WEBVTT - Bankers on the Frontlines 0:00:12.560 --> 0:00:15.720 Hello, and welcome to What Goes Up, a Bloomberg weekly 0:00:15.760 --> 0:00:19.200 market podcast. I'm Sara Pants, a reporter on the Cross 0:00:19.200 --> 0:00:22.560 Asset team, and I'm Mike Reagan, a senior editor on 0:00:22.600 --> 0:00:25.160 the Markets team. This week on the show, we've gotten 0:00:25.200 --> 0:00:27.720 some of the first real reads into the effect of 0:00:27.720 --> 0:00:31.440 the coronavirus on the economy. It's disheartening to say, but 0:00:31.560 --> 0:00:35.840 a record six point six million people filed for unemployment 0:00:35.880 --> 0:00:39.080 insurance in the last week, a record by far. While 0:00:39.120 --> 0:00:42.760 markets remain volatile, resiliency has remained, and that too as 0:00:42.840 --> 0:00:45.760 oil prices fell to the lowest since two thousand and one. 0:00:46.200 --> 0:00:48.239 You know, and Sarah, I feel like we jinxed it 0:00:48.440 --> 0:00:51.280 by having the Craziest Thing we Saw in Markets on 0:00:51.320 --> 0:00:53.800 this show, because now all of a sudden, we're almost 0:00:53.920 --> 0:00:55.960 year into the show, and I feel like everything in 0:00:56.040 --> 0:00:58.720 markets is crazy. It's it's all. We should have just 0:00:59.000 --> 0:01:01.760 named the podcast the Craziest Things we Saw in Markets 0:01:01.760 --> 0:01:04.040 this week, and then it could just be a general 0:01:04.080 --> 0:01:06.480 market recap. What do you think maybe we should have 0:01:06.560 --> 0:01:09.679 Although we also did get someone we officially launched the 0:01:09.680 --> 0:01:11.800 podcast with the name What Goes Up? They said, you know, 0:01:11.840 --> 0:01:15.840 you're just waiting for what goes down to happen to then, yeah, 0:01:15.840 --> 0:01:19.040 that might that might have by the jinxta too, Sarah, 0:01:19.120 --> 0:01:21.759 before we start talking about the markets and get into 0:01:21.959 --> 0:01:24.560 and introduced our guests, I'm curious what life is like 0:01:24.680 --> 0:01:28.399 for you. You've been quarantined there in Manhattan for the 0:01:28.480 --> 0:01:31.120 duration of this virus. I I stopped going into New 0:01:31.200 --> 0:01:34.800 York City round March twelve. I never thought i'd i'd 0:01:35.120 --> 0:01:39.960 ever missed that daily commute from New Jersey, but sure enough, Uh, strangely, 0:01:40.040 --> 0:01:41.640 I'm beginning to miss it. But I'm wondering. You know, 0:01:41.680 --> 0:01:44.360 we have listeners around the world on this podcast. I'm 0:01:44.400 --> 0:01:47.240 sure a lot of people are as curious as I 0:01:47.280 --> 0:01:50.080 am as far as what's just what's life like in 0:01:50.160 --> 0:01:54.680 Manhattan right now? In this situation. You know, it's really strange, 0:01:54.840 --> 0:01:58.440 especially for the city, and it's it's really quiet, which 0:01:58.440 --> 0:02:01.040 when you think of Manhattan obvious so you don't think quiet. 0:02:01.040 --> 0:02:02.400 But if I were to go to my window right 0:02:02.400 --> 0:02:05.360 now and just look outside, I likely wouldn't see a 0:02:05.440 --> 0:02:08.400 single soul. I mean, I try to get outside every 0:02:08.440 --> 0:02:10.840 now and then to go on walks, but keep my distance. 0:02:11.040 --> 0:02:12.880 But you can pretty much walk in the middle of 0:02:12.880 --> 0:02:16.200 the street. There's hardly any cars around, um, which is 0:02:16.360 --> 0:02:19.000 so strange to say. Usually you would see taxis, there'll 0:02:19.000 --> 0:02:20.960 be plenty of traffic. Now you're walking in the middle 0:02:21.000 --> 0:02:24.840 of the street to keep your six feet distance. But yeah, 0:02:24.919 --> 0:02:29.000 it's just there's an eerie feel. Especially it rained a 0:02:29.040 --> 0:02:31.760 lot this week, so it was particularly eerie because there 0:02:31.800 --> 0:02:34.480 was no one around and it was just gray and rainy. Um. 0:02:34.560 --> 0:02:36.920 But it's definitely strange. It doesn't it doesn't feel like 0:02:36.960 --> 0:02:39.880 the city. It's such a weird phenomenon. You