WEBVTT - Stocks More Attractive Than Alternatives: Bill Miller 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penel Podcast. I'm Paul swing you. 0:00:05.360 --> 0:00:07.680 Along with my co host Lisa Brahma Waits. Each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money. Whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg Penl podcast on Apple 0:00:15.520 --> 0:00:17.960 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:23.600 at Bloomberg dot com. We are so lucky, Paul Uh 0:00:23.760 --> 0:00:25.640 to be able to have the opportunity to sit down 0:00:25.640 --> 0:00:30.400 with Bill Miller, legendary investor widely respected for his ability 0:00:30.480 --> 0:00:33.360 to outperform the SMP five hundred with his like Mason 0:00:33.440 --> 0:00:38.000 Value Trust for fifteen consecutive years, an unheard of track record, 0:00:38.440 --> 0:00:41.040 and he joins us here currently chairman and Chief Investment 0:00:41.080 --> 0:00:44.360 Officer of Miller Value Partners with two billion dollars of 0:00:44.400 --> 0:00:48.120 assets under management. So Bill, thank you for being with us. 0:00:48.159 --> 0:00:51.640 I want to start with this idea of out performance 0:00:52.240 --> 0:00:55.400 because you have achieved that, and I'm wondering as people 0:00:55.440 --> 0:00:58.120 talk about Bill Gross, for example, talking about how it's 0:00:58.160 --> 0:01:02.480 increasingly difficult to outperform in an era of indexed funds, 0:01:02.960 --> 0:01:06.040 do you agree. I think it's always been difficult to 0:01:06.040 --> 0:01:08.920 to outperform. In fact, when Warren Buffett set up his 0:01:08.920 --> 0:01:12.280 partnership in the nineteen fifties, he said that he would 0:01:12.280 --> 0:01:14.920 consider a good result if he could outperform the Dow 0:01:15.080 --> 0:01:17.240 Jones Industrial Index and pointed out that I think there 0:01:17.319 --> 0:01:19.640 might have been eight or eighty five mutual funds at 0:01:19.640 --> 0:01:21.520 the time, and only about five percent of those had 0:01:21.640 --> 0:01:23.680 been able to do that over the past ten years. 0:01:23.680 --> 0:01:26.560 So it's always been difficult. I think it's it's trickier 0:01:26.600 --> 0:01:29.240 now a little bit, not because of index funds, but 0:01:29.400 --> 0:01:32.200 because of the changed i'd say polarity of the market 0:01:32.280 --> 0:01:35.959 after the financial crisis, and specifically that the financial crisis 0:01:35.959 --> 0:01:38.919 was so devastating to so many people that that effectively 0:01:38.959 --> 0:01:42.640 people are risk and volatility phobic, and so whenever there's 0:01:42.680 --> 0:01:45.760 a perception of increased risk or the stock market volatility 0:01:45.760 --> 0:01:49.160 goes up, everybody rushes to quote reduce their risk exposure, 0:01:49.320 --> 0:01:51.200 and that leads to these kind of cascading events like 0:01:51.240 --> 0:01:53.160 we saw in the fourth quarter. Well, but we've seen 0:01:53.440 --> 0:01:58.600 a tremendous move towards passive investment across the investment horizon. 0:01:58.600 --> 0:02:00.360 Maybe that was accelerated a little bit by some of 0:02:00.400 --> 0:02:02.400 the things come out of the financial crisis. Is that 0:02:02.440 --> 0:02:04.760 a trend you expect to continue or do you think 0:02:04.800 --> 0:02:08.359 there's a day for active advisers. I know, I think 0:02:08.360 --> 0:02:11.000 the trend is likely to continue. I saw a study, 0:02:11.040 --> 0:02:15.359 but I think Mercer that UH indicated that the market 0:02:15.440 --> 0:02:19.200 could still performance functions of price discovery if even if 0:02:19.240 --> 0:02:21.840 over seventy percent of the market stock market we're indexed. 