straightforward, not only in 182 00:11:14,920 --> 00:11:18,480 Speaker 1: terms of the information, but in terms of the reporting requirements. Well, 183 00:11:18,520 --> 00:11:22,320 Speaker 1: I think you're right, Pim, that's right for those who 184 00:11:22,400 --> 00:11:24,839 Speaker 1: are willing to invest the time. I like to say 185 00:11:24,880 --> 00:11:27,880 Speaker 1: to people, do as much time investing in a municipal 186 00:11:27,920 --> 00:11:31,640 Speaker 1: bond as you would shopping a new car. Think about 187 00:11:31,679 --> 00:11:34,560 Speaker 1: that half an hour for a new car, half an 188 00:11:34,559 --> 00:11:37,240 Speaker 1: hour to learn something before you go put a hundred 189 00:11:37,360 --> 00:11:40,120 Speaker 1: or two hundred thousand or a million into a credit 190 00:11:40,320 --> 00:11:43,160 Speaker 1: that a governmental body is going to pay you back. 191 00:11:43,520 --> 00:11:45,600 Speaker 1: You want to know a little bit about well as 192 00:11:45,640 --> 00:11:48,360 Speaker 1: people are sort of doing their research for I mean, 193 00:11:48,520 --> 00:11:50,319 Speaker 1: you know, you look at the market over the last 194 00:11:50,360 --> 00:11:52,160 Speaker 1: few days and even on a daylight today, where we 195 00:11:52,160 --> 00:11:54,560 Speaker 1: were up you know, a couple of percentage points, and 196 00:11:54,600 --> 00:11:56,920 Speaker 1: now we're starting back into the red. This is a 197 00:11:56,960 --> 00:11:59,920 Speaker 1: period of volatility on a day to day basis extreme 198 00:12:00,080 --> 00:12:02,679 Speaker 1: volatilely at least extreme relative to where we were the 199 00:12:02,760 --> 00:12:05,600 Speaker 1: last couple of years. And I wonder where is the 200 00:12:05,640 --> 00:12:08,199 Speaker 1: safety if you're trying to sort of invest for the 201 00:12:08,280 --> 00:12:11,320 Speaker 1: long term but still sort of protect yourself against somebody 202 00:12:11,280 --> 00:12:13,760 Speaker 1: these day to day and week to week moves, where 203 00:12:13,760 --> 00:12:16,840 Speaker 1: do you look well? Talking about safety, so you know 204 00:12:16,880 --> 00:12:20,400 Speaker 1: you can go to cash, get two, take no risk, 205 00:12:20,840 --> 00:12:24,000 Speaker 1: make no gain, and that's roughly the rate of inflation. 206 00:12:24,280 --> 00:12:27,680 Speaker 1: So after inflation you're at zero. That's where you would 207 00:12:27,679 --> 00:12:30,800 Speaker 1: expect to be. If you took zero risk, you wouldn't gain, 208 00:12:30,880 --> 00:12:33,440 Speaker 1: you wouldn't lose, You'd be exactly in the same place. 209 00:12:33,720 --> 00:12:36,400 Speaker 1: The questions do you want to do something else? I 210 00:12:36,520 --> 00:12:42,000 Speaker 1: look at the stock market today. Take the SMP index today, 211 00:12:42,040 --> 00:12:46,840 Speaker 1: it's thirteen times the earnings. Often we are a few 212 00:12:46,920 --> 00:12:51,200 Speaker 1: days away from If that is off by a little, 213 00:12:51,559 --> 00:12:57,160 Speaker 1: it's close. That's an earnings yield of eight percent. The 214 00:12:57,240 --> 00:13:01,960 Speaker 1: thirty year treasures at three, that's five hundred basis points 215 00:13:02,000 --> 00:13:06,319 Speaker 1: of equity risk premium. The last time I looked, every time, 216 00:13:06,400 --> 00:13:09,760 Speaker 1: you could see the stock market for sale at five 217 00:13:09,840 --> 00:13:12,960 Speaker 1: hundred basis points with an equity risk premium, and you 218 00:13:13,080 --> 00:13:16,080 Speaker 1: bought it. Twelve or eighteen or six or twenty two 219 00:13:16,120 --> 00:13:21,040 Speaker 1: months later you were glad you did. We are scaled 220 00:13:21,280 --> 00:13:24,640 Speaker 1: into this market. We think the stock market is a bargain. 221 00:13:25,080 --> 00:13:27,520 Speaker 1: We think it is worried about a whole lot of 222 00:13:27,559 --> 00:13:32,440 Speaker 1: serious things. And that's why it's cheap. Well done, Thank 223 00:13:32,440 --> 00:13:35,679 Speaker 1: you very much, David Kotalk Humbling Advisors. You know, just 224 00:13:35,720 --> 00:13:38,400 Speaker 1: to mention, I did a little calculation. If you're in 225 00:13:38,480 --> 00:13:42,520 Speaker 1: New York State, for example, a ten year MUNI two 226 00:13:42,520 --> 00:13:48,440 Speaker 1: point to seven, but the taxable equivalency yield there is 227 00:13:48,559 --> 00:13:51,760 Speaker 1: over three and three quarters of a percent, and that's 228 00:13:51,800 --> 00:13:57,160 Speaker 1: for ten years, so three