WEBVTT - Traders Ready for CPI as EU Elections Impact Markets 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.960 --> 0:00:15.560 This is the Bloomberg Surveillance Podcast. I'm Tom Keene along 0:00:15.600 --> 0:00:18.960 with Paul Sweeney. Join us each day for insight from 0:00:18.960 --> 0:00:23.160 the best in economics, finance, investment, and international relations. You 0:00:23.160 --> 0:00:26.520 can also watch the show live on YouTube. Visit the 0:00:26.520 --> 0:00:31.280 Bloomberg Podcast channel on YouTube to see the show weekday 0:00:31.280 --> 0:00:34.320 mornings from seven to ten am Eastern from our global 0:00:34.360 --> 0:00:39.000 headquarters in New York City. Subscribe to the podcast on Apple, Spotify, 0:00:39.360 --> 0:00:42.920 or anywhere else you listen and always I'm Bloomberg Radio, 0:00:43.080 --> 0:00:46.920 the Bloomberg Terminal, and the Bloomberg Business App. With a 0:00:47.040 --> 0:00:54.000 brilliant summary of the history of index concentration in portfolio concentration. 0:00:54.160 --> 0:00:57.080 And I didn't realize, you know, the way we have 0:00:57.120 --> 0:01:00.520 the big techno, this has been normal this. You know, 0:01:00.560 --> 0:01:03.440 there's other times it's been like this, you know, the 0:01:03.560 --> 0:01:04.800 sixties or the fifties. 0:01:04.920 --> 0:01:09.120 Yeah, I'm not sure that's necessarily a healthy aspect of 0:01:09.160 --> 0:01:11.360 the market. I mean again, this, you don't know this, 0:01:11.680 --> 0:01:14.679 you know, focus on a handful of stocks, a dozen 0:01:14.760 --> 0:01:16.880 stocks in terms of the market capitalization. 0:01:17.840 --> 0:01:19.360 But that's where we are tap with big tech. 0:01:19.440 --> 0:01:22.039 We bring it up because Sarah Hunt joins us right now. 0:01:23.240 --> 0:01:29.200 Sarah Hunt with Alpine Woods Capital Investors. The top ten 0:01:29.280 --> 0:01:31.240 stocks and are holding make up one hundred and forty 0:01:31.240 --> 0:01:34.040 two percent of the portfolio. Have you ever seen it 0:01:34.040 --> 0:01:34.920 this concentrated? 0:01:35.160 --> 0:01:35.720 Good morning. 0:01:35.800 --> 0:01:38.200 I have not, and I think that that is something 0:01:38.240 --> 0:01:40.679 that we were discussing last year. It is something that 0:01:40.760 --> 0:01:42.560 is going to continue to be well. But also we 0:01:42.560 --> 0:01:44.120 were talking about last year because you had the top 0:01:44.120 --> 0:01:46.680 seven right, they were a big percentage. They had to 0:01:46.680 --> 0:01:49.120 reboalac the S and P last year in the middle 0:01:49.120 --> 0:01:50.560 of the year, which they don't usually do because the 0:01:50.600 --> 0:01:53.440 concentration got so high. So that is something that we're 0:01:53.480 --> 0:01:55.000 going to continue to contend the lesson. 0:01:55.440 --> 0:01:57.520 I mean, the fact is the index is the index. 0:01:57.600 --> 0:02:00.600 If that's the numbers, that's the numbers. So they basically 0:02:00.600 --> 0:02:04.640 made up fictional numbers because they thought the concentration was 0:02:04.680 --> 0:02:05.160 too much. 0:02:05.400 --> 0:02:08.360 Well, I don't think that anyone anticipated the concentration becoming 0:02:08.400 --> 0:02:10.000 this high, because you didn't think that you were gonna 0:02:10.000 --> 0:02:12.000 have capitalization weighted that we become. 0:02:11.919 --> 0:02:13.880 Like in video just reached a trillion dollars, So you 0:02:13.919 --> 0:02:15.680 didn't think that that was going to happen that fast. 0:02:15.680 --> 0:02:18.040 There's been a We've just got the story out from 0:02:18.560 --> 0:02:22.280 Van Vasilika of the four hundred and seventy billion dollar 0:02:22.400 --> 0:02:26.960 rally in Apple. Are these things under owned? Is that 0:02:27.040 --> 0:02:30.200 really the shock here that in Video or Apple are 0:02:30.360 --> 0:02:33.359 actually under owned by American Wall Street? 