0:02:22.080 --> 0:02:24.120 And I think the trend is you know, it's it's 0:02:24.160 --> 0:02:26.280 long standing UM and I think it's there for a 0:02:26.280 --> 0:02:28.959 good reason, which is that UM, it's very difficult to 0:02:28.960 --> 0:02:32.560 outperform and be so many people that are trying to 0:02:32.560 --> 0:02:35.280 outperform are afraid of tracking error going away from the market, 0:02:35.360 --> 0:02:38.720 especially in the downside that they're effectively closet indexers, so 0:02:38.760 --> 0:02:41.840 they're they're basically high priced passive investors. And so the 0:02:41.880 --> 0:02:44.880 movement isn't so much from active to passive, it's from 0:02:44.880 --> 0:02:48.320 expensive passive to cheap passive. Well, it seems like that's 0:02:48.320 --> 0:02:50.720 a no brainer as to what people would want. You know, 0:02:50.800 --> 0:02:53.160 you talked about how it's always been hard to outperform, 0:02:53.200 --> 0:02:56.000 and yet you did so for more than a decade's 0:02:56.080 --> 0:03:00.080 rate with your fund. What's the secret please reveal it 0:03:00.160 --> 0:03:04.960 right now, you know I think that that, Um, I'll 0:03:04.960 --> 0:03:07.720 answered slightly different ways. It in two different ways, right, 0:03:07.960 --> 0:03:11.680 the way in which we invest and people cannot perform 0:03:11.720 --> 0:03:14.520 a wide read different strategies. But we're value investors, and 0:03:14.520 --> 0:03:16.760 so we're looking to buy businesses at a discount or 0:03:16.800 --> 0:03:19.760 what they're worth. And I'd say that the secret is 0:03:19.800 --> 0:03:21.880 that the earnings have very little to do with what 0:03:21.960 --> 0:03:25.000 they're worth. Probably the best example is Amazon, where people 0:03:25.040 --> 0:03:27.520 for fifteen or eighteen years would say, oh, it's grossly 0:03:27.560 --> 0:03:30.240 over priced because they make no money. And my answer 0:03:30.240 --> 0:03:32.880 to that was My answer to that was always, well, 0:03:32.919 --> 0:03:36.040 they came public with a four hundred million dollar market 0:03:36.160 --> 0:03:39.440 value and now they have an eight hundred billion dollar 0:03:39.640 --> 0:03:43.040 market value and they never sold any stock. Where where'd 0:03:43.040 --> 0:03:45.440 that value come from? And the answer is that they 0:03:45.520 --> 0:03:47.880 created a lot of value. They just didn't didn't report 0:03:48.360 --> 0:03:50.880 a lot of profits under gap accounting. And one of 0:03:50.880 --> 0:03:52.720 the one of the things that I try to impress 0:03:52.760 --> 0:03:55.320 upon people is there's a reason it's called generally accepted 0:03:55.320 --> 0:03:59.760 accounting principles and not divinely inspired account of principles or 0:03:59.800 --> 0:04:04.760 accurately conceived the counting. Well, it's interesting as you talk 0:04:04.840 --> 0:04:08.000 about how the amount of money that they actually are 0:04:08.040 --> 0:04:11.600 bringing in any given time isn't necessarily what the company 0:04:11.680 --> 0:04:13.480 is worth. Interesting to say this at a time when 0:04:13.560 --> 0:04:16.599 Lift it just started trading, and we have all of 0:04:16.600 --> 0:04:18.320 the I p O is the big tech tour links 0:04:18.360 --> 0:04:21.000 that are slated to go public later this year. Do 0:04:21.040 --> 0:04:23.839 you think that that's a similar situation to Amazon or 0:04:23.880 --> 0:04:25.640 do you think it's different because they waited for so 0:04:25.720 --> 0:04:29.080 much longer and they're coming it's sort of a peak 0:04:29.160 --> 0:04:31.920 market valuation time. You know, I don't. I haven't looked 0:04:31.920 --> 0:04:36.159 at Lift carefully enough to have an informed judgment about it. Um. 0:04:36.200 --> 0:04:38.560 I think all of those companies that you're talking about 0:04:38.680 --> 0:04:42.880 are are very rapidly growing companies doing something different from 0:04:42.920 --> 0:04:45.719 what other people had done ten or twenty years ago, 0:04:46.240 --> 0:04:48.279 and so they generated a lot of excitement because they've 0:04:48.279 --> 0:04:51.120 grown revenues very rapidly. It's it's less clear to me 0:04:51.200 --> 0:04:56.159 what the economic model of the business is sustainably longer term. So, 0:04:56.240 --> 0:04:58.920 but we've had some tremendous volatility, you know, just over 0:04:58.960 --> 0:05:01.320 the last four or five months. That meltdown in December, 0:05:01.640 --> 0:05:04.000 you know, I guess hitting the trough Christmas Eve and 0:05:04.000 --> 0:05:07.320 then there's a great start to twenty uh nineteen with 0:05:07.360 --> 0:05:09.360 the SMP up over twelve percent. What is your view 0:05:09.360 --> 0:05:12.919 of the market right now? Oh, I think the market 0:05:12.920 --> 0:05:17.479 you know, we're gonna end the quarter up somewhere twelve um. 0:05:17.920 --> 0:05:20.919 I think the market is very attractively priced relative to alternatives. 