Speaker 1: This is Bloomberg surveillance. We don't feel that we're necessarily
Speaker 1: on the cusp of a recession. Business is okay and
Speaker 1: pretty good in some places. Because the FETs kept raped
Speaker 1: down here at zero for so long, it's distorting how
Speaker 1: people finance themselves. What happens in the market is it
Speaker 1: only looks at the positives, and it interprets everything positively
Speaker 1: as long as it can, and then it gives up
Speaker 1: the ghost and it flips one eighty. Bloomberg Surveillance your
Speaker 1: link to the world of economics, finance, and investment. On
Speaker 1: Bloomberg Radio. Good Morning everyone, Michael McKee and Tom Keene
Speaker 1: Bloomberg Surveillance worldwide, indeed nationwide on Bloomberg twelve, Boston, Bloomberg
Speaker 1: eleven three oh New York, home of the New York Mets,
Speaker 1: Bloomberg FM, Washington and Baltimore, Good Morning, Baltimore. Orioles ascended
Speaker 1: that according to minty vesuji Ace Orioles viewpoint here at
Speaker 1: Bloomberg and of course Bloomberg nine sixty the Bay Area
Speaker 1: as well, San France, I had no what the giants
Speaker 1: are doing. I've got to get giants have won the
Speaker 1: World Series the last three even years. So there is
Speaker 1: some thought that just that coincidence alone, aside from the
Speaker 1: fact that they have players, might might push them forward.
Speaker 1: We're gonna talk to the Clayton Kershaw of Equity Investments.
Speaker 1: Douglas Cast to join us here momentarily. Bloomberg Surveillance. Much
Speaker 1: of my con RESUDC accounting tax advisory. To minimize risk
Speaker 1: and capture value in private equity, you need cone residuct
Speaker 1: or forward thinking creates results. Find out how a cone
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Speaker 1: I c K. It's gorgeous February morning. The sun is up,
Speaker 1: it's staying up longer. It's a good time to speak
Speaker 1: to Douglas Cast of Seebers. Doug, good morning, Pictures and
Speaker 1: catches last week. I know it's like a good thing
Speaker 1: in in America. UM let's frame Doug right now within
Speaker 1: pictures and Catchers. Obviously l A is spending more money
Speaker 1: than anyone. That's the one way that in baseball. Where's
Speaker 1: the one way that you are a feared of right now?
Speaker 1: In the equity markets, I would um, I think we're
Speaker 1: in a in a in a very difficult and confusing period.
Speaker 1: Um I mentioned to you in a memo to you
Speaker 1: and Lee the producer, that UM, I was at a
Speaker 1: James Tell a concert of all places at Donald Trump's
Speaker 1: Morrow Largo House in Palm Beach on Saturday night, and
Speaker 1: he was he was singing Fire and Rain and invoked
Speaker 1: to me the obviously the Robert Frost poem Fire and Rain,
Speaker 1: which discusses the familiar question about the fate of the
Speaker 1: world whether it's more likely to be destroyed by fire ice.
