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Speaker 1: Global business news twenty four hours a day at Bloomberg

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Speaker 1: dot Com, the Radio, plus mobile APT and on your radio.

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Speaker 1: This is a Bloomberg Business flag from Bloomberg World Handquarters.

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Speaker 1: I'm Charlie Palette. Stocks are trading Laura, thirteen minutes to

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Speaker 1: go ahead of the close. Earnings continue to set the

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Speaker 1: tone for global equity markets. SMP five hundred index off

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Speaker 1: its session low, down eight points, now at sixty four,

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Speaker 1: a drop of four tents of one percent, and has

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Speaker 1: stack down seventeen a drop of three tents up one percent.

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Speaker 1: Town Industrials down eighty one points, a drop of four

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Speaker 1: tenths of one percent. Ten year of five thirty seconds

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Speaker 1: yield one point five six percent, Gold up thirteen twenty,

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Speaker 1: the ounce advancing one percent to thirteen thirty two, and

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Speaker 1: crude Oil West Texas Intermediate down two and a half percent,

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Speaker 1: dropping a dollar sixteen of barrel to forty four fifty nine.

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Speaker 1: I'm Charlie Pallott, and that's a Bloomberg Business Flash. Thank you,

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Speaker 1: Charlie Pellett. It's time now for the E t F Report.

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Speaker 1: It's brought to you by National Realty Providers Satisfaction Guaranteed,

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Speaker 1: New York City Realty Investments. See them at n r

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Speaker 1: i A dot net. Let's go to Catherine Cowdery for

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Speaker 1: our exchange traded funds report. Emerging markets ETFs are staging

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Speaker 1: a comeback this month as investors buy into them at

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Speaker 1: the fastest pace in more than two years. Here's Bloomberg

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Speaker 1: Intelligence analyst Eric Beltoonis. One of the products that's right

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Speaker 1: up there and flows um and beating them all is

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Speaker 1: the Emerging Markets bondy t F e m B from

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Speaker 1: my shares. It's basically up to eight billion dollars in assets.

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Speaker 1: It's quietly becoming a monster in the space. E m

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Speaker 1: B has gained twelve and a half percent since the

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Speaker 1: start of the year and has a twelve month dividend

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Speaker 1: yield of four point seven percent. It's got the volatility

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Speaker 1: that's one third of the equity side, so you're talking

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Speaker 1: about really great risk and just return. So as you'd expect,

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Speaker 1: investors are rushing into it. And the one thing investors

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Speaker 1: need to know about this one is aid's in US debts,

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Speaker 1: so there's no currency risk, but it's about hiled and

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Speaker 1: it's got a duration of seven years, so there's a

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Speaker 1: little more interest right risk than you might be used

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Speaker 1: to in like a bond TF and the is the

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Speaker 1: largest emerging market bond ETF. It provides access to the

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Speaker 1: sovereign debt of more than thirty emerging market countries with

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Speaker 1: an expense ratio of forty basis points. That's your Bloomberg

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Speaker 1: ETF report. I'm Katherine Cowdery. You're listening to Taking Stock

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Speaker 1: with Kathleen Hayes and Pim Box on Bloomberg Radio. So

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Speaker 1: far this year, the SMP five hundred is up a

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Speaker 1: little bit more than five and a half per cent,

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Speaker 1: but it has been thirteen months since the SMP fire

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Speaker 1: broke new records. Hillary Kramer, President, chief investment Officer A

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Speaker 1: and G Capital Group that joins us now to tell

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Speaker 1: us more about investments. Hillary, thank you very much for

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Speaker 1: spending time coming in UM. What is it that makes

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Speaker 1: you feel like this is a repeat of seven nineteen

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Speaker 1: eighty nine. What what makes you feel it where you

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Speaker 1: know deja vu all over again? Well, it's deja vu

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Speaker 1: in terms of the movement of the market. The reasons

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Speaker 1: are completely different. This is the first time that we

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Speaker 1: really are seeing a FED driven um central bank policy market.

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Speaker 1: That's that's just on fire. That's that's flying high, and

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Speaker 1: I think this is going to end really badly ultimately.