have these 0:02:39.919 --> 0:02:43.639 markets in just this spasm of turmoil, and your New 0:02:43.680 --> 0:02:46.120 York City is quieter than it's ever been. It's just 0:02:46.320 --> 0:02:48.960 a very surreal experience all around. It's it's weird still 0:02:49.000 --> 0:02:53.239 being here. I can promise you that. Well, let's get 0:02:53.320 --> 0:02:55.960 right to the markets then, and UM happy to introduce 0:02:56.320 --> 0:02:58.399 a new guest, first time on the show. Her name 0:02:58.440 --> 0:03:03.760 is Diane Jaffee. She is a senior portfolio manager at TCW. Diane, 0:03:03.760 --> 0:03:06.800 welcome to the show. Thank you, grilled to be here. 0:03:07.120 --> 0:03:09.080 And I don't know where you're quarantining. Maybe you're in 0:03:09.080 --> 0:03:12.280 the city too or not anymore. I was there with 0:03:12.720 --> 0:03:18.400 Sarah for a while, but now we're in Thermon, Vermont. 0:03:18.440 --> 0:03:20.680 I think Vermont would be one of my top choices 0:03:20.760 --> 0:03:23.720 to uh to quarantine and get some fresh air and 0:03:24.320 --> 0:03:28.040 uh blue skies and everything. So good wise choice, social 0:03:28.080 --> 0:03:34.800 distance all the time in vermach nothing's changed. It comes natural, 0:03:34.880 --> 0:03:36.600 especially if you tell them you're from New Jersey. They 0:03:36.640 --> 0:03:40.280 keep their distance. I've I've learned in But Diane, let's 0:03:40.320 --> 0:03:43.360 talk about these crazy markets. Because I know you're a 0:03:43.480 --> 0:03:48.120 value focused investor. You your senior portfolio manager at tc W. 0:03:48.440 --> 0:03:51.720 You manage several funds or at least on the management 0:03:51.720 --> 0:03:55.560 committee of several um But I I gotta say I've 0:03:55.600 --> 0:03:57.320 been doing this for many years now. I won't tell 0:03:57.360 --> 0:03:59.280 everyone how many. I like to keep the illusion that 0:03:59.320 --> 0:04:02.040 I'm a young, hip her. But I don't think I've 0:04:02.080 --> 0:04:05.800 ever seen anything like this as far as just the 0:04:06.880 --> 0:04:11.400 complete unknowns about what the earnings outlook is, what the 0:04:11.560 --> 0:04:14.800 GDP outlook is? UH. And I know you focus a 0:04:14.840 --> 0:04:17.600 lot on dividends and dividend growth. What the you know 0:04:17.640 --> 0:04:19.839 where the stable dividends are going to come from? Who's 0:04:19.839 --> 0:04:21.760 going to cut their dividends? So I guess you know, 0:04:21.800 --> 0:04:23.880 to make a long question very short, like how do 0:04:23.920 --> 0:04:26.640 you do your job in this environment when there's so 0:04:26.640 --> 0:04:29.200 many unknowns. Well, Luckily, I have a great team of 0:04:29.240 --> 0:04:32.480 analysts who work with me. We have the largest internal 0:04:32.520 --> 0:04:35.760 research team on the equity side at TCW, with six 0:04:35.839 --> 0:04:39.960 dedicated analysts. And I'm proud to say that our strategies 0:04:39.960 --> 0:04:43.440 are going to hit their twenty five year GIFTS compliant 0:04:43.480 --> 0:04:48.440 track record this month of April. So um that you know. 0:04:48.480 --> 0:04:50.360 So we've been through a lot of cycles together. We've 0:04:50.400 --> 0:04:54.640 worked together for eight team years on average. But you're right, 0:04:55.000 --> 0:04:58.080 this is different. This is a pandemic and um, and 0:04:58.120 --> 0:05:00.360 you can get bits and pieces of inform Asian if 0:05:00.400 --> 0:05:03.279 you go to Stars back in two thousand and three 0:05:03.360 --> 0:05:06.440 or a bowla and two thousand and eighteen. But um, 0:05:06.640 --> 0:05:10.400 really we haven't seen anything like this for over a 0:05:10.480 --> 0:05:15.160 hundred years back to night. It really is unbelievable. And 0:05:15.440 --> 0:05:17.680 you shared a timeline with us in the notes, and 0:05:18.160 --> 0:05:21.120 I thought it was really great. It's a stylized timeline, 0:05:21.120 --> 0:05:23.520 and essentially what you did was you lay out the 0:05:23.560 --> 0:05:27.919 months and you lay out at different areas of where 