Speaker 1: But I got back to a famous memo that our
Speaker 1: mutual friend Barton, the late Barton Biggs Road of Coal
Speaker 1: fire in I think it's time to fear the ice. Well,
Speaker 1: we are in a period of substandard economic and tempted
Speaker 1: profit growth, and that's our destiny. Sum. We have am
Speaker 1: and a broken market mechanism which is dominated by leverage
Speaker 1: ets and by these machines and algos who are agnostic
Speaker 1: to balance sheets, private market value and income statements. So
Speaker 1: we get this market would note what I call no
Speaker 1: memory from day to day. Um, These investment strategies of
Speaker 1: mass destruction tend to exaggerate short term market moves like
Speaker 1: we've experienced in January to the downside, upside and now
Speaker 1: today to the upside. So I'm I'm basically fearful that
Speaker 1: we're in um um. You know, we have this upward
Speaker 1: reevaluation of multiples between O nine and to fifteen, and
Speaker 1: I think that the recent rerating of stocks lower theems
Speaker 1: to reflect the recognition that profits too, will be lower
Speaker 1: for longer. The critics Doug will say, you go short,
Speaker 1: you go along, you move in and out. Tell us
Speaker 1: where you are right now and what it would suffice
Speaker 1: the frank if that's the last line of the Robert
Speaker 1: Frost poem, and what would suffice to bring you forward
Speaker 1: to a new direction? Um. I would be more optimistic
Speaker 1: if I had a sense that the secular deterioration and
Speaker 1: growth prospects um um uh morphed into a more rapid
Speaker 1: period of economic growth at our dependency upon monetary policy
Speaker 1: makers are central bankers to stimulate self sustaining growth and
Speaker 1: escape philosophy velocity UH were successful, and I just don't
Speaker 1: see it. So I am modestly bullish near term, but
Speaker 1: embarish into media term. I expect the SMP to decline
Speaker 1: to a low double digit percentage this year. I'm currently
Speaker 1: to answer your question positioned only slightly net short, preferring
Speaker 1: to see a more rapid build up an optimistic investor
Speaker 1: sentiment before expanding my short exposure. It's interesting to note
Speaker 1: that a bunch of the investor surveys came out and
Speaker 1: market bain bowls remain at very low levels. The consensus
Speaker 1: and um of of bears actually rose last week, which
Speaker 1: is bullish for the market. As a contrarian, would it
Speaker 1: be I think everybody can agree we're not going to
Speaker 1: see the fiscal policy action that the world is calling for.
Speaker 1: So would it be better if central banks just sort
Speaker 1: of shut up and got the heck out of the way,
Speaker 1: Because yeah, I think, I think, Mike, it would have
Speaker 1: been much better if we did this a year ago
Speaker 1: at first of all, if they stopped easing a year
Speaker 1: ago and um and basically let the let the market
Speaker 1: have have natural price discovery as opposed to this artificiality
Speaker 1: and you know machines that are um um um and
Speaker 1: algorithms which are moved by the next announcement with regard
Speaker 1: to drag or the intention to stay lower for longer.
Speaker 1: It's just not a natural sequence of events. And I
Speaker 1: think that this whole thing has led up that I
Speaker 1: think the recent market weakness reflects the loss of confidence
Speaker 1: in all central bankers and concerns that monetary policy in
Speaker 1: the US has lost its effectiveness and or has pulled
Speaker 1: forward corporate sales and profits of economic activity. I call
Speaker 1: this the AHA moment. It's it's not a market friendly
Speaker 1: moment for valuations. How do you filter out the noise? Then,
Speaker 1: um As Richard Bernstein, you wrote a great book called
Speaker 1: Navigating the Noise, which which I really recommend. It's tough.
Speaker 1: I just think it's where it's really tough, Mike and Thomas.
Speaker 1: For the buying whole crowd. It's easy for the traders
Speaker 1: if you approach the market in a kind of emotional
Speaker 1: list way, buying the stream dips, selling or shorting the
Speaker 1: extreme bouts of your four and we've seen four or
Speaker 1: five of those of consequence in the year. So I
Speaker 1: think the odds of a recession on mounting. But I
Speaker 1: want to add an important point I think that was
Speaker 1: made on Bloomberg on Surveillance last week. It's important to
Speaker 1: note that a precondition for a bear market is not
Speaker 1: necessarily a recession. Bear markets can occur even if the
Speaker 1: US fails to fall into recession. It happened in nineteen
Speaker 1: sixty two, sixty six, and eighty seven and eight. I
Speaker 1: used to work with a guy when I was at Putnam.
Speaker 1: When I graduated Wharton called Wally Deemer, who was a fantastic,
Speaker 1: a legendary technical analyst, and he once said, you don't
Speaker 1: buy GDP futures, you buy SMP futures. Yeah. That's extremely well,
Speaker 1: said Doug. I I saw the Martian Uh the other day.
Speaker 1: It really, really really thought was an excellent effort. And
Speaker 1: as Matt Damon says in the middle of the movie,
Speaker 1: let's science this. You are known for being an adult
Speaker 1: about sciencing your belief what's Doug casts science right now.