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Speaker 1: But for all those investors staying on the sidelines, just

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Speaker 1: keep in mind, we can stay moving upwards for months

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Speaker 1: like this, absolutely for months. The only thing that's going

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Speaker 1: to throw a wrench into this bull market is if

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Speaker 1: the FED realizes and gets a little hawkish and they

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Speaker 1: start realizing that they need to tighten up rates because

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Speaker 1: they have no excuse not to anymore, right they look

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Speaker 1: at look at every employment report is an excuse to say, oh,

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Speaker 1: we got to you, or maybe even foreign currency. They

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Speaker 1: have no reason to do that anymore. And then, of

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Speaker 1: course we have issues like Brexit or China. But otherwise,

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Speaker 1: if there's no big black swan event, everyone should enjoy

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Speaker 1: this party because it's gonna stay strong, all right, It's

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Speaker 1: gonna stay strong. So what are some of the industry

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Speaker 1: groups that you recommend people getting into. I mean, for example,

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Speaker 1: you write tech is coming back and healthcare is rebounding. Yeah,

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Speaker 1: they sure are. Some of the biotechs are looking a

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Speaker 1: lot stronger now. You know, most of those companies were

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Speaker 1: really knocked out because hedge funds unwound. You know, when

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Speaker 1: when in June. We had some real blow ups that

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Speaker 1: took place, so it wasn't really necessarily anything fundamental there.

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Speaker 1: I do look also in terms of capitalization. I love

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Speaker 1: some of these what are now called small caps, but

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Speaker 1: in my mind, because I'm old school, they're still midcaps

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Speaker 1: companies like Olden Dome tar So is a paper company.

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Speaker 1: It's over a hundred years old, at two point two

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Speaker 1: billion market cap, and you know, you get a really

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Speaker 1: strong diven in yield here four point seven percent. And

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Speaker 1: they're also in consumer products as well, absorbancy So paper products.

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Speaker 1: This is a company that is going to be consolidated.

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Speaker 1: Was the rest of the paper industry arc to consolidate

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Speaker 1: a company like Olan Winchester Ammunition, um O l N

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Speaker 1: divd in yield of three point one percent only a

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Speaker 1: four point four billion dollar market cap. Again, a company

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Speaker 1: that's over a hundred years old. There's something to be

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Speaker 1: said for this. At the same time, Look, you could

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Speaker 1: also ride, you know, you could ride, you could you

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Speaker 1: could ride the roller coaster upwards before you head down

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Speaker 1: and and jump on Facebook, Amazon, They're gonna go higher

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Speaker 1: next week when they when they report earnings. You know,

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Speaker 1: a company like Twitter, We're not so sure about. You

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Speaker 1: know a lot of people who have loaded into Twitter

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Speaker 1: thinking that they're gonna get acquired, and then keep averaging

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Speaker 1: down as they buy into that. Um. Apple's one I

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Speaker 1: think to be careful of. But companies like Amazon and Facebook,

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Speaker 1: even though they trade like growth companies and they have

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Speaker 1: three billion dollar market caps plus, uh, they could certainly

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Speaker 1: go higher. Uh. Companies like McDonald's it's reporting next week,

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Speaker 1: m c D. Again. You know, it's all about yield.

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Speaker 1: Everyone's chasing yield, but there's not necessarily a good thing.

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Speaker 1: Well that's the problem we're all. I mean, you're just

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Speaker 1: really just a function of the price, right. I mean,

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Speaker 1: you can payl can be the same, and if the

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Speaker 1: stock price goes down, it's gonna look like the company's

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Speaker 1: going gangbusters in terms of yield. But all you've really

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Speaker 1: done has lost the percentage of your capital, right, and

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Speaker 1: that and that could be the scenario that we start

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Speaker 1: to see, which is why everyone gets scared. And when

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Speaker 1: we screen for companies and dividen yeld, anytime we see

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Speaker 1: a dividan yield above seven, you know we run because well,

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Speaker 1: you want to know that the company has the money

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Speaker 1: order the right, right. We know that they're going to

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Speaker 1: be a cut coming soon. But the dividend yield scenario

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Speaker 1: is such that every institutional and individual investor is forced

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Speaker 1: into equities. It's become the bond equivalent. It's become the

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Speaker 1: replacement for having c ds, for being able to get

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Speaker 1: some kind of yield on cash. And that's why this

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Speaker 1: ends badly. But for right now, there's a lot of

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Speaker 1: cash still on the sidelines. I still look at the percentages.

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Speaker 1: A lot of the managed funds have more than three

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Speaker 1: percent cash, which is you know, pretty pretty high in

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Speaker 1: terms of history oracle averages. That money can certainly be

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Speaker 1: deployed and um, and there's room in the market to

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Speaker 1: make money. You know, watch watch the watch the industrials,

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Speaker 1: I mean psychologically, as I said, Amazon and Facebook, those

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Speaker 1: are really big, those are really important, should go higher.

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Speaker 1: The market as a whole, you know, is looking for those.

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Speaker 1: But you know, take a look also and see what

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Speaker 1: happens tomorrow with honeywell, you know next week with three M.

