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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along

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Speaker 1: with Jonathan Farrell and Lisa Brownwitz Jaily, we bring you

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Speaker 1: insight from the best and economics, finance, investment and international relations.

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Speaker 1: Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot com

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Speaker 1: and of course on the Bloomberg terminal. Maria Gabelly with

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Speaker 1: us right now, needs no introduction with Gabelly Funds and also,

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Speaker 1: of course is wonderful individual stock work sometimes see it

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Speaker 1: in Baron's were thrilled at Mr Gobelly could join us

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Speaker 1: this morning. Mary, I'm gonna stay in a stock theme

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Speaker 1: and I'm gonna start out with your wheelhouse long agoing

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Speaker 1: far away. You knew where spark plug went. You knew

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Speaker 1: the carburetors. You know the automobiles and the tractors. Case

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Speaker 1: Holland is a bet on the American agriculture. You go long,

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Speaker 1: Case Holland, Why, well, I've got Let's assume the stock

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Speaker 1: markets flat for the next two years. Assumed that the

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Speaker 1: ten year bond is two and a half of two

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Speaker 1: corporate taxes. How do you make so I look for

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Speaker 1: companies that can benefit from infrastructure? Case knew how even

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Speaker 1: if there isn't any, the construction business will boom in

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Speaker 1: part because of the tailwind up CAPEX from corporation. Secondly,

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Speaker 1: the agricultural ecosystem farmers have underspent, but more importantly than that,

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Speaker 1: tom more importantly, they want precision farming. That's the name

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Speaker 1: of the game. Less water, more precise, less labor because

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Speaker 1: your factors can do it autonomously. And then what you

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Speaker 1: want to own is a company, uh that basically also

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Speaker 1: has an ability to do s G. A new CEO

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Speaker 1: Scott Wine came up from Fars and so case New

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Speaker 1: Holland a fifteen and a half dollars with a bucket

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Speaker 1: of quarter and earnings in two years and a spinoff

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Speaker 1: of their Ibico business, which is financial engineering. That's enough

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Speaker 1: reasons done it and buy it. Well, let's continue the

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Speaker 1: theme here. Heister. Yeah, most of our viewer and listeners

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Speaker 1: don't know Hoister h y s t R. Heister Yale.

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Speaker 1: That's not Amazon. What's the risk here of missing out

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Speaker 1: on Amazon and Apple if I go into a gabelly

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Speaker 1: case Hollander Heister Yale. Well, the notion is that you

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Speaker 1: basically have choice in life and choice in making another

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Speaker 1: one of my fifty per centers. Tom is a company

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Speaker 1: called GROUPO Televisa. But going back to Hister Yelle, the

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Speaker 1: stock seventy three, the sixteen million chairs Rankin, who's a

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Speaker 1: young guy at seventy nine, same age as Biden. He

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Speaker 1: basically is running the company and they put too much

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Speaker 1: money without demonstrating the success in creating a hydrogen fuel

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Speaker 1: for their forklift trucks and then taking that skill set

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Speaker 1: and moving it elsewhere. You know, it's a it's a

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Speaker 1: good bit on the recovery of their business, which benefits

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Speaker 1: from the change in the logistics and the stock seventy

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Speaker 1: three we thought they would earn five dollars in two years.

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Speaker 1: Were still sticking with that. But the it's not one

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Speaker 1: of my nifty fifty for the moment, but it's an

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Speaker 1: okay play from here and we own it. We're nibbling

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Speaker 1: at it again and we own it and we haven't

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Speaker 1: sold much. It went from sixty to a hundred back

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Speaker 1: to sixty five or seventy where it's training. Now, let

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Speaker 1: me on a bigger thing for you in the grants

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Speaker 1: you at the line, and this is from your notes.

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Speaker 1: I just want to say one word to you. Plastics

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Speaker 1: today you say he would have said batteries why marriage.

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Speaker 1: Well that's a great point, John, Let's go back one

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Speaker 1: giant step. What we have to do is love the planet,

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Speaker 1: love the people in our planet, and look at the

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Speaker 1: potential in that regard. Climate change requires renewables, that's wind,

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Speaker 1: solar transmission, where I have a bunch of companies that

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Speaker 1: I like, uh, cybersecurity because there's some crazy organizations around

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Speaker 1: the world that are unfettered, but also battery storage. And

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Speaker 1: then on top of that you have the E V dynamic,

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Speaker 1: and that is do you do lithium eye line or

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Speaker 1: do you lose solid state or which of those two

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Speaker 1: will work? How do you get fast charged, how to

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Speaker 1: get longer distance, how do you recycle it? So the

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Speaker 1: battery is an important element in that ecosystem. We're having

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Speaker 1: our forty six forty six years of an auto conference

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Speaker 1: this time. Last year was featuring three years ago autonomous vehicles,

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Speaker 1: last year with pre owned cars, uh, and this year

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Speaker 1: it's gonna be batteries. So I like that over the

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Speaker 1: next three or four years, how do we get a

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Speaker 1: major battery breakthrough? And companies like Berkshire have to we

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Speaker 1: understand that what they're doing in their and their field,

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Speaker 1: and companies that provide lithium like album mall In Live

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Speaker 1: and and so on a benefit from that, And how

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Speaker 1: do we do it in the US. Are you more

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Speaker 1: interested in doing it then through the batteries, through the

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Speaker 1: technology that goes into the car, or can you do

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Speaker 1: which one is in Mariott, I've the answer is that

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Speaker 1: we look at the entire ecosystem. I'm just picking batteries

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Speaker 1: because it was if you saw The Graduate, which was

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Speaker 1: at R rated probably at the time, it was that

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Speaker 1: scene in there where Dustin Hoffman has to confront the

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Speaker 1: husband or is conf unted by the husband of um

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Speaker 1: end Up without getting into details for this is a

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Speaker 1: next family program, I think that's it. So it's batteries

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Speaker 1: is a good sound, like you could have said removal

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Speaker 1: of plastics, recycling of plastics on it, but I just choice.

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Speaker 1: I chose batteries because I spent my fifty five years

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Speaker 1: in the auto industry. So Mario, there is a question

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Speaker 1: if we want to go to the Graduate graduating parallels

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Speaker 1: where Dustin Hoffman was under the water, blowing bubbles and

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Speaker 1: sort of trying to reset his life, and there is

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Speaker 1: a question as you try to look for bottom up

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Speaker 1: opportunities about how you even evaluate what's been priced in,

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Speaker 1: because a lot of the companies that you're talking about

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Speaker 1: the industries, particularly within renewable energy and batteries, have been

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Speaker 1: incredibly highly bid up because people agree with you, at

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Speaker 1: what point is it too much and has it been

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Speaker 1: priced in? You always look at value versus price. I

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Speaker 1: think you'll make a significant of fifty and four years.

