WEBVTT - Surveillance: No Tax Legislation Before Midterms, Hudak Says 0:00:00.080 --> 0:00:12.960 Ye. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane 0:00:13.480 --> 0:00:17.560 jay Ley. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:32.440 Bloomberg dot Com, and of course on the Bloomberg. Joining 0:00:32.479 --> 0:00:34.200 us here in New York City is Kate more blank 0:00:34.280 --> 0:00:37.919 Rock Investment Institute Chief Equity Strategistics. She joins us Now, 0:00:37.960 --> 0:00:41.160 Good morning, Kate, Good morning. Some optimism this morning in China. 0:00:41.240 --> 0:00:44.040 Do you have it longer term? I definitely have a 0:00:44.120 --> 0:00:46.320 longer term, and I think that some of what we've 0:00:46.320 --> 0:00:48.120 seen in terms of the price action so far has 0:00:48.159 --> 0:00:52.159 been really really overdone this year. You know, I don't 0:00:52.240 --> 0:00:54.800 understand why investors are surprised that the government has come 0:00:54.800 --> 0:00:57.200 out and said that they are going to support strategic 0:00:57.280 --> 0:01:02.760 industries technology private firms going to provide both explicit and 0:01:02.840 --> 0:01:06.759 implicit support on financing as well as on the regulatory side. 0:01:06.959 --> 0:01:09.760 This has always been the case, and people who have 0:01:09.840 --> 0:01:13.479 been reluctant to invest in China are those that don't 0:01:13.560 --> 0:01:19.080 understand the strength of Chinese political will and how important 0:01:19.160 --> 0:01:22.160 the growth and the breadth of the economy is for 0:01:22.200 --> 0:01:24.679 the future plans. So we saw the plunge protection team 0:01:25.040 --> 0:01:29.160 get into action. What if they learned from and why 0:01:29.200 --> 0:01:32.240 is this response any different? So I think what's happened 0:01:32.240 --> 0:01:34.800 in two thousand eighteen is a little bit different in 0:01:34.840 --> 0:01:38.119 that um the government has put a series of policies 0:01:38.360 --> 0:01:41.759 and new regulations in place that, you know, while hurting 0:01:41.760 --> 0:01:44.200 earnings maybe a little bit in the near term, especially 0:01:44.200 --> 0:01:47.560 around some of the key sectors in China, actually really 0:01:47.640 --> 0:01:51.280 lay the groundwork for more sustained and better growth in 0:01:51.360 --> 0:01:54.920 the future. This isn't just about supporting stocks right now. 0:01:55.200 --> 0:01:57.920 This is about creating the right framework and the long 0:01:58.040 --> 0:02:01.800 term support from you know, the policy side that will 0:02:01.800 --> 0:02:05.120 allow the kind of growth and development that they need 0:02:05.320 --> 0:02:08.960 to achieve their big technology goals. Well, then all the 0:02:09.440 --> 0:02:11.280 you know, the optimism we have and shall we heard 0:02:11.320 --> 0:02:15.560 Kate Moore's optimism here over the last number of hours. 0:02:15.960 --> 0:02:18.720 But within this optimism is a gloom crew. Doug Cass 0:02:18.720 --> 0:02:21.840 will join us later on. Doug Cass is a little 0:02:21.880 --> 0:02:25.280 bit cautious on the market. What do the cautious people 0:02:25.360 --> 0:02:28.959 get wrong? Is it financial? Is it mood? Is it 0:02:29.120 --> 0:02:31.240 the size of the bet one way or another? What 0:02:31.400 --> 0:02:33.200 is it? Yeah? Tom. Let me just say, I don't 0:02:33.200 --> 0:02:34.880 think I'm gonna live this down when I get into 0:02:34.880 --> 0:02:37.840 the office today. Kate, You're too optimistic is going to 0:02:37.919 --> 0:02:40.440 be branded right across my face. But here's what I 0:02:40.480 --> 0:02:46.400 will say. The people who are very pessimistic are concerned that, 0:02:46.639 --> 0:02:49.400 you know, all of these policy things will weigh indefinitely 0:02:49.560 --> 0:02:52.800 on the potential for earnings and growth. People who are optimistic, 0:02:53.040 --> 0:02:56.000 you tend to have a slightly longer time horizon. Exactly 0:02:56.240 --> 0:03:00.120 is Doug cass would say that, did Kate? More is 0:03:00.280 --> 0:03:03.040 X access is way different than the kind of access 0:03:03.080 --> 0:03:05.960 Doug Kiss, don't anow us the characterize what you're saying. 