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Speaker 1: You know, we already have Illinois tool Works behind us.

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Speaker 1: Everyone should keep in mind though a little tool works.

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Speaker 1: We all think they had great earnings, Yeah they had

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Speaker 1: great earnings, but actual organic growth was only one to

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Speaker 1: two percent, So keep an eye and C G G E.

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Speaker 1: Of course General Electric, you know which is coming tomorrow, UM,

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Speaker 1: United United Technologies. These are very important proxies for the

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Speaker 1: market and it's an important message that we're looking for

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Speaker 1: because economic growth UM is there, but it's still paltry,

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Speaker 1: So pay attention. Does this underscore the issue that this

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Speaker 1: is a market in which companies have been very challenged

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Speaker 1: in growing their red and you but profits have increased

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Speaker 1: for a variety of reasons, whether it's increased productivity, lower

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Speaker 1: head count, or indeed just buying back the shares and

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Speaker 1: making the numbers look great. Oh pim, I think when

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Speaker 1: you talk about that, like lots of companies scream out

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Speaker 1: in my mind. But Goldman Sacks would be an excellent

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Speaker 1: example where the earnings I mean, sure the stock didn't

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Speaker 1: do well when they when Goldman Sacks reported, but if

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Speaker 1: you look at the revenues of Goldman Sacks versus the earnings,

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Speaker 1: I mean, it's really pathetic. Now it's still one of

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Speaker 1: my favorite companies, and i'd still put you know, if

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Speaker 1: I had to choose one company to invest in and

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Speaker 1: only one that I was allowed to put all my

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Speaker 1: money in I'd still run into Goldman Sacks, you know,

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Speaker 1: especially at a hundred and sixty dollars. But be careful there.

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Speaker 1: Take a look at what the numbers really mean. You

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Speaker 1: look at something like fixed income trading at Goldman Sacks,

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Speaker 1: which revenue wise fixing the bond trading used to do

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Speaker 1: about six billion in the first half of two thousand ten.

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Speaker 1: You're talking about less than two billion in the first

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Speaker 1: half of two thousand sixteen. Goldman Acts has made the

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Speaker 1: numbers by really tightening up on the expense side. Well,

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Speaker 1: you looked at the revenue as you just indicated, Goldman

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Speaker 1: Sachs revenue for fiscal twenty fifteen, uh thirty three and

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Speaker 1: a half billion. That's down from more than thirty four

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Speaker 1: billion the previous year. Tell me a little bit about Amazon,

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Speaker 1: because this is a stock that you know, has a

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Speaker 1: lot of cheerleaders, but also has people scratching their heads

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Speaker 1: thinking how does this company continue to grow and yet

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Speaker 1: its bottom line is always being reinvested into new technologies

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Speaker 1: and new ways to make money. Well, I've always been positive, optimistic,

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Speaker 1: and very impressed with Amazon of all the tech, of

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Speaker 1: all the tech internet based companies. The reason that Amazon

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Speaker 1: continues to do well is because they have made that investment.

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Speaker 1: There were years when everyone thought Amazon was making mistake

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Speaker 1: investing in warehouses and building these large, these large warehouses

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Speaker 1: on scale. But it's really paying off. And if you

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Speaker 1: think about it, um, Amazon really owns retail online. I

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Speaker 1: mean they really own it. And Amazon Prime has taken off,

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Speaker 1: and now what Amazon has with with media and entering

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Speaker 1: that that realm. I think that Amazon deserves to be

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Speaker 1: where it is, regardless of the inflated multiples there. Well,

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Speaker 1: the stock of Amazon, believe us up about ten percent

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Speaker 1: so far this year. Compare that. I was just looking

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Speaker 1: at JP Morgan up rather down about three and a

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Speaker 1: half percent. But you know that Amazon has two thirty

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Speaker 1: thousand employees and JP Morgan has just two hundred forty,

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Speaker 1: so they are both you know, behemoth in their in

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Speaker 1: their field. Last point to what what should people really

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Speaker 1: be worried about? What the Federal Reserve is gonna do?

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Speaker 1: Give about ten seconds, Yes, pim it really does matter.

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Speaker 1: It can really hurt the market, but it will help

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Speaker 1: financial stocks all right, by those banks, by those banks.

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Speaker 1: As you said, to be careful though, be careful. Thank

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Speaker 1: you very much, Hillary Kramer, always a pleasure, President, Chief

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Speaker 1: Investment Officer a G Capital Group. This is taking Stock.

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Speaker 1: I'm pim Fox. Coming up next the closing bell on

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Speaker 1: Wall Street. And this is Bloomberg. H