0:05:21.279 --> 0:05:24.520 You know, the bonds, you what two point four percent something. 0:05:24.560 --> 0:05:27.159 Let's they trade at forty times a cash flow stream 0:05:27.160 --> 0:05:30.200 that isn't gonna grow, and stocks trade around sixteen times 0:05:30.200 --> 0:05:32.920 forward earnings and with a cash flow stream that's gonna 0:05:32.920 --> 0:05:34.880 grow around six percent, generating a lot of free cash. 0:05:35.320 --> 0:05:37.360 So I don't think I don't think that the alternatives 0:05:37.360 --> 0:05:40.240 two stocks are particularly attractive. And I think that stocks, 0:05:40.360 --> 0:05:43.920 by the way, are are actually cheap well explay. There 0:05:43.960 --> 0:05:45.960 are a lot of stocks out there that are very 0:05:46.040 --> 0:05:48.200 cheap and that um that I think are going to 0:05:48.279 --> 0:05:50.920 do very very well in the United States. Oh yeah, yeah, 0:05:51.440 --> 0:05:54.520 names yeah, Well, well, Amazon is still twenty percent off 0:05:54.520 --> 0:05:56.800 the high and if you look at a w S 0:05:56.839 --> 0:06:00.000 Amazon Web Services, and you look at the advertising business 0:06:00.000 --> 0:06:03.800 that they've just recently been growing those two businesses alone 0:06:04.000 --> 0:06:06.920 in about three and a half years. If they're valued 0:06:07.000 --> 0:06:10.520 similarly to what Facebook and Google were valued at when 0:06:10.520 --> 0:06:13.520 they were in the high growth phase or that um, 0:06:13.640 --> 0:06:16.920 something like uh Salesforce is currently valued at those two 0:06:16.920 --> 0:06:20.040 businesses alone will be worth more than Amazon's entire market account. 0:06:20.200 --> 0:06:23.120 What about the banking sector because we've seen them really 0:06:23.160 --> 0:06:27.040 beaten up based on the narrowing yield curve and fears 0:06:27.040 --> 0:06:30.080 of growth. If stocks still look good, then that means 0:06:30.120 --> 0:06:34.120 growth isn't that bad? Attract evaluations there? Oh? Yeah, yeah, 0:06:34.160 --> 0:06:36.479 we love what we love the financials broadly speaking, but 0:06:36.520 --> 0:06:39.760 we young you know, we own JP Morgan, um, we 0:06:39.839 --> 0:06:42.279 do Bank America. Are you adding here? We have we 0:06:42.320 --> 0:06:44.760 have full positions in those. If we didn't have them, 0:06:44.760 --> 0:06:46.880 we would be buying them here. Yeah, what are some 0:06:46.920 --> 0:06:49.000 of the other Is there any sector that just scares 0:06:49.040 --> 0:06:51.640 you right here that whether from a valuation perspective, you 0:06:51.720 --> 0:06:54.080 just you can't get your hands around the fundamentals because 0:06:54.080 --> 0:06:55.760 it seems like again with a twelve percent move here 0:06:55.800 --> 0:06:58.839 and yes and P has been pretty broad performance here, 0:06:59.360 --> 0:07:02.479 I think that you abilities and consumer staples are unattractive 0:07:02.480 --> 0:07:05.880 in here. They're trading high valuations relative history. That's because 0:07:05.920 --> 0:07:09.840 they're they're low volatility, they're predictable, and so they perform 0:07:09.880 --> 0:07:13.720 a risk mitigation function in many people's portfolios. But in 0:07:13.840 --> 0:07:15.400 terms and and so obviously if we if we have 0:07:15.440 --> 0:07:17.560 a deflation, if if the world gets a lot worse, 0:07:17.640 --> 0:07:19.840 they'll continue to do fine. But I think we're going 0:07:19.880 --> 0:07:22.600 to settle in here to a one point eight percent 0:07:22.680 --> 0:07:25.400 to two point one percent growth rate, and and they're 0:07:25.400 --> 0:07:27.440 not competitive in that in that kind of an environment. 