0:05:27.960 --> 0:05:30.240 we have passed and what we are looking forward to, 0:05:30.400 --> 0:05:32.360 so as what we have passed or in the midst 0:05:32.440 --> 0:05:36.559 of some are consumer panic and social distancing, US cases, Peak, 0:05:36.720 --> 0:05:40.160 policymakers Act, which have all happened. Now where you say 0:05:40.200 --> 0:05:43.120 the next test of the market is that's earnings downgrades 0:05:43.200 --> 0:05:46.720 because even when we look at bottoms up analysts estimates, 0:05:46.720 --> 0:05:49.400 they haven't really haven't been able to keep up. Right now, 0:05:49.600 --> 0:05:54.000 they're only estimating pretty much a modest decline in earnings 0:05:54.120 --> 0:05:57.400 for the year. I mean, what are you guys expecting 0:05:57.839 --> 0:06:00.760 once we potentially do see the is flowing in or 0:06:00.800 --> 0:06:03.080 once earning season does start in a few weeks, what 0:06:03.120 --> 0:06:05.400 do you expect and how do you expect the market 0:06:05.440 --> 0:06:10.040 to take that? Yeah, I think there will definitely be 0:06:10.080 --> 0:06:12.160 a real test of the market bottom we saw in 0:06:12.600 --> 0:06:15.760 the last week of March. I'd like to source a 0:06:15.800 --> 0:06:19.240 fund Strett. You know, they provided that graphic, which is 0:06:19.320 --> 0:06:21.880 great and I think it does help give a realistic 0:06:21.920 --> 0:06:25.320 picture within days or weeks of what we can anticipate. 0:06:25.360 --> 0:06:28.479 But earning season, we'll start with the big banks. They're 0:06:28.520 --> 0:06:31.760 on the front lines of this and um and it 0:06:31.800 --> 0:06:34.839 gives me a lot of comfort just to know that 0:06:35.240 --> 0:06:39.359 this economic backbone of the economy is really in a 0:06:39.400 --> 0:06:41.960 good place right now, you know, much different than it 0:06:42.120 --> 0:06:45.880 was in two thousand and eight, we've been stress tests, 0:06:46.200 --> 0:06:49.360 we've been steacard, we've been defast and so they're they're 0:06:49.400 --> 0:06:51.440 really going to be the front lines here in terms 0:06:51.480 --> 0:06:54.640 of the conduit for the Treasury and the Fed to 0:06:54.760 --> 0:06:57.640 reach out to businesses, to reach out to lenders, to 0:06:57.760 --> 0:07:00.440 reach out to borrowers, um, and so it will be 0:07:00.560 --> 0:07:03.800 very telling what the banks say. Where do dividends and 0:07:03.839 --> 0:07:08.000 by backs typically fit into your investment process? Goldman Sacks 0:07:08.000 --> 0:07:10.640 had an analysis out saying that already this year we've 0:07:10.640 --> 0:07:12.880 seen roughly a quarter of the amount of by bucks 0:07:12.960 --> 0:07:16.120 we saw last year already pulled by companies. I mean, 0:07:16.840 --> 0:07:19.400 is this disheartening to you, guys, or do you feel 0:07:19.440 --> 0:07:23.760 as though that's okay? Because companies have to allocate cash 0:07:23.960 --> 0:07:26.400 where necessary at this point in time, or maybe keep 0:07:26.400 --> 0:07:30.920 more cash on their balance sheets. I think, um that 0:07:31.200 --> 0:07:34.200 I'm a big fan of dividends because it not only 0:07:34.480 --> 0:07:38.360 says that the there's good stewardship by the management teams 0:07:38.360 --> 0:07:41.440 of those companies saying, Okay, we've already fulfilled what we 0:07:41.480 --> 0:07:44.960 need to do for capex or you growth opportunities, and 0:07:45.000 --> 0:07:49.120 so we're returning cash to our shareholders in the form 0:07:49.160 --> 0:07:53.640 of dividends, and no entity likes to cut or suspend dividends, 0:07:53.720 --> 0:07:56.400 so they have to think long and hard. In fact, 0:07:57.520 --> 0:08:02.440 said the other day that you know, even before the coronavirus, 0:08:02.600 --> 0:08:06.160 they were contemplating any kind of black swan event to 0:08:06.240 --> 0:08:09.480 make sure that those dividends were safe. So, for US, 0:08:09.680 --> 0:08:13.000 dividends are one of our five valuation factors. We look 0:08:13.040 --> 0:08:16.400 at price to book, price to cash