0:03:06.560 --> 0:03:08.960 If it's not optimism, what would you call it? How 0:03:08.960 --> 0:03:10.760 would you frame the way you're thinking about the world 0:03:10.840 --> 0:03:13.040 right now? I'd say I have the ability to look 0:03:13.080 --> 0:03:16.800 through some of the near term noise volatility UH and 0:03:16.919 --> 0:03:20.600 some challenges and some headwinds to Chinese sectors into Chinese 0:03:20.760 --> 0:03:23.919 growth expectations is very likely in the near term, and 0:03:23.919 --> 0:03:25.680 I'm gonna, if I'm gonna be totally honest with you, 0:03:25.919 --> 0:03:28.760 I can't necessarily identify catalysts that's gonna lead China to 0:03:28.840 --> 0:03:30.960 rip and outperform the rest of the market in the 0:03:31.040 --> 0:03:34.960 fourth quarter. But I think you know, as especially longer 0:03:35.080 --> 0:03:38.920 term investors and individual investors think about their allocation to 0:03:39.000 --> 0:03:43.080 this incredibly important economy, to these really interesting markets where 0:03:43.080 --> 0:03:46.760 companies don't look exactly like their US counterparts, they need 0:03:46.840 --> 0:03:50.280 to think about adding over the medium term. And you 0:03:50.320 --> 0:03:52.360 know this is what you hear me say, which is 0:03:52.400 --> 0:03:56.040 to try and reverse the negative. I think that the 0:03:56.400 --> 0:03:58.640 order take away the cloud that's been hanging over a 0:03:58.720 --> 0:04:02.520 lot of people's recent experience in emerging markets and say 0:04:02.520 --> 0:04:05.560 there are some very very strong growth stories. A big 0:04:05.560 --> 0:04:07.840 week for tech earnings in the United States this week. 0:04:08.000 --> 0:04:12.440 The divergence, though, in between Chinese tech and US tech 0:04:12.760 --> 0:04:16.240 has been absolutely massive. Are you saying that you would 0:04:16.240 --> 0:04:19.240 buy the Chinese side of the story and look for 0:04:19.279 --> 0:04:22.760 some convergence here. It's really convenient to say that US company, 0:04:22.920 --> 0:04:25.840 US tech and Chinese tech are kind of similar sides 0:04:25.880 --> 0:04:28.839 of the same idea, But the composition of these companies, 0:04:29.320 --> 0:04:33.560 their demand, their content, the regulatory environment are all totally different. 0:04:33.839 --> 0:04:37.960 And you've seen what is almost four four thousand basis 0:04:38.000 --> 0:04:41.520 points spread between the performance of US tech companies and 0:04:41.640 --> 0:04:46.320 Chinese tech. But apples to apples or it's not these 0:04:46.320 --> 0:04:48.679 are you know. My point is if you're thinking about 0:04:48.720 --> 0:04:51.919 technology over the long term, you've got to own both sides. 0:04:51.960 --> 0:04:55.559 These companies do different things, access different consumer bases and 0:04:55.560 --> 0:04:59.240 and are developing technologies at different pieces. It's not you know, 0:04:59.360 --> 0:05:02.359 you don't have a an Apple in China or you 0:05:02.360 --> 0:05:10.000 know an Amazon in China that I feel pretty calfinated accident. 0:05:10.520 --> 0:05:13.120 She's stand up on the upper west side of the week. 0:05:13.400 --> 0:05:16.960 Kay as much sharper than us about that big week 0:05:17.040 --> 0:05:19.280 coming up for tech and eggs. What are you looking for? 0:05:19.520 --> 0:05:22.640 Netflix just does everything the bulls wanted to do, and 0:05:22.720 --> 0:05:26.160 then the stock ends the week down two. Well, we're 0:05:26.200 --> 0:05:28.719 in this market where if you are putting up numbers 0:05:28.760 --> 0:05:31.839 that look too good that everyone's going to step back. 0:05:32.120 --> 0:05:34.120 Is it possible that we continue to get the same 0:05:34.200 --> 0:05:37.520 kind of subscription growth? Who knows? Um, there's we really 0:05:37.560 --> 0:05:40.200 are looking for goldilocks numbers, things strong but not so 0:05:40.400 --> 0:05:43.320 strong that they don't look unsustainable. And you know, it's 0:05:43.360 --> 0:05:46.239 possible that good numbers this year pardon me, this quarter 0:05:46.960 --> 0:05:48.960 on the top line and the bottom