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Speaker 1: I'll give you the four names and then you can

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Speaker 1: pick whatever you want. I gave it case to Holland,

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Speaker 1: I give you Group of Television because the Spanish market

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Speaker 1: is doing well, the good management, the financial engineering. They're

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Speaker 1: converting it with univisual Univision, and Univision is going public

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Speaker 1: sometime in the next six months. And then you have

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Speaker 1: in addition to that, a company that's buying at a

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Speaker 1: bargain price. Going back to your E D notion Electric

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Speaker 1: Vehicles for the last smile electric Vehicles period. Electric Trucks

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Speaker 1: Company and UH Volkswagen spun off their truck business traded on,

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Speaker 1: but they have a lot of at that intellectual capacity

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Speaker 1: and they're buying at a bargain price. Navistar, which is

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Speaker 1: closing shorely Tradon is selling at twenty eight euros. They're

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Speaker 1: gonna earn four dollars plus and you've got a good play,

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Speaker 1: and you know the stock is a fifty in two years.

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Speaker 1: So you know, there's a lot of ways to participate

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Speaker 1: at the margins on some of these stocks. And uh,

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Speaker 1: you know that then obviously you gotta play baseball at

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Speaker 1: this time of year, so you don't need to say

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Speaker 1: what's over priced in this market? What happens when the

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Speaker 1: government comes in with a six point two trillion dollar

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Speaker 1: expenditure and and raise only four trillion and we've gotta

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Speaker 1: increased deficit. You know, we think about those things, but

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Speaker 1: we look at companies Lisa with a microscope, and then

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Speaker 1: we look and step back with a telescope and say,

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Speaker 1: what's gonna work two years from now? Uh? You know,

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Speaker 1: in some of these stocks we don't chase and nor

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Speaker 1: that we go short Nicola or al R and so on.

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Speaker 1: So I will let you talk about the opportunities in

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Speaker 1: baseball with Tom, and I'm sure that you have things

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Speaker 1: to sell him for his triple average cash fund. There

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Speaker 1: is a question though, about concentration, especially as someone who

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Speaker 1: has been bottom up for so many years. Do you

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Speaker 1: have more confidence in a higher degree of concentration your

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Speaker 1: portfolio if you can do the analysis, then you have

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Speaker 1: in the past, just based on where we are in

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Speaker 1: the credit cycle. Well, you take our small cap front. Okay,

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Speaker 1: we love the ignored and unloved. And so when we

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Speaker 1: go see a company, and that, by the way, finally

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Speaker 1: getting out to see three or fourth companies, I saw

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Speaker 1: one that's not in small cap I, T and T.

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Speaker 1: You listen to that story. You listen to how management

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Speaker 1: is executing. You listen to how every day they come

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Speaker 1: in and work and they worked at fanties off for

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Speaker 1: the for the economy, for the company, for the shareholders,

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Speaker 1: and for their constituents. So there's a lot of companies

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Speaker 1: that are not fully understood because you have the new

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Speaker 1: dynamics in the market, MOBI al goes obviously and so on,

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Speaker 1: and then there's a lot of risks. The risk that

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Speaker 1: you point out, I worry about the high margin requirements.

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Speaker 1: Should we increase the margin requirement? I worry about shadow

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Speaker 1: banking the dot Frank Today you guys are talking about

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Speaker 1: the huge amount of money coming in by the banks

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Speaker 1: this afternoon tomorrow. But it's in part they were reined

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Speaker 1: in by dot Frank if DoD Frank some credits in

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Speaker 1: addition to that. Uh So, we look at the valuations

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Speaker 1: and we look at what is the present value of

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Speaker 1: the future stream and who's gonna buy the company. Lisa

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Speaker 1: think about SPACs, thinks about strategics, buying companies with their

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Speaker 1: stocks at these prices using it as a currency. And

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Speaker 1: even companies that we like are selling converts when a

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Speaker 1: one percent coopon up to raise money. Mario, I want

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Speaker 1: to talk about the heart and soul of the matter,

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Speaker 1: particularly going into this earning season. And this goes back

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Speaker 1: to the wonderful Jack Welch. The idea of pricing power.

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Speaker 1: Revenues are made up of a unit dynamic and a

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Speaker 1: price dynamic. Are we gonna have pricing power and unit

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Speaker 1: growth to go with it? That's a good question. Talk.

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Speaker 1: The way we look at the model is everybody talks

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Speaker 1: seven percent GDP growth, but that's not that's real. You've

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Speaker 1: got three percent inflation. Revenues are gonna grow ten percent.

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Speaker 1: So if I was the only company in the United States,

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Speaker 1: I'm gonna have temper cent revenue increase and I'm gonna

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Speaker 1: basically look for improvement in two in part because of

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Speaker 1: the leg effect of certain companies coming through. But if

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Speaker 1: I have a surgeon my cost which is crimping my

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Speaker 1: gross margin, can I pass through my cost with the

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Speaker 1: margin maintained. There are companies that can do that. Sdn

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Speaker 1: A is not gonna rise temper cent, so I have

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Speaker 1: an increase in pretax mode and then I'm gonna get

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Speaker 1: hurt by taxes and I'm gonna be hurt by uh

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Speaker 1: an increase the multiple. But but the heart of the

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Speaker 1: matter here, and this goes back to the religion of Gabelly,

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Speaker 1: is I want my cash back. I want dividend growth.

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Speaker 1: They want share buy back. Do you see any change

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Speaker 1: in use of cash dynamics. Yeah, I got a big

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Speaker 1: fan of cash buy back. And if corporate dipp and

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Speaker 1: you're gonna pay on dividends and you've got a soul

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Speaker 1: tax that adds thirteen and then you've got the Obama

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Speaker 1: tax on top of that you're gonna keep and that's

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Speaker 1: a triple tax on childers. No, I'm not a big

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Speaker 1: fan of dividends. I like the buffet approach, get good

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Speaker 1: managements that compound. Yes, he's buying backstock because it's really

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Speaker 1: well below intrinsic value. But but Tom, a year ago,

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Speaker 1: when I was on a program, we had shortage people

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Speaker 1: who were concerned about financial liquidity. Today they're not as

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Speaker 1: concerned about that. They want supplied their overordering, and you're

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Speaker 1: gonna see some double some of that and the surgeon prices.

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Speaker 1: You saw Lumba come down from seventeen eight hundreds. But

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Speaker 1: you're gonna have wage increases because there's a shortage of

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Speaker 1: lay and that gives you your wage push element to inflation.

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Speaker 1: And that's what we have to be sensitive about. And

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Speaker 1: one of my directors call out to Perl when he

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Speaker 1: was headed the Bundesbank, said it's like inflations, like two paste.

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Speaker 1: Once it gets out, it's very hard to put it

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Speaker 1: back in the tube. So we have to be super sensitive.