point and if you want 229 00:13:57,160 --> 00:13:59,040 Speaker 1: to come to Florida, I'll get your visa. You can 230 00:13:59,080 --> 00:14:03,240 Speaker 1: come visit men, we will, Thanks very much, David Kotok, Chairman, 231 00:14:03,320 --> 00:14:17,720 Speaker 1: Chief investment Officer, Cumberland Advisors. Joining us now in our 232 00:14:17,760 --> 00:14:21,480 Speaker 1: Bloomberg Interactor Broker Studios is Marty Schanker, our chief content 233 00:14:21,560 --> 00:14:25,640 Speaker 1: officer for Bloomberg and Marty. Earlier today, the Commerce Department 234 00:14:25,880 --> 00:14:30,360 Speaker 1: released a note saying that they would not be reporting 235 00:14:30,520 --> 00:14:36,840 Speaker 1: any more economic data because of the government shutdown. And 236 00:14:37,000 --> 00:14:41,440 Speaker 1: while we know that many essential services in government are 237 00:14:41,560 --> 00:14:47,200 Speaker 1: up and running, the lack of economic data has got 238 00:14:47,200 --> 00:14:51,320 Speaker 1: to be adding to the confusion or the consternation of investors, 239 00:14:51,320 --> 00:14:54,520 Speaker 1: no question about it. I mean, it's not like those 240 00:14:54,560 --> 00:14:57,760 Speaker 1: statistics will go away forever. But to the extent that 241 00:14:58,000 --> 00:15:01,120 Speaker 1: markets take a cue from the fundamental economic activity, the 242 00:15:01,120 --> 00:15:05,600 Speaker 1: Commerce departments reports are important, and uh, we'll have to 243 00:15:05,640 --> 00:15:09,560 Speaker 1: do without them for what could be quite a long time. Okay, 244 00:15:09,600 --> 00:15:11,360 Speaker 1: well that's where I wanted to go. Do you have 245 00:15:11,400 --> 00:15:15,120 Speaker 1: a crystal ball on this? I don't have a crystal ball. 246 00:15:15,160 --> 00:15:18,280 Speaker 1: I only have my own opinion. And my opinion is 247 00:15:18,320 --> 00:15:20,880 Speaker 1: this standoff is going to be quite longer than a 248 00:15:20,880 --> 00:15:23,720 Speaker 1: lot of people think. Why Because I don't think the 249 00:15:23,800 --> 00:15:29,160 Speaker 1: Democrats this is an incredibly important symbolic moment for them. 250 00:15:29,200 --> 00:15:32,920 Speaker 1: They the Democrats and certainly in the House, feel that 251 00:15:33,000 --> 00:15:36,000 Speaker 1: they were given a mandate by the voters to put 252 00:15:36,040 --> 00:15:39,000 Speaker 1: a check on this president, and if in some way 253 00:15:39,000 --> 00:15:42,760 Speaker 1: they relent on the wall, which they have said they 254 00:15:42,760 --> 00:15:46,360 Speaker 1: will not do, um, it would be a sign of 255 00:15:46,520 --> 00:15:50,200 Speaker 1: weakness at the very beginning of this relationship. So I 256 00:15:50,240 --> 00:15:53,080 Speaker 1: don't see them backing down, and I certainly don't see 257 00:15:53,120 --> 00:15:57,760 Speaker 1: Donald Trump backing down. Now, there may be once Nancy 258 00:15:57,800 --> 00:16:02,160 Speaker 1: Pelosi takes the realt the of the House, there may 259 00:16:02,240 --> 00:16:05,440 Speaker 1: be an artful way out of this um and it 260 00:16:05,480 --> 00:16:08,600 Speaker 1: will take art because it will not be science for 261 00:16:08,640 --> 00:16:11,760 Speaker 1: them to figure out a compromise. When when does the public, though, 262 00:16:12,120 --> 00:16:14,800 Speaker 1: sort of start to pressure. I mean, we've had shutdowns before, 263 00:16:15,320 --> 00:16:18,920 Speaker 1: and it seems that generally the public either uh doesn't 264 00:16:19,000 --> 00:16:21,760 Speaker 1: really care as much, or if they do care, they 265 00:16:21,760 --> 00:16:25,840 Speaker 1: tend to blame uh Congress more than they do the President. Yeah. Well, 266 00:16:26,240 --> 00:16:30,000 Speaker 1: as we all know, the President famously took ownership of 267 00:16:30,040 --> 00:16:32,640 Speaker 1: this shutdown. But we have to remember this is a 268 00:16:32,720 --> 00:16:37,200 Speaker 1: partial shutdown. A number of agencies and parts of the 269 00:16:37,280 --> 00:16:41,360 Speaker 1: government still are functioning. Essential employees do have to come 270 00:16:41,360 --> 00:16:43,160 Speaker 1: to work even though they're not going to get paid, 271 00:16:43,200 --> 00:16:47,120 Speaker 1: but they will retroactively make sure that they do get paid. Um. 272 00:16:47,240 --> 00:16:50,120 Speaker 1: So it's you know, I think we're a long way 273 00:16:50,160 --> 00:16:53,000 Speaker 1: before the public really notices a difference. It's not like 274 00:16:53,120 --> 