0:02:33.720 --> 0:02:36.679 Well, given the concentration in the SMP, relatively speaking, you 0:02:36.720 --> 0:02:38.440 could say yes about some of that. I think that 0:02:38.480 --> 0:02:40.880 even when people bought Nvidia as it was moving up, 0:02:41.240 --> 0:02:43.240 it was racing so far ahead, and it was getting 0:02:43.240 --> 0:02:45.320 a more and more side of the index where even 0:02:45.320 --> 0:02:47.079 if you owned it, you were underweight. And I think 0:02:47.120 --> 0:02:49.960 Apple went through somewhat of a correction and somewhat of 0:02:50.000 --> 0:02:52.440 a left behind era. And I don't think that people 0:02:52.440 --> 0:02:54.480 were holding as much Apple as the S ANDP is holding. 0:02:54.600 --> 0:02:56.799 But there's a risk to that too, because when something 0:02:56.880 --> 0:02:59.360 like Apple has a downdraft all of a sudden, if 0:02:59.400 --> 0:03:01.720 you're eight percent Apple like the index was, that's a 0:03:01.720 --> 0:03:03.000 big problem for your portfolio. 0:03:03.160 --> 0:03:05.640 So what, you know, what are you suggesting folks do 0:03:05.760 --> 0:03:10.040 these days chase those magnificent whatever number they are, or 0:03:10.440 --> 0:03:13.000 try to sign try to find value outside of those 0:03:13.200 --> 0:03:14.000 big tech names. 0:03:14.240 --> 0:03:16.079 I think it's a combination of the two because I 0:03:16.280 --> 0:03:17.880 chase is a word that I hate to use, but 0:03:18.400 --> 0:03:21.200 the big tech stocks that are generating tons of cash, 0:03:21.280 --> 0:03:23.800 it's difficult to say I don't want them in my portfolio, 0:03:23.840 --> 0:03:26.320 even though the valuations continue to rise, because they're not 0:03:26.440 --> 0:03:28.200 in any kind of trouble. This is not the dot 0:03:28.240 --> 0:03:29.880 com era, where a lot of the stocks that were 0:03:29.960 --> 0:03:33.480 running were stocks that had to be financed by their vendors. 0:03:33.560 --> 0:03:35.360 These are companies that can pay for all of the 0:03:35.400 --> 0:03:36.160 Nvidios chips. 0:03:36.200 --> 0:03:36.320 Right. 0:03:36.360 --> 0:03:38.600 This is Google and Meta. These are companies that can 0:03:38.640 --> 0:03:42.320 pay for the stuff that Google that Nvidia is building. 0:03:42.560 --> 0:03:44.160 But I also think you have to look around and 0:03:44.200 --> 0:03:45.760 say there are other areas of the market that are 0:03:45.840 --> 0:03:47.600 under owned. I can look for good dividends, I can 0:03:47.600 --> 0:03:49.160 look for good cash flow, I can look for things 0:03:49.200 --> 0:03:51.440 like fivebacks, and I can look for areas where I 0:03:51.480 --> 0:03:54.200 don't have to worry as much about that multiple. And 0:03:54.240 --> 0:03:56.040 then I can see what happens with the FED, because 0:03:56.040 --> 0:03:57.360 that's a whole other iteration. 0:03:57.400 --> 0:04:01.320 At the minute, right, Paul Downdrift the pandemic Apple down 0:04:01.360 --> 0:04:04.880 to thirty five percent into the October bottom. The ed 0:04:05.000 --> 0:04:08.360 YARDENI relp F income were a bottom. Apple down twenty 0:04:08.440 --> 0:04:09.040 nine percent. 0:04:09.160 --> 0:04:11.160 Yeah, so those are the draw down. Those are the 0:04:11.200 --> 0:04:14.560 draw down there. So you know, Sarah, I mean a 0:04:14.560 --> 0:04:16.240 lot of things. How do you guys start off. 0:04:16.120 --> 0:04:19.679 With just your allocations these days equity versus fixed income? 0:04:19.720 --> 0:04:23.000 Because I'm very happy sitting them into your treasure getting 0:04:23.080 --> 0:04:24.200 daring close to five percent. 0:04:24.520 --> 0:04:26.919 It depends a lot on the investor themselves, and you know, 0:04:26.960 --> 0:04:30.359 we manage a combination of individual accounts and then also funds. 