1 00:00:00,360 --> 00:00:08,680 Speaker 1: Do you know where the markets are headed? We've got 2 00:00:08,880 --> 00:00:12,160 Speaker 1: two perfect individuals to kind of kick that around. Finning 3 00:00:12,160 --> 00:00:14,680 Speaker 1: Catalina back with US president and global macro strategist at 4 00:00:14,680 --> 00:00:18,880 Speaker 1: bloom Marble Research, also Magic, member of Adriatic Capital Partners 5 00:00:18,920 --> 00:00:21,640 Speaker 1: in her Bloomberg eleven three oh studio, although with Rob Johnson, 6 00:00:21,800 --> 00:00:25,120 Speaker 1: President at the Institute for New Economic Thinking. Um, nice 7 00:00:25,120 --> 00:00:27,960 Speaker 1: to have you here. Good afternoon, guys. Do you know 8 00:00:28,000 --> 00:00:31,760 Speaker 1: where you're going, Finny Catalina. You know there's I said 9 00:00:31,760 --> 00:00:34,520 Speaker 1: to you, man, there's so much going on right now. 10 00:00:34,920 --> 00:00:36,920 Speaker 1: Investors seem to be pretty immune though, to things that 11 00:00:37,000 --> 00:00:40,920 Speaker 1: might otherwise shake them up in another era. Um, where 12 00:00:40,920 --> 00:00:43,000 Speaker 1: do you see the markets headed right now? Well, you've 13 00:00:43,000 --> 00:00:47,320 Speaker 1: been a lot more I feel like realistic. Thank you. Well, 14 00:00:47,479 --> 00:00:49,080 Speaker 1: that's a polite way you're saying. I've been a little 15 00:00:49,120 --> 00:00:54,360 Speaker 1: bit more. Yes, a lot, a lot cautious. Yes, Um, 16 00:00:54,440 --> 00:00:58,400 Speaker 1: earnings and interest rates they're good. Valuation justifications can be 17 00:00:58,520 --> 00:01:02,200 Speaker 1: found and that's uh, that's kind of like the centerpiece 18 00:01:02,240 --> 00:01:07,640 Speaker 1: of the action that many investment professionals are are relying upon. 19 00:01:08,440 --> 00:01:11,319 Speaker 1: And as long as that's the case, then you know, 20 00:01:11,400 --> 00:01:14,520 Speaker 1: it's hard to argue against that. And if you look 21 00:01:14,560 --> 00:01:18,480 Speaker 1: at market indicators, you're not getting any market indicators meaning 22 00:01:18,760 --> 00:01:23,039 Speaker 1: price action uh and momentum uh that that give you 23 00:01:23,200 --> 00:01:26,200 Speaker 1: any any sort of warning signs that hey, you know, 24 00:01:26,280 --> 00:01:29,640 Speaker 1: maybe market sentiment might be starting to change. So but 25 00:01:29,640 --> 00:01:32,560 Speaker 1: you're still cautious. I'm still cautious for the reasons that 26 00:01:32,600 --> 00:01:34,920 Speaker 1: I think we'll discuss here, having to do with what 27 00:01:35,000 --> 00:01:39,920 Speaker 1: i've I've called upstream downstream sort of issues with the 28 00:01:40,000 --> 00:01:44,440 Speaker 1: earnings and interest rates being the downstream pool of investment 29 00:01:44,440 --> 00:01:46,600 Speaker 1: decision making. Well, let me bring you into this. When 30 00:01:46,640 --> 00:01:47,960 Speaker 1: you look at the markets, when you look at the 31 00:01:48,000 --> 00:01:53,280 Speaker 1: economic backdrop, what do you see. I see a political 32 00:01:53,360 --> 00:01:57,680 Speaker 1: economic environment around the world, an American based world system 33 00:01:57,720 --> 00:02:03,160 Speaker 1: since World War Two that's disintegrating. The Russian US European 34 00:02:03,520 --> 00:02:07,160 Speaker 1: alliance is kind of hanging by a thread, and maybe 35 00:02:07,200 --> 00:02:11,240 Speaker 1: the Russians are holding a sword and the Chinese are 36 00:02:11,320 --> 00:02:14,240 Speaker 1: changing the architecture and the nature of how things operate 37 00:02:14,280 --> 00:02:17,280 Speaker 1: in Asia. And I don't think equity analysts or even 38 00:02:17,280 --> 00:02:21,120 Speaker 1: currency traders were really priced those things because it's not 39 00:02:21,720 --> 00:02:24,760 Speaker 1: it's not like a deck of carts. It's like an 40 00:02:24,840 --> 00:02:29,799 Speaker 1: unknown unknown. It's different and from different, and there's no 41 00:02:30,320 --> 00:02:33,560 Speaker 1: history of probabilities. There's no history and there's no logic. 