00:16:56,400 Speaker 1: this is a prime tour season where people are flooding 275 00:16:56,480 --> 00:17:01,920 Speaker 1: national parks. Um so, uh, you know, at the at 276 00:17:01,960 --> 00:17:05,560 Speaker 1: the margins there there may be slow down in various 277 00:17:05,720 --> 00:17:09,480 Speaker 1: permits and visa applications and things like that, but I 278 00:17:09,520 --> 00:17:12,080 Speaker 1: don't think there will be a fundamental change. So it's 279 00:17:12,119 --> 00:17:14,840 Speaker 1: a shutdown that a lot of people won't feel for 280 00:17:14,920 --> 00:17:18,760 Speaker 1: quite some time. One of the issues is the performance 281 00:17:18,800 --> 00:17:22,280 Speaker 1: of the US economy. So while the economy is strong, 282 00:17:22,720 --> 00:17:27,439 Speaker 1: political chaos may not necessarily reverberate. But as we heard earlier, 283 00:17:27,520 --> 00:17:30,320 Speaker 1: Charlie Pellett giving us to details from the Richmond FED 284 00:17:31,080 --> 00:17:36,960 Speaker 1: that gauge of economic activity, it's about factory production dropping. Also, 285 00:17:37,160 --> 00:17:40,640 Speaker 1: you add in the Kansas City FEDS index of manufacturing 286 00:17:41,119 --> 00:17:44,440 Speaker 1: that fell to a two year low in December. Also 287 00:17:44,520 --> 00:17:48,480 Speaker 1: the regional FED factory gauges Empire State Survey and the 288 00:17:48,600 --> 00:17:52,840 Speaker 1: FED the Philadelphia FED report there at their lowest level 289 00:17:52,880 --> 00:17:57,119 Speaker 1: in eighteen months. That's got to be concerning to a 290 00:17:57,200 --> 00:18:01,520 Speaker 1: president that is interested in tow to the strength of 291 00:18:01,560 --> 00:18:05,199 Speaker 1: the economy. Well, I uh, just the other day the 292 00:18:05,240 --> 00:18:09,000 Speaker 1: President outed the strength of corporate earnings and basically painted 293 00:18:09,000 --> 00:18:11,040 Speaker 1: a pretty rosy picture. So I don't think that he 294 00:18:11,160 --> 00:18:15,680 Speaker 1: is necessarily in the weeds on regional FED reports. Um. 295 00:18:15,800 --> 00:18:18,879 Speaker 1: That said, I do think that investors are concerned about 296 00:18:18,920 --> 00:18:22,720 Speaker 1: these little signs of weakness in the economy in an 297 00:18:23,040 --> 00:18:26,960 Speaker 1: era of rising interest rates. Um. And that is where 298 00:18:27,359 --> 00:18:32,280 Speaker 1: obviously Donald Trump has taken his his case. And in fact, 299 00:18:32,359 --> 00:18:34,639 Speaker 1: even though a lot of people disagree with the way 300 00:18:34,720 --> 00:18:39,679 Speaker 1: he's going about trying to influence the FED, there are 301 00:18:39,720 --> 00:18:42,720 Speaker 1: a number of investors and significant ones who think he's 302 00:18:42,800 --> 00:18:47,160 Speaker 1: right that the FED may be making a serious policy mistake. Well, 303 00:18:47,440 --> 00:18:48,760 Speaker 1: you know, I also want to talk about just this 304 00:18:48,800 --> 00:18:51,440 Speaker 1: general idea of a functioning government, because you know, in 305 00:18:51,480 --> 00:18:54,240 Speaker 1: addition to not having a budget, um, we also have 306 00:18:54,359 --> 00:18:57,000 Speaker 1: a White House that has two cabinet positions that that 307 00:18:57,200 --> 00:19:00,159 Speaker 1: don't have permanent uh replacements yet, as well as a 308 00:19:00,240 --> 00:19:03,280 Speaker 1: chief of staff position that is uh uh still sort 309 00:19:03,280 --> 00:19:06,000 Speaker 1: of on an acting basis. I guess with the appointment 310 00:19:06,000 --> 00:19:08,439 Speaker 1: of mcmulphaney, Oh, you know, do we get to a 311 00:19:08,560 --> 00:19:11,399 Speaker 1: stage here where we really have to start questioning whether 312 00:19:11,480 --> 00:19:14,760 Speaker 1: anything can get done simply because there's not really anyone 313 00:19:15,040 --> 00:19:18,760 Speaker 1: there to sort of carry out the orders of the president. Well, 314 00:19:18,800 --> 00:19:25,080 Speaker 1: I do think that the level of uncertainty emanating from 315 00:19:25,119 --> 00:19:29,399 Speaker 1: the White House is rather than presidented. Even within the 316 00:19:29,480 --> 00:19:34,600 Speaker 1: Trump administration itself, it's two years. So I do think 317 00:19:34,600 --> 00:19:37,159 Speaker 1: that that is a significant factor in the way the 318 00:19:37,200 --> 00:19:42,640 Speaker 1: markets are reacting. There is no certainty about anything unless 319 00:19:42,640 --> 00:19:48,280 Speaker 1: it and even the president's own pronouncements sometimes contradict each other. 