WEBVTT - Bloomberg Surveillance October 15, 2024 0:00:00.120 --> 0:00:06.800 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.680 --> 0:00:15.480 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.720 with Lisa Bromwitz and Amrie Hortern. Join us each day 0:00:18.760 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.440 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.960 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.319 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:35.920 Terminal and the Bloomberg Business. 0:00:35.640 --> 0:00:37.320 App and with the Surrounded Table. 0:00:37.400 --> 0:00:41.360 Vishell Canduja of Morgan Stanley Investment Management vish Ow, good morning. 0:00:41.400 --> 0:00:42.400 It's good to see you morning. 0:00:42.680 --> 0:00:44.920 We've just had a big month of global easing, which 0:00:44.960 --> 0:00:47.440 you've recognized yourself. We've had a federal reserve cut by 0:00:47.440 --> 0:00:50.120 fifty basis points. We've had China begin to take on 0:00:50.200 --> 0:00:52.320 more of an easy posture. Is that a reason to 0:00:52.360 --> 0:00:53.640 buy bonds or sell them? 0:00:53.920 --> 0:00:56.440 I think after the visa, absolutely by them. I think 0:00:56.480 --> 0:00:59.120 at two fifty bus's points till twenty twenty five, I 0:00:59.160 --> 0:01:02.000 think it was a tough, tough slog there, and we 0:01:02.000 --> 0:01:05.160 were backing away from it. At this point. I think 0:01:05.360 --> 0:01:08.600 we think it's fair value at this point. But I 0:01:08.600 --> 0:01:10.880 think the market is getting a little bit carried away 0:01:11.680 --> 0:01:14.240 with the stimulus, as you pointed out, as well as 0:01:14.280 --> 0:01:17.000 the one or two good data points that have come out. 0:01:17.200 --> 0:01:18.400 Doesn't change the trend for us. 0:01:18.440 --> 0:01:20.319 Well, tell me what the trend is for you, because 0:01:20.319 --> 0:01:22.119 it's been very confusing for the rest of us. We've 0:01:22.120 --> 0:01:24.400 seen contradictory dansa across the board. When it comes to 0:01:24.440 --> 0:01:27.040 the jobs market. You can pick out the employment components 0:01:27.080 --> 0:01:29.800 of the m week, the labor differential not great and 0:01:29.840 --> 0:01:32.360 getting worse, or you could look to headline pay rolls 0:01:32.360 --> 0:01:34.840 at America and just say everything's okay. Unemployment is still 0:01:34.840 --> 0:01:37.040 close to four percent. What is it to worry about. 0:01:37.120 --> 0:01:37.880 What's the trend for you? 0:01:38.319 --> 0:01:41.240 This inflation is very intact for us. I think Kathy 0:01:41.319 --> 0:01:43.600 might mention in the previous slot as well. I think 0:01:43.640 --> 0:01:47.160 the data points that we are getting within inflation. Definitely 0:01:47.200 --> 0:01:49.440 the ones that are a little bit more volatile are 0:01:49.600 --> 0:01:52.520 showing up, which we don't think are going to persist 0:01:52.600 --> 0:01:54.520 for a long time, or we are a big component 0:01:54.560 --> 0:01:56.680 of shelter is going to drop off, as at least 0:01:56.720 --> 0:01:59.400 from the indicators that be track. So this inflation is 0:01:59.480 --> 0:02:04.280 very intact. Economy is still in that exuberant slash soft 0:02:04.360 --> 0:02:06.640 landing phase, so you see the growth perk up from 0:02:06.640 --> 0:02:09.400 time and again labor market being one component of that. 0:02:09.480 --> 0:02:12.160 We don't think that these cuts that they've announced, or 0:02:12.200 --> 0:02:15.960 they've started off with fifty basis points are anything to 0:02:16.000 --> 0:02:19.160 resuscitate an economy which is going into a