line aren't met 0:05:49.080 --> 0:05:52.400 with huge out performance. So um, but I would say 0:05:52.440 --> 0:05:55.400 that's an opportunity especially our growth managers are looking to 0:05:55.480 --> 0:05:58.080 add shares. At this point, does it matter what corporations 0:05:58.120 --> 0:06:00.440 are doing with their cash, because to me, it's my 0:06:00.720 --> 0:06:04.560 my official line interview after interview is nothing's changed, and 0:06:04.720 --> 0:06:07.040 they're doing a little bit of capex and everybody stands 0:06:07.080 --> 0:06:09.800 up and cheers, but it's a yeah, but kind of capex, 0:06:09.880 --> 0:06:12.080 that's no big deal. Well, the only CAPEX we're really 0:06:12.160 --> 0:06:14.760 seeing grow in a meaningful way into thousand eighteen is 0:06:14.800 --> 0:06:18.200 in tech. Actually, every other sector is kind of doing 0:06:18.279 --> 0:06:20.200 what it's done for most of the post crisis period. 0:06:20.240 --> 0:06:22.760 It's like low single digit growth, just what they need 0:06:22.880 --> 0:06:24.760 to do. It's really interesting to me, though, that when 0:06:24.800 --> 0:06:26.479 growth starts to want to perform, we get a lot 0:06:26.520 --> 0:06:28.240 of people come on this program and say it's time 0:06:28.320 --> 0:06:30.480 to shift to value, that rotation is here, get out 0:06:30.520 --> 0:06:32.400 of growth, go to value. And then you just said 0:06:32.400 --> 0:06:35.760 your growth managers are looking to add to exposure. So 0:06:35.920 --> 0:06:37.880 clearly for black Rock that's the theme. You think growth 0:06:37.960 --> 0:06:40.400 is where it's at, that's where it stays. So last 0:06:40.440 --> 0:06:42.719 week we had a great debate. We had our equities 0:06:42.760 --> 0:06:45.080 off site and value versus growth was one of our 0:06:45.200 --> 0:06:49.200 key discussion points. What do you see Houston, Red Sex. 0:06:49.480 --> 0:06:51.479 Is that where your off site was. Well, there are 0:06:51.480 --> 0:06:53.400 a lot of different teams here. This is what I'm 0:06:53.400 --> 0:06:56.880 gonna say when it comes to value. You tend to 0:06:56.960 --> 0:07:00.960 have value as a style outperform when you are in 0:07:01.040 --> 0:07:04.520 an economic or accelerating economic environment, when the second derivative 0:07:04.560 --> 0:07:07.840 growth looks really good. Um, and that has been you know, 0:07:08.080 --> 0:07:11.480 the experience that most people have lived through. What I 0:07:11.520 --> 0:07:13.560 will tell you though, is that like what's falling into 0:07:13.600 --> 0:07:15.960 the value style and disease right now? Some of it's 0:07:16.000 --> 0:07:18.200 just not very good quality and some of it is 0:07:18.240 --> 0:07:21.560 structurally impaired. And I think our value managers would say, 0:07:22.120 --> 0:07:23.840 you know, the work they have to do is that 0:07:24.000 --> 0:07:26.320 much more difficult than it's ever been in the past. 0:07:26.680 --> 0:07:29.400 We are also, while we're looking for a sustained expansion, 0:07:29.600 --> 0:07:31.960 are not looking for a massive acceleration in the growth 0:07:32.040 --> 0:07:33.840 rate at this point. And that I think, you know, 0:07:34.080 --> 0:07:48.200 tempers the opportunity for value. John Hudeck where this was Brookings, 0:07:48.480 --> 0:07:51.640 we talked policy after the election. Do you just assume John, 0:07:51.680 --> 0:07:53.560 I mean, you're not like a poll wank, but do 0:07:53.640 --> 0:07:58.400 you just assume gridlock Democrat House? Yeah, if the Democrats 0:07:58.480 --> 0:08:01.720 take back the House. Sure, gridlock is going to increase dramatically. 0:08:01.800 --> 0:08:05.720 You're going to have one party controlling the House, another 0:08:05.800 --> 0:08:09.080 party controlling the Senate that agree on next to nothing. 