320 00:19:48,880 --> 00:19:52,520 Speaker 1: So if you cannot predict with any certainty what is 321 00:19:52,520 --> 00:19:55,199 Speaker 1: going to happen in the next hour, let alone the 322 00:19:55,240 --> 00:19:58,480 Speaker 1: next week or month, Yeah, I do think it does 323 00:19:58,560 --> 00:20:01,399 Speaker 1: have an effect on investors, and I think it has 324 00:20:01,440 --> 00:20:04,399 Speaker 1: an effect on the economy, and this is not something 325 00:20:04,440 --> 00:20:07,480 Speaker 1: that's going to go away anytime soon. Thank you very much, 326 00:20:07,560 --> 00:20:10,720 Speaker 1: Marty Schenker, much appreciated. Marty Schenker is the chief content 327 00:20:10,840 --> 00:20:15,119 Speaker 1: officer for Bloomberg, speaking about the government shutdown on a 328 00:20:15,240 --> 00:20:18,679 Speaker 1: day that Kevin Hassett, the aide to President Donald Trump, 329 00:20:18,720 --> 00:20:22,920 Speaker 1: says that Federal Reserve Chair Jerome Pale's job is one 330 00:20:23,040 --> 00:20:39,760 Speaker 1: hundred percent safe. President Donald Trump expressing confidence in his 331 00:20:39,880 --> 00:20:43,720 Speaker 1: Treasury secretary. Here to tell us more. Chris Whalen, chairman 332 00:20:43,800 --> 00:20:48,520 Speaker 1: of Whalon Global Advisors. Chris Whalen, does it make sense 333 00:20:48,600 --> 00:20:52,879 Speaker 1: for the Secretary of the Treasury to speak individually to 334 00:20:53,040 --> 00:20:57,080 Speaker 1: the major banks of the United States, the chief executives 335 00:20:57,400 --> 00:21:01,000 Speaker 1: to reassure them that there's nothing wrong when there doesn't 336 00:21:01,040 --> 00:21:05,720 Speaker 1: seem to be anything wrong. Well, hello, Pim, by the way, 337 00:21:05,720 --> 00:21:09,920 Speaker 1: happy holidays. Of course, that's his job, but he shouldn't 338 00:21:09,960 --> 00:21:12,960 Speaker 1: go out on Twitter or any other public medium and 339 00:21:12,960 --> 00:21:16,720 Speaker 1: then talk about it. Uh. Federal regulators in the United 340 00:21:16,720 --> 00:21:19,879 Speaker 1: States have a longstanding policy you never talked about banks 341 00:21:19,880 --> 00:21:23,040 Speaker 1: while are open. The bank dies, if it's taken over 342 00:21:23,040 --> 00:21:24,600 Speaker 1: by the f d i C, then you have to 343 00:21:24,640 --> 00:21:27,879 Speaker 1: talk about it. But other than that you never talked 344 00:21:27,920 --> 00:21:31,480 Speaker 1: about specific institutions or even groups of institutions because it's 345 00:21:31,480 --> 00:21:36,920 Speaker 1: not helpful. Well, Chris, one of these there's no upside. Yeah, well, Chris. 346 00:21:36,960 --> 00:21:38,879 Speaker 1: One of the issues though, that that was also raised 347 00:21:38,920 --> 00:21:40,960 Speaker 1: was that there didn't seem to be any coordination between 348 00:21:40,960 --> 00:21:43,560 Speaker 1: the Treasury and some of the other federal agencies like 349 00:21:43,600 --> 00:21:45,960 Speaker 1: the SEC and some of the other members of f STOCK. 350 00:21:46,160 --> 00:21:48,720 Speaker 1: And I wonder how much of that might have actually 351 00:21:48,800 --> 00:21:50,439 Speaker 1: rattled the markets, that this was just sort of an 352 00:21:50,480 --> 00:21:54,359 Speaker 1: independent decision at least apparently an independent decision that Dominution made. 353 00:21:55,960 --> 00:21:58,720 Speaker 1: I don't really know the details. You raise a good point. 354 00:21:59,200 --> 00:22:03,200 Speaker 1: The prime very point of contact for financial institutions or 355 00:22:03,240 --> 00:22:06,879 Speaker 1: their their primary regulator, which is usually the occ that 356 00:22:07,000 --> 00:22:10,280 Speaker 1: the Treasury or the FED. UH. There's no need for 357 00:22:10,320 --> 00:22:13,880 Speaker 1: this to be aired in public. It's like the stress tests. 