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Speaker 1: Let's get to David ko talk. David is CEO and

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Speaker 1: chairman of Cumberland Advisers. So David, let's weigh up a

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Speaker 1: point I raised there in the data check. China ending

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Speaker 1: its isolation. It seems like good news. It's it's hugely

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Speaker 1: positive for growth, but it may also be negative for

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Speaker 1: global inflation and also perhaps the export of some new

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Speaker 1: mutated strains of the virus. Let's start off with you

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Speaker 1: know how it how it makes the vet's job. Does

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Speaker 1: this make the central bankers job a lot more difficult? Well,

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Speaker 1: thank you, Brian, thanks for having me on. Happy New

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Speaker 1: Year to you and Reach. It's a pleasure to end

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Speaker 1: the year in a conversation with you. Although the topic

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Speaker 1: that you just described is a tough one. UM, China

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Speaker 1: is a roaring forest fire right now with COVID. We

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Speaker 1: know that we wonder about how big the data impact

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Speaker 1: is in terms of deaths and long COVID disability and

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Speaker 1: hospital to all the reports that we see, and we

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Speaker 1: also know that the opening up is going to trigger

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Speaker 1: more energy consumption and we see it reflected already in

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Speaker 1: changes in the oil price in the oil markets. So

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Speaker 1: that's the tradeoff, UM, more economic growth when China gets

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Speaker 1: through the COVID forest fire, No question about that. Higher

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Speaker 1: oil prices makes the FEDS job harder. But tell us

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Speaker 1: something here, David, I mean, do you think that we

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Speaker 1: could perhaps see China exporting it's a disinflation that it

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Speaker 1: has compared to the rest of the world, though it

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Speaker 1: is inflation well but in name, but I mean, it

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Speaker 1: is far far less than what's going on elsewhere. Well,

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Speaker 1: you reach, that's that's really a cutting edge question. How

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Speaker 1: badly will the labor force in China be impacted by COVID.

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Speaker 1: That's really key. If if there's three or four million deaths,

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Speaker 1: and remember the United States had a million and a

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Speaker 1: quarter excess deaths, and there's a population in China that

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Speaker 1: doesn't have the vaccine protection that Americans had, notwithstanding all

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Speaker 1: the anti vaxers in the US. So labor force is

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Speaker 1: very critical in transition with this pandemic. A year from now,

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Speaker 1: things will be better, but now we're not so sure

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Speaker 1: what the impacts will be. See when I was looking

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Speaker 1: at this, I was thinking that traders should not worry

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Speaker 1: so much about inflation because of exactly the point that

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Speaker 1: Risch made. At the moment, China doesn't have an inflation

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Speaker 1: problem and struggling so much to get out of COVID

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Speaker 1: and lockdowns that you know, prices have been pretty pretty

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Speaker 1: stable there. And also in terms of how wicked could

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Speaker 1: the mutations be. You know, they're opening up at a

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Speaker 1: time when the virus has mutated to the weak side.

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Speaker 1: Everybody's getting it and shaking it off in four or

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Speaker 1: five days. So wouldn't you want to look at this

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Speaker 1: as a pretty big net positive. It should be a

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Speaker 1: pretty big net positive. I agree. I mean, in our

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Speaker 1: portfolio strategy, we are operating under the assumption that it

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Speaker 1: is a net positive from the investor standpoint. And the

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Speaker 1: worrisome is how strong shocks and responses to shocks don't

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Speaker 1: run on linear timetables. They have they are very valuable.

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Speaker 1: And we still have a shooting war in Europe, and

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Speaker 1: we still have a worldwide financial sanctions war, and we

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Speaker 1: still have misbehavior with North Korea. Oh my gosh, you

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Speaker 1: can't make all this stuff up. There's so many moving parts, David,

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Speaker 1: let us not forget that. You know, it's also an

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Speaker 1: air at the moment of tightening monetary policy. We've got

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Speaker 1: these geopolitical problems, COVID as we've been talking about in China.

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Speaker 1: How does this set up twenty three How do you

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Speaker 1: see the assumptions playing into this and going on on

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Speaker 1: the ground. Well, China is the one place where you

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Speaker 1: don't have tightening monetary policy. So will the resurgence in

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Speaker 1: China because of the monetary easing and in debt relief

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Speaker 1: trigger some inflationary pressures. We'll find out as for the

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Speaker 1: G seven. As for the US, You're right, we have

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Speaker 1: worldwide tightening policy and we have yet to full to

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Speaker 1: feel the full force of that. The lag time may

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Speaker 1: be sure. There's a Federal Reserve study out now it's

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Speaker 1: it's twelve months instead of eighteen months. Well, who knows.