0:04:30.640 --> 0:04:32.600 So I think that you know, you're looking at what 0:04:32.800 --> 0:04:35.960 someone's where they are in their investment life cycle, matters 0:04:36.000 --> 0:04:38.080 a lot about what your fixed income allocation is going 0:04:38.120 --> 0:04:40.000 to be, and also what their risk tolerance is. There 0:04:40.000 --> 0:04:42.920 are some people that even though bonds have actually now 0:04:42.960 --> 0:04:44.960 have a yield, which they didn't for a decade and 0:04:45.000 --> 0:04:47.560 a half, people got so used to not owning bonds 0:04:47.800 --> 0:04:49.880 that they look at equity returns and they say five 0:04:49.880 --> 0:04:52.040 percent is not enough. But then you have a bad 0:04:52.120 --> 0:04:53.919 year like twenty twenty two, and you think, you know, 0:04:54.000 --> 0:04:56.080 it would have been nice, although bonds had their own 0:04:56.080 --> 0:04:58.520 problems in twenty twenty two. So I think that there 0:04:58.600 --> 0:05:00.160 is a good case to be made for having having 0:05:00.240 --> 0:05:01.279 an allocation to bonds. 0:05:01.279 --> 0:05:02.800 It depends on who you are, where you are in 0:05:02.800 --> 0:05:03.520 that cycle. 0:05:03.560 --> 0:05:05.760 And we also manage some balanced accounts so that also 0:05:06.120 --> 0:05:08.200 you want some of that fixed income. And finally it's 0:05:08.240 --> 0:05:10.200 helping you after years of not being available. 0:05:10.240 --> 0:05:13.360 Do you see dividend growth? We just asked Cantopolis or 0:05:13.400 --> 0:05:16.720 Richard Bernstein this, do you see dividend growth? Is a 0:05:16.800 --> 0:05:20.680 yield equivalent? Is it competing with yield the Sweeney two year? 0:05:21.240 --> 0:05:22.080 I think that it is. 0:05:22.120 --> 0:05:24.719 I think depending on the sector and depending on what 0:05:24.760 --> 0:05:26.160 the company can do. I don't want to see a 0:05:26.240 --> 0:05:28.520 yield that's growing because someone's going into debt to pay 0:05:28.520 --> 0:05:30.960 that dividend. But if I've got if I've got growing 0:05:31.000 --> 0:05:33.280 cash low and I can increase the dividend, it's not 0:05:33.320 --> 0:05:35.000 necessarily going to give me what a two year is. 0:05:35.080 --> 0:05:37.479 But I also have some potential capital appreciation. 0:05:37.040 --> 0:05:37.400 On the side. 0:05:37.440 --> 0:05:42.160 Say, the math of this is thirty percent of stocks succeed, 0:05:42.279 --> 0:05:45.000 seventy percent of stocks that don't. How do you choose 0:05:45.040 --> 0:05:48.279 that thirty percent winners? Right now? Looking out three years 0:05:48.360 --> 0:05:50.719 or five years, what's a key determinant? 0:05:51.040 --> 0:05:54.160 Well, I think that that requires looking into what or 0:05:54.200 --> 0:05:56.360 having a discussion about where you think things are going. 0:05:56.400 --> 0:05:58.560 If you look at the whole technology space that's getting 0:05:58.600 --> 0:06:00.520 bigger and bigger and bigger, and has been. 0:06:00.360 --> 0:06:01.359 For the last decade. 0:06:01.480 --> 0:06:03.479 It used to be it ran on cycles that were 0:06:03.560 --> 0:06:05.520 attached to things like PCs and phones. 0:06:05.839 --> 0:06:08.359 Now it's going on cycles of what is the car build? 0:06:08.400 --> 0:06:08.800 What is this? 0:06:08.880 --> 0:06:12.440 The industrial absorption of technology and the absorption of technology 0:06:12.480 --> 0:06:15.000 across the board has been incredibly rapid. Is that going 0:06:15.040 --> 0:06:16.599 to change in the next three to five years? 0:06:16.760 --> 0:06:18.760 I don't think so. Does it matter what you pay 0:06:18.800 --> 0:06:20.200 for these things? Yes? It does. 0:06:20.240 --> 0:06:21.640 So you have to keep an eye on both what 0:06:21.720 --> 0:06:24.600 you anticipate to happen and sort of say where are 0:06:24.600 --> 0:06:27.240 industry is going to have problems? People right now think 0:06:27.279 --> 0:06:29.400 the energy industry is going away. It's going to be 0:06:29.440 --> 0:06:31.480 a much longer tail than people think. But it's a 0:06:31.520 --> 0:06:34.599 difficult area to have exposure to because people don't like 0:06:34.640 --> 0:06:37.720 it as much. But there is a longer term reality 0:06:37.920 --> 0:06:39.480 that we are going to be needing fossil fuels for 0:06:39.520 --> 0:06:40.960 a lot longer than people want to admit. 