358 00:22:14,240 --> 00:22:17,400 Speaker 1: Stress tests should not have a public dimension. We shouldn't 359 00:22:17,440 --> 00:22:20,280 Speaker 1: have this media circus every year when the stress test 360 00:22:20,359 --> 00:22:23,639 Speaker 1: results are a release because they're as just speaking as 361 00:22:23,680 --> 00:22:26,280 Speaker 1: an analyst, they're not helpful at all. They don't tell 362 00:22:26,359 --> 00:22:30,600 Speaker 1: us anything, and I think it detracts from the dignity 363 00:22:30,760 --> 00:22:35,000 Speaker 1: and the effectiveness of senior public officials like Secretary Manuchin 364 00:22:35,480 --> 00:22:38,719 Speaker 1: when they get out on Twitter and kind of, you know, 365 00:22:38,880 --> 00:22:43,800 Speaker 1: imitate the president's political communications on something which shouldn't be 366 00:22:44,200 --> 00:22:48,199 Speaker 1: about politics. You know, you don't help anything when you 367 00:22:48,240 --> 00:22:53,120 Speaker 1: get out there. I always remind people of of what happened, uh, 368 00:22:53,160 --> 00:22:55,160 Speaker 1: you know during the crisis when you had to Hank 369 00:22:55,240 --> 00:22:58,880 Speaker 1: Paulson talking about buying bad assets from City Group, or 370 00:22:59,119 --> 00:23:01,840 Speaker 1: how Fannie and Freddie we're going to issue covered bonds. 371 00:23:02,240 --> 00:23:05,800 Speaker 1: He almost created the markets with those public comments. So 372 00:23:05,960 --> 00:23:10,600 Speaker 1: it's almost always negative. There is no upside to doing 373 00:23:10,640 --> 00:23:13,359 Speaker 1: that sort of thing. You talk to them privately, you listen, 374 00:23:13,840 --> 00:23:16,399 Speaker 1: you ask them if they know something that you don't know, 375 00:23:16,880 --> 00:23:19,640 Speaker 1: and then you share that information privately with the other 376 00:23:19,640 --> 00:23:23,440 Speaker 1: officials in the federal government, and you take action when necessary. 377 00:23:23,800 --> 00:23:26,159 Speaker 1: But you don't get out there and just gratuitously make 378 00:23:26,240 --> 00:23:28,399 Speaker 1: comments because it's not going to help. You know. The 379 00:23:28,400 --> 00:23:31,640 Speaker 1: big problem here is that the Fed has not articulated 380 00:23:32,160 --> 00:23:35,000 Speaker 1: what's going to happen as they shrink their balance sheet. 381 00:23:35,280 --> 00:23:38,600 Speaker 1: That's why the markets are seizing up, because liquidity is 382 00:23:38,640 --> 00:23:40,919 Speaker 1: tight and it's going to get tighter, and they have 383 00:23:41,080 --> 00:23:43,480 Speaker 1: not explained that to People are pretending that we're in 384 00:23:43,480 --> 00:23:47,000 Speaker 1: a normal narrative here and we're not. So I think 385 00:23:47,240 --> 00:23:49,280 Speaker 1: there's no way to fix that by getting out on 386 00:23:49,320 --> 00:23:53,760 Speaker 1: the soapbox and making gratuitous comments. Alright, But Chris Whalen, 387 00:23:54,240 --> 00:23:59,320 Speaker 1: Treasury Secretary Minution, is a veteran of financial markets, chief 388 00:23:59,520 --> 00:24:04,399 Speaker 1: investor officer Goldman Sachs, previously chairman, founder of One West 389 00:24:04,480 --> 00:24:09,119 Speaker 1: Bank Dune Capital Management. He knows all this. Why do 390 00:24:09,119 --> 00:24:13,240 Speaker 1: you think he did it? Uh? I think there are 391 00:24:13,320 --> 00:24:17,560 Speaker 1: times when people in public life believe that they have 392 00:24:17,720 --> 00:24:21,160 Speaker 1: to do something, that they have to say something, and 393 00:24:21,560 --> 00:24:24,720 Speaker 1: those are the times when their advisors and counselors need 394 00:24:24,800 --> 00:24:28,480 Speaker 1: to grab them and say, no, don't do that. Um. 395 00:24:28,520 --> 00:24:31,240 Speaker 1: You know, Steve and Ugens a very smart for accomplish man. 396 00:24:31,800 --> 00:24:34,200 Speaker 1: I think he knows better. And I don't know why 397 00:24:34,280 --> 00:24:36,760 Speaker 1: he did this. Maybe it was because the markets had 398 00:24:36,800 --> 00:24:39,880 Speaker 1: moved quite a bit, but I hope in the future 399 00:24:40,000 --> 00:24:43,679 Speaker 1: he will take a more considered approach. And yeah, you 400 00:24:43,680 --> 00:24:46,240 Speaker 1: want to communicate. His job is to listen. Of course, 401 00:24:46,280 --> 00:24:49,880 Speaker 1: it is the control of the currency who reports to him. 402 00:24:49,920 --> 00:24:52,400 Speaker 1: His job is to listen and to understand what's going 403 00:24:52,440 --> 00:24:55,320 Speaker 1: on in the markets. But you know, these federal agencies 404 00:24:55,600 --> 00:24:59,159 Speaker 1: should only be heard when there's really a crisis, and 405 00:24:59,200 --> 00:25:02,680 Speaker 1: then they have to act. You see that very clearly 406 00:25:02,720 --> 00:25:04,720 Speaker 1: with the way Sheila Bear in the f d i C. 407 00:25:05,359 --> 00:25:08,720 Speaker 1: The time of crisis. She was out front communicating every day. 408 00:25:08,800 --> 00:25:12,080 Speaker 1: When the crisis was over, that agency faded back into 409 00:25:12,119 --> 00:25:15,000 Speaker 1: the background