recession. So 0:02:19.600 --> 0:02:22.799 these are recalibration cuts. They've used that word very very clearly, as. 0:02:22.639 --> 0:02:26.560 Well pause an economy that's going into recession. What signs 0:02:26.600 --> 0:02:29.160 are we seeing of any potential recession anywhere on the 0:02:29.160 --> 0:02:32.520 horizon base and everything that everyone's saying these companies included 0:02:32.720 --> 0:02:34.120 about how strong the consumer is. 0:02:34.320 --> 0:02:37.480 I think narrative shifts are so severe, and we've seen 0:02:37.520 --> 0:02:39.720 that since twenty twenty two. I think we saw the 0:02:39.720 --> 0:02:42.280 two one in fifty basis points priced in with two 0:02:42.960 --> 0:02:46.360 really tough NFP reports where we started to question whether 0:02:46.440 --> 0:02:50.600 these are because of labor pool increasing or people coming 0:02:50.639 --> 0:02:53.040 into the job force, or this is because of layoffs. 0:02:53.040 --> 0:02:55.399 And then I think the market got very tied up 0:02:55.840 --> 0:02:57.720 with that for probably about two and a half months, 0:02:57.720 --> 0:02:59.600 and now we are coming back into it with one 0:03:00.200 --> 0:03:03.239 very very strong labor report that comes out. So yes, 0:03:03.320 --> 0:03:06.560 consumer is strong. Underneath balance sheets are very strong. We 0:03:06.639 --> 0:03:09.640 invest in balance sheets, you have bondholders. One quick point 0:03:09.680 --> 0:03:12.440 also I would raise is this is the issue that 0:03:12.480 --> 0:03:15.240 people have if a big chunk of the economy is 0:03:15.280 --> 0:03:18.120 interest rate insensitive, which is because of the stimulus that 0:03:18.160 --> 0:03:20.839 you put in, and then you ensued a very low 0:03:20.840 --> 0:03:23.440 interest rate environment where all of us three finance said 0:03:23.440 --> 0:03:26.160 three percent thirty y are fixed, very similar to what 0:03:26.280 --> 0:03:26.960 Comcast you. 0:03:26.880 --> 0:03:28.560 Say all of us, all of us wish we had 0:03:28.600 --> 0:03:30.679 done that. Not all of us did. Some of us did, 0:03:30.960 --> 0:03:32.639 and some of us did, and ones around this time. 0:03:32.680 --> 0:03:33.560 I'm very happy. 0:03:33.360 --> 0:03:35.080 About it, and some people are pretty bitter about it. 0:03:35.120 --> 0:03:36.920 But I am wondering you actually are seeing a tick 0:03:37.000 --> 0:03:40.280 up in mortgage at least for financings as a results 0:03:40.360 --> 0:03:42.440 have how much things are coming down. The world that 0:03:42.480 --> 0:03:45.680 you're talking about with this binary risk of narrative shifts 0:03:46.200 --> 0:03:49.840 doesn't speak to a world where credit should be holding 0:03:49.880 --> 0:03:51.160 in as much as it is. 0:03:51.480 --> 0:03:53.160 Wouldn't you think if there was a. 0:03:53.160 --> 0:03:56.720 Risk that in particular high yal bonds should be just 0:03:56.800 --> 0:03:58.800 ticking up, sowing a little bit of a sign of 0:03:58.840 --> 0:04:01.960 concern rather than absolutely cratering when it comes to the 0:04:02.000 --> 0:04:05.240 extra spread that investors demand to own over very fair rates. 0:04:05.080 --> 0:04:06.720 Very fair we are trying to demand a little bit 0:04:06.760 --> 0:04:08.280 and we are getting priced out. So we are at 0:04:08.280 --> 0:04:10.920 the lowest point of high yell in our portfolios. For 0:04:10.960 --> 0:04:13.680 that one reason, I think if we slotted in the 0:04:13.720 --> 0:04:16.640 way of how we look at the world fundamentals, technicals, valuations, 0:04:16.720 --> 0:04:19.919 fundamentals are strong. You can take a few companies out 0:04:20.120 --> 0:04:23.360 of that picture who are edosyncratically going through issues. Right now, 0:04:23.800 --> 0:04:27.120 technicals are fiercely strong, and that is less of a 0:04:27.120 --> 0:04:29.200 spread buyer, more of a yield buyer that is coming 0:04:29.200 --> 0:04:32.800 into the market. Real yields are high, and yields are 0:04:32.960 --> 0:04:35.520 best predictor of total dons analyzed for the next three years. 