0:06:41.400 --> 0:06:45.280 So, I guess, just setting back here, how about valuation 0:06:45.400 --> 0:06:48.280 for this market. We've seen stocks run here, We've had 0:06:48.320 --> 0:06:50.000 good earnings. I'm not sure if the earnings are good 0:06:50.040 --> 0:06:52.320 enough to support the moves we've seen in this market 0:06:52.839 --> 0:06:53.880 over the last twelve months. 0:06:54.000 --> 0:06:55.159 How do you think about valuation? 0:06:56.120 --> 0:06:58.640 Well, that's also it ends up being sector dependent as well, 0:06:58.680 --> 0:07:01.280 because you see that the value since the technology sector 0:07:01.320 --> 0:07:03.440 are higher. You've seen some of that come down as 0:07:03.440 --> 0:07:06.240 the ship as the spend has shifted from things like 0:07:06.600 --> 0:07:09.359 software to things like chips. Right, So there's a change 0:07:09.400 --> 0:07:10.920 there and you have to be careful because some of 0:07:10.960 --> 0:07:13.000 those valuations and technology are very high. 0:07:13.040 --> 0:07:14.640 Do you care about Apple today? Are you going to 0:07:14.680 --> 0:07:16.280 acquire shares with this meeting? 0:07:17.400 --> 0:07:20.280 We own Apple already, so do we want it to go? Well? 0:07:20.360 --> 0:07:22.120 Yes, Am I going to add more to it at 0:07:22.120 --> 0:07:24.600 the moment? Probably not, because you just had this stock 0:07:24.760 --> 0:07:27.280 rally back another ten fifteen. 0:07:27.040 --> 0:07:28.080 Percent less marketing. 0:07:28.360 --> 0:07:30.640 It's an amazing it had, but it had a huge rally. 0:07:30.680 --> 0:07:32.200 So that was but you didn't sell it when it 0:07:32.240 --> 0:07:34.720 went down, right, because that's the participation that you can 0:07:35.000 --> 0:07:36.040 have to continue to have. 0:07:37.000 --> 0:07:39.640 Sure, thank you so much, good stuff, Sarah Hunt, Thank 0:07:39.680 --> 0:07:41.360 you so much. 0:07:51.240 --> 0:07:54.080 Lori Cavasina joins us now from the lawn at the 0:07:54.240 --> 0:07:57.920 University of Virginia, Head of US Equity Strategy RBC Capital Markets. 0:07:58.240 --> 0:07:58.680 So LORII. 0:07:59.320 --> 0:08:02.480 What happens if this feeder reserve says, you know what, 0:08:02.560 --> 0:08:05.200 the data does not support a rate cut. 0:08:05.240 --> 0:08:06.440 What happens to the market here? 0:08:07.960 --> 0:08:09.920 All right, well, thanks for having me as always, And look, 0:08:09.960 --> 0:08:12.200 I think that's a fantastic question if you want to 0:08:12.240 --> 0:08:14.840 just go purely by the numbers, when we walk through 0:08:15.320 --> 0:08:17.920 that kind of scenario, getting you know, just no moves, 0:08:17.960 --> 0:08:20.320 further moves by the Fed this year, no cuts, no hikes, 0:08:20.320 --> 0:08:24.920 STICKI er inflation than anticipated, and say tenure yields, you know, 0:08:25.000 --> 0:08:28.200 sort of settle out around the recent highs our Work 0:08:28.240 --> 0:08:30.400 says that knocks the pe multiple down a little bit 0:08:30.440 --> 0:08:33.400 below twenty one and pulls the s and P five hundred. 0:08:33.400 --> 0:08:35.560 If you're looking on my earnings, which are two thirty seven, 0:08:35.600 --> 0:08:37.720 around forty nine hundred. If you're looking a little more 0:08:37.720 --> 0:08:40.640 generously at consensus earnings, which are around two forty five, 0:08:40.880 --> 0:08:44.120 you get closer to fifty one hundred. But either way, 0:08:44.200 --> 0:08:46.600 you know, I think we think there's some modest downside 0:08:46.640 --> 0:08:48.600 from here. We do think at this point in time, 0:08:48.640 --> 0:08:50.920 based on our modeling, this idea of getting one maybe 0:08:50.960 --> 0:08:54.360 two cuts and you know, kind of inflation coming down 0:08:54.360 --> 0:08:56.959 to two six on PCE that seems to be fully 0:08:57.000 --> 0:09:00.319 reflected in stock prices around fifty three hundred if you 0:09:00.440 --> 0:09:03.200 use the consensus earnings numbers. So I think we're fairly 0:09:03.240 --> 0:09:05.800 priced for that rosy scenario now, and if we don't 0:09:05.880 --> 0:09:08.080 get it, not a ton of damage to the market, 0:09:08.160 --> 0:09:10.439 but some modest impacts. 