and you almost never hear about them. But 410 00:25:15,119 --> 00:25:17,280 Speaker 1: that's the way you handle these things. You don't get 411 00:25:17,320 --> 00:25:21,360 Speaker 1: out there and start trying to guide perception with comments 412 00:25:21,440 --> 00:25:24,359 Speaker 1: that frankly, no one's gonna understand. They don't have access 413 00:25:24,400 --> 00:25:28,359 Speaker 1: to the information he received, so he can't share it 414 00:25:28,400 --> 00:25:32,080 Speaker 1: because it's obviously confidential. So my question to him was, 415 00:25:32,200 --> 00:25:35,160 Speaker 1: what was the point what we're trying to achieve by 416 00:25:35,160 --> 00:25:39,159 Speaker 1: going out on Twitter? And I can't imagine anything that 417 00:25:39,240 --> 00:25:41,960 Speaker 1: detracts more from the dignity of the office of the 418 00:25:42,000 --> 00:25:45,000 Speaker 1: Secretary of Treasury. And he should know better. He does 419 00:25:45,040 --> 00:25:48,160 Speaker 1: no better, of course he does, Thanks very much. Chris Whalen, 420 00:25:48,359 --> 00:25:53,720 Speaker 1: chairman of Whalen Global Advisers, speaking about Treasury Secretary Stephen 421 00:25:53,960 --> 00:26:05,320 Speaker 1: Minuchin and his conversation and tweet storm regarding US banking policy. 422 00:26:11,000 --> 00:26:13,119 Speaker 1: And you know, Romain of many people they are going 423 00:26:13,160 --> 00:26:17,680 Speaker 1: to be opening their account statements probably what the maybe 424 00:26:17,800 --> 00:26:20,480 Speaker 1: end of the first or the second week of January, 425 00:26:20,560 --> 00:26:23,679 Speaker 1: and they probably aren't gonna like what they see. Well, 426 00:26:23,720 --> 00:26:26,199 Speaker 1: if they're brave enough to look, I guess well done, right, 427 00:26:26,240 --> 00:26:28,080 Speaker 1: I mean, because right now we're taking a look at 428 00:26:28,119 --> 00:26:32,040 Speaker 1: the SMP five. Despite its rise today of more than 429 00:26:32,080 --> 00:26:35,720 Speaker 1: one and a quarter percent trades at twenty three eight three, 430 00:26:35,800 --> 00:26:38,600 Speaker 1: that is a drop of more than ten and a 431 00:26:38,600 --> 00:26:42,600 Speaker 1: half percent so far this year. So to help reduce 432 00:26:42,680 --> 00:26:46,040 Speaker 1: some of the panic, we've invited Avny Ramnani to join us, 433 00:26:46,119 --> 00:26:49,800 Speaker 1: director of financial Planning and wealth Management at Francis Financial, 434 00:26:50,520 --> 00:26:52,680 Speaker 1: joining us here in studio any thank you very much 435 00:26:52,680 --> 00:26:54,560 Speaker 1: for being here. Have you gotten a lot of calls 436 00:26:54,560 --> 00:26:57,639 Speaker 1: from clients over the last couple of weeks, You know, 437 00:26:58,119 --> 00:27:01,879 Speaker 1: not that many. We have trained our plans well and 438 00:27:01,960 --> 00:27:04,240 Speaker 1: we try to sort of get ahead of the ball 439 00:27:04,720 --> 00:27:07,000 Speaker 1: and send out emails when we see the market go 440 00:27:07,119 --> 00:27:10,879 Speaker 1: down and say don't panic. We expected this part of 441 00:27:10,920 --> 00:27:14,320 Speaker 1: the you know, keep your eye on the long term. Um, 442 00:27:14,359 --> 00:27:17,400 Speaker 1: so we haven't got that many calls. Do you think 443 00:27:17,400 --> 00:27:19,600 Speaker 1: there's a point though, or do you see a point 444 00:27:19,600 --> 00:27:22,720 Speaker 1: where we get to that stage where people do start 445 00:27:22,760 --> 00:27:25,720 Speaker 1: to not necessarily panic, but to start to worry. Uh, 446 00:27:25,760 --> 00:27:27,480 Speaker 1: they worry a little bit too much about some of 447 00:27:27,520 --> 00:27:30,760 Speaker 1: the short term moves and how that affects their sort 448 00:27:30,760 --> 00:27:35,520 Speaker 1: of long term outlook. Oh, yes, they're worrying for sure, um. 449 00:27:35,680 --> 00:27:37,680 Speaker 1: But our job is to sort of hold their hands 450 00:27:37,760 --> 00:27:42,120 Speaker 1: through this time and say, hey, we know this, um 451 00:27:42,440 --> 00:27:47,240 Speaker 1: and in you know, inherently in the economy, it looks 452 00:27:47,240 --> 00:27:51,560 Speaker 1: like there's good signs. They're not excellent signs, but they're 453 00:27:51,600 --> 00:27:54,760 Speaker 1: not too bad either. There are some structural issues going 454 00:27:54,800 --> 00:27:57,040 Speaker 1: on right now in the market, but if you look 455 00:27:57,080 --> 00:28:00,359 Speaker 1: ahead for a year or two, uh, it's it going 456 