0:07:27.480 --> 0:07:30.800 There seems to be a real kind of dissonance in 0:07:30.840 --> 0:07:33.000 the market right now because there are a lot of 0:07:33.000 --> 0:07:37.640 people saying that US equities are still very attractive, But 0:07:37.680 --> 0:07:41.520 then you also have bonds that are gaining dramatically, yields 0:07:41.560 --> 0:07:46.120 dropping and indicating some sort of downturn slow down. Do 0:07:46.160 --> 0:07:49.840 you think that those two ideas are incoherent? That basically, 0:07:49.880 --> 0:07:52.720 you can't have bonds continuing to rally with yields continuing 0:07:52.760 --> 0:07:58.760 to go lower with stocks still ripping higher. Well, I's 0:07:58.760 --> 0:08:01.120 put it in a little broader content. X SO bonds 0:08:01.160 --> 0:08:04.120 had a thirty five year bull market from night one too, 0:08:04.200 --> 0:08:07.720 roughly with two thousand and thirteen fourteen right, and so 0:08:07.920 --> 0:08:10.640 bond bonds are in a bearer market right now. Bond 0:08:10.720 --> 0:08:13.880 yields bottomed in two thousand and sixteen so at one 0:08:14.080 --> 0:08:16.840 one thirty eight, I think and uh, and so now 0:08:16.880 --> 0:08:20.400 we're at two thirty two forty, So yes, they've rallied 0:08:20.400 --> 0:08:23.200 from where they were last year. But I think that 0:08:23.520 --> 0:08:25.280 you know, if you look at stocks, stocks are a 0:08:25.280 --> 0:08:27.200 lot higher than they were in two thousand and sixteen. 0:08:27.760 --> 0:08:29.680 So I think that stocks and that's the reason for 0:08:29.760 --> 0:08:31.840 that is that stocks are more attractive than bonds. And 0:08:31.840 --> 0:08:34.560 and bonds will protect you on uh, you know if 0:08:34.600 --> 0:08:37.320 if we have a recession, but um, they're not going 0:08:37.360 --> 0:08:39.280 to help you. If growth just chugs along at one 0:08:39.280 --> 0:08:41.760 and a half or two percent, you're gonna gradually lose 0:08:41.800 --> 0:08:44.880 money in bonds over time. You mentioned the R word recession. 0:08:45.240 --> 0:08:48.319 What is your view of this inverted yield curve and 0:08:48.320 --> 0:08:51.280 how much concern should investors have as it relates to 0:08:51.520 --> 0:08:56.600 potentially recession? Very little? Um, you know, people are you're 0:08:56.640 --> 0:08:58.240 not thinking about? I think the yield curve in a 0:08:58.679 --> 0:09:01.080 in a way that reflects what's going on there. So 0:09:01.160 --> 0:09:03.920 you've got you've got ten trillion dollars worth of sovereign 0:09:03.960 --> 0:09:07.760 bonds of negative yields, and you've had this financial repression, 0:09:07.800 --> 0:09:09.520 whether it be Japan buying half of the j g 0:09:09.679 --> 0:09:12.880 B s or what DROG did or what the U 0:09:12.960 --> 0:09:15.400 s FET has done, so that that has suppressed yields 0:09:15.400 --> 0:09:19.280 globally and uh and actually us the yields in the 0:09:19.360 --> 0:09:21.160 in the US I think are reflective of that. And 0:09:21.200 --> 0:09:25.040 also to emphasize again, the financial crisis change people's perceptions 0:09:25.040 --> 0:09:27.960 of risk. So here we are at the Game conference. 0:09:28.000 --> 0:09:29.960 They're all these students here who are looking to go 0:09:30.080 --> 0:09:33.840 into the business. What advice would you give a budding 0:09:33.880 --> 0:09:37.439 young professional looking to go into finance right now? Well, 0:09:37.600 --> 0:09:40.839 I think you know, finances. Actually this is not uh, 0:09:41.000 --> 0:09:42.960 something that I think people are happy up to. Finance 0:09:43.000 --> 0:09:46.440 has been gradually gaining market share in the global economy 0:09:46.440 --> 0:09:48.960 for a long time, and it changes the where the 0:09:48.960 --> 0:09:50.840 where the you know, where the action is, so that 0:09:50.880 --> 0:09:53.160 you know, right now the action is in VC and 0:09:53.200 --> 0:09:55.680 startups and things like that. Maybe maybe hedge funds, not 0:09:55.679 --> 0:09:58.320 in mutual funds, which you're in secular decline, But I'd 0:09:58.360 --> 0:10:00.520 say that I'd say the most important thing is get in, 0:10:00.880 --> 0:10:03.600 you know, get a job in finance, and once you're in, 0:10:03.760 --> 0:10:05.760 then it's easier to move around to something that might 0:10:05.800 --> 0:10:07.720 be more attractive. But as it management is still an 0:10:07.760 --> 0:10:11.000 attractive career. Yes, yeah, it's it's it's a good business. 