0:09:10.880 --> 0:09:15.040 Are you surprised, Laurie that the market has risen? I 0:09:15.080 --> 0:09:18.400 guess we're twelve percent or so somewhat this year, despite 0:09:18.400 --> 0:09:20.560 the fact that this market again went into the year 0:09:20.640 --> 0:09:23.160 discounting maybe five or six rate cuts and now we're 0:09:23.200 --> 0:09:26.240 down to maybe one or two. Despite that reduction in 0:09:27.000 --> 0:09:30.480 the FED dubbishness, the stock market's kind of risen here 0:09:30.559 --> 0:09:31.160 twelve percent. 0:09:31.160 --> 0:09:32.000 Are you surprised by that? 0:09:33.040 --> 0:09:35.720 Well, you know, I think it's surprising from a FED 0:09:35.880 --> 0:09:38.440 inflation interest rate angle. I think if you put it 0:09:38.480 --> 0:09:41.720 in the context of all these conflicting cross currents that 0:09:41.760 --> 0:09:45.080 we have the big tailwind that's actually I think responsible 0:09:45.120 --> 0:09:48.480 for most of that appreciation is the economic tailwind. And 0:09:48.520 --> 0:09:50.600 so I love these stats. But if you look at 0:09:50.600 --> 0:09:53.000 the ECFC data on Bloomberg, and I look at this 0:09:53.000 --> 0:09:55.720 stuff every Friday, and you can track the consensus GDP 0:09:55.840 --> 0:09:58.319 forecasts on the street. If you look at the twenty 0:09:58.360 --> 0:10:01.360 twenty four number last summer, it was point six percent 0:10:01.440 --> 0:10:04.480 for twenty twenty four on real GDP on the annual basis. 0:10:04.720 --> 0:10:06.679 If you looked at that stat in January, it was 0:10:06.760 --> 0:10:09.040 one point three percent, and then I think it was 0:10:09.040 --> 0:10:11.840 sometime in February we saw big melt up and it 0:10:11.880 --> 0:10:14.040 crossed over the two percent mark, and now I believe 0:10:14.040 --> 0:10:16.720 it's sitting around two point four percent or so. Zero 0:10:16.800 --> 0:10:19.960 to two percent GDP is typically very weak for the 0:10:19.960 --> 0:10:22.839 equity market. Two to four typically you get, you know, 0:10:22.920 --> 0:10:25.200 kind of a twelve to thirteen percent type gain, and 0:10:25.200 --> 0:10:27.200 that's about what we've gotten so far this year. So 0:10:27.240 --> 0:10:31.319 we've exited economic purgatory and we've moved into the idea 0:10:31.360 --> 0:10:33.160 that the economy is actually pretty healthy. 0:10:33.440 --> 0:10:36.480 But Lourie, small cap and I don't know where mid 0:10:36.520 --> 0:10:40.600 cap is in this debate. I'm not informed are in purgatory. 0:10:41.320 --> 0:10:44.680 I yes, we've been here before. I really want to emphasize, folks, 0:10:44.920 --> 0:10:48.400 I can remember times where small cap was in purgatory. 0:10:48.960 --> 0:10:54.800 What's the catalyst of big cap south or small cap north? 0:10:56.520 --> 0:10:59.120 So it's a it's a great question, Tom. I think 0:10:59.160 --> 0:11:01.839 small cap PA have been dealing with this, I mean 0:11:01.880 --> 0:11:04.080 for a long time, but really focused on you in 0:11:04.120 --> 0:11:06.680 this cycle. When are we going to get those FED cuts? 0:11:07.000 --> 0:11:10.600 If you look historically, small caps typically do do well 0:11:10.640 --> 0:11:13.920 in easying cycles relative to large but unfortunately they don't 0:11:13.960 --> 0:11:14.959 tend to pre trade it. 0:11:15.000 --> 0:11:15.720 They tend to. 0:11:15.640 --> 0:11:19.200 See the inflection after the cuts start happening. And that's 0:11:19.240 --> 0:11:22.839 why I think small caps, you know, they're not really 0:11:22.880 --> 0:11:25.719 making major new loaves relative to large cap right now. 0:11:25.760 --> 0:11:28.120 They're trying to defend their ground because there's still some 0:11:28.200 --> 0:11:30.480 of that optimism out there. But we really need those 0:11:30.520 --> 0:11:33.200 cuts to come through. I do think the economic tailwinds 0:11:33.200 --> 0:11:35.640 are also putting the floor under them under a relative basis. 