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Speaker 1: At what point does Powell lift this foot off the

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Speaker 1: accelerator on financial dynamics in terms of pumping money into

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Speaker 1: the system, and how will the market react. But that's

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Speaker 1: just a short term pothole in the next ten year

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Speaker 1: voyage for stock ownership. Mario, let's not wait another year

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Speaker 1: before we talk again. It's got a catch up, sir,

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Speaker 1: as always, Mario Cavelly There Caveelli Fund CEO and sharemon

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Speaker 1: I want to send to Lori Canvasy, to Tim obviously

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Speaker 1: Capital Market's head of US equity strategy, and Laurie let's

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Speaker 1: start there. Do we want to stick with what's worked

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Speaker 1: so far this year energy the banks for the second

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Speaker 1: half too. It's a great question, John. We spent a

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Speaker 1: lot of time on that in medias and Look, I

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Speaker 1: think that the leadership backdrop is getting a little bit choppier,

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Speaker 1: but I think at the end of the day, there's

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Speaker 1: still a lot of room in the cyclical value trade UM.

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Speaker 1: So your your your poster children of that are going

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Speaker 1: to be things like the financials, energy materials UM. I

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Speaker 1: might be a little bit cooler on the industrials. I

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Speaker 1: don't think you have the same valuation opportunity and industrial

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Speaker 1: so you arguably have some you know, catalysts from the

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Speaker 1: from the infrastructure bill UM, but I think that you

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Speaker 1: still have a lot of room in these banks, in particular,

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Speaker 1: it's regularly one of the cheapest sectors in the market.

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Speaker 1: We've got catalysts now in the form of what are

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Speaker 1: probably gonna be pretty buy back at big, big buyback

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Speaker 1: announcements CUP coming, and I think that the underlying economic

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Speaker 1: data is going to continue to run pretty hot. I

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Speaker 1: think they're gonna be some wobbles here, which might you know,

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Speaker 1: kind of keep some of that leadership, you know, moving

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Speaker 1: back and forth day to day, week to week. But

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Speaker 1: at the end of the day, this economy is running very,

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Speaker 1: very hot above long term averages, and that should push

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Speaker 1: you into the cyclicals for a while longer. Lore readjust

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Speaker 1: market cap right now, do you go to MidCap small

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Speaker 1: cap or you barbell and MidCap small cap with selected

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Speaker 1: big cap So I think that you want to go

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Speaker 1: down into MidCap if you're a large cap manager, and

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Speaker 1: if you're a multi cap manager, you do want to

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Speaker 1: go all the way down into smaller cap stocks. And

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Speaker 1: you know, there are a couple of reasons for that one.

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Speaker 1: If you just look at it at the broader index level,

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Speaker 1: these companies are still inherently more cyclical than the big

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Speaker 1: cap companies, so you're getting more exposure to that, you know,

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Speaker 1: kind of hot US domestic economy um. And also, frankly,

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Speaker 1: the valuation appeal is there. We've been in this world

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Speaker 1: for the last decade or so where large cap growth

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Speaker 1: megacap growth has dominated. If you look at the relative

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Speaker 1: valuation multiples between mid and large or small and large. Frankly,

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Speaker 1: I mean there's still pretty astounding. There's still a lot

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Speaker 1: of valuation runway here. LORI, How do you make sense then,

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Speaker 1: given your call on the rally that we've seen in

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Speaker 1: the tenure, notwithstanding last week where we saw the sell off,

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Speaker 1: the idea here that the balance seems to be towards

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Speaker 1: lower yields, how does that cohere with his view towards

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Speaker 1: cyclicals like financials, which depend on higher yields. Look, I'm

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Speaker 1: an equity strategist, but you know, when I talked to

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Speaker 1: my friends in the fixed income world, they a very

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Speaker 1: good job of convincing me that the yield is not

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Speaker 1: necessarily reacting only to macroeconomic conditions, that there's also a

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Speaker 1: positioning issue um at play. And I know that in

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Speaker 1: my work whenever I look at anything from a tactical

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Speaker 1: asset allocation perspective, so I look at the healthhold balance sheets,

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Speaker 1: for example, I if I look at tactical assid allocation

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Speaker 1: funds tracked by morning Star, I see very very low

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Speaker 1: bond exposure and very very high equity exposure. So I

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Speaker 1: do think that there is a lot of truth to

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Speaker 1: the idea that there is some positioning um at play

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Speaker 1: in the in the yield. Let's talk about the positioning

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Speaker 1: in your world energy by more than on sp energy.

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Speaker 1: On that sect. We talked about the banks briefly a

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Speaker 1: couple of moments ago. Laurie, you do some tremendous work

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Speaker 1: on ownership. Who owns this story? How well owned is it?

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Speaker 1: How well owned is that story right now? So let's

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Speaker 1: take energy first, because I think that's a little bit

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Speaker 1: different from the financials or the materials. If we look

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Speaker 1: at energy, it's actually hilarious, at least if you're a

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Speaker 1: data nerd like me, because every positioning study I run,

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Speaker 1: everybody does their best to stay neutral the end energy sector.

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Speaker 1: Whether I'm looking at large cap value funds, growth funds,

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Speaker 1: small cap funds, hedge funds, SMP five, benchmark funds, everybody

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Speaker 1: just hugs the benchmark waiting here. And I think that's

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Speaker 1: because commodity prices, you know, are difficult for equity folks

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Speaker 1: to predict um. And I think frankly, a lot of

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Speaker 1: equity folks have been burned over the years trying to

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Speaker 1: make big bets on commodity prices. So they try to

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Speaker 1: you know, just really hug the benchmark. If you look

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Speaker 1: at the Russell reconstitution. One thing we've heard sort of

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Speaker 1: forecast season, um, was certain managers were seeing energy going

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Speaker 1: up in their benchmark waiting. They're like, well, you know,

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Speaker 1: I don't want to be overweight this sector, but I

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Speaker 1: need to own another stock. You know, I may have

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Speaker 1: one a small position, I need to add a little

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Speaker 1: bit more. I think if you look at the financials,

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Speaker 1: it's entirely different. The large cap long only to have

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Speaker 1: been there for a long time. Frankly, it's something that's

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Speaker 1: really impeded their performance in recent years, and it's working

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Speaker 1: out for them now. Um. But if you look at

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Speaker 1: hedge funds, I mean they were deeply, deeply underweight at

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Speaker 1: the end of one que and they actually got more underweight,

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Speaker 1: which is the exact opposite of what you would have expected.

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Speaker 1: So the financials, if the hedge funds ever come back in,

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Speaker 1: I mean, get out of the way. They're going to

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Speaker 1: bid this space up in a hurry. Laurie is Amazon, Apple,

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Speaker 1: the rest of them? Are they part of your valuation runway?

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Speaker 1: So look, when we look at sort of the tech

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Speaker 1: space or the communication services space, I actually have a

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Speaker 1: basket of T I MT tech, Internet media, telecom. I

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Speaker 1: grew up in the kind of aftermath of the tech

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Speaker 1: bubble on the street. Uh, you know, we we started

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Speaker 1: out thinking it would be the craziest thing, you know,

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Speaker 1: we've ever seen in our careers, and it just has

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Speaker 1: gotten crazier and crazier. But that's a that's another tangent um.

