Speaker 1: All right, let's get to the next guess. Joe Gilbert's
Speaker 1: portfolio managed yet Integrity Asset Management discussing the latest on
Speaker 1: the markets, Joe Wilkins is a program. It does seem
Speaker 1: as that what we had was certainly look at what
Speaker 1: inflation was doing for the last few weeks and not
Speaker 1: looking at the growth picture. Has that been a tilt? No, UM,
Speaker 1: thanks for having me on. And you know, I don't
Speaker 1: know necessarily if there's been a tilt. I think the
Speaker 1: market that you know, likes to focus on what it
Speaker 1: you know, what's in front of it. So you know,
Speaker 1: we have the GDP numbers that come out and we're
Speaker 1: more focused on the growth aspects, we get CPI and
Speaker 1: then the market pivots to more inflation where they're they're
Speaker 1: both are are are big concerns growth and inflation because
Speaker 1: one is running too hot and one is UM. You know,
Speaker 1: we fear is running a lot lower than people expect
Speaker 1: right now. So you know, I think right now the
Speaker 1: market is probably ripe to focus on inflation, especially this
Speaker 1: week with Jackson Hole, because that's what UM chairman Pale
Speaker 1: is gonna focus on and where he is to markets
Speaker 1: and how he how strongly he talks down. Inflation is
Speaker 1: gonna pay pivotal how UM, recess has performed this week,
Speaker 1: So inflation, if it is turning, is not so bad
Speaker 1: if you have growth. Um, we did have a strong
Speaker 1: job report, we had a strong services p m I,
Speaker 1: and we had companies announced earnings that were pretty solid
Speaker 1: on the week side, we have a market signal, we
Speaker 1: have the inversion of the yield curve, which suggests recession
Speaker 1: is coming. Um. What else are you looking at to
Speaker 1: figure out that formula? You know? You know, I think
Speaker 1: right there in your question that you have some some
Speaker 1: good road maps there because I think what has happened
Speaker 1: here is that you know, we the market looks at
Speaker 1: the jobless the job numbers, which we were very strong,
Speaker 1: as you alluded to, UM, and then we have all
Speaker 1: the you know, the services p m I which was strong.
Speaker 1: A lot of these these indicators are are backward looking.
Speaker 1: So you have right now that so the Fed will
Speaker 1: will talk about how strong the economy is, but it
Speaker 1: really should be saying how strong the economy was. So
Speaker 1: I think that is actually where we're gonna have this
Speaker 1: disconnect because if they keep layering on more and more
Speaker 1: rate hikes, in the midst of these lagging indicators. I
Speaker 1: think that that's how you get caught off size there,
Speaker 1: and then we end up in a situation where the
Speaker 1: FED is going to need to cut a lot sooner
Speaker 1: than they are suggesting that they want to. So the
Speaker 1: question is, then, I suppose you know, with all the
Speaker 1: information available, Joe, how how do you take invest of
Speaker 1: that money? I mean, is this the time to be
Speaker 1: looking at some of those equity or so I say,
Speaker 1: industry groups that should performed badly Again, you've gotta be
Speaker 1: selective here and look at them once again. Uh, that's
Speaker 1: exactly right. That's that's how we're we're playing it right now.
Speaker 1: We look at it as the first and first out
Speaker 1: market UM. And what I mean by that is at
Speaker 1: the beginning of the year UM, we had a lot
Speaker 1: of technology stocks, a lot of the earlier cycle cyclical
Speaker 1: companies UM sell off. And then you add on the
Speaker 1: flip side, the you know, more of the lagging companies
Speaker 1: and sectors such as energy were the ones that performed strongly.
Speaker 1: So we think right now what we've had is we've
Speaker 1: had a pivot in the market. So what we're doing
Speaker 1: is we're just looking at more of the consumer discretionary names,
Speaker 1: which sold off strongly in the beginning in the first
Speaker 1: quarter of the year, some of the semiconductor names, some
Speaker 1: of housing names, because we think that's the contrarian play.
Speaker 1: But we also think that those sectors have already just counted,
Speaker 1: you know, a recession, whether it be mild or severe.
Speaker 1: So I think that that is where you're gonna have
Speaker 1: the opportunities, and that's what you're gonna have the evaluation
Speaker 1: protection on the downside. Yeah, that's very interesting. I I
Speaker 1: let's focus on housing for a moment, then, because you know,
Speaker 1: we got some data last week that spooked a lot
Speaker 1: of people. Housing starts. We're down nine point six percent,
Speaker 1: and that sounds bad, but it's actually good for for
Speaker 1: the builders. It's it's good for prices, and so it's
Speaker 1: probably good for people. The homebuilders have learned a lot
Speaker 1: since the GFC. Uh. They're shutting down the housing stars
Speaker 1: because they don't want a glut. But what some people
Speaker 1: would like to see is a glut because that would
Speaker 1: really bring down prices, and and that's not this no,
Speaker 1: and I think that you're you're right there. I mean
Speaker 1: the housing the home builders have gotten religion they're managing
Speaker 1: their business a lot, you know, a lot more smartly
Speaker 1: than they previously have, so I we don't expect there
Speaker 1: would be a glut of inventory, and so with that
Speaker 1: that allows them to be able to be a lot
Speaker 1: more strategic and when they actually are building homes and
Speaker 1: making sure that the houses that they sell are going
Speaker 1: to be as profitable now as they were personally, you know,
Speaker 1: a year ago. So I think that is the opportunity there. Unfortunately,
Speaker 1: as you also alluded to, that prevents home prices from
Speaker 1: really dramatically falling, and that owner's equivalent rent aspect of
Speaker 1: it that goes into the CPI from really falling um
Speaker 1: dramatically as well. Mhm, Joe, how does okay, we talk
Speaker 1: about what's going on with interest rate hikes, but how
Speaker 1: does quoditative tightening at the moment effect the way you
Speaker 1: look at investment? And I'll top of that, what have
Speaker 1: we seen so far? Are we seeing any impact from it?
Speaker 1: You know? You know, right now, I think we're we're
Speaker 1: really on the precipice of actually feeling any of the
Speaker 1: quantitative tightening. I think I'm being honest, we haven't really
Speaker 1: even felt this full scale of interest rate hikes UM
Speaker 1: quantitative tightening. You know it's going to be full scale
Speaker 1: UM starting uh next month. UM are are What we
Speaker 1: think is, you know, the market isn't really factoring in
Speaker 1: that quantitative tightening alone this year is roughly equal to
Speaker 1: twenty five basis point of a rate hike. So we
Speaker 1: think that you know that is there's additional tightening going
Speaker 1: on in the system. There's additional tightening with the money supply,
Speaker 1: with money supply coming out of the system. So all
Speaker 1: of these things actually bode well for inflation coming down.
Speaker 1: We just have to get to the point is inflation
Speaker 1: gonna come down fast enough or rapidly enough that that
Speaker 1: the FED is actually lend the pulse. Alright, Joe, I
Speaker 1: like your style direct very good. Thank you for joining
Speaker 1: us here live, particularly on your Sunday evening. Kill Gilbert,
Speaker 1: portfolio manager at Integrity Asset Management,