0:10:11.000 --> 0:10:13.560 It's a business it's under secular pressure for the reasons 0:10:13.559 --> 0:10:16.840 I talked about, which is the move to passive uh 0:10:16.880 --> 0:10:19.160 for example. And uh. And I think there's you know, 0:10:19.160 --> 0:10:22.920 there's it's it's highly regulated. So that's that's a negative 0:10:22.920 --> 0:10:25.480 in my in my opinion. But but no, it's it's 0:10:25.480 --> 0:10:28.679 an attractive business. It's interesting you mentioned regulation, and obviously 0:10:28.920 --> 0:10:31.760 a significant layer of regulation came upon the financial services 0:10:31.800 --> 0:10:34.960 industry after the financial crisis. Is that just the new 0:10:35.000 --> 0:10:37.960 way of life? Already? Think that the you know, as 0:10:38.040 --> 0:10:40.440 time moves on, some of those regulations may peel off 0:10:40.480 --> 0:10:43.000 this industry and will allow maybe improve the profitability of 0:10:43.040 --> 0:10:46.440 the financial services industry. Um. You know, I think I 0:10:46.440 --> 0:10:49.160 agree with Jamie Diamond. Uh. And when when Jamie said 0:10:49.280 --> 0:10:51.760 it's it's not a question of more or less regulation, 0:10:51.800 --> 0:10:54.400 it's a question of good or bad regulation. So I 0:10:54.480 --> 0:10:56.520 think we want to get rid of bad regulations and 0:10:56.520 --> 0:10:58.880 good regulations we can have more of those. Bill Miller, 0:10:59.040 --> 0:11:00.920 thank you so much for all the time you've given us. 0:11:00.920 --> 0:11:03.880 We really appreciate it. Bill Miller is chairman and chief 0:11:03.880 --> 0:11:07.000 investment officer at Miller Value Partners. With two billion dollars 0:11:07.200 --> 0:11:12.440 under management. But Bill Miller, legendary investor, he outperformed his 0:11:12.559 --> 0:11:16.920 leg basin value trust outperformed the SMP five hundred benchmark 0:11:17.120 --> 0:11:21.319 for fifteen straight years. It can be done. It's difficult, 0:11:21.320 --> 0:11:38.839 It's always been difficult, but Bill Miller has done it well. 0:11:38.880 --> 0:11:41.240 Today we are closing out what is shapes up to 0:11:41.240 --> 0:11:44.400 be the best quarter performance for the SMP five hundred 0:11:44.480 --> 0:11:46.760 since two thousand nine. The question a lot of investors 0:11:46.800 --> 0:11:49.400 have is what's left to help. We're gonna pose that 0:11:49.480 --> 0:11:52.640 question to our next guest, Kate Moore, Kate's chief equity 0:11:52.679 --> 0:11:55.480 strategist for black Rock with get this assets on the 0:11:55.520 --> 0:12:00.719 management's Lisa six trillion with a T. It's just amazing. Uh. 0:12:01.000 --> 0:12:03.600 Kate joins us here at in New York at the 0:12:03.760 --> 0:12:07.040 ninth annual Quinnipiac Game Conference here in midtown. K thanks 0:12:07.080 --> 0:12:09.120 so much for joining us. So I'll put that question 0:12:09.120 --> 0:12:10.960 to you. God, we've had such a run here this 0:12:11.080 --> 0:12:13.520 first quarter. I think the bulls will tell you yeah, 0:12:13.600 --> 0:12:15.480 but we're just kind of clawing back what we lost 0:12:15.480 --> 0:12:18.439 in the fourth quarter last year. How do you see it? 0:12:18.480 --> 0:12:21.920 Glass half full or half empty? Uh? Glass neutral? At 0:12:21.920 --> 0:12:23.959 the moment. Look, as an equity investor, I think you 0:12:24.000 --> 0:12:25.600 always have to be a little bit of an optimist 0:12:25.600 --> 0:12:28.200 and you have to really look for long term opportunities. 