Speaker 1: But my thocts is to be is to be UM basically,
Speaker 1: to reduce gross exposure in an uncertain, volatile, and unpredictable period.
Speaker 1: There are times to play and there's times, as Warren
Speaker 1: Buffett says to you know, to have your hands on
Speaker 1: you know, UM quietly. So hard hard. It's hard because
Speaker 1: of the aforementioned discussion of these um um weapons of
Speaker 1: financial market destruction, the leverage ETFs and UM, the quant strategies,
Speaker 1: gamma hedging, risk parity trading, that that worship at the
Speaker 1: altar of price momentum. They they sent they tend to
Speaker 1: exaggerate your term market confused investors, They send false market messages,
Speaker 1: and importantly, they blemished the value of stock charts and
Speaker 1: technical analysis. Okay, I'll go with all that you now,
Speaker 1: but what I want to know for traders, and this
Speaker 1: is not what we do in surveillance a lot we
Speaker 1: do more long term investment. But Mr Cass, what I
Speaker 1: want to know is in the middle of reminiscence of
Speaker 1: a stock operator, like you know, you're the only ones
Speaker 1: still alive. It was there when the book is written.
Speaker 1: But there's a point where the guy just says, I'm
Speaker 1: going to Florida. Where I'm in Florida, I know, but
Speaker 1: pulling pulling away from the market actively. Yeah, but there's
Speaker 1: a point I'm trying to capture alpha by exploiting, as
Speaker 1: they said, in an unemotional way, the gyrations of the market,
Speaker 1: which are random and unpredictable. Are you clearly people aren't
Speaker 1: fastible enough and they should just sit on their hands.
Speaker 1: Are you at a point where it's so uncertain or
Speaker 1: convoluted to the upsilon so high that you just say
Speaker 1: I can't do this and you sit off to the
Speaker 1: sidelines for a while. I think that's the best strategy
Speaker 1: for the average investors. Boring, it's boring. You have a
Speaker 1: lot of you'll have a lot of silence on market. No, No,
Speaker 1: we don't want that. We don't want that, but I
Speaker 1: think it's important advice. We're gonna come back with Doug
Speaker 1: cass on all the rage right now, financial engineering, which
Speaker 1: is out there, use of cash and you know, someone
Speaker 1: what the actives are doing here recently. But I really
Speaker 1: want to talk to him about financial engineering America Belli says,
Speaker 1: give me back the money, thank you. A lot of
Speaker 1: other people say there should be this moral high ground
Speaker 1: of using it for other sources like investment, maybe actually
Speaker 1: creates jobs as well. We'll return with Doug cass of
Speaker 1: Sea Breeze investment, Futures up twenty two, jol futures up.
Speaker 1: All right, let's check in with John Tucker and get
Speaker 1: the latest world in national news. Well, Michael and Tom.
Speaker 1: With Jeff Bush's departure from the presidential race, Saturday, fundraisers
Speaker 1: are facing the question pick another side or retreat. Most
Speaker 1: most loyalist content at Sunday said they were preparing to
Speaker 1: support Marco Rubio or no one in particular. Apple CEO
Speaker 1: Tim Cook has jumped back into the prey over FBI
Speaker 1: demands at the company help hack a locked IPO used
Speaker 1: by the shooter, you know, San Bernardino attack. In an
Speaker 1: early morning email to employees, Cook says the government should
Speaker 1: withdraw its demanded. The emerging legal fight is sparked a
Speaker 1: debate on government power, privacy, digital rights, public safety and security.
Speaker 1: An epic chair and draped in black, is greeting Supreme
Speaker 1: Court justices meeting today for the first time since the
Speaker 1: death of Justice and Sinan Scalia. The remaining a justice
Speaker 1: is resumed work today. Scalia's chair will remain as a
Speaker 1: tribute until next month. Global News twenty four hours a day,
Speaker 1: powered by a twenty jouralists more than one fifty news
Speaker 1: bureaus around the world. I'm John, Tucker, Michael and Tomas John.
Speaker 1: Thanks so much coming up on use of cash, Doug
Speaker 1: Cass really looking forward to that next Bloomberg's surveillance. Good morning.
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