0:08:09.320 --> 0:08:13.000 And unless unless Pelosi and Schumer can somehow extend an 0:08:13.040 --> 0:08:15.720 olive branch to the president, um, it's going to be 0:08:16.040 --> 0:08:19.120 a period in which we have another nothing. Congress. Is 0:08:19.160 --> 0:08:23.480 grid luck good? Well, gridlock is good if Congress is 0:08:23.560 --> 0:08:25.760 proposing a lot of bad ideas. And I think there 0:08:25.800 --> 0:08:27.920 are a lot of Americans who see Congress as a 0:08:28.000 --> 0:08:30.520 group that's proposing a lot of bad ideas in terms 0:08:30.560 --> 0:08:33.679 of policy. But at the same time, there are must 0:08:33.800 --> 0:08:39.120 pass pieces of legislation like appropriations bills that gridlock really threatens, 0:08:39.200 --> 0:08:42.679 and that increases the likelihood of government shutdowns, lacks of 0:08:42.800 --> 0:08:46.520 reauthorization for essential agencies, and in a whole host of 0:08:46.559 --> 0:08:48.839 other problems. John, what can the president do without a 0:08:48.880 --> 0:08:51.960 Republican Congress if that is indeed what we get after 0:08:52.000 --> 0:08:54.000 the midterms, And why do you think the focus will 0:08:54.040 --> 0:08:58.800 be well? Presidents face this fairly regularly. Right the past, 0:08:58.840 --> 0:09:01.839 several presidents have baced a period of unified government and 0:09:01.920 --> 0:09:04.760 then a period in which they lost control of at 0:09:04.840 --> 0:09:07.319 least one House of Congress, and they handle it in 0:09:07.400 --> 0:09:11.719 different ways. An effective president takes a deep breath and says, well, 0:09:11.840 --> 0:09:14.960 the political landscape has changed dramatically, and if I want 0:09:15.040 --> 0:09:18.040 to be effective at all, I have to become a dealmaker. 0:09:18.200 --> 0:09:20.920 And for President Trump, he sort of prides himself on that, 0:09:21.040 --> 0:09:24.240 and I think he has an opportunity to change course 0:09:24.320 --> 0:09:27.559 a bit. If, however, he stays course given a different 0:09:27.600 --> 0:09:31.240 political environment, it means that he will contribute to that gridlock. 0:09:31.320 --> 0:09:34.360 In Any hope of breaking that gridlock, of course, comes 0:09:34.440 --> 0:09:36.599 from the Oval Office, and if the Oval Office is 0:09:36.640 --> 0:09:39.040 not willing to put in the time, then gridlock is 0:09:39.040 --> 0:09:43.920 the name of the game. Who was the last effective president? John, Well, 0:09:44.080 --> 0:09:47.079 you know, I think, uh, It's not often talked about, 0:09:47.120 --> 0:09:51.000 but I think President George W. Bush actually worked surprisingly 0:09:51.160 --> 0:09:55.080 well with uh Democrats in Congress after the two thousand 0:09:55.280 --> 0:09:58.880 six of wave of Democrats taking control. I mean they 0:09:58.920 --> 0:10:02.160 didn't you know, they didn't do everything that they wanted 0:10:02.240 --> 0:10:05.560 to get done, but they were as antagonist because people 0:10:05.600 --> 0:10:07.800 thought they'd be. And John, this goes the heart of 0:10:07.880 --> 0:10:11.959 your academics, which is the idea of a president with 0:10:12.160 --> 0:10:16.280 executive experience, And we can clearly state that President Trump 0:10:16.320 --> 0:10:19.439 did not have that not serving in government, and President 0:10:19.480 --> 0:10:22.320 Obama was Senator Obama. Do you make a big deal 0:10:22.400 --> 0:10:25.840 of someone that enters the office that actually was a governor. 0:10:26.800 --> 0:10:28.920 I think that's pretty helpful when you look at a 0:10:29.000 --> 0:10:32.000 President Clinton who worked well with a Republican Congress, or 0:10:32.000 --> 0:10:35.040 I should say relatively well President Bush who worked well 0:10:35.600 --> 0:10:38.240 with the Democratic Congress. Part of that had to do 0:10:38.400 --> 0:10:41.760 with their experience previously. But I think with President Trump, 0:10:41.880 --> 0:10:44.480 you know, he is an executive. He is a business executive, 0:10:44.880 --> 0:10:48.040 and in his many decades of working not just in 0:10:48.120 --> 0:10:51.080 New York, but in other countries I'm sorry, other major 0:10:51.160 --> 0:10:55.720 cities around the world, he saw these changes in political environments, 0:10:55.840 --> 0:10:59.480 real estate environments, and economic environments, and to be effective 0:10:59.559 --> 0:11:03.160 he need to change when those environments changed. And so 0:11:03.280 --> 0:11:05.520 I think he has an opportunity to do that. The 0:11:05.640 --> 0:11:08.439 question is whether he will. The president's tone and I 0:11:08.960 --> 0:11:11.680 believe I saw the video and the blur of the weekend, 0:11:12.160 --> 0:11:15.960 But Johanna Hudec, can the president get tax legislation through 0:11:16.080 --> 0:11:20.640 by the first Tuesday of November? Absolutely not, thank you. 0:11:20.840 --> 0:11:24.559 Not going to get anything through between now in this 0:11:25.120 --> 0:11:28.400 next election day or frankly now in November of twenty nineteen. 