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Speaker 1: But look at the end of the day, you know,

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Speaker 1: I think the fundamentals in that space are unbelievably strong,

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Speaker 1: and I think the secular growth appeal is there. I

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Speaker 1: think that there are two problems with that space today.

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Speaker 1: I think number one, you just don't have the same

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Speaker 1: valuation opportunity. Now you've gotten better valuations as the year

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Speaker 1: has progressed, UM, but we just don't see cheap valuations

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Speaker 1: versus the S and P. And that's important because for

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Speaker 1: much of the big bull run in that T I

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Speaker 1: M T space from the financial crisis up to kind

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Speaker 1: of that pre pandemic era, UM, we did cheap relative

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Speaker 1: p S. A lot of people forget that it wasn't

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Speaker 1: just about the secular growth narrative. And I think the

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Speaker 1: problem today when you think about the fundamentals, the fundamentals

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Speaker 1: are fine. They're just not all that special. They're just

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Speaker 1: just not all that unique. And that's where I go

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Speaker 1: back to this idea of a hot economy and the

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Speaker 1: aftermath of the financial crisis. We really didn't get a

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Speaker 1: lot out of Washington, and we had an economy that

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Speaker 1: ran cool below average, below the two and a half

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Speaker 1: percent long term run rate for quite some time. And

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Speaker 1: that's really the kind of environment that secular growth does

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Speaker 1: well in. But right now I'm looking down the barrel

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Speaker 1: of you know, kind of six seven percent GDP this year,

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Speaker 1: four percent plus next year, getting back closer to average

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Speaker 1: frankly in three. But it's you know, it's just not

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Speaker 1: the same kind of post crisis environment that we had

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Speaker 1: back then. And these secular growth names, they're just not

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Speaker 1: that special anymore. That's the problem with them. Right now,

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Speaker 1: you're special. We love catching out right now in the

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Speaker 1: infrastructure bate debate. It would be good to get a

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Speaker 1: little experience. We can do that with decades of work.

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Speaker 1: William Hoglan joins us the Bipartisan Policy Center Senior vice President,

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Speaker 1: with all sorts of tangible work over the decades with

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Speaker 1: Capitol Hill, with the House, and with the Senate Bill Hoglan,

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Speaker 1: we don't want to pay for our infrastructure. At what

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Speaker 1: point did we decide the gas tax was a bad idea?

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Speaker 1: I think that we decided. I think the President decided

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Speaker 1: that when he decided that he would not want to

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Speaker 1: raise taxes on anybody with incomes less than four hundred thousand.

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Speaker 1: I think that was the mark that resulted in their

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Speaker 1: not being any increase in the gas tax. I agree

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Speaker 1: with you, Tom, I think that's an obvious one. In

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Speaker 1: the past, that's been one that we've used to fund

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Speaker 1: our fund, our Highway Trust Fund. But it obviously it

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Speaker 1: was tied up with the politics of not taxing anybody

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Speaker 1: with incomes under four Okay, But the critics here Bill

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Speaker 1: Hoglan say, simple, the gas tax goes to other programs.

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Speaker 1: Can they in a bipartisan agreement if they say the

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Speaker 1: gas tax increase will all go to bridges, etcetera, etcetera.

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Speaker 1: Is that doable? Yes, it's absolutely doable, and you can

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Speaker 1: define where you want that revenue to go. It goes

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Speaker 1: right now, goes into the Highway Trust Fund, and you

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Speaker 1: can make certain that that money is spent specifically on

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Speaker 1: highways and bridges as example, without having to go to

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Speaker 1: other things that you have a transit tax tax also

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Speaker 1: that goes into a transit fund. So there are ways

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Speaker 1: to handle that bipartisan wise. I think that's a that's

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Speaker 1: a bogus argument that you can't you can't do what

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Speaker 1: you've just outlined. Tom. But Bill, there is this larger argument,

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Speaker 1: which is do we really have to pay for anything

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Speaker 1: anymore given the fact that benchmark yields are so low

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Speaker 1: and they are around the world. And this goes to

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Speaker 1: your more than three decades of service for the government

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Speaker 1: crafting budgets. Have we rethought the need to repay or

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Speaker 1: actually work over the asked for some of these programs

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Speaker 1: based in the fact the bigger deficits haven't proven to

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Speaker 1: be a liability for the nation. Well, Lisa, I'm sorry,

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Speaker 1: but I'm one of those who still believes that deficits

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Speaker 1: and debt matter, and that while interest rates clearly are

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Speaker 1: low right now and this is a good time in

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Speaker 1: terms of investments and going forward for from the federal

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Speaker 1: government's perspective long term, I am not of the mindset

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Speaker 1: that those interest rates won't climb back up. And once

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Speaker 1: they climb back up, when you're running a debt, total

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Speaker 1: debt a well over thirty trillion dollars. Then the fastest

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Speaker 1: growing component of the federal budget will not be Social

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Speaker 1: Security or Medicare, but it will be just paying the

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Speaker 1: interest on our public debt. So I'm sorry, I'm of

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Speaker 1: that mindset. Still believe that you have to pay for

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Speaker 1: what you have to pay for this, even with the

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Speaker 1: low interest rates that we have, and I think, uh,

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Speaker 1: in many ways, the bipartisan agreement that was reached over

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Speaker 1: last Thursday, off track on Friday, back on tracks yesterday

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Speaker 1: and Saturday on Sunday, I think that there was an

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Speaker 1: indication there's some desire to try to pay for it,

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Speaker 1: even though the pay for us I think are somewhat soft.

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Speaker 1: Do you think among the Republican members who still do

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Speaker 1: keep in contact with do you think that they have

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Speaker 1: rethought whether it's proper to have this low tax rate

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Speaker 1: for corporations, whether they actually would be more amenable to

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Speaker 1: the idea of raising those based on the steady trajectory

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Speaker 1: downwards that we've seen over the past few decades. Yeah,

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Speaker 1: I think that. I think that depends what Republicans I

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Speaker 1: talked to and their staffs particularly. I think there are

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Speaker 1: some who would agree that there is a need for

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Speaker 1: a readjustment of the corporate tax I think we're probably

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Speaker 1: if we get to it, uh in another bill called

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Speaker 1: the Reconciliation Bill. I think you're going to see a movement,

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Speaker 1: particularly in the area from going up to not on

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Speaker 1: the corporate tax rate that the President's proposed, but I

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Speaker 1: think you're going to find that there is going to

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Speaker 1: be some pressure here to increase uh, increased taxes and

429
00:21:57,320 --> 00:22:00,199
Speaker 1: corporate taxes. I mean, John, it's in the United them

430
00:22:00,240 --> 00:22:02,960
Speaker 1: as well. The Hammersmith Bridge back to eight seven or

431
00:22:03,000 --> 00:22:06,880
Speaker 1: whatever is basically completely broken down, and they can't get

432
00:22:06,880 --> 00:22:08,840
Speaker 1: it done there, can they. I love how you're confined

433
00:22:08,880 --> 00:22:10,560
Speaker 1: about this is if you've ever been south of the

434
00:22:10,680 --> 00:22:13,159
Speaker 1: river in London, you ever been on that bridge? Time? I?