0:12:28.559 --> 0:12:29.920 But I'll be honest with you, as much of a 0:12:29.960 --> 0:12:32.320 bull as I've been over the last ten years this cycle, 0:12:32.720 --> 0:12:34.720 I have to say the run that we have in 0:12:34.720 --> 0:12:37.160 the fourth first quarter is gonna be really difficult to 0:12:37.200 --> 0:12:40.240 replicate in the second quarter. So much of the returns, 0:12:40.320 --> 0:12:42.400 not just in the US equity market, but across all 0:12:42.440 --> 0:12:45.840 regions have really been driven by multiple expansion and not 0:12:45.920 --> 0:12:48.840 so much about an upgrade of fundamentals. So I am 0:12:48.960 --> 0:12:51.880 very focused as companies are reporting their first quarter earnings 0:12:52.080 --> 0:12:55.199 for more positive guidance and for sort of a sense 0:12:55.280 --> 0:12:58.120 that the downward revisions we've had to two thousand nineteen 0:12:58.160 --> 0:13:00.720 expectations are kind of behind us. We're not gonna get 0:13:00.720 --> 0:13:05.559 another big multiple snap back like we had um in 0:13:05.679 --> 0:13:08.720 terms of multiple expansion this year. So so Lift Chairs, 0:13:08.760 --> 0:13:10.920 I should just mention because we've been talking about this 0:13:10.960 --> 0:13:14.199 throughout the day. Lift shares did open up for trading 0:13:14.240 --> 0:13:16.920 on the Nasdaq. They opened at eighty seven dollars and 0:13:16.960 --> 0:13:19.120 twenty four cents to share, a huge pop from the 0:13:19.160 --> 0:13:22.040 seventy two dollars uh that it was initially priced at 0:13:22.120 --> 0:13:24.280 yesterday when it had its I p O And I 0:13:24.320 --> 0:13:27.640 just wonder, Kate, this will be viewed as a huge 0:13:27.679 --> 0:13:29.960 win for the slate of I p O s that 0:13:30.120 --> 0:13:32.800 are lined up for later in this year. I'm thinking Pinterest, 0:13:32.880 --> 0:13:36.200 I'm thinking Uber, I'm thinking Palin here all these big 0:13:36.200 --> 0:13:40.439 tech darlings. Do you view this as a positive sign 0:13:40.600 --> 0:13:43.480 or a negative sign for equity markets? I think there's 0:13:43.480 --> 0:13:47.480 an almost insatiable demand for tech companies. What we need 0:13:47.520 --> 0:13:49.160 to see is that all the companies that come to 0:13:49.200 --> 0:13:52.240 market end up becoming profitable and not just good stories 0:13:52.360 --> 0:13:54.400 or have a good consumer base to begin with. This 0:13:54.480 --> 0:13:56.960 is a story about sustainability. At this point in the cycle. 0:13:57.280 --> 0:13:59.800 We're not in the early stages where at the later stages, 0:14:00.160 --> 0:14:02.440 you know, once we get you know, these shares treating, 0:14:02.440 --> 0:14:04.560 it's going to be a show me moment, I say, 0:14:04.559 --> 0:14:06.800 over the coming quarters. So I'm not going to comment 0:14:06.840 --> 0:14:09.360 specifically on LIFT, but to say, you know, we are 0:14:09.679 --> 0:14:12.679 long term roles on technology. We see a lot of 0:14:12.720 --> 0:14:15.240 these companies coming to market. It's kind of broadening the 0:14:15.360 --> 0:14:18.320 landscape for that sector. But we really want to see 0:14:18.360 --> 0:14:22.480 them earn good money and earn it through slower growth periods. 0:14:22.600 --> 0:14:25.320 Can you imagine that that's actually something that investors care 0:14:25.360 --> 0:14:27.440 about making money? I mean, he's sitting in I don't 0:14:27.440 --> 0:14:28.760 know if Kate was in the New York lunch or 0:14:28.760 --> 0:14:30.920 there's probably hundreds of investors. I wonder if people were 0:14:30.920 --> 0:14:33.160 really pushing back on the profitability. It doesn't seem the 0:14:33.280 --> 0:14:35.920 lack thereof the lack thereof the lack thereof So okay, 0:14:35.960 --> 0:14:37.400 you know, one of the things that's been driving the 0:14:37.440 --> 0:14:39.960 market this year and arguably pushed it down in the 0:14:39.960 --> 0:14:43.280 fourth quarter last year, or some of the not non 0:14:43.360 --> 0:14:45.840 earnings things, some of the geo political issues, you know, 0:14:45.920 --> 0:14:48.760 and one of the things is trade for example. So 0:14:48.840 --> 0:14:50.600 I mean, I know, we're our folks are over in 0:14:50.720 --> 0:14:53.240 China right now. How important is that still to the 0:14:53.280 --> 0:14:56.920 market to get something done with China, something meaningful. I 0:14:56.920 --> 0:14:59.360 think it's incredibly important. And here's what I would