0:11:28.840 --> 0:11:30.959 So let's tell foreign policy, John, because that's where the 0:11:31.000 --> 0:11:34.839 focus is right now, Saudi Arabia. Would it be fant 0:11:34.880 --> 0:11:36.839 to say this is the biggest foreign policy crisis so 0:11:37.000 --> 0:11:41.920 far of the Trump administration. Absolutely. I think some are 0:11:42.040 --> 0:11:44.000 looking at this, or I should say very few are 0:11:44.040 --> 0:11:46.920 looking at this as an issue of a journalist being 0:11:47.640 --> 0:11:50.720 tortured and dismembered. But this is of course much larger. 0:11:50.800 --> 0:11:53.880 It has to do with American values and leadership around 0:11:53.920 --> 0:11:58.199 the world, respect for media, and of course economic and 0:11:58.280 --> 0:12:02.240 defense relationships. And audio Arabia is an important, important economic 0:12:02.360 --> 0:12:06.679 partner and an important partner in America's defense. But we 0:12:06.800 --> 0:12:08.880 have a lot of partners who do things from time 0:12:08.920 --> 0:12:11.920 to time that appalls the US and there has to 0:12:12.040 --> 0:12:15.320 be a response to that. And the president right now 0:12:15.440 --> 0:12:19.240 is facing acrossroads, and he can make a very bad choice, 0:12:19.440 --> 0:12:22.160 and he can make a series of better choices, and 0:12:22.360 --> 0:12:24.960 the ball is really in his core. So walk me through, John, 0:12:25.000 --> 0:12:28.040 what you think are a series of better choices? You know, 0:12:28.120 --> 0:12:31.960 I think a series of better choices includes a serious 0:12:32.080 --> 0:12:34.679 reprimand of Saudi Arabia that would probably come in the 0:12:34.800 --> 0:12:38.160 form of some mild sanctions. Um it would come from 0:12:38.720 --> 0:12:43.760 a very um uh you know, firm statement from the 0:12:43.880 --> 0:12:47.120 President and probably a firm statement from the Congress that 0:12:47.240 --> 0:12:50.280 the United States does not condone this behavior and it 0:12:50.320 --> 0:12:53.880 will stand up for media around the world who, frankly, 0:12:54.360 --> 0:12:56.760 as you both know, are under attack and a variety 0:12:56.800 --> 0:13:00.640 of countries every day. John, one more question, what happens 0:13:00.679 --> 0:13:04.040 the first Wednesday of November. I mean, if there's let's 0:13:04.040 --> 0:13:07.320 assume the Democrats take the House, what's the lame duck 0:13:07.559 --> 0:13:09.959 character of I mean, John Farrell is looking at me like, 0:13:10.080 --> 0:13:13.440 what's lane duck? Explain lame duck to our global audience, 0:13:13.720 --> 0:13:17.040 and what flavor of lame duck? Will this be? Sure? 0:13:17.200 --> 0:13:20.200 Lame duck exists for a Congress or for a president, 0:13:20.280 --> 0:13:23.679 and that happens after an election and before either a 0:13:23.760 --> 0:13:25.959 new Congress has sworn in or a new president is 0:13:26.000 --> 0:13:28.400 sworn in. What you're going to see in the lamb 0:13:28.480 --> 0:13:32.000 Duck is a Senate that is rapidly approving judges as 0:13:32.080 --> 0:13:34.000 quickly as they can. I think that's going to be 0:13:34.120 --> 0:13:39.280 true even if uh the uh, you know, Republicans maintain control. 0:13:39.920 --> 0:13:43.079 There are some loose ends in terms of appropriations. A 0:13:43.200 --> 0:13:47.079 farm bill etcetera that Congress wants to get through, and 0:13:47.160 --> 0:13:50.760 I think sanctions on Saudi Arabia is something that this 0:13:50.960 --> 0:13:54.120 Congress is going to want to get done before January. John, 0:13:54.200 --> 0:13:56.200 Thank you so much January Duck with Brookings to give 0:13:56.280 --> 0:14:07.760 us a good election, John, why don't you bring in 0:14:07.840 --> 0:14:10.480 young Mailey. In the equity markets, Matt Madbie millerit back 0:14:10.600 --> 0:14:14.760 and lac Managing director and equity strategist. Good morning to 0:14:14.800 --> 0:14:17.640 your Matt. Big week for tech nes this week in America. 