42 00:02:33,600 --> 00:02:38,000 Speaker 1: There's just stories, and those stories aren't very well anchored. 43 00:02:38,880 --> 00:02:42,960 Speaker 1: And for that reason, the issue that I have, the 44 00:02:43,000 --> 00:02:47,799 Speaker 1: problem that uh several others have with this market being 45 00:02:47,840 --> 00:02:50,679 Speaker 1: priced the way it is, is from a valuation point 46 00:02:50,720 --> 00:02:54,320 Speaker 1: of view, it's priced as though everything is sweetness and light, 47 00:02:54,919 --> 00:02:58,760 Speaker 1: that there aren't these unknown issues that are out there. 48 00:02:58,800 --> 00:03:04,120 Speaker 1: There isn't as unprecedented period that we are living in. Uh. 49 00:03:04,240 --> 00:03:06,560 Speaker 1: Even if you just take it from a central bank 50 00:03:07,040 --> 00:03:11,040 Speaker 1: monetary activism point of view, UH, that should take a 51 00:03:11,080 --> 00:03:15,960 Speaker 1: few points off of a fully valued market, but it hasn't. 52 00:03:16,200 --> 00:03:19,560 Speaker 1: Because liquidity is there. Money flows, the music is playing, 53 00:03:19,639 --> 00:03:21,920 Speaker 1: you have to dance, and this goes on and on 54 00:03:21,960 --> 00:03:24,160 Speaker 1: and on until it stops going on. The earnings are 55 00:03:24,160 --> 00:03:25,920 Speaker 1: also there. And I'm just taking a look at some 56 00:03:26,000 --> 00:03:28,200 Speaker 1: numbers that uh in one of our Bloomberg stories, because 57 00:03:28,200 --> 00:03:29,520 Speaker 1: we all were kind of blown away by some of 58 00:03:29,520 --> 00:03:32,600 Speaker 1: the big tech names last week and how impressive they were, 59 00:03:32,639 --> 00:03:34,240 Speaker 1: and concerned that they weren't going to kind of live 60 00:03:34,280 --> 00:03:37,760 Speaker 1: up to expectations, and yet they largely did. Uh. We've 61 00:03:37,800 --> 00:03:39,280 Speaker 1: got more than half of the S and P five 62 00:03:39,360 --> 00:03:43,160 Speaker 1: hundred index companies reporting earnings have risen eight point four percent, 63 00:03:43,240 --> 00:03:45,680 Speaker 1: sales are up six point three percent. Go over to Europe. 64 00:03:45,960 --> 00:03:48,760 Speaker 1: Profit growth for companies in the stock six hundred coming 65 00:03:48,840 --> 00:03:52,640 Speaker 1: in at around eight percent pretty strong, uh. And then 66 00:03:52,680 --> 00:03:55,280 Speaker 1: you've got among the roughly one quarter of the companies 67 00:03:55,280 --> 00:03:57,120 Speaker 1: in the m S c I A C Asia Pacific 68 00:03:57,200 --> 00:04:00,240 Speaker 1: Index have reported growth was even more brisk. It's a 69 00:04:00,240 --> 00:04:03,360 Speaker 1: pretty decent backdrop and pretty decent backdrop. The issue is 70 00:04:03,480 --> 00:04:08,480 Speaker 1: valuation at what level is are the markets taking on 71 00:04:08,600 --> 00:04:14,160 Speaker 1: too much risk, pricing in too much uh enthusiasm uh 72 00:04:14,200 --> 00:04:18,240 Speaker 1: and confidence and comfort uh in those earnings and that 73 00:04:18,360 --> 00:04:21,560 Speaker 1: that's that's the issue that uh that is problematic to 74 00:04:21,600 --> 00:04:24,920 Speaker 1: me and and has been for quite some time. And 75 00:04:25,040 --> 00:04:28,400 Speaker 1: uh so I've been driving as an investment manager with 76 00:04:28,440 --> 00:04:30,880 Speaker 1: one foot on the