flow, price to sales, 0:08:16.440 --> 0:08:20.320 price to earnings ratio, and dividend yields, and we particularly 0:08:20.360 --> 0:08:24.640 like it when those dividends can grow over time. UM 0:08:24.760 --> 0:08:28.800 So buy backs, you know, I think you have to 0:08:28.840 --> 0:08:32.000 be very careful with them because you know, all those 0:08:32.000 --> 0:08:36.760 buybacks companies made last year or in January February this year, 0:08:36.760 --> 0:08:41.760 it looked pretty poor investments. And I don't want of 0:08:41.800 --> 0:08:45.720 the strategies at TCW is a dividend appreciation fund. And 0:08:45.760 --> 0:08:49.479 I just have to assume that the universe of companies 0:08:49.600 --> 0:08:52.040 that are going to be able to increase their dividends, 0:08:52.320 --> 0:08:55.440 uh this year, maybe even next year, just it's call 0:08:55.480 --> 0:08:58.680 it the near future. It must be a very swiftly 0:08:58.800 --> 0:09:02.840 shrinking universe. I mean, where could one possibly look for 0:09:03.160 --> 0:09:06.600 sort of a dividend aristocrat in this scenario, a company 0:09:06.600 --> 0:09:08.840 that is able going to have the strength to be 0:09:08.880 --> 0:09:11.880 able to increase its dividend. I mean, am I right? 0:09:11.960 --> 0:09:14.960 That that's that's almost a very much a dying breed 0:09:15.040 --> 0:09:19.040 right now right there. Definitely know IBM right has famous 0:09:19.080 --> 0:09:24.080 stalwart provider of dividends. That's a big holding for us UM. 0:09:24.120 --> 0:09:27.320 You know, our goal is to give our clients a 0:09:27.360 --> 0:09:31.920 diversified value portfolio that has capital return plus dividend appreciation. 0:09:32.679 --> 0:09:36.280 So uh, right now are yields in the dividend appreciation 0:09:36.840 --> 0:09:40.160 they're higher than SMP and the Russell one thousand value. 0:09:40.800 --> 0:09:44.480 We do have to be super careful about UM finding 0:09:44.480 --> 0:09:48.640 the companies that can. Definitely, Chevron won't increase its dividend, 0:09:48.800 --> 0:09:51.679 right They've already said that, but they're doing everything to 0:09:51.760 --> 0:09:56.600 preserve their dividend and UM and that's important to us 0:09:56.640 --> 0:10:00.120 that they've been disciplined for the last five years or 0:10:00.160 --> 0:10:03.000 so that when we do have a pandemic, they are 0:10:03.040 --> 0:10:07.080 able to continue to provide their shareholders with their dividends. 0:10:07.120 --> 0:10:11.120 So dividends sanctity as well as the appreciation is going 0:10:11.200 --> 0:10:14.280 to matter now going forward. Earlier on in the show, Diane, 0:10:14.320 --> 0:10:16.600 you said that you believe that what we would likely 0:10:16.640 --> 0:10:19.800 retest the lows that we saw back in March in 0:10:20.240 --> 0:10:23.160 the market. And I bring this up because you guys 0:10:23.200 --> 0:10:26.960 are in a survey and in the survey, seventy of 0:10:27.040 --> 0:10:30.000 respondent said that they believe that what we're seeing now 0:10:30.160 --> 0:10:32.319 and what we saw particularly last week is a bear 0:10:32.400 --> 0:10:35.960 market rally and will likely retest the lows. Why are 0:10:36.480 --> 0:10:38.800 you so sure or why do you believe that we 0:10:38.840 --> 0:10:40.760 will retest the lows? And why do you think so 0:10:40.800 --> 0:10:45.880 many people out there believe the same as well. It's 0:10:45.960 --> 0:10:48.440 like Warren Buffett said that when the tide goes out, 0:10:48.480 --> 0:10:52.240 you can see who's wearing their bathing suits. And that's 0:10:52.240 --> 0:10:54.520 what's going to happen with earning suitis right? You know? 0:10:54.640 --> 0:10:58.680 You might think this company that you own, um, you know, 0:10:58.720 --> 0:11:02.240 has the balance sheet and income statement to uh persevere 0:11:02.240 --> 0:11:05.560 through this environment, and then reality hits like a pie 0:11:05.679 --> 0:11:10.440 of face. So um, that's why earning season will be 0:11:10.559 --> 0:11:13.880 so super important because while we