435
00:22:14,760 --> 00:22:17,560
Speaker 1: I maybe, I don't know. I went to the Imperial

436
00:22:17,560 --> 00:22:20,240
Speaker 1: War Museum, did you. Okay? Yeah, I think that was

437
00:22:20,320 --> 00:22:22,919
Speaker 1: south of the river. Belle. Let's go that not on

438
00:22:22,960 --> 00:22:26,640
Speaker 1: this particular self topic of the Hammersmith Bridge. But defining

439
00:22:26,680 --> 00:22:29,679
Speaker 1: infrastructure seems to be a struggle right now. If we've

440
00:22:29,680 --> 00:22:31,960
Speaker 1: done that, now, have we agreed on what infrastructure is?

441
00:22:32,640 --> 00:22:35,080
Speaker 1: I think we've agreed in a bi person manner that

442
00:22:35,160 --> 00:22:39,879
Speaker 1: it's basic physical infrastructure that has a bipartisan support. There

443
00:22:39,960 --> 00:22:43,160
Speaker 1: still is a lot of discussion and will be continue

444
00:22:43,200 --> 00:22:46,840
Speaker 1: to beat this h about other forms of what's called

445
00:22:46,880 --> 00:22:52,400
Speaker 1: individual or personal infrastructure, childcare, family paid lead UH, these

446
00:22:52,480 --> 00:22:56,600
Speaker 1: kinds of provisions that some of the progressives in the

447
00:22:56,640 --> 00:22:59,560
Speaker 1: Congress want to define and which would would which has

448
00:22:59,600 --> 00:23:02,720
Speaker 1: been one of the issues over the weekend about the

449
00:23:02,760 --> 00:23:06,000
Speaker 1: dividing the Republicans and the progressives from the Republicans in

450
00:23:06,080 --> 00:23:08,600
Speaker 1: terms of what they want to put in. But I

451
00:23:08,640 --> 00:23:11,680
Speaker 1: think for right now, for now, for the current and

452
00:23:11,840 --> 00:23:14,560
Speaker 1: hopefully we'll be able to put this bill together. The

453
00:23:14,560 --> 00:23:17,680
Speaker 1: Republicans and Congress, along with the Democrats and the leadership

454
00:23:17,720 --> 00:23:20,040
Speaker 1: and Congress and the President, I think they've pretty well

455
00:23:20,080 --> 00:23:26,560
Speaker 1: defined it as physical infrastructure UH, bridges, waterways, highways, h

456
00:23:27,240 --> 00:23:29,600
Speaker 1: I think it has been expanded to include, of course

457
00:23:29,880 --> 00:23:35,600
Speaker 1: issues associated with the broadband but but but the individual infrastructure,

458
00:23:35,680 --> 00:23:38,720
Speaker 1: the family UH plan that the President put forward, I

459
00:23:38,720 --> 00:23:40,600
Speaker 1: think it's still up in the airs to whether that

460
00:23:40,600 --> 00:23:43,240
Speaker 1: should be defined as infrastructure or not in the minds

461
00:23:43,280 --> 00:23:46,240
Speaker 1: of a number of individuals within the Congress. But I

462
00:23:46,280 --> 00:23:49,480
Speaker 1: was gonna see you we appreciate venty times bill hugand

463
00:23:49,640 --> 00:23:59,119
Speaker 1: Biess and Policy Santa Snia, Vice President. Let's bringing Tavanka Sho.

464
00:23:59,280 --> 00:24:01,800
Speaker 1: We come toto fe to see and David, if I may,

465
00:24:02,119 --> 00:24:04,159
Speaker 1: I want to start right there. Is there still a

466
00:24:04,240 --> 00:24:08,960
Speaker 1: big beat on something big happening down in Washington. I

467
00:24:09,160 --> 00:24:11,560
Speaker 1: don't know about. I mean, it looks like we'll have

468
00:24:11,800 --> 00:24:17,040
Speaker 1: some type of infrastructure playing. John. They have to deliver

469
00:24:17,400 --> 00:24:21,080
Speaker 1: a plan. It won't be as big as anticipated, and

470
00:24:21,240 --> 00:24:25,040
Speaker 1: it will have all kinds of changes in it. That's underway.

471
00:24:26,119 --> 00:24:31,040
Speaker 1: Biden wants to complete something. The Republicans don't want to

472
00:24:31,119 --> 00:24:35,040
Speaker 1: be the obstacle that nothing. So it would look to

473
00:24:35,119 --> 00:24:39,480
Speaker 1: me as if something will happen, and whether it's a

474
00:24:39,560 --> 00:24:43,520
Speaker 1: billion or nine d billion or trillion or whatever the

475
00:24:43,680 --> 00:24:46,639
Speaker 1: number will be, we'll got to find out. David, um,

476
00:24:46,680 --> 00:24:48,720
Speaker 1: I want to talk about marcuts first, we'll do COVID

477
00:24:48,800 --> 00:24:51,960
Speaker 1: here and David, you went to some cash here. Everybody

478
00:24:52,080 --> 00:24:56,680
Speaker 1: follows your often allocations of E T F Cumberland Advisors.

479
00:24:56,680 --> 00:24:58,840
Speaker 1: You're sitting on cash. What are you gonna do with it?

480
00:24:59,240 --> 00:25:03,640
Speaker 1: What is your re search on sectors? Tell you right now? Well,

481
00:25:03,840 --> 00:25:07,560
Speaker 1: our largest sector tom is a health care sector. We

482
00:25:07,680 --> 00:25:13,040
Speaker 1: have maintained that as a strategic position. That group did

483
00:25:13,320 --> 00:25:16,520
Speaker 1: very well and then sort of leveled off except for

484
00:25:16,600 --> 00:25:22,119
Speaker 1: a couple of biotechs. We believe the COVID shock is

485
00:25:22,200 --> 00:25:26,120
Speaker 1: a strategic shock that will take years. And the health

486
00:25:26,200 --> 00:25:29,360
Speaker 1: care sector in the United States and the various component

487
00:25:29,480 --> 00:25:33,639
Speaker 1: parts of it, are they beneficiaries in a business sense.

