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Speaker 1: This is a Bloomberg Business Flash from Bloomberg World Handquarters.
Speaker 1: I'm Charlie Pellet. Stalks are lower with the SMP five
Speaker 1: hundred index down two points now at two thousand and
Speaker 1: eighty six. To drop there one tenth of one percent.
Speaker 1: Navastank is down eight to thirty five, a drop of
Speaker 1: two tenths of one percent. Down in dust wheels down
Speaker 1: forty five, a drop of three tenths of one percent.
Speaker 1: The tenure of eight thirty seconds that yield one point
Speaker 1: six seven percent. Gold down five dollars the ounce to
Speaker 1: twelve sixty seven to drop there are four tenths of
Speaker 1: one percent, and crude oil is down one and a
Speaker 1: half percent, down seventy four cents of arral right now
Speaker 1: West Texas Intermediate at forty nine dollars and eleven cents.
Speaker 1: I'm Charlie Pellott. That's a Bloomberg Business Flash, Charlie Pellot,
Speaker 1: thank you so very much. Time now for the et
Speaker 1: F Report, brought to you by National Realty Providers of
Speaker 1: one percent satisfaction guaranteed new York City Realty Investments. See
Speaker 1: them at n r I a dot net. Let's turn
Speaker 1: out to our own, Catherine Cowdery. The Obama administration is
Speaker 1: opening US guys to more commercial drones with a long
Speaker 1: awaited regulations. The new rules are designed to allow routine
Speaker 1: use of small drones by real estate agents, farmers, filmmakers,
Speaker 1: and countless other commercial operators. One of the thematic ets
Speaker 1: has launched this year focuses on drones. Andrew chain In,
Speaker 1: chief executive of Pure Funds, on why his firm launched
Speaker 1: the I fly e t F. Drones is something that's
Speaker 1: They've been around, but now their uses are expanding rapidly
Speaker 1: due to technology and realization that they can be used
Speaker 1: for agriculture, to fight diseases, UH, for medical um UH
Speaker 1: for for dropping on medical supplies and remote areas. These
Speaker 1: are things that the uses as technology increases, will be
Speaker 1: much more prevalent in our society. The Pure Funds Drone
Speaker 1: Economy Strategy e t F has two point six million
Speaker 1: dollars in total assets and an expense ratio of seventy five.
Speaker 1: Based his points, it's top holdings include Parrot Air, Environment, Bowing,
Speaker 1: and go Pro. It's gained four point nine percent over
Speaker 1: the past month. That's your Bloomberg ETF report. I'm Catherine Cowdery.
Speaker 1: This is taking Stock with pim Box and Kathleen Hayes
Speaker 1: on Bloomberg Radio. Negative interest rates in the credit markets.
Speaker 1: US Treasury the ten year yielding one pan six seven percent,
Speaker 1: the thirty years under two and a half percent. What
Speaker 1: to do with your money? John Manley is the chief
Speaker 1: equity strategist at Wells Fargo Funds Management, helping to manage
Speaker 1: two hundred and forty five billion dollars, and he joins
Speaker 1: us here in the studio. John, thank you very much
Speaker 1: for coming in. Thank you for having me. All right,
Speaker 1: equity strategist. You're getting a lot of calls from people saying,
Speaker 1: I can't live on my bond income. Can you help
Speaker 1: me out with some equities? Yeah? Absolutely, It's been going
Speaker 1: on for a while. And what else are you gonna do?
Speaker 1: I think it's it's the worst form of investment except
Speaker 1: for all the others. When it comes to yield, and
Speaker 1: I think you can they'll buy pretty good, actually pretty
Speaker 1: high quality companies with a decent yield and some chance
Speaker 1: for appreciation and diving an increase in the future. So
Speaker 1: it's not bad. So I remember, was it year to
Speaker 1: all classes? In my head? But you know, a year
Speaker 1: and a half ago, I guess dividend payers, dividend pays,
Speaker 1: dividend pairs. So everybody jumped in, you know what I mean.
Speaker 1: And and so now some people would say it's still
Speaker 1: a good strategy, but maybe it's just a little more
Speaker 1: expensive to get in. Well, I think, you know, there
Speaker 1: are other fish to fry too. I think one of
Speaker 1: the things that's happened for the last two years that's
Speaker 1: so amazing to me is that neither stocks nor earnings
Speaker 1: expectations have gone anywhere in the U S. And I
Speaker 1: think that's helped the big companies as well as the
Speaker 1: yield play. I think earnings are starting to lift off
Speaker 1: a little bit, and if that happens, I think you
Speaker 1: could see more outperformance in the MidCap sector. So I'm
Speaker 1: sort of agnostic when it comes to this sort of thing.