won't have a full quarter, 0:11:14.000 --> 0:11:17.360 test will have um, you know, the latter half of 0:11:17.480 --> 0:11:22.200 March for fiscal year quarterly earnings report, but we certainly 0:11:22.240 --> 0:11:29.160 will start to hear company guidance and and I think 0:11:29.240 --> 0:11:48.400 that's when reality will hit. Yeah, diet, I wanted to 0:11:48.400 --> 0:11:51.559 bring up a good question from a listener on Twitter, 0:11:52.000 --> 0:11:55.480 UH and see what your thoughts are. His handle is 0:11:55.600 --> 0:11:59.920 at j y Squall, and he said, I'm watching for 0:12:00.080 --> 0:12:02.920 this week's episode to understand how can the market be 0:12:03.120 --> 0:12:07.120 up when the jobless claims are skyrocketing? Now, specifically, I 0:12:07.120 --> 0:12:09.280 think I can answer his question for that day. He 0:12:09.280 --> 0:12:12.959 he wrote to us on Thursday, when President Trump had 0:12:12.960 --> 0:12:17.200 tweeted about his hopes for Saudi Arabia and Russia to 0:12:18.000 --> 0:12:21.240 UH cut oil production to to bolster that market. And 0:12:21.280 --> 0:12:23.200 I think that was a big part of that bounce 0:12:23.320 --> 0:12:25.679 that day. It's sort of faded as the day went on, 0:12:25.720 --> 0:12:28.360 as people realized maybe this was a little bit of 0:12:28.400 --> 0:12:31.720 wishful thinking on the presence part. But in the bigger 0:12:31.720 --> 0:12:34.360 scheme of things, you know, we you see these ferocious 0:12:34.400 --> 0:12:36.719 rebounds in the middle of bear markets like we saw 0:12:36.760 --> 0:12:39.640 in fact, you know, the Dow was technically in a 0:12:39.800 --> 0:12:42.120 in a bull market that, like like Sarah wrote about, 0:12:42.160 --> 0:12:45.240 up off its lows. I'm just trying to figure out 0:12:45.320 --> 0:12:48.600 if you have any sense of who does the buying 0:12:48.880 --> 0:12:51.360 at that point. I mean to me, it's almost as 0:12:51.400 --> 0:12:55.440 if traders understand sort of the playbook for a bear market, 0:12:55.559 --> 0:12:59.160 that you get these huge bounces in the middle of 0:12:59.160 --> 0:13:02.480 a market that is in the longer term trending downward. 0:13:02.760 --> 0:13:04.319 I mean, do you think it's as simple as that, 0:13:04.440 --> 0:13:07.640 sort of these fast twitch traders that that sort of 0:13:07.640 --> 0:13:11.040 take command of the market at times like this when 0:13:11.120 --> 0:13:14.640 real fundamental investors may be still on the sidelines more 0:13:14.720 --> 0:13:17.439 or less, there is a lot of cash on the sidelines. 0:13:17.520 --> 0:13:23.280 Still surprising to me actually, um, considering how long and 0:13:23.360 --> 0:13:25.680 far the school market was. But you know, everyone likes 0:13:25.679 --> 0:13:27.600 to look in the rear view mirror in two thousand 0:13:27.640 --> 0:13:29.760 and eight, two thousand and nine were so horrible that 0:13:29.800 --> 0:13:33.040 a lot of people kept cash on the sidelines. What's 0:13:33.600 --> 0:13:38.679 um making it very difficult for investors in the in 0:13:38.720 --> 0:13:41.120 the here and now is that for the last thirty 0:13:41.160 --> 0:13:45.120 days or so, the stock moves have been plus or 0:13:45.160 --> 0:13:49.720 minus five percent. That's on heard of. That's an unprecedented 0:13:50.120 --> 0:13:54.080 type of alatility. We're a big believer in dollar cost averaging. Uh. 0:13:54.240 --> 0:13:57.360 If we have found great opportunities in the market because 0:13:57.400 --> 0:14:00.319 of this set off, and you think the catalysts there 0:14:00.360 --> 0:14:03.200 for the future, we wouldn't go full out and buy 0:14:03.360 --> 0:14:07.840 the biggest position UM we would normally hold in the portfolio. 0:14:08.040 --> 0:14:10.720 I think this is a really good strategy for all investors. 0:14:11.080 --> 0:14:15.880 You know, leg into the position, um, because tomorrow maybe 0:14:15.880 --> 0:14:18.640 down or tomorrow might be up. So UM, i'd like 0:14:18.679 --> 0:14:22.240 to I'd like to offer that really time tested advice. 