488
00:25:34,480 --> 00:25:37,360
Speaker 1: Wish it were otherwise. We don't want pandemics, but that's

489
00:25:37,400 --> 00:25:41,040
Speaker 1: what we have. So the health care sector is probably

490
00:25:41,119 --> 00:25:46,159
Speaker 1: four of the SMP five in our shop. We're closer

491
00:25:46,240 --> 00:25:50,359
Speaker 1: to double that around. It's the highest wait for a

492
00:25:50,480 --> 00:25:55,119
Speaker 1: large sector I have I have ever been, So, David,

493
00:25:55,200 --> 00:25:56,840
Speaker 1: I want to go back to this idea that Tom

494
00:25:56,960 --> 00:26:00,960
Speaker 1: raised about higher cash allocation. What are you seeing not

495
00:26:01,160 --> 00:26:05,080
Speaker 1: being fully invested that other people are not well. We

496
00:26:05,200 --> 00:26:09,159
Speaker 1: had a position of Lisa in in materials commodities to

497
00:26:09,400 --> 00:26:12,960
Speaker 1: E t f s. We sold them and we are

498
00:26:13,119 --> 00:26:16,320
Speaker 1: not ready to redeploy that cash. We are not going

499
00:26:16,359 --> 00:26:19,840
Speaker 1: to put any more into healthcare. So we have to

500
00:26:20,160 --> 00:26:23,160
Speaker 1: look at the sectors very carefully. As you just said

501
00:26:23,240 --> 00:26:27,400
Speaker 1: in the beginning, we're slowing from a peak. So if

502
00:26:27,400 --> 00:26:30,399
Speaker 1: you're going down the highway at sixty miles and you

503
00:26:30,560 --> 00:26:34,560
Speaker 1: slow to forty miles, an hour. At the time you're slowing,

504
00:26:34,840 --> 00:26:37,240
Speaker 1: you don't know. It feels the same as if you're

505
00:26:37,240 --> 00:26:39,600
Speaker 1: going to slow to zero. I don't believe we're going

506
00:26:39,640 --> 00:26:43,240
Speaker 1: to go to zero, but we are slowing. We cannot

507
00:26:43,359 --> 00:26:47,720
Speaker 1: maintain this six seven percent GDP growth rate in the

508
00:26:47,840 --> 00:26:51,040
Speaker 1: United States. It's not there to be had. So the

509
00:26:51,200 --> 00:26:54,360
Speaker 1: slowing is going to reveal something. The second thing that's

510
00:26:54,400 --> 00:26:57,280
Speaker 1: going to reveal a lot are the earnings reports, which

511
00:26:57,320 --> 00:27:00,320
Speaker 1: are going to start in the next couple of weeks.

512
00:27:00,760 --> 00:27:05,600
Speaker 1: We're going to get a handle on earnings capacity in

513
00:27:05,800 --> 00:27:12,040
Speaker 1: this quarter of such robust recovering. David, because the time

514
00:27:12,160 --> 00:27:14,160
Speaker 1: John lies and I have like six things to talk

515
00:27:14,200 --> 00:27:16,200
Speaker 1: to you about. I know you're in Breckon Ridge, where

516
00:27:16,200 --> 00:27:19,000
Speaker 1: the Blue River moves north to the Colorado. We could

517
00:27:19,000 --> 00:27:21,320
Speaker 1: do the western drought. We'll do that in another time.

518
00:27:21,800 --> 00:27:25,640
Speaker 1: David Kotak, you were the absolute national leader in Wall

519
00:27:25,720 --> 00:27:29,640
Speaker 1: Street on the bird virus of years ago. Everybody thought

520
00:27:29,720 --> 00:27:32,440
Speaker 1: you were nuts, and now in hindsight, you look like

521
00:27:32,520 --> 00:27:36,000
Speaker 1: an absolute genius. Your thought and how we're going to

522
00:27:36,080 --> 00:27:39,119
Speaker 1: adapt to COVID, the delta variant, and how we get

523
00:27:39,160 --> 00:27:44,200
Speaker 1: out of this pandemic. I I think I'm very pessimistic

524
00:27:44,280 --> 00:27:47,600
Speaker 1: about it because of the political divide in the United States.

525
00:27:47,760 --> 00:27:51,399
Speaker 1: Town and we see it happening. We see for you,

526
00:27:51,560 --> 00:27:57,440
Speaker 1: Bloomberg reported four eighty two counties which have low vaccination

527
00:27:57,640 --> 00:28:02,560
Speaker 1: rates and they all have rising alter rates. Pandemic isn't over.

528
00:28:02,840 --> 00:28:05,840
Speaker 1: It's going to be over sometime. It will take a while.

529
00:28:06,240 --> 00:28:11,000
Speaker 1: Do you fold that into your investment Outlook? Absolutely, we

530
00:28:11,160 --> 00:28:14,639
Speaker 1: have a million excess deaths. We have three and a

531
00:28:14,680 --> 00:28:20,320
Speaker 1: half million long haul disability, partial or full disability COVID cases,

532
00:28:20,760 --> 00:28:23,800
Speaker 1: and we have more of it coming. So that's what's

533
00:28:23,840 --> 00:28:27,480
Speaker 1: happening in the United States, and then it's worldwide. So

534
00:28:27,680 --> 00:28:31,320
Speaker 1: we don't even fold in the global impact yet, but

535
00:28:31,520 --> 00:28:35,800
Speaker 1: that's coming to well specifically then, David just quickly linked

536
00:28:35,840 --> 00:28:39,880
Speaker 1: to that is in your market code. Well, I want

537
00:28:39,960 --> 00:28:43,320
Speaker 1: some cash. I want the healthcare sector. And the second

538
00:28:43,640 --> 00:28:48,280
Speaker 1: overweight sector, John is defense because of what the world

539
00:28:48,400 --> 00:28:51,000
Speaker 1: looks like. You just reported a run you've gotten to

540
00:28:51,320 --> 00:28:54,240
Speaker 1: air strikes. I mean, defense is a big issue in

541
00:28:54,320 --> 00:28:57,680
Speaker 1: the United States. I don't see a defense budget cut

542
00:28:57,920 --> 00:29:03,280
Speaker 1: or any anywhere near and any impairment of defense. The

543
00:29:03,400 --> 00:29:07,760
Speaker 1: United States has a very heavy defense load now in

544
00:29:07,920 --> 00:29:11,160
Speaker 1: this world, David got to leave it there. Small stuff,

545
00:29:11,400 --> 00:29:14,280
Speaker 1: interesting provocative thoughts. David kot there come to devise a

546
00:29:14,360 --> 00:29:22,520
Speaker 1: see io, Lisa, I'm gonna have you asked the first

547
00:29:22,600 --> 00:29:24,840
Speaker 1: question to Mr Brill, but it's got to be on

548
00:29:24,920 --> 00:29:29,000
Speaker 1: the supply or the so called dearth of it coming up. Well,

549
00:29:29,000 --> 00:29:32,280
Speaker 1: the idea here being that our company is actually deleveraging.