0:14:17.880 --> 0:14:20.840 What are you looking for? Well, I mean it's it's 0:14:20.880 --> 0:14:23.320 going to be very very important because the tech has 0:14:23.320 --> 0:14:26.600 obviously been the key, key leader in the market, in 0:14:26.640 --> 0:14:29.600 the stock market since the election. Remember everybody said that 0:14:29.680 --> 0:14:31.440 the you know, President Trump is gonna be negative for 0:14:31.920 --> 0:14:34.560 uh for tech companies, and in the group was getting 0:14:34.600 --> 0:14:37.560 hit right after the election. They've rallied strongly since then. 0:14:37.920 --> 0:14:40.680 The one concern, of course, is the key leader within 0:14:40.960 --> 0:14:43.360 the tech group has been the semi conductors, and they've 0:14:43.400 --> 0:14:46.680 been acting very poorly lately. Uh so uh you know, 0:14:46.960 --> 0:14:49.000 they've been much more weaker than the rest of the group. 0:14:49.040 --> 0:14:50.960 We keep talking about the Tunter day moving average in 0:14:51.000 --> 0:14:53.160 the in the SMP five hundred, which we continue to 0:14:53.240 --> 0:14:55.440 cling to the same thing as in the XLK, the 0:14:55.720 --> 0:15:00.680 UH Tech ETF, but the SOCKS Semiconductor Index or the 0:15:00.840 --> 0:15:03.760 SMH which is the semi e t F, it's broken 0:15:03.800 --> 0:15:06.680 well below. It's two winter day moving average seven percent below. 0:15:06.720 --> 0:15:08.680 And it's a very very important support level for that 0:15:08.720 --> 0:15:10.560 one as well. So if we don't get to UH 0:15:10.840 --> 0:15:13.440 this group to turn around and for the general UH 0:15:14.080 --> 0:15:17.440 group to see good earnings to help the you know, 0:15:17.720 --> 0:15:20.080 the tech group, the key leadership group bounced back, We're 0:15:20.080 --> 0:15:22.160 gonna have some more headwines as we moved to the bag, 0:15:22.240 --> 0:15:23.720 just to break down tech a little bit more. We 0:15:23.760 --> 0:15:26.440 have seen a divergence within the big fang names themselves, 0:15:26.560 --> 0:15:30.720 notably the difference between say, Facebook and Netflix through and 0:15:30.760 --> 0:15:34.280 it's been quite dramatic. Are there any particular names, any companies, 0:15:34.320 --> 0:15:36.760 any business models that you think will do better in 0:15:36.840 --> 0:15:40.360 the current environment. Well, I mean, the one thing that 0:15:40.400 --> 0:15:42.880 we have to look at is, you know, this whole 0:15:42.960 --> 0:15:46.760 thing with when it's kind of funny because away from 0:15:46.800 --> 0:15:50.280 the fundamental side of the situation, I'm more interested in 0:15:50.680 --> 0:15:52.880 how crowded this trade. As you talk about the fang stocks, 0:15:53.120 --> 0:15:55.160 you look at a Facebook. You know, in this recent 0:15:55.240 --> 0:15:58.560 most recent downturn, Facebook is actually outperformed. It's it's come 0:15:58.600 --> 0:16:00.760 down a little bit, but it's actually been trading more sideways. 0:16:01.000 --> 0:16:03.960 A lot of these stocks are very very crowded because 0:16:04.000 --> 0:16:06.800 they performed very well. Uh. But Facebook, of course it's 0:16:06.800 --> 0:16:10.520 been washed out. It's done more. It's no longer crowded people. 0:16:11.000 --> 0:16:12.520 It's not not a lot of week money in it. 0:16:12.680 --> 0:16:15.040 So I think some of these underperformers are going to 0:16:15.120 --> 0:16:17.320 do better. It's October whatever it is, and we're all 0:16:17.400 --> 0:16:20.760 focused on the first Tuesday of November. Michael Purvis, Weed 0:16:20.840 --> 0:16:23.240 and Matt Malie wrote a wonderful note a couple of 0:16:23.280 --> 0:16:25.160 weeks ago. A number of weeks ago, I should say 0:16:25.880 --> 0:16:32.400 about how portfolios have to adjust, what percent of portfolios 0:16:32.520 --> 0:16:37.000 are behind right now? The answers, it's ginormous, isn't