brake and unfortunately I should have 77 00:04:30,880 --> 00:04:35,480 Speaker 1: taken that foot off the Sorry, Sorry for you, Sorry 78 00:04:35,520 --> 00:04:37,039 Speaker 1: for you. We'll talk to a little bit more about 79 00:04:37,080 --> 00:04:41,480 Speaker 1: this upstream downstream idea that you guys have been talking about. Well, 80 00:04:41,760 --> 00:04:45,240 Speaker 1: just to quickly mentioned that, uh, in the upstream, if 81 00:04:45,279 --> 00:04:48,920 Speaker 1: you use the analogy of upstream of of lakes and 82 00:04:49,240 --> 00:04:51,760 Speaker 1: creeks and streams and all of that, they feed down 83 00:04:51,760 --> 00:04:54,719 Speaker 1: to the downstream world of rivers. The downstream world of 84 00:04:54,800 --> 00:04:59,200 Speaker 1: rivers is where investment professionals occupy, and they look at 85 00:04:59,240 --> 00:05:03,839 Speaker 1: the inputs into their valuation models downstream and they delegate 86 00:05:03,880 --> 00:05:08,120 Speaker 1: to the upstream area the experts. And that's the issue 87 00:05:08,160 --> 00:05:10,560 Speaker 1: that I think Rob can talk to in terms of 88 00:05:10,600 --> 00:05:13,159 Speaker 1: some of the concerns that one should have about what's 89 00:05:13,200 --> 00:05:18,640 Speaker 1: going on in the upstream upstream world. My sense of 90 00:05:18,680 --> 00:05:23,000 Speaker 1: the upstream world is it is a pretend fantasy park 91 00:05:23,080 --> 00:05:26,000 Speaker 1: of precision. It is a place where if you look 92 00:05:26,040 --> 00:05:28,720 Speaker 1: at just take the Federal Reserve or the Bank of England, 93 00:05:29,080 --> 00:05:33,080 Speaker 1: their forecasting record is abysmal. The Council of Economic Advisors 94 00:05:33,120 --> 00:05:37,000 Speaker 1: forecasting record is abysmal. But people yring for order. We're 95 00:05:37,000 --> 00:05:41,080 Speaker 1: all kind of psychological suckers, and so they come out 96 00:05:41,120 --> 00:05:43,359 Speaker 1: with all their models and rituals. It's it's like some 97 00:05:43,480 --> 00:05:45,760 Speaker 1: old kind of church ritual in the old days, and 98 00:05:45,800 --> 00:05:48,119 Speaker 1: they come out and they tell you this is what's 99 00:05:48,160 --> 00:05:52,039 Speaker 1: going to happen, and everybody knows, everybody else wants to 100 00:05:52,160 --> 00:05:55,280 Speaker 1: feel like things are orderly, and we all condition on 101 00:05:55,320 --> 00:05:56,920 Speaker 1: each other, and then we all go off to the 102 00:05:57,000 --> 00:06:01,400 Speaker 1: races and tell those things are how say refuted by evidence. 103 00:06:01,480 --> 00:06:03,360 Speaker 1: Rob just kind about twenty twods. So then, what would 104 00:06:03,360 --> 00:06:07,000 Speaker 1: you say investors should do? Ignore most of the so 105 00:06:07,120 --> 00:06:09,400 Speaker 1: called experts. I don't know what to call you guys, 106 00:06:09,440 --> 00:06:11,680 Speaker 1: but you know I think what I think what you 107 00:06:11,720 --> 00:06:15,960 Speaker 1: have to do is make up your own mind and 108 00:06:16,240 --> 00:06:21,159 Speaker 1: don't pretend the experts. As when they talked about Adam 109 00:06:21,200 --> 00:06:25,040 Speaker 1: Smith in The Invisible Hand, one of his biographers said, 110 00:06:25,040 --> 00:06:28,200 Speaker 1: that's a father in a fatherless world. We're in a 111 00:06:28,279 --> 00:06:34,599 Speaker 1: fatherless world. Boy, Monday, pretty negative. Gotta run. Finny Catalano, 112 00:06:35,279 --> 00:06:38,880 Speaker 1: Blue Marble Research and Adriana Capital Partners. Rob Johnson, President 113 00:06:38,920 --> 00:06:41,440 Speaker 1: at the Institute for New Economic Thinking. You are listening 114 00:06:41,480 --> 00:06:42,400 Speaker 1: to Bloomberg Radio.