550
00:29:32,320 --> 00:29:36,080
Speaker 1: Are they actually becoming more credit worthy and perhaps justifying

551
00:29:36,400 --> 00:29:39,720
Speaker 1: the tightening and spreads? Matt Brill of Investo ahead of

552
00:29:39,840 --> 00:29:42,680
Speaker 1: US investment Grade and senior portfolio manager, do you think

553
00:29:42,720 --> 00:29:45,080
Speaker 1: that that's what's going on here, that they're actually becoming

554
00:29:45,200 --> 00:29:49,880
Speaker 1: more credit worthy companies? Hey, good morning everybody. Yeah, I

555
00:29:50,160 --> 00:29:52,920
Speaker 1: do think that you're seeing just the fundamentals get better

556
00:29:52,960 --> 00:29:54,680
Speaker 1: and better with the U. S economy, but you're also

557
00:29:54,720 --> 00:29:57,800
Speaker 1: seeing corporations really trying to figure out how to get

558
00:29:57,880 --> 00:29:59,760
Speaker 1: rid of last year's debt. And last year's debt was

559
00:29:59,800 --> 00:30:02,680
Speaker 1: all out survival, and this year they're really kind of pivoted.

560
00:30:03,000 --> 00:30:04,920
Speaker 1: And so we've seen a T and T, we've seen

561
00:30:05,040 --> 00:30:07,720
Speaker 1: g e ups are all big names looking to pay

562
00:30:07,760 --> 00:30:10,800
Speaker 1: down debt. So overall that that's pretty good for the market.

563
00:30:11,000 --> 00:30:14,080
Speaker 1: Um I would say he's evaluations are very very challenged though,

564
00:30:14,320 --> 00:30:16,920
Speaker 1: but the fundamental fundamentals are going to keep getting better. Here,

565
00:30:17,080 --> 00:30:19,680
Speaker 1: what is the maturity probabfile of these massive companies look

566
00:30:19,720 --> 00:30:23,480
Speaker 1: like now, Matt, So, most of these companies have actually

567
00:30:23,600 --> 00:30:25,280
Speaker 1: termed out their debt. We call this, you know, kind

568
00:30:25,320 --> 00:30:27,520
Speaker 1: of kicking the can down the road, or or really

569
00:30:27,560 --> 00:30:29,680
Speaker 1: just making sure they don't have any near term debt maturity.

570
00:30:29,760 --> 00:30:32,680
Speaker 1: So the average duration of the US corporate market continues

571
00:30:32,720 --> 00:30:35,920
Speaker 1: to get longer. Um. That's bad from a mark to

572
00:30:36,040 --> 00:30:38,640
Speaker 1: market standpoint, that's because it means there's more duration, more

573
00:30:38,760 --> 00:30:42,200
Speaker 1: volatility potentially, but it's very good from a fundamental standpoint

574
00:30:42,240 --> 00:30:44,560
Speaker 1: because it means they don't have near term debt maturities

575
00:30:44,760 --> 00:30:46,320
Speaker 1: that they have to worry about if the market were

576
00:30:46,360 --> 00:30:48,440
Speaker 1: to seize up again. So all in, you know, I'd say,

577
00:30:48,480 --> 00:30:50,440
Speaker 1: that's really in that positive. Do they play into this

578
00:30:50,600 --> 00:30:52,280
Speaker 1: theme if the same is true, if how yield that

579
00:30:52,400 --> 00:30:55,440
Speaker 1: was stripping out the sick locality from this market, just

580
00:30:55,560 --> 00:30:58,720
Speaker 1: how sensitive these markets are to a given turn of

581
00:30:58,760 --> 00:31:03,080
Speaker 1: the economy. I think so from from from the turning

582
00:31:03,080 --> 00:31:05,760
Speaker 1: out of maturities, but also at least it was mentioning

583
00:31:05,800 --> 00:31:07,560
Speaker 1: which just the Federal Reserve and that all the FED

584
00:31:07,640 --> 00:31:10,800
Speaker 1: didn't really buy high yield, they did buy some crossover names. Really,

585
00:31:10,880 --> 00:31:13,080
Speaker 1: just the fact that the FED was there, I think

586
00:31:13,120 --> 00:31:16,280
Speaker 1: eliminated tail risk to the corporate credit market. And so

587
00:31:16,800 --> 00:31:18,720
Speaker 1: whether or not this will be permanent, it is certainly

588
00:31:18,800 --> 00:31:20,960
Speaker 1: up for debate. But we do believe that from an

589
00:31:21,040 --> 00:31:24,280
Speaker 1: overall beta standpoint, um, you know, it means that you're

590
00:31:24,360 --> 00:31:27,080
Speaker 1: you're more comfortable investing in investing in the investment grade

591
00:31:27,120 --> 00:31:28,760
Speaker 1: market and a little bit in the aield market as well.

592
00:31:29,440 --> 00:31:31,560
Speaker 1: Matt bro I, I look at all this and I go,

593
00:31:32,160 --> 00:31:35,560
Speaker 1: is this two thousand six? Is this two thousand six?

594
00:31:37,200 --> 00:31:39,880
Speaker 1: It's not. It's it's two thousand one, just to be clear.

595
00:31:40,440 --> 00:31:44,680
Speaker 1: But it has some resemblances to it, but but not

596
00:31:44,840 --> 00:31:47,280
Speaker 1: really so two thousands six, two thousand seven, you had

597
00:31:47,320 --> 00:31:49,440
Speaker 1: the t x U l B OH just a few

598
00:31:49,480 --> 00:31:51,680
Speaker 1: weeks ago you had the medline LBO, and the medline

599
00:31:51,800 --> 00:31:55,080
Speaker 1: LBO it has about fifty equity so t x U,

600
00:31:55,160 --> 00:31:57,160
Speaker 1: I can't remember the exact number, it is around fifteen

601
00:31:57,240 --> 00:32:00,400
Speaker 1: percent equity, So you went from fifteen to fifty. So

602
00:32:00,520 --> 00:32:03,320
Speaker 1: there's a lot more equity um private equities having to

603
00:32:03,320 --> 00:32:05,320
Speaker 1: put up more more more equity into the deals to

604
00:32:05,320 --> 00:32:07,760
Speaker 1: get these deals done. They don't want to go through

605
00:32:07,800 --> 00:32:09,400
Speaker 1: t x U. T XU they made some money off

606
00:32:09,440 --> 00:32:10,520
Speaker 1: of but at the end of the day, you know,

607
00:32:10,600 --> 00:32:12,600
Speaker 1: the market wouldn't fund a deal like that today. I

608
00:32:12,680 --> 00:32:15,240
Speaker 1: really don't think they would. They did, however, fund a

609
00:32:15,360 --> 00:32:18,880
Speaker 1: five hundred million dollar micro strategy deal to buy bitcoin,

610
00:32:19,240 --> 00:32:21,400
Speaker 1: so you know, maybe that's a little different. I like

611
00:32:21,520 --> 00:32:23,840
Speaker 1: to say though, that there is a lot more prudency

612
00:32:23,880 --> 00:32:25,680
Speaker 1: in this market. There are people that are really not

613
00:32:25,840 --> 00:32:28,080
Speaker 1: going to make dumb decisions. I don't think on the

614
00:32:28,240 --> 00:32:30,600
Speaker 1: on the investor side of things, but they are being

615
00:32:30,680 --> 00:32:32,760
Speaker 1: forced to invest, and they are being forced to invest

616
00:32:32,800 --> 00:32:36,040
Speaker 1: at a rich evaluations, but not into bad companies, just

617
00:32:36,160 --> 00:32:38,080
Speaker 1: necessarily maybe not as much yield as they would like.