it. Yes, 0:16:37.440 --> 0:16:40.160 you know, it's well, of course every year it's it's 0:16:40.280 --> 0:16:44.280 kind of funny how how badly the tend money managers, 0:16:44.320 --> 0:16:45.960 both on the hedge fund side and on the mutual 0:16:46.000 --> 0:16:49.080 fund side, UH tend to underperform the market. The thing 0:16:49.200 --> 0:16:52.160 is nowadays, it's it's on a percentage basis. It's a 0:16:52.240 --> 0:16:55.200 big percentage, but a lot of them are very tied, 0:16:55.320 --> 0:16:57.600 very closely to these indexes, so they're not well behind 0:16:57.640 --> 0:17:00.240 the market. However, it's kind of funny because I'm still 0:17:00.280 --> 0:17:01.640 think we might need need to get a little bit 0:17:01.640 --> 0:17:04.480 of more of a wash out here before the market 0:17:04.560 --> 0:17:06.840 really bottoms. But as you get past the election, you know, 0:17:06.960 --> 0:17:09.160 we all know that the in mid term election years, 0:17:09.160 --> 0:17:11.639 and market tends a rally towards the end of the year. Uh, 0:17:11.840 --> 0:17:18.560 then performance sphere become plays a huge, huge, uh component 0:17:18.600 --> 0:17:20.440 to what's going on in the marketplace. Even if you 0:17:20.520 --> 0:17:22.119 think we're gonna have a horrible gonna have a horrible 0:17:22.160 --> 0:17:24.679 recession in two thousand nineteen, if the markets trailing at 0:17:24.680 --> 0:17:26.919 the end of the year, and you're an institutional money manager, 0:17:27.119 --> 0:17:28.560 you've got to be in the market. You've got to 0:17:28.600 --> 0:17:30.960 be buying. So uh. You know, people may be a 0:17:30.960 --> 0:17:32.720 little bit of careful, especially on some of these groups 0:17:32.760 --> 0:17:34.640 that are very badly beaten up, some of the bank 0:17:34.720 --> 0:17:36.879 stocks which have rallied strongly at the end of the 0:17:36.920 --> 0:17:38.879 year the last two years. I've been really negative on 0:17:38.920 --> 0:17:42.200 the group, but I always be careful. Wait are you 0:17:42.320 --> 0:17:47.200 saying no? Uh, you know, I'll take it back yes, 0:17:47.280 --> 0:17:48.800 I think right now. I think as we look at 0:17:48.840 --> 0:17:51.760 the two thousand nineteen with interest rates moving higher, things 0:17:51.800 --> 0:17:53.879 have changed. We keep them saying that in the fundamentals 0:17:53.920 --> 0:17:56.680 haven't changed. You know, mortgage rates have doubled, I'm sorry, 0:17:56.720 --> 0:17:58.320 not double, They've gone up a full percent in the 0:17:58.440 --> 0:18:02.320 last year. Uh A. Long term bonds have doubled since 0:18:02.359 --> 0:18:04.479 a little of two thousand sixteen. The yield on long 0:18:04.600 --> 0:18:06.960 term bonds. Uh. There's, of course, there's a lot of 0:18:07.080 --> 0:18:10.000 uncertainly now with earnings. So my thing is raising a 0:18:10.040 --> 0:18:11.880 little bit of cash in case we have a tough year, 0:18:12.080 --> 0:18:14.280 get a little bit more defensive, because these defensive groups 0:18:14.320 --> 0:18:17.479 are out performing, especially Matt MAYLEI thank you so much, 0:18:17.520 --> 0:18:31.160 milar type. I greatly appreciate it, without question. My interview 0:18:31.200 --> 0:18:34.640 of the day on the issues of Saudi Arabia, Turkey 0:18:34.840 --> 0:18:37.960 at the United States. Stephen Cook, Stephen A. Cook is 0:18:38.000 --> 0:18:41.400 with the Council on Foreign Relations. I can't say enough 0:18:41.560 --> 0:18:45.840 about his book False Dawn, Protest, Democracy and Violence. I'll 0:18:45.840 --> 0:18:47.840 look at the Middle East, look at the Arab Spring. 