0:11:35.640 --> 0:11:37.400 But at the end of the day, it doesn't matter 0:11:37.400 --> 0:11:39.920 how many charts I show people on the balance sheets. 0:11:40.400 --> 0:11:42.599 Hedge funds think they're worse than large and want to 0:11:42.600 --> 0:11:44.560 beat them up as long as the Fed's entightened mode. 0:11:44.679 --> 0:11:48.600 Good morning pleasant. In California, Paul I completely randomly off 0:11:48.679 --> 0:11:54.640 Russell two thousand, took Simpson Manufacturing fifty five hundred employees. 0:11:55.160 --> 0:11:59.760 They're at a nineteen multiple. Their dividend growth is Okaya 0:12:00.120 --> 0:12:04.000 rate four percent per year for a very small dividend, 0:12:04.720 --> 0:12:08.080 and what do you do in an Apple world? What 0:12:08.080 --> 0:12:11.400 do you do in pleasants in California? If Cooper Tino 0:12:11.520 --> 0:12:13.079 owns a high ground, I don't get it. 0:12:13.240 --> 0:12:16.079 Exactly. Simpson Manufacturer, I hadn't heard of that would be 0:12:16.160 --> 0:12:18.199 never heard of the exactly good stuff exactly. 0:12:18.480 --> 0:12:21.920 Hey Lourie, I know you recently were attended the RBC 0:12:22.040 --> 0:12:25.240 Consumer Conference. How do you think that consumer's doing out there? 0:12:25.280 --> 0:12:26.400 What did you hear at that conference? 0:12:27.600 --> 0:12:30.000 So you know, I will say it was a fantastic conference. 0:12:30.000 --> 0:12:33.280 We had a really interesting cross section of companies. What 0:12:33.520 --> 0:12:35.679 one of the big takeaways that I heard was that 0:12:35.720 --> 0:12:39.280 the high end is still relatively resilient, but the low 0:12:39.400 --> 0:12:41.920 end in particular, and we've heard this on conference calls 0:12:41.960 --> 0:12:45.000 as well, is really seeing the impact of higher inflation. 0:12:45.120 --> 0:12:47.400 And then I heard a number of auto related companies 0:12:47.440 --> 0:12:49.440 and so really got an airfull about the interest rate 0:12:49.520 --> 0:12:52.680 impact as well. And if I think about that conference, 0:12:52.679 --> 0:12:54.400 and I also kind of go back to this last 0:12:54.440 --> 0:12:56.480 reporting season, I think a lot of the themes on 0:12:56.520 --> 0:12:59.400 the consumer are still the same high end versus low end. 0:12:59.440 --> 0:13:03.320 All these press resilience YadA YadA YadA, value consciousness, but 0:13:03.400 --> 0:13:05.920 it does seem just like the tone has you know, 0:13:06.240 --> 0:13:08.840 gotten a little bit worse. I think the way our 0:13:08.880 --> 0:13:11.000 analysts put it in his recap report was that the 0:13:11.440 --> 0:13:14.000 negative tone around some of these issues just escalated. 0:13:14.600 --> 0:13:19.800 Laurie is smart observation out on I'll get It Folks 0:13:19.800 --> 0:13:23.920 three two one YouTube the live chat, Chris thank you 0:13:24.400 --> 0:13:27.360 out on YouTube the live chat, and Laurie he says, 0:13:27.400 --> 0:13:31.240 where's the profits in Russell two thousand? I mean, are 0:13:31.280 --> 0:13:35.319 these people generating profit? Are they capital allocating? Are they 0:13:35.360 --> 0:13:39.320 on an EVA spread basis making money like the fancy people. 