00:28:00,359 --> 00:28:02,960 Speaker 1: to be that bad. And that's what we tell our 457 00:28:03,000 --> 00:28:08,359 Speaker 1: clients that just hold on. Uh, these are the underlying 458 00:28:08,359 --> 00:28:11,680 Speaker 1: economy is good and this is going to turn around 459 00:28:12,080 --> 00:28:15,600 Speaker 1: as it usually does. Okay, as it as it usually does. 460 00:28:15,720 --> 00:28:20,720 Speaker 1: Having said that, how do you help clients manage their 461 00:28:20,880 --> 00:28:24,320 Speaker 1: risk tolerance? Not their risk, but their risk tolerance? Because 462 00:28:24,320 --> 00:28:27,879 Speaker 1: I have a feeling that if your stock portfolio, your 463 00:28:27,920 --> 00:28:33,560 Speaker 1: bond portfolio, your investment is up ten, you might say 464 00:28:34,000 --> 00:28:37,800 Speaker 1: I'm not worried about risk. I'm happy to take more risk. 465 00:28:38,120 --> 00:28:42,960 Speaker 1: But when you open that statement and you're down, your 466 00:28:42,960 --> 00:28:46,720 Speaker 1: whole risk profile changes. Even though nothing has really changed 467 00:28:47,080 --> 00:28:50,800 Speaker 1: in your brain or in the real world. That is 468 00:28:51,040 --> 00:28:54,480 Speaker 1: so true, pim Um. You know, when the markets are 469 00:28:54,480 --> 00:28:56,960 Speaker 1: going up, people are thinking, hey, I can take more risk. 470 00:28:57,080 --> 00:29:00,640 Speaker 1: This is great, But this is the time when it 471 00:29:00,880 --> 00:29:05,880 Speaker 1: truly tests your ability to take risk. And I tell 472 00:29:05,960 --> 00:29:10,160 Speaker 1: my clients look in this downturn, if you've lost sleep, 473 00:29:10,320 --> 00:29:13,960 Speaker 1: if you're having trouble, you know, if you're falling, sick 474 00:29:14,080 --> 00:29:17,200 Speaker 1: or something, then it's time to take a serious look 475 00:29:17,240 --> 00:29:20,080 Speaker 1: at whether this is the right portfolio for you. And 476 00:29:20,360 --> 00:29:23,840 Speaker 1: you know there this is a great time to do 477 00:29:23,880 --> 00:29:27,480 Speaker 1: it with a market downturn. Uh. There are three things 478 00:29:27,520 --> 00:29:30,440 Speaker 1: that actually come into play at this time. One is 479 00:29:30,520 --> 00:29:34,920 Speaker 1: that if you've had any tax gains during the course 480 00:29:34,960 --> 00:29:38,240 Speaker 1: of the year, this is a fantastic time to take 481 00:29:38,280 --> 00:29:41,720 Speaker 1: tax losses. So in the short term, as you mentioned before, 482 00:29:41,840 --> 00:29:44,960 Speaker 1: that's one of the things you can think about. Um, 483 00:29:45,080 --> 00:29:47,520 Speaker 1: So you know that's one thing. The second thing is 484 00:29:47,560 --> 00:29:51,479 Speaker 1: do you have cash sitting aside? This is a fire sale. 485 00:29:52,240 --> 00:29:55,360 Speaker 1: If you have cash sitting aside, you know, holiday cash, 486 00:29:55,400 --> 00:29:59,040 Speaker 1: from grandma's whatever it is, I would say put it in. 487 00:29:59,200 --> 00:30:01,440 Speaker 1: This is a grea eight time to get in. And 488 00:30:01,480 --> 00:30:04,640 Speaker 1: the third thing around that restolerance is look at your 489 00:30:04,760 --> 00:30:09,120 Speaker 1: asset allocation, because things would have shifted. With the equity 490 00:30:09,160 --> 00:30:14,040 Speaker 1: markets falling about ten percent this year, uh, your allocation 491 00:30:14,120 --> 00:30:18,360 Speaker 1: to equities have definitely gone down. So look at whether 492 00:30:18,440 --> 00:30:20,560 Speaker 1: this is a good time to do some kind of 493 00:30:20,600 --> 00:30:23,720 Speaker 1: a reallocation, keeping in mind if there are any tax 494 00:30:23,800 --> 00:30:26,560 Speaker 1: losses you need to take, or any cash sitting aside. 495 00:30:26,560 --> 00:30:28,320 Speaker 1: I'm going to go back to two point number two 496 00:30:28,360 --> 00:30:30,320 Speaker 1: because I mean, for people who have already been invested 497 00:30:30,360 --> 00:30:31,960 Speaker 1: in the market for some time, it's it's kind of 498 00:30:31,960 --> 00:30:34,200 Speaker 1: easy to tell them just sit this out and you 499 00:30:34,200 --> 00:30:36,280 Speaker 1: know you'll do fine over the long term. But what 500 00:30:36,360 --> 00:30:39,440 Speaker 1: about for say a younger generation that hasn't actually put 501 00:30:39,480 --> 00:30:41,880 Speaker 1: any money uh to work in the market in any 502 00:30:41,960 --> 00:30:45,120 Speaker 1: sort of meaningful way. If you get someone of that age, say, 503 00:30:45,200 --> 00:30:48,240 Speaker 1: you know, thirty years old, it comes to you and 504 00:30:48,520 --> 00:30:50,520 Speaker 1: are you are you hearing any sort of reticence to 505 00:30:50,640 --> 00:30:53,840 Speaker 1: even jump in, to take that first step. How do 506 00:30:53,880 --> 00:30:56,520 Speaker 1: you convince someone that it's safe to do that when 507 00:30:56,520 --> 00:30:58,640 Speaker 1: they're watching all these headlines go by over the past, 508 00:30:58,680 --> 00:31:01,720 Speaker 1: you know, a few weeks or months. That's an excellent point. 