0:18:48.280 --> 0:18:50.720 It is one of those books where I'm reading every 0:18:50.840 --> 0:18:54.119 word cover to cover. Stephen Cook, good morning. If you 0:18:54.800 --> 0:18:57.680 uh wrote false Dawn today, How would you change the 0:18:57.760 --> 0:19:02.359 chapter on Turkey? Well, I think the chapter actually holds 0:19:02.480 --> 0:19:06.880 up even stronger now. Turkey was one of those countries 0:19:07.280 --> 0:19:10.479 in the early two thousand's that I think people widely 0:19:10.520 --> 0:19:13.080 believed would be a member of the European Union. By 0:19:14.560 --> 0:19:18.200 and um, it is more authoritarian now than I think 0:19:18.280 --> 0:19:22.320 it's been in since the Republic of Turkey's founding almost 0:19:23.040 --> 0:19:28.960 nine years ago. So the Turkish president ridget type Aerdan 0:19:29.359 --> 0:19:34.920 essentially runs a one man elected autocracy. Within this is 0:19:35.000 --> 0:19:39.200 a present from Mr Rohan in his autocracy? Would you 0:19:39.320 --> 0:19:43.320 explain his calculus now? I think it's been confusing within 0:19:43.400 --> 0:19:47.680 the media, the Ariduan calculus of Saudi Arabia combined with 0:19:47.800 --> 0:19:51.520 the calculus is to the United States and to Iran 0:19:51.600 --> 0:19:55.320 as well. Well. The issue of the day being the 0:19:55.440 --> 0:19:59.160 relationship between Turkey and Saudi Arabian. I think it's fairly 0:19:59.359 --> 0:20:05.800 clear that everyone has multiple interest in doing everything possible 0:20:06.240 --> 0:20:12.040 to embarrass the saudiast Um. First of all, he can 0:20:12.200 --> 0:20:17.200 demonstrate through the leaks to the press that Turkey can 0:20:17.240 --> 0:20:22.040 be a responsible citizen as opposed to a reckless Saudi Arabia. 0:20:22.320 --> 0:20:28.000 He's scheduled to announce tomorrow. Uh. There the Turkish government's 0:20:28.000 --> 0:20:31.639 belief of what happened to the Saudi journalist Jamal Kashogi, 0:20:32.040 --> 0:20:34.600 And I think what he's trying to do is to 0:20:34.720 --> 0:20:38.360 demonstrate that for all the criticism that the Turkish Turkish 0:20:38.440 --> 0:20:42.280 press has taken for its past fabrications on this issue, 0:20:42.400 --> 0:20:48.399 they've been one on the story and have reflected accurately 0:20:48.520 --> 0:20:52.560 what's happened. And then it's important to remember that Saudi Arabia, 0:20:53.480 --> 0:20:58.480 he is a arrival and actually in conflict with one 0:20:58.800 --> 0:21:03.200 of Turkeys st jijik Allas, the government of Cota, and 0:21:03.359 --> 0:21:06.080 so anything that Aireduan can do to kind of bring 0:21:06.200 --> 0:21:09.959 the Saudis down and notch will be beneficial to him. 0:21:10.400 --> 0:21:13.399 On the question of Iran, the Turks really have played 0:21:13.560 --> 0:21:16.520 a double game. Um. They have been signal publicly that 0:21:16.640 --> 0:21:18.520 they want to be on the side of the United States, 0:21:18.880 --> 0:21:23.200 while over the course of the preceding decade helped the 0:21:23.280 --> 0:21:30.159 Iranians evade UN sanctions. So uh, it's entirely unclear what 0:21:30.320 --> 0:21:33.720 they're going to do with the renewing sanctions. Stephen A. Cook, 0:21:33.760 --> 0:21:36.920 with his constant formulations, I can't say enough about False Dawn. 0:21:36.960 --> 0:21:40.000 I'm reading it cover to cover Stephen A. Cook. This 0:21:40.119 --> 0:21:42.320 came up this weekend. Let's let's have the pro answer 0:21:42.400 --> 0:21:46.120 the question. If the Saudis are Sunni and the Iranians 0:21:46.160 --> 0:21:52.639 are Shia, what is Turkey. Well, Turkey is predominantly a 0:21:52.760 --> 0:21:56.320 Sunni country, but the Turks have never really pursued a 0:21:56.400 --> 0:21:59.040 sectarian farm policy in the same way that the Saudis have, 0:21:59.200 --> 0:22:02.600 for example, the way the Iranians have. Um, the Turks 0:22:02.640 --> 0:22:07.040 see themselves as natural leaders of the Muslim world and 0:22:07.119 --> 0:22:11.800 that includes sunny and Well then all this is where 0:22:11.920 --> 0:22:14.000 we go from here. Of course, CNN leading with the 0:22:14.080 --> 0:22:17.320 report uh this morning of a double coming out of 0:22:17.359 --> 0:22:20.440 the consulate that looked like Mr Shogen all that. What 0:22:20.680 --> 0:22:24.800 is a pro like you monitoring over the next over 0:22:24.880 --> 0:22:30.400 the next seventy two hours. Well, what's really, I think 0:22:30.480 --> 0:22:33.960 crucially important is the way in which the sad government 0:22:34.080 --> 0:22:39.720 responds to these revelations. Uh. It is a situation which 0:22:39.800 --> 0:22:42.560 is obviously very very difficult for the Saudist to get 0:22:42.640 --> 0:22:46.479