say. 0:15:00.440 --> 0:15:03.640 We've had a real repricing of the US China risk, 0:15:04.000 --> 0:15:06.880 not just the tension around trade, but also the overall 0:15:06.920 --> 0:15:09.440 relationship between the two countries. You know, in the last 0:15:09.520 --> 0:15:12.280 three months, certainly that was a downward pressure on the 0:15:12.320 --> 0:15:14.920 market in the fourth quarter. We don't want the market 0:15:14.960 --> 0:15:17.680 to become complacent about this though. Uh. If we get 0:15:17.680 --> 0:15:20.960 an agreement that's not substantial or that doesn't really dig 0:15:20.960 --> 0:15:23.880 get some of the deep issues between the two countries, 0:15:24.200 --> 0:15:27.440 then we're going to be constantly revisiting, um the relationship 0:15:27.520 --> 0:15:31.080 and trade for many quarters to come. So look, as 0:15:31.080 --> 0:15:33.800 I think about the next couple of weeks, Uh, we 0:15:33.840 --> 0:15:36.760 need to see something that is you know, more than surface. 0:15:37.000 --> 0:15:39.640 We need to see something that's more sustainable. It seems 0:15:39.640 --> 0:15:41.640 that both the US and China are looking to sit 0:15:41.640 --> 0:15:43.600 at the table together for sustained periods of time, So 0:15:43.640 --> 0:15:46.880 that's encouraging. But if something doesn't manifest, I'd say the 0:15:46.960 --> 0:15:49.400 left tail on this trade is pretty big, um, and 0:15:49.440 --> 0:15:51.080 you could see some of the steam come out of 0:15:51.120 --> 0:15:54.400 the market, all right, So that potentially could be a 0:15:54.440 --> 0:15:57.880 wild card. I'm curious about a call that you made 0:15:57.920 --> 0:16:01.040 recently in a report that you helped call her where 0:16:01.080 --> 0:16:04.280 you still see a value in having a substantial allocation 0:16:04.280 --> 0:16:07.080 to government bonds even at yields that are this load. 0:16:07.080 --> 0:16:09.600 Do you stand by that? Why? Look, this is about 0:16:09.800 --> 0:16:12.960 overall portfolio construction, like look on an equity strategist, but 0:16:13.000 --> 0:16:15.480 I come from a macro background, and I understand that 0:16:15.520 --> 0:16:16.920 at this point in the cycle you need to have 0:16:16.960 --> 0:16:21.200 a pretty good balance between risk and reward. And uh, 0:16:21.480 --> 0:16:24.160 we're recommending still an overweight to equities and to US 0:16:24.200 --> 0:16:27.120 and emerging market equities in particular, but also to sort 0:16:27.160 --> 0:16:30.200 of balance out your portfolio by saying, you know, it 0:16:30.280 --> 0:16:32.760 makes sense to own treasuries at this point in both 0:16:32.760 --> 0:16:35.440 the business and a market cycle. Where like, what ma Charity, 0:16:36.240 --> 0:16:39.000 So we've had a pretty big move in the last 0:16:39.480 --> 0:16:42.520 week and have two weeks so no value is a 0:16:42.520 --> 0:16:45.200 little less exciting than it had been. So she's saying, 0:16:45.240 --> 0:16:50.200 short en up. That's basically yeah, that is exactly what 0:16:50.240 --> 0:16:53.040 I'm saying, Um, you know that, and that this move 0:16:53.080 --> 0:16:56.000 actually says, you know, sending different signals to different risk, 0:16:56.040 --> 0:16:59.440 ASCID markets, etcetera. But that doesn't mean we shouldn't own 0:16:59.640 --> 0:17:02.200 treasure rays as a balance the to the equity part. 0:17:02.640 --> 0:17:05.399 Given the dovish tilt by the FED, we've seen a 0:17:05.400 --> 0:17:08.520 lot of the risky assets performed well, the high old bonds, 0:17:08.720 --> 0:17:11.119 emerging markets. What is your view on some of that 0:17:11.240 --> 0:17:12.960 pushing out on the risk curve a little bit. Given 0:17:12.960 --> 0:17:15.000 the performance that we've had you know, it's frustrating a 0:17:15.000 --> 0:17:16.879 little bit because you think about the last decade and 0:17:16.920 --> 0:17:19.560 we've wanted to get to a period where the market 0:17:19.600 --> 0:17:25.080 was obsessing less about fed moves, fed language, fed body 0:17:25.240 --> 0:17:29.200 language and and all sorry yeah, and overall central bank tone. 