0:04:35.600 --> 0:04:37.919 When we look at spreads, it spreads exclusively and we 0:04:38.000 --> 0:04:40.120 compare them to a different period and we say they 0:04:40.120 --> 0:04:42.839 are just as time as they work back then multi 0:04:42.880 --> 0:04:47.159 decade sides. How difficult different is the index now versus say, 0:04:47.279 --> 0:04:49.520 pre GFC, How different is this one? 0:04:49.880 --> 0:04:53.040 Much cleaner? Balance sheets are much much stronger. Even if 0:04:53.080 --> 0:04:56.560 growth flatlines from here at one to two percent real GDB, 0:04:57.080 --> 0:04:59.240 I think pop will be just fine. As coming back 0:04:59.279 --> 0:05:01.640 to that homeowner example, I think a lot of balance 0:05:01.680 --> 0:05:02.919 sheets can have connotations. 0:05:03.040 --> 0:05:05.120 So can I just ask an additional question please? And 0:05:05.120 --> 0:05:06.560 I know it's difficult and I don't expect you to 0:05:06.600 --> 0:05:10.160 have a precise answer, but typically historically three hundred basis 0:05:10.160 --> 0:05:12.960 points two fifty on high yield is super super sigh. 0:05:13.200 --> 0:05:15.200 Do you need to rethink that is a new number 0:05:15.240 --> 0:05:16.760 like two hundred one fifty? 0:05:16.880 --> 0:05:17.960 What is it? Could be? 0:05:18.200 --> 0:05:21.120 Absolutely could be if triple cs continue the carnage that 0:05:21.120 --> 0:05:22.880 they've been on probably over the last two and a 0:05:22.920 --> 0:05:25.320 half months. Here you just correctly, if you take out 0:05:25.360 --> 0:05:28.080 distress from high yield, it's another fifty basis points already 0:05:28.080 --> 0:05:31.080 there to your point around that low two hundreds, if 0:05:31.120 --> 0:05:35.280 you will. We think that spreads are very commensurate to 0:05:35.320 --> 0:05:37.960 the fundamentals and technicals we are going through. We could 0:05:37.960 --> 0:05:40.599 be tight and frustratingly tight for a long period of time, 0:05:40.680 --> 0:05:44.200 but we are not expensive at this point. Now. I'm 0:05:44.200 --> 0:05:46.599 going to second statement right after that is sure we 0:05:46.640 --> 0:05:48.880 are at the lowest amount of spread risks in our 0:05:48.920 --> 0:05:52.239 portfolios in a long time, highest quality, highest interest rate duration. 0:05:52.320 --> 0:05:55.919 Were explaining why steepeners. We don't think that volatility adjusted, 0:05:56.000 --> 0:05:58.479 you're getting paid for the spread risks that you're taking out. 0:05:59.080 --> 0:06:01.560 Triple B to double is the lowest and probably about 0:06:01.600 --> 0:06:04.880 two decades At this point. As a spread investor, I'm 0:06:04.920 --> 0:06:07.600 always looking for more premium. I need to get too paid, 0:06:08.240 --> 0:06:10.400 need to get paid for that volatility that I'm taking on. 0:06:10.680 --> 0:06:15.000 So for fixed income portfolios, I can still diversified, high quality, 0:06:15.080 --> 0:06:18.040 can still spit out probably five to seven percent total 0:06:18.160 --> 0:06:21.760 turn in the next three years analyze, I'm taking that 0:06:21.920 --> 0:06:25.240 probability bit higher versus going down below investment rate. 0:06:25.320 --> 0:06:27.039 When you take a step back, you said that the 0:06:27.080 --> 0:06:30.039 technicals