618
00:32:38,600 --> 00:32:40,800
Speaker 1: So where's the opportunity? I mean, you know, I know,

619
00:32:40,880 --> 00:32:44,120
Speaker 1: we're sixty forty in my portfolio, I mean John's portfolio.

620
00:32:44,160 --> 00:32:48,200
Speaker 1: Excuse me? If I got two percent and fixed income,

621
00:32:48,280 --> 00:32:51,320
Speaker 1: what do I do? Well? John is a really young guy,

622
00:32:51,400 --> 00:32:56,560
Speaker 1: so he doesn't really need a lot of good Yeah,

623
00:33:02,520 --> 00:33:04,960
Speaker 1: there is opportunities still in the reopening trade, where we're

624
00:33:05,000 --> 00:33:07,600
Speaker 1: seeing names like Boeing today get a large deal from

625
00:33:07,720 --> 00:33:10,239
Speaker 1: from United that they have some negative news out as well,

626
00:33:10,320 --> 00:33:12,120
Speaker 1: But for the most part, the reopening trade lives on

627
00:33:12,520 --> 00:33:14,960
Speaker 1: the reflation trade. You're calling, well, maybe not calling for

628
00:33:15,000 --> 00:33:17,600
Speaker 1: a hundred dollars there, Tom, But we do think that

629
00:33:17,960 --> 00:33:20,280
Speaker 1: that that that commodity prices go higher, and with that

630
00:33:20,680 --> 00:33:23,440
Speaker 1: there are certainly opportunities with the emerging market world as well.

631
00:33:23,520 --> 00:33:26,960
Speaker 1: So emerging markets um that that have more correlation to

632
00:33:27,760 --> 00:33:31,000
Speaker 1: commodity prices and asset prices overall going up um you know,

633
00:33:31,120 --> 00:33:33,800
Speaker 1: we think is good. So there are ways to make

634
00:33:33,920 --> 00:33:36,360
Speaker 1: money in the in the corporate market right now, particularly

635
00:33:36,400 --> 00:33:39,280
Speaker 1: in investment grade around the globe. But it's a lot

636
00:33:39,360 --> 00:33:41,160
Speaker 1: more selective and it's it's not the two thousand and

637
00:33:41,200 --> 00:33:43,040
Speaker 1: twenty trade of just riding the beta. You have to

638
00:33:43,160 --> 00:33:45,840
Speaker 1: really look under every stone to find to find value

639
00:33:45,840 --> 00:33:48,680
Speaker 1: out there. It's interesting, there's sort of contradictory messages here.

640
00:33:48,800 --> 00:33:51,040
Speaker 1: On one hand, you have to look under every stone

641
00:33:51,200 --> 00:33:54,200
Speaker 1: and be idiosyncratic and and and select securities. In the

642
00:33:54,280 --> 00:33:56,480
Speaker 1: other hand, it's a macro trade. I mean, at a

643
00:33:56,560 --> 00:34:00,760
Speaker 1: certain point, credit trades in tandem with treasuries rate full stop,

644
00:34:01,040 --> 00:34:03,880
Speaker 1: because ultimately it's whether the Fed comes in and backs

645
00:34:03,920 --> 00:34:09,719
Speaker 1: things and how duration sensitive some of these bonds have become. No, yes,

646
00:34:09,800 --> 00:34:12,360
Speaker 1: that's right, and so duration has really been the the

647
00:34:12,480 --> 00:34:14,360
Speaker 1: you know, the the key theme of the year. And

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00:34:14,480 --> 00:34:16,080
Speaker 1: you look up and and and you know, we don't

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00:34:16,120 --> 00:34:17,960
Speaker 1: have equity like returns this year. But if you look

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00:34:18,000 --> 00:34:20,120
Speaker 1: at most corporate bonds that they're essentially flat on the

651
00:34:20,160 --> 00:34:22,160
Speaker 1: ear in terms of total returns. So it hasn't been

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00:34:22,200 --> 00:34:24,920
Speaker 1: the disaster that many might have predicted um at the

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00:34:24,960 --> 00:34:26,600
Speaker 1: start of the year when we were seeing interest rates

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00:34:26,680 --> 00:34:29,200
Speaker 1: go higher. UM. So I would say, if the all

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00:34:29,239 --> 00:34:31,160
Speaker 1: eyes are on the Fed in terms of tapering, all

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00:34:31,200 --> 00:34:32,879
Speaker 1: eyes are on the Fed in terms of whether they're

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00:34:32,880 --> 00:34:35,520
Speaker 1: going to have lift off. Um, the foreigners continue to

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00:34:35,600 --> 00:34:37,600
Speaker 1: buy a lot of bonds. And if the Fed does

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00:34:37,719 --> 00:34:40,560
Speaker 1: lift off, that makes makes hedging costs go higher. If

660
00:34:40,600 --> 00:34:43,239
Speaker 1: hedging costs go higher, the foreign buyers will buy less.

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00:34:43,600 --> 00:34:45,479
Speaker 1: So to us, that's really the key thing to watch

662
00:34:45,600 --> 00:34:47,880
Speaker 1: is is when will the Fed hike because when they do,

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00:34:48,400 --> 00:34:51,000
Speaker 1: that will likely make it more expensive for foreigner buyers

664
00:34:51,040 --> 00:34:53,000
Speaker 1: and and and and less attractive to them to buy

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00:34:53,000 --> 00:34:55,680
Speaker 1: our our higher yielding bonds here versus their negative yielding

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00:34:55,680 --> 00:34:58,080
Speaker 1: bonds back home. Prey small funnel point them. Matt's going

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00:34:58,120 --> 00:35:00,120
Speaker 1: to catch up. Matt bro investa had a fe s

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00:35:00,200 --> 00:35:03,920
Speaker 1: investment cried, It's welcome back any time. This is the

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00:35:03,960 --> 00:35:08,600
Speaker 1: Bloomberg Surveillance Podcast. Thanks for listening. Join us live weekdays

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00:35:08,680 --> 00:35:12,040
Speaker 1: from seven to ten am Eastern on Bloomberg Radio and

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00:35:12,239 --> 00:35:16,040
Speaker 1: on Bloomberg Television each day from six to nine am

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00:35:16,560 --> 00:35:20,279
Speaker 1: for insight from the best in economics, finance, investment, and

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00:35:20,440 --> 00:35:26,920
Speaker 1: international relations. And subscribe to the Surveillance podcast on Apple podcast, SoundCloud,

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00:35:27,120 --> 00:35:30,680
Speaker 1: Bloomberg dot com, and of course, on the terminal. I'm

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00:35:30,760 --> 00:35:33,400
Speaker 1: Tom keene In. This is Bloomberg