0:13:41.040 --> 0:13:44.160 So look, if you look at gauges of profitability in 0:13:44.200 --> 0:13:47.720 small cap or earning's quality, definitely, if you look at 0:13:47.720 --> 0:13:50.600 the Russell two thousand, those metrics don't look as good 0:13:50.640 --> 0:13:53.080 as they have historically. They typically, you know, you have 0:13:53.120 --> 0:13:55.720 a higher percentage of negative earners in the Russell two 0:13:55.760 --> 0:13:57.720 thousand then the S and P. That's true, but that 0:13:57.800 --> 0:14:01.040 gap has exacerbated over time. Some of that is because 0:14:01.040 --> 0:14:04.559 of index composition issues. You have a lot of biotech 0:14:04.679 --> 0:14:06.840 sitting in small cap, you have a lot of res 0:14:06.840 --> 0:14:09.200 sitting in small caps, so some of it can be 0:14:09.280 --> 0:14:11.160 explained by that. But if you do look at sectors 0:14:11.240 --> 0:14:14.920 like technology, you're also seeing more loss makers. You know, 0:14:15.280 --> 0:14:18.040 I think people do look at that to say, okay, 0:14:18.080 --> 0:14:21.600 it's a lower gage of quality. The SMP six hundred 0:14:21.640 --> 0:14:23.880 doesn't have as many of those issues, and it's still 0:14:23.960 --> 0:14:26.000 underperformed large caps as well. So I don't think you 0:14:26.000 --> 0:14:29.600 can blame small cap underperformance entirely on that, but honestly, 0:14:29.640 --> 0:14:32.680 to people buy small caps for future growth, not necessarily 0:14:32.760 --> 0:14:34.000 present day profitability. 0:14:34.240 --> 0:14:38.000 Laurie, thank you so much, Lori Kelvicina with our VC 0:14:42.400 --> 0:14:47.120 for blowing up the show. India modi yep, mccral's shoals. 0:14:47.800 --> 0:14:51.520 Italy is doing okay. Belgium, the guy resigns. I remember 0:14:51.560 --> 0:14:55.320 interviewing Mendavos years ago and I just said, get Terrence Haynes. 0:14:55.320 --> 0:14:58.760 I don't care about anything else. Get Terry Haynes with Pangaea. 0:14:59.080 --> 0:15:03.080 And he's here today. But the ramifications not for Europe, 0:15:03.280 --> 0:15:07.400 not for India, not for Belgium, but for mister Biden, 0:15:07.640 --> 0:15:11.720 mister Trump, Terry Haynes. There's a message here. What should 0:15:11.760 --> 0:15:16.120 the Biden and Trump campaigns interpret? Forward to November? 0:15:17.840 --> 0:15:20.640 Well, good morning everybody. You know, I think they had 0:15:20.680 --> 0:15:24.320 a look at all these all these results very closely, 0:15:24.360 --> 0:15:27.280 including Mexico, South Africa, and the Lights didn't mention it, 0:15:27.400 --> 0:15:31.560 and and Biden fundamentally, what Biden fundamentally needs to do 0:15:32.360 --> 0:15:37.600 is to is to actually double down on explaining, you know, 0:15:38.000 --> 0:15:40.600 both his domestic policy and his foreign policy, not just 0:15:40.640 --> 0:15:43.760 in a pithy election way, but actually get to what 0:15:43.800 --> 0:15:47.040 the stakes are and why we need to be doing 0:15:47.080 --> 0:15:50.000 what we're doing. And this administration is bad at that, 0:15:50.120 --> 0:15:52.120 and I think frankly Trump's not much better at it. 0:15:52.160 --> 0:15:55.600 But they need to do that, not just you know, 0:15:55.640 --> 0:15:58.120 because he's president and because he's running for reelection. 0:15:58.840 --> 0:16:01.760 So, Terry, what we've seen in some of these elections 0:16:01.760 --> 0:16:04.520 and geopolitics around the globe over the past several weeks 0:16:04.520 --> 0:16:06.560 and months is the far right. I'm not sure if 0:16:06.560 --> 0:16:08.480 we can call them the far right anymore. Maybe they're 0:16:08.480 --> 0:16:11.240 more of the of the of the center of where 0:16:11.240 --> 0:16:14.760 folks are thinking about. But again, if you're President Biden here, 0:16:15.280 --> 0:16:17.200 you know you've got to be concerned about this, don't you. 0:16:18.440 --> 0:16:19.440 Well, yeah, I think so. 0:16:20.040 --> 0:16:22.760 But you know what we're seeing here, I think both 0:16:22.800 --> 0:16:25.520 in the United States and certainly in Europe, so the 0:16:25.560 --> 0:16:28.320 West as a whole is kind of a bonfire of 0:16:28.320 --> 0:16:32.200 the vanities moment. You know, the politically entrenched don't seem 0:16:32.240 --> 0:16:35.960 to understand or really acknowledge their own roles in creating 0:16:36.400 --> 0:16:39.840 over the last generation policy and political cull the sacks 0:16:40.240 --> 0:16:44.640 that are that people are frustrated about. People want results, 0:16:44.760 --> 0:16:46.800 and you know, we started to see that almost a 0:16:46.920 --> 0:16:50.280 decade ago with Trump and you know we're seeing it 0:16:50.560 --> 0:16:54.440 again in Europe now. Whether or not the EU elections, 0:16:54.880 --> 0:16:59.360 you know, produce a real change is arguable the EU 0:16:59.400 --> 0:17:01.360 elections ten to be more of a protest vote than 0:17:01.360 --> 0:17:05.080 anything else, which is precisely why a lot of people 0:17:05.119 --> 0:17:08.240 are scratching their heads about Macron's desire to hold go 0:17:08.280 --> 0:17:09.600 ahead and hold a snap election. 0:17:11.560 --> 0:17:15.200 Terry just nailed it. Aster Green's always does talking about 0:17:15.400 --> 0:17:21.320 cul de sects of people in policy and society. Did 0:17:21.400 --> 0:17:24.920 George Herbert Walker Bush do that or James Earl Carter 0:17:25.520 --> 0:17:27.600 of the other team. I don't think they did that. 0:17:27.800 --> 0:17:32.240 I don't you know, So, Terry, if you're president former 0:17:32.280 --> 0:17:36.560 president Trump, here, what's the play over the next several months? 0:17:36.600 --> 0:17:40.120 Is it staying with that playbook that worked for him 0:17:40.119 --> 0:17:45.800 the last time? Is that still the playbook going forward? 0:17:45.840 --> 0:17:49.160 That's the playbook? You know, he'll run that he thinks 0:17:49.160 --> 0:17:51.399 he needs to run. But he's in a much big 0:17:51.480 --> 0:17:55.640 different situation Paul in three than he was in twenty sixteen, 0:17:56.119 --> 0:18:01.160 in three particulars. Firstly, you know, he's not new anymore. 0:18:01.400 --> 0:18:04.400 He's not the new, shiny, big alternative that people are 0:18:04.400 --> 0:18:08.240 so frustrated about they were willing to take a flyer on. Secondly, 0:18:08.320 --> 0:18:10.600 he does not have a United Republican Party. He's got 0:18:10.640 --> 0:18:12.800 a split Republican Party. And if you don't believe me, 0:18:13.480 --> 0:18:15.760 watch how he's doing the dance with Nicki Haley to 0:18:15.760 --> 0:18:17.920 try to get her twenty to forty percent of voters 0:18:18.240 --> 0:18:21.920 inside the tent. And Thirdly, he's not winning independence. He's 0:18:21.920 --> 0:18:26.480 losing independence right now. So you know he'll do what 0:18:26.520 --> 0:18:29.240 he does. And at the same time, they have to 0:18:29.240 --> 0:18:30.800 do different things in order to prevail. 0:18:30.840 --> 0:18:32.480 I think, Terry, I think the heart of the matter, 0:18:32.520 --> 0:18:34.200 we're going to see this, let's get out front, Terry. 0:18:34.200 --> 0:18:37.280 Of all the op edification in the evening news and 0:18:37.320 --> 0:18:40.920 the cable TV frenzy and all that Ian Bremer led 0:18:40.960 --> 0:18:44.080 with the inflation discussion off these elections in the harm 0:18:44.840 --> 0:18:47.720 to the middle class and lower class, did we see 0:18:47.760 --> 0:18:51.920 a shift today where there's proof of concept that all 0:18:51.960 --> 0:18:56.719 that matters is immigration, migration, and green climate change. Did 0:18:56.800 --> 0:18:58.879 that shift happen over the weekend? 0:19:01.320 --> 0:19:03.680 You know, I don't think so, because but the reason 0:19:03.720 --> 0:19:05.720 why I think there's a shift happening, all right, But 0:19:05.760 --> 0:19:08.800 I don't think it's really those issues. Political people love 0:19:08.880 --> 0:19:11.040 to turn the dials and talk about issues, you know, 0:19:11.119 --> 0:19:14.520 as if the right calibration of issues can be you know, 0:19:14.600 --> 0:19:18.000