0:14:22.800 --> 0:14:27.800 And UM, yeah, this is once we once we there 0:14:27.840 --> 0:14:32.440 are two hundred and sixties seven drugs in trial right now, 0:14:33.000 --> 0:14:38.200 whether to ameliorate or be a potential vaccine for the coronavirus. 0:14:38.240 --> 0:14:41.200 Something is going to work. You know, they're they're making 0:14:41.240 --> 0:14:46.240 do with antibiotics or old malaria UM drugs that are 0:14:46.240 --> 0:14:48.400 on the shelf that they're trying to dust off. But 0:14:48.440 --> 0:14:52.040 we're going to find something. And this volatility is because 0:14:52.440 --> 0:14:58.440 people just don't now and we do need some some 0:14:58.720 --> 0:15:03.720 hope and resolution in terms of the disease to help 0:15:03.840 --> 0:15:06.680 us look forward for the longer term. But I will say, 0:15:06.720 --> 0:15:09.240 in terms of your comment about you know, how could 0:15:09.280 --> 0:15:13.840 the market be up when John was claims are so high. 0:15:13.880 --> 0:15:18.280 The market is an anticipatory animal and we like to 0:15:19.000 --> 0:15:22.800 look forward. UM. I don't think anybody thinks this is 0:15:22.840 --> 0:15:25.720 going to be the peak in the job was claims 0:15:26.040 --> 0:15:31.320 Um but the markets will advance, uh when they can 0:15:31.360 --> 0:15:34.800 see beyond that, and that's super important. Over the next 0:15:34.840 --> 0:15:37.760 six to twelve months. Investors are looking at far out. 0:15:38.440 --> 0:15:40.880 So you mentioned dollar cost averaging, so you can spread 0:15:40.880 --> 0:15:45.200 it out. But of course timing the market is virtually impossible, 0:15:45.400 --> 0:15:49.480 even for some of the biggest professionals out there, but 0:15:49.600 --> 0:15:53.400 for those who are dying to try to figure out 0:15:53.600 --> 0:15:56.120 if the bottom has passed, when one is best to 0:15:56.120 --> 0:15:59.680 get in. Is it typically better to be earlier or 0:15:59.800 --> 0:16:02.880 is it typically better to be late and be sure 0:16:03.080 --> 0:16:05.280 at least that we're headed on the way up and 0:16:05.600 --> 0:16:08.760 things are ameliorating or getting better. That is the age 0:16:08.760 --> 0:16:12.840 old question. I have so many clients who who who 0:16:12.840 --> 0:16:15.920 think you know exactly you know? Should I be earlier? 0:16:16.040 --> 0:16:18.400 Should I wake till everything is good? And what happens 0:16:18.520 --> 0:16:21.240 is if you wait till everything is great, then you're 0:16:21.280 --> 0:16:26.680 afraid to invest because you think he's peaked. So you 0:16:26.720 --> 0:16:30.120 know value you know, and particularly are so we do 0:16:30.240 --> 0:16:33.680 tend to be early. But I do, like, I really 0:16:33.680 --> 0:16:38.760 do love the idea of dollar cost averaging in that's amazing. 0:16:38.800 --> 0:16:41.960 You said two hundred and sixties. Some drugs are in 0:16:42.080 --> 0:16:46.920 trial right now for something either too as a vaccine. 0:16:46.920 --> 0:16:51.600 I guess we were to treat the symptoms of the virus. 0:16:52.840 --> 0:16:56.520 It's amazing, isn't it brings me? Brings me uh to 0:16:56.920 --> 0:17:01.600 uh point you made in this note uh opportunistic realization 0:17:01.640 --> 0:17:05.040 of profits uh meaning you know, selling your your winners 0:17:05.080 --> 0:17:07.240 when they've when they've may be gone a little too 0:17:07.280 --> 0:17:09.600 far where you've at least you know, been able to 0:17:09.680 --> 0:17:12.480 ride them a long time. And you you mentioned Jilliad, 0:17:12.800 --> 0:17:15.960 the stock appreciated because of its has this army of 0:17:16.440 --> 0:17:19.840 anti viral medications uh potentially to use in the fighting 0:17:19.880 --> 0:17:23.919 assist fires. I've noticed. I mean, it seems like there's 0:17:24.040 --> 0:17:28.480 been in the midst of all this panic selling, there's 0:17:28.520 --> 0:17:32.040 been almost um an irrational exuberance towards some of these 0:17:32.119 --> 0:17:36.359 drug stocks. You know, I remember the Maderna Pharmaceuticals, very small, 0:17:36.600 --> 0:17:40.959 uh drug developer. Is that part of it with with 0:17:41.000 --> 0:17:43.880 why you you may have trimmed some of the Giliad steak? 