Speaker 1: I still think for myself being an aging baby when
Speaker 1: we're you know, large caps are not a bad place
Speaker 1: to be aging. You're not aging, John Manley, I'm aged. Actually,
Speaker 1: all right, thanks thanks for setting us straight here, all right.
Speaker 1: So in that con text, though, is there a change
Speaker 1: in the way people view their investments. And the reason
Speaker 1: I ask you, I want to get to the idea
Speaker 1: of liquidity because at times of crisis or chaos, liquidity
Speaker 1: is at a premium, but you don't know you you
Speaker 1: should have bought it previously, right, Yeah, it's but I
Speaker 1: like liquidity. I'm not so sure at real crisis moments
Speaker 1: it matters because if everybody's heading for the door, I
Speaker 1: don't know if you can make a door big enough.
Speaker 1: You've got to be outside for its work. But I
Speaker 1: think most times, one of the things that I like
Speaker 1: about stock markets in mid to large cap stocks is
Speaker 1: you can be wrong and change your mind and get out.
Speaker 1: And I think that's incredibly important. The idea of being
Speaker 1: locked into an investment when you know it's gone bad
Speaker 1: must be a sickening feeling. Yeah, for thirty years, let's
Speaker 1: say you lend your money to the US government for
Speaker 1: thirty years or two and a half percent, you've got
Speaker 1: to find someone else. If rates go higher, you've got
Speaker 1: to find someone else that will take that off your hands. Well,
Speaker 1: you probably will find some much. It depends how much
Speaker 1: you have to cut the price for them to come
Speaker 1: on board and so I think, you know, I think
Speaker 1: one of the things about midcaps that we're finding sort
Speaker 1: of interesting right now is they're sort of the honors
Speaker 1: class of small caps, that they have some of the
Speaker 1: inefficiency of small caps, but they also have some of
Speaker 1: the liquidity of large caps. And I think that's that
Speaker 1: might be that that might not be a bad combination.
Speaker 1: Off earnings start to do better. So what is the
Speaker 1: likelihood of earnings doing better? Well, they're starting to lift
Speaker 1: off a little bit. First of all, I don't believe
Speaker 1: the theory that they can't go higher. I know profitability
Speaker 1: levels are very high, but that's happened without a surge
Speaker 1: in the economy. Usually when the economy gets better, when
Speaker 1: the economy starts to be a bit more robust here
Speaker 1: and around the world, earnings pick up. I think that happens.
Speaker 1: I just think we come from higher levels this time
Speaker 1: because other things that are more secular nature of boosted profits,
Speaker 1: of profitability. So I think it can happen. All right,
Speaker 1: So you talk about MidCap companies, how do you define
Speaker 1: MidCap these? You know, it's I I never am good
Speaker 1: with numbers, so I'll sort of dodge your question as best.
Speaker 1: I think the wrong business. I'm the intuitive type. You
Speaker 1: know what. Sometimes they think numbers give you a false
Speaker 1: sense of accuracy. I think they're smaller than bigger, they're
Speaker 1: bigger than small and uh, they sort of fit somewhere
Speaker 1: in the middle. So I don't have an absolute number.
Speaker 1: So this is not a mid cap. This is well,
Speaker 1: if you are are not wealthy, or if you are wealthy,
Speaker 1: what about diversification? If you if someone comes to you
Speaker 1: with ten million dollars or five hundred thousand dollars, even
Speaker 1: a hundred thousand dollars and not so much. Older people
Speaker 1: do this, but younger people, I mean, how how would
Speaker 1: you tell them to diversify? Would you put ten percent
Speaker 1: in emerging markets and in equities? And if so, what kind?
Speaker 1: I'm just curious when you look at the money you're
Speaker 1: the portfolios you're managing, the people you're advising, how do
Speaker 1: you figure that out? Well, I mean it depends on them.
Speaker 1: They sort of have to answer the questions themselves. How
Speaker 1: much risk coolerant do they have? How much they how
Speaker 1: about if they want to make as much money as
Speaker 1: they can and not lose any Well, okay, I think
Speaker 1: I might buy them dinner and talk about it over that.
Speaker 1: I you know, obviously those those are predict regalship. You
Speaker 1: have to take risk to make money, and I think
Speaker 1: it's a question of balancing. I right now I would
Speaker 1: be overweight equities, probably with a tilt towards MidCap and
Speaker 1: outside the US, I mean, probably with a tilt towards Europe,
Speaker 1: because I think Big Europe is getting better. Uh. And
Speaker 1: I have to own some emerging markets. I do in
Speaker 1: my own account because I feel there's too much potential there.