0:17:29.600 --> 0:17:32.399 And you know, the frustrating thing here is that we 0:17:32.440 --> 0:17:36.440 are still incredibly focused on every bit of news we 0:17:36.520 --> 0:17:39.720 get from policymakers. There was a former boss of mine 0:17:39.760 --> 0:17:43.680 that used to say, uh, markets stop panicking when policymakers 0:17:43.680 --> 0:17:45.520 start panicking. And I think that's what we've had a 0:17:45.560 --> 0:17:47.399 little bit over the last three to four months. The 0:17:47.520 --> 0:17:50.800 shift to dovishness has made markets feel more confident. But 0:17:50.840 --> 0:17:53.639 I would sort of note, you know, we don't we 0:17:53.680 --> 0:17:56.159 don't expect we're going to be in a contraction in 0:17:56.240 --> 0:17:58.840 the US economy or the global economy. We're still in 0:17:58.880 --> 0:18:01.919 pretty good shape. And I think the balance of risks 0:18:01.960 --> 0:18:05.200 around the next rate move UH is not being appreciated 0:18:05.200 --> 0:18:07.199 by the market. That's a nice way of saying the 0:18:07.200 --> 0:18:09.400 markets pricing and cuts when we don't think that's likely 0:18:09.400 --> 0:18:12.240 in the near term. Kate, since we are here at 0:18:12.400 --> 0:18:15.240 the Quinnipiac Game Forum with all of these students here, 0:18:15.880 --> 0:18:20.000 what advice would you give someone starting out in finance. Yeah, 0:18:20.040 --> 0:18:21.800 I think the biggest piece of advice I would give 0:18:21.880 --> 0:18:24.400 is to stay really open minded. Our industry is changing. 0:18:24.480 --> 0:18:26.679 The way that we invest today is so different than 0:18:26.720 --> 0:18:29.320 we did it ten years ago or twenty years ago. Uh, 0:18:29.359 --> 0:18:33.000 the kinds of information we incorporate into our investment process. Uh, 0:18:33.040 --> 0:18:35.679 the flexibility you need to have. And so you know, 0:18:35.840 --> 0:18:38.920 I'm completely blown away by how many students are here 0:18:38.960 --> 0:18:41.840 and their passion for investing already. UM, but as if 0:18:41.840 --> 0:18:44.320 they think about their careers, they need to stay really 0:18:44.359 --> 0:18:48.320 open minded. UM as this industry changes. I've pivoted a 0:18:48.359 --> 0:18:50.080 couple of times. I'm sure I still will in the 0:18:50.520 --> 0:18:53.440 balance of my career. UM. And to be really willing 0:18:53.440 --> 0:18:55.560 to sort of disrupt your own process. Don't get stuck 0:18:55.560 --> 0:18:58.040 on analyzing a stock or an asset class in a 0:18:58.119 --> 0:19:01.200 very specific way. Be really will to take into new information. 0:19:01.600 --> 0:19:03.760 Kate Moore, we always love having you on. Thank you 0:19:03.840 --> 0:19:05.920 so much for being with us. Kate Moore is chief 0:19:06.119 --> 0:19:09.439 was equity strategist for Black Rock with nearly six trillion 0:19:09.480 --> 0:19:29.320 dollars of assets under management. Boy, the SMP is up 0:19:30.160 --> 0:19:33.000 year to date. It seems like you know everybody's making money, 0:19:33.000 --> 0:19:35.320 but one sector of the market that is just getting 0:19:35.320 --> 0:19:39.080 cloberts healthcare just news, you know, I guess most recently 0:19:39.160 --> 0:19:42.600 news that the Trump administration is renewing is it's pushed 0:19:42.600 --> 0:19:45.239 to eliminate obombacare. To get a sense of kind of 0:19:45.280 --> 0:19:47.880 what is going on in healthcare and how to view 0:19:47.920 --> 0:19:50.840 the sector going forward, to welcome Aaron Gibbs. Aaron is 0:19:50.840 --> 0:19:55.359 a portfolio manager at SMP Advisory Services. She joins us 0:19:55.359 --> 0:19:59.200 here in New York at the Quinnipiac Game Conference. Aaron, 0:19:59.200 --> 0:20:02.800 thanks so much for joy us. So this seems like 0:20:02.840 --> 0:20:06.440 a secular concern and overhang for this sector. How should 0:20:06.480 --> 0:20:09.359 investors approach healthcare? So what you really need to do 0:20:09.440 --> 0:20:12.000 is break it down in between the industries, because a 0:20:12.040 --> 0:20:14.840 few of the industries are what's really dragging down the 0:20:15.000 --> 0:20:18.320