509 00:31:01,760 --> 00:31:05,080 Speaker 1: I think it's a great time, especially for younger people 510 00:31:05,200 --> 00:31:08,680 Speaker 1: to get in the market because they have such a 511 00:31:08,760 --> 00:31:11,960 Speaker 1: long time horizon in front of them that if they 512 00:31:12,080 --> 00:31:15,640 Speaker 1: look if this was, you know, sixty years from now, 513 00:31:15,840 --> 00:31:19,840 Speaker 1: they look back, this downtown in the market would be 514 00:31:19,880 --> 00:31:22,280 Speaker 1: a blip on the on the chart. So it really 515 00:31:22,360 --> 00:31:25,160 Speaker 1: doesn't matter. When there is an opportunity like this, you 516 00:31:25,200 --> 00:31:28,120 Speaker 1: get in. It's a fire sale. And that's what I 517 00:31:28,120 --> 00:31:31,560 Speaker 1: would tell them, and the other piece about just you know, 518 00:31:31,640 --> 00:31:36,240 Speaker 1: thinking about their risk tolerance, it's you're in this for 519 00:31:36,320 --> 00:31:38,720 Speaker 1: the long term unless you want to you know, keep 520 00:31:38,760 --> 00:31:42,160 Speaker 1: that money aside for buying a home or something. Uh, 521 00:31:42,280 --> 00:31:46,000 Speaker 1: you really want to get in right now. Okay, let's 522 00:31:46,040 --> 00:31:48,720 Speaker 1: talk specifics. I want to ask you about emerging markets. 523 00:31:49,240 --> 00:31:52,600 Speaker 1: Are emerging markets? Is that a conversation that you can 524 00:31:52,720 --> 00:31:58,280 Speaker 1: have calmly now with investors? Um, well defined calmly, but 525 00:31:59,200 --> 00:32:03,480 Speaker 1: I think that's definitely a very important conversation to have. Uh. 526 00:32:03,840 --> 00:32:06,280 Speaker 1: Last year, if you ask somebody at the end of 527 00:32:07,960 --> 00:32:09,880 Speaker 1: UH in, you know, to ask them to invest in 528 00:32:09,920 --> 00:32:13,600 Speaker 1: emerging markets, they would jump at the opportunity because emerging 529 00:32:13,640 --> 00:32:21,760 Speaker 1: markets return so um. But this year it's a blood path. 530 00:32:22,320 --> 00:32:25,800 Speaker 1: But that's the nature of the game. That's the nature 531 00:32:25,840 --> 00:32:28,840 Speaker 1: of the market, and well, you know, when you look 532 00:32:28,840 --> 00:32:32,520 Speaker 1: at asset allocation and thinking about constructing a portfolio, we 533 00:32:32,680 --> 00:32:36,400 Speaker 1: encourage clients to think about it as a um, as 534 00:32:36,440 --> 00:32:40,680 Speaker 1: a car, and different parts of your portfolio have different 535 00:32:40,680 --> 00:32:46,480 Speaker 1: functions to perform. Now, emerging markets is like that turbo 536 00:32:46,680 --> 00:32:50,920 Speaker 1: charge to your engine. So it's a very high risk 537 00:32:51,520 --> 00:32:56,040 Speaker 1: part of the market, but in the longer term that's 538 00:32:56,120 --> 00:32:59,360 Speaker 1: the place that is likely to get the most growth. 539 00:33:00,080 --> 00:33:04,320 Speaker 1: So if you look at that car and you want 540 00:33:04,360 --> 00:33:07,000 Speaker 1: to provide the turbo charge, that's where you put it. 541 00:33:07,280 --> 00:33:08,840 Speaker 1: I want to thank you very much for coming in 542 00:33:08,880 --> 00:33:12,200 Speaker 1: and spending time with us. Any Ramnani is the director 543 00:33:12,320 --> 00:33:19,320 Speaker 1: Financial Planning Wealth Management for Francis Financial. Thanks for listening 544 00:33:19,320 --> 00:33:22,240 Speaker 1: to the Bloomberg P and L podcast. You can subscribe 545 00:33:22,240 --> 00:33:25,840 Speaker 1: and listen to interviews at Apple Podcasts, SoundCloud, or whatever 546 00:33:25,880 --> 00:33:29,360 Speaker 1: podcast platform you prefer. I'm pim Fox. I'm on Twitter 547 00:33:29,640 --> 00:33:33,160 Speaker 1: at pim Fox. I'm on Twitter at Lisa Abramo. It's 548 00:33:33,200 --> 00:33:36,240 Speaker 1: one before the podcast. You can always catch us worldwide 549 00:33:36,280 --> 00:33:37,200 Speaker 1: on Bloomberg Radio.