Speaker 1: If there is such a thing as a compelling value,
Speaker 1: I think emerging markets are compelling value. But you don't
Speaker 1: get compelled right away necessarily. And John, I wonder if
Speaker 1: you could comment on the notion that more and more
Speaker 1: of the stock trading that goes on, the prices that
Speaker 1: we see are influenced by high frequency trading and by
Speaker 1: daily moves in and out. That's a very different kind
Speaker 1: of world than investing your money. That certainly is, and
Speaker 1: it's not a world that I understand very well or
Speaker 1: that I want to participate. I understand it, but I
Speaker 1: don't necessarily want to participate. And I sort of figured
Speaker 1: that these these trading operations create opportunities for people who
Speaker 1: are investors, and it requires you have a strong stomach
Speaker 1: and a sense that you have an idea of what's
Speaker 1: really going on. So how do I want to describe it?
Speaker 1: I think to a degree that the high frequency trading
Speaker 1: may put a little vibration in the market from time
Speaker 1: to time. I don't think at the end of the
Speaker 1: week or the end of the month, and certainly not
Speaker 1: at the end of the year, it's gonna make any
Speaker 1: difference to the way I want to invest my money.
Speaker 1: Though uncertainty Jane Allen is uncertainty, uh to the to
Speaker 1: a maximum degree. She's uncertain enough to say, you know,
Speaker 1: will maybe raise rates this year. I think we will,
Speaker 1: because I think the economy will pick up. But hey,
Speaker 1: I I can't tell you. I just see the signs
Speaker 1: that it could and should, but I've seen signs that
Speaker 1: it might take longer. Well, you know, I think they
Speaker 1: call her data dependent or the FED is data dependent.
Speaker 1: I think that's wonderful. I'm data dependent. When I get
Speaker 1: an airplane, I know it's supposed to land at three,
Speaker 1: but half an hour later, I'm not going to insist
Speaker 1: on getting out over scripton. It's as simple as that.
Speaker 1: I'll do it when I think it's safe. She'll raise
Speaker 1: rates when you think she can do it without adversely
Speaker 1: affecting the economy. So all my fellow equity strategist who
Speaker 1: think they know how many times she's going to do it,
Speaker 1: that's kind of an interesting trick since she doesn't know
Speaker 1: it herself. Yeah, I'm gonna use that metaphor. I love that.
Speaker 1: Like sitting on a plane, if the weather is not right,
Speaker 1: you don't take off. I think that's great for the fit. Well,
Speaker 1: I thought also that John is not getting out over Schenectady.
Speaker 1: If I've done that, well, I hope you've done it
Speaker 1: with while the plane was on the ground. In that context, though,
Speaker 1: you can't wait for what the Federal Reserve is or
Speaker 1: isn't going to do if you're planning for your financial
Speaker 1: future or for the future of your business. So what
Speaker 1: do we know. I mean, we don't know how many
Speaker 1: times are going to raise rates. But I think to me,
Speaker 1: the real question is is the Fed going to want
Speaker 1: to encourage your discourage economic growth from the next twelve
Speaker 1: to eighteen months. And I think that's a much easier question.
Speaker 1: They're not going to try and discourage growth. If they
Speaker 1: try and encourage growth, and they that includes higher rates.
Speaker 1: It only includes higher rates if they think the economy
Speaker 1: can adjust to those rights will not hurt it. So
Speaker 1: the FED, as far as I'm concerned, is still gonna
Speaker 1: be pushing money towards the economy in the next year
Speaker 1: or so. That's at least a supportive factor for stocks,
Speaker 1: pushing money towards the economy. In other words, they will
Speaker 1: not raise rates much, if at all, and they won't
Speaker 1: sell any bonds out of that big, big portfolio bonds.
Speaker 1: I can't see that the next twelve months. I mean,
Speaker 1: it's possible, but we'd have a much stronger economy between
Speaker 1: now and then I think of it. The Fed's job
Speaker 1: is to maximize growth and and and minimize inflation, which
Speaker 1: is sort of the conundrum you gave me earlier in
Speaker 1: the show. How do you do that? The answer is
Speaker 1: they try and regulate the economy, and all they can
Speaker 1: do they can't make is buy things or not buy things,
Speaker 1: build or not build. All they can do is make
Speaker 1: the money seem cheaper expensive. Well, I think there's also
Speaker 1: this minimax theory that the FED and Jennet Ellensama I
Speaker 1: think has mentioned it. You minimize the worst these days,
Speaker 1: mistake you could make, and probably for now, the fed's
Speaker 1: worst mistake would be raising rates prematurely. John Manley taken
Speaker 1: off today here at Bloomberg Radio, chief equity strategist Wells
Speaker 1: Fargo Funds Management. He thinks earnings could pick up. The
Speaker 1: Fed's going to be some wind at the stock market's back,
Speaker 1: and those mid caps look pretty darn good to him.
Speaker 1: Caffeine his pim Fox taking stock on Bloberg Radio