0:17:44.000 --> 0:17:46.919 Is it? Are people just getting a little too excited 0:17:46.920 --> 0:17:49.440 about some of these drug makers? Do you think, well, 0:17:49.760 --> 0:17:53.639 we still like the valuation of Gilead and um and 0:17:53.720 --> 0:17:56.400 you do you know, I'd like to think that investors 0:17:56.400 --> 0:17:59.639 when looking for companies that might be winners here in 0:17:59.720 --> 0:18:03.800 the event against COVID nineteen. When they saw that gilly 0:18:03.840 --> 0:18:05.480 I could be one of the winners and then looked 0:18:05.480 --> 0:18:09.640 at their batton sheet and their cash flow statement said oh, well, 0:18:09.720 --> 0:18:13.720 that's a juicy dividend that I can feel quite confident about. That. 0:18:13.840 --> 0:18:16.679 It was a key prompt thought process for them in 0:18:16.800 --> 0:18:20.919 terms of um, Gillia as a stock in the portfolio. Um, 0:18:21.359 --> 0:18:24.080 but it did run up a little bit. And um 0:18:24.160 --> 0:18:26.879 and while they do have an army avantiid their old drugs, 0:18:26.880 --> 0:18:29.520 and that's you know, one of them, for example, help 0:18:29.600 --> 0:18:34.040 cure help, see right, help, it's helping to eradicated, which 0:18:34.080 --> 0:18:37.440 is amazing. Um. You know, we did get a little 0:18:37.440 --> 0:18:41.119 worried that if there were too many hopes pinned from Disappear, 0:18:41.320 --> 0:18:44.040 which is the one that is being tested in China 0:18:44.280 --> 0:18:47.240 and in the US right now, that there might be 0:18:47.880 --> 0:18:50.399 a near term self. And one of our disciplines is 0:18:50.520 --> 0:18:54.840 if stock appreciates above five per cent in the portfolio, 0:18:54.960 --> 0:18:57.480 we're automatically going to scale it back because we don't 0:18:57.520 --> 0:19:02.199 want any name to be too big. That's interesting, So 0:19:02.280 --> 0:19:04.960 yet you have a five percent cap on on any 0:19:04.960 --> 0:19:09.080 single holding in the portfolio. Yeah, it's just it's proven 0:19:09.119 --> 0:19:12.840 to be a good one. Yeah. Well, Mike, some would 0:19:12.880 --> 0:19:15.080 say that certainly, as you alluded to that some of 0:19:15.080 --> 0:19:17.880 these moves in the healthcare names are or have been 0:19:18.359 --> 0:19:20.720 a bit crazy. So you know what time it is, then, 0:19:22.840 --> 0:19:26.240 I guess it's that time. Um, Sarah, we got a 0:19:26.280 --> 0:19:30.959 great uh call over the podcast hotline. For once in 0:19:31.000 --> 0:19:33.960 my life, I have the number handy, so I'll take 0:19:33.960 --> 0:19:36.640 the pressure off of you the only time, Mike. This 0:19:36.720 --> 0:19:39.119 is the only time I haven't never had. So the 0:19:39.200 --> 0:19:44.280 number is six four six three to four three four nine. Oh. 0:19:44.359 --> 0:19:46.760 So please, if you saw something crazy in the markets, 0:19:46.760 --> 0:19:49.720 give us a call, leave us a voicemail and maybe 0:19:49.720 --> 0:19:52.320 we'll play your voicemail on the show. And if you 0:19:52.320 --> 0:19:55.440 have any other comments, Uh, we're happy to be very 0:19:55.440 --> 0:19:57.440 happy to hear from you. But we got a call 0:19:57.520 --> 0:20:00.600 all the way from Hong Kong a listener named Gerald, 0:20:00.760 --> 0:20:03.240 So let's listen to what he had to say. Hi, 0:20:03.640 --> 0:20:05.879 I'm going to cheat just a little bit, you know, 0:20:06.040 --> 0:20:11.680 like Mike. First, what I saw was a webcast from 0:20:11.800 --> 0:20:15.639 a Tree Capital. In it, their co founder Howard Marks 0:20:15.880 --> 0:20:18.920 mentioned a memo he wrote twenty years ago with a 0:20:19.080 --> 0:20:23.720 quote that says you cannot predict the nixt recession or 0:20:23.760 --> 0:20:27.720 the next market sell off, but you can prepare for it, 0:20:28.320 --> 0:20:32.000 so for a wisdom as usual. Then the crazy part 0:20:32.119 --> 0:20:36.400 hits