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Speaker 1: So black times with monetary policy are there. How much

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Speaker 1: the shock of rising interest rates and tightening financial conditions

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Speaker 1: in the United States is evidenced yet in the economy

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Speaker 1: and in markets remains to be seen. I'm not sangling

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Speaker 1: about this. I think we have recession and trouble in

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Speaker 1: front of us. So you don't buy some of the

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Speaker 1: latest data. I mean, just on Friday we had data

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Speaker 1: that that really encouraged markets, and it helped a big

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Speaker 1: rally yesterday. In addition to the China News. If we

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Speaker 1: set aside the China News, does the US still have

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Speaker 1: an inflation problem? Yes? I think so. It seems to

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Speaker 1: me that if the FED wants the inflation rate measured

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Speaker 1: by the PC or PCE core to be a sustainable

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Speaker 1: two percent, it has to say stay tighter longer, and

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Speaker 1: Loretta Mester reaffirmed that with an interview with Mike McKee

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Speaker 1: on Bloomberg just very recently, tighter longer. Now we'll find

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Speaker 1: out what that means. So otherwise the Fed would have

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Speaker 1: to say, will accept three percent and will accept four

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Speaker 1: and I don't think that's in the cards. David, Okay,

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Speaker 1: let's have a look at how you know you're you're

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Speaker 1: going to in terms of asset allocation and the like.

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Speaker 1: I mean, we saw essentially the end of free money,

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Speaker 1: of course, and it's still be that that whole concept

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Speaker 1: of free moneys and the lack of it now has

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Speaker 1: being digested. How does this change? Is it now all

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Speaker 1: about the search? Um? You know, we've got yields of

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Speaker 1: course now really showing some juice as it were, where'd

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Speaker 1: you go defensive and high yield? What's the deal? And

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Speaker 1: you know, how does the whole of the yep. App Well,

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Speaker 1: I wouldn't go in high yield because I believe credit

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Speaker 1: spreads were widened and therefore you want the highest quality

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Speaker 1: credit if you're going to be in the bond side,

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Speaker 1: and we are emphasizing that and particularly doing so in

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Speaker 1: for American clients in tax free municipal bonds because there's

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Speaker 1: some relatively cheap to the taxable bonds in the stock market.

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Speaker 1: We're about in cash reach, and we have overweight positions

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Speaker 1: in aerospace defense for all the reasons that we've talked

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Speaker 1: about around the world, the health care sector for all

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Speaker 1: the reasons that we continue to talk about, and alternate

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Speaker 1: energy not fossil fuel. And we also now have a

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Speaker 1: ten percent position in gold and silver miners. We think

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Speaker 1: precious metals are gonna go north in price. David, do

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Speaker 1: do you think that looking at what we're in the

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Speaker 1: midst of is kind of cyclical and uh, just go

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Speaker 1: with some of the secular choices like you said, I mean,

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Speaker 1: Tesla now has dropped from basically the beginning of the year,

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Speaker 1: and its p s in the low twenties. So do

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Speaker 1: do you want to play play that or you know,

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Speaker 1: the profile that you've been describing is a very cautious one,

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Speaker 1: not opportunistic. No, I'm on the cautious side. Um, and

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Speaker 1: I realize there's a lot of very optimistic uh forecast

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Speaker 1: fore maybe by the end of but we haven't seen

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Speaker 1: any earnings contraction yet. Markets are still seeing SMP five

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Speaker 1: foundered earnings with two hundred plus kind of number. We

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Speaker 1: don't know how those are gonna come in. The profit

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Speaker 1: share of the g d P is very high. It

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Speaker 1: seems to me if we're going to get a slow

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Speaker 1: down a recession, that has to contract. So we are cautious,

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Speaker 1: we are not roaring optimists in our so briefly, then,

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Speaker 1: do do you do you like duration here? I would

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Speaker 1: be very careful in the tax free municipal bond space

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Speaker 1: in US, yes, in the treasury curve no, okay, I

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Speaker 1: would save that. He will save the y to that.

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Speaker 1: No for our next visit to hope to have you

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Speaker 1: on soon, probably within a month or so. Thanks very much, David.

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Speaker 1: David ko Talk, chief investment Officer and chairman of Cumberland

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Speaker 1: Advisers