me. Just three months ago, when fund managers were 0:20:36.400 --> 0:20:42.119 making theasts. How many times have you heard some very smart, 0:20:42.480 --> 0:20:47.960 very respectable managers say that although the market is richly valued, 0:20:48.280 --> 0:20:52.159 they could see absolutely no reason for a recession in 0:20:52.240 --> 0:20:55.800 the next six to twelve months. I may have heard 0:20:55.840 --> 0:21:00.160 this a dozen times on various podcasts, and I at 0:21:00.320 --> 0:21:03.560 every time there was no argument from me. These are 0:21:03.600 --> 0:21:07.639 smart and successful investment professionals. But that was just three 0:21:07.680 --> 0:21:11.359 months ago. It is crazy how things can change on 0:21:11.440 --> 0:21:16.000 a dime like that. How far in the future can 0:21:16.040 --> 0:21:20.240 we really see? Yeah, I think he makes a great point. 0:21:20.680 --> 0:21:24.120 You think of all those look ahead uh forecast pieces 0:21:24.160 --> 0:21:27.240 that people spent countless hours on and you know about 0:21:27.240 --> 0:21:29.000 a month end of the year, they're all sort of 0:21:29.080 --> 0:21:31.439 null and void. What do you take exception, Sarah with 0:21:31.520 --> 0:21:33.760 him saying I cheat a little bit. I thought you 0:21:33.800 --> 0:21:35.359 were going to say, that's what you agreed with. He 0:21:35.440 --> 0:21:38.000 was calling you out. But it does remind me of 0:21:38.040 --> 0:21:39.800 one line, I won't I won't call the shop out. 0:21:39.800 --> 0:21:41.840 But there was one line I read earlier this year 0:21:41.920 --> 0:21:43.720 that said, maybe the best reason to be bullish is 0:21:43.760 --> 0:21:45.879 the fact that there's no reason to be bearished. And 0:21:45.880 --> 0:21:49.639 then you have all of this evolve and it just 0:21:49.720 --> 0:21:53.080 goes to show really it's nothing anyone could have predicted, 0:21:54.359 --> 0:21:57.280 right right, Yeah, Diane, I'm wondering how you handle something 0:21:57.359 --> 0:21:59.120 like that. I mean, it feels like not so long ago, 0:21:59.240 --> 0:22:02.879 everyone had to be a European political science expert to 0:22:02.960 --> 0:22:05.320 get through the debt crisis, you know. Then we were 0:22:05.359 --> 0:22:10.760 all became sort of oil field experts and credit oil 0:22:10.800 --> 0:22:15.919 credit experts, and then Iranian experts and US trying to 0:22:15.960 --> 0:22:20.159 trade experts. But I gotta say having to become a 0:22:20.160 --> 0:22:24.560 an expert on viruses is something new. Was It must 0:22:24.600 --> 0:22:27.600 get overwhelming as a fund manager to try to have 0:22:27.680 --> 0:22:30.560 to react to crisis after crisis like this, especially when 0:22:30.560 --> 0:22:32.600 so many of them turned out to be sort of 0:22:32.640 --> 0:22:35.360 false alarms, and then all of a sudden you get 0:22:35.440 --> 0:22:37.639 hit by something like this. I mean, is this this 0:22:37.720 --> 0:22:41.560 must have been one of the more stressful episodes of 0:22:41.600 --> 0:22:44.879 your career. I would imagine, Well, I care deeply about 0:22:44.920 --> 0:22:48.280 our clients and my most important job and we have 0:22:48.359 --> 0:22:51.080 a lot of dear friends in Hong Kong. My most 0:22:51.119 --> 0:22:53.359 important job is really to hold their hands during this 0:22:53.560 --> 0:22:57.520 time and say, you know, let's you know, we're going 0:22:57.560 --> 0:23:01.360 to be vigilant here. We're coming through the portfolio. We're 0:23:01.359 --> 0:23:04.440 doing it for you. We're going to lead out the 0:23:04.760 --> 0:23:07.680 names that should be leaded out in mature. We're investing 0:23:07.680 --> 0:23:10.359 in the ones that will prosper for you and have 0:23:10.480 --> 0:23:13.919 power for you and your portfolio going forward. So that 0:23:15.000 --> 0:23:19.760 surprisingly um comes to be called upon more often than not, 0:23:20.240 --> 0:23:22.280 the job of saying this is our job, this is 0:23:22.320 --> 0:23:24.240 what we love to do, and we love to take 0:23:24.280 --> 0:23:27.040