are very strong for credit for bonds. Just in general, 0:06:30.080 --> 0:06:32.919 there's a flood of cash coming in. Where's that cash 0:06:33.000 --> 0:06:35.720 coming from. How much is coming from people who are 0:06:35.720 --> 0:06:38.039 waking up to the realization that they're not going to 0:06:38.080 --> 0:06:40.680 get Social Security or some of these other benefits when 0:06:40.680 --> 0:06:43.200 they're old and I need the income and they're going 0:06:43.279 --> 0:06:46.560 to need to really be invested and get something more reliable. 0:06:46.800 --> 0:06:49.600 Yeah. No, I think the lock and yield effect is 0:06:49.720 --> 0:06:52.760 very compelling at this point. I think the except for 0:06:52.800 --> 0:06:54.839 the very front end of zero to two, zero to 0:06:54.839 --> 0:06:56.760 three year part of the curve, where I think the 0:06:56.800 --> 0:07:00.080 sofa should adjust as the fact comes down from the 0:07:00.120 --> 0:07:04.119 lofty levels. I think every other part of fixed income 0:07:04.160 --> 0:07:07.080 curves have already adjusted to be steeper. So the roll 0:07:07.160 --> 0:07:10.200 down the traditional way of earning money within fixed income, 0:07:10.520 --> 0:07:12.840 and sometimes the cliched way of how we put it 0:07:12.880 --> 0:07:16.000 is the dual mandate of fixed income has high probability 0:07:16.040 --> 0:07:18.600 to be met for that long term saver that you 0:07:18.640 --> 0:07:21.120 have income toll return, and then you have the negative 0:07:21.160 --> 0:07:23.720 correlation to risky assets, which is back as inflation is 0:07:23.760 --> 0:07:24.200 coming down. 0:07:24.360 --> 0:07:26.679 How do you hedge against the potential for some sort 0:07:26.720 --> 0:07:30.240 of geopolitical disruption and oil price is surging. I mean, 0:07:30.280 --> 0:07:33.760 there's sort of this counterintuitive connection between bonds and oil 0:07:33.840 --> 0:07:36.520 prices that we've seen over the past few months. How 0:07:36.600 --> 0:07:39.360 much are you really planning for a scenario of that type. 0:07:39.480 --> 0:07:43.440 I think it's tough to like massively shift portfolio positioning 0:07:43.600 --> 0:07:46.280 for that one. I think one way that we are 0:07:46.320 --> 0:07:50.640 trying to adjust portfolios is that your overweight risk were 0:07:50.680 --> 0:07:54.320 overweight credit risk not as much though over the last 0:07:54.360 --> 0:07:56.080 like three years, if you will, so we are at 0:07:56.080 --> 0:07:58.880 the lowest point of our overweight, you still have an 0:07:58.880 --> 0:08:02.680 overweight poster that if this geopolitical tensions do fled up 0:08:02.720 --> 0:08:05.160 even further, which we had a few signs in the 0:08:05.240 --> 0:08:07.400 last like two to three weeks that it could have 0:08:08.080 --> 0:08:11.200 that we have enough potential to add below investment grade 0:08:11.280 --> 0:08:15.240 risk which will sell off and react to these geopolitical tensions. 0:08:15.280 --> 0:08:17.360 And then the back end of the treasury curve is 0:08:17.360 --> 0:08:20.760 one more less geopolitical, more deficit situation that we are 0:08:20.840 --> 0:08:21.920 significantly underweight. 0:08:22.000 --> 0:08:23.520 Are you worried about the deficit? 0:08:24.520 --> 0:08:28.640 We are nauseous about it in terms of the biggest 0:08:28.720 --> 0:08:31.160 post war. Again, we can throw out stats all day long, 0:08:31.240 --> 0:08:34.000 but I think the weight affects is you need to 0:08:34.040 --> 0:08:36.360 grow out of it, or you need to do something 0:08:36.400 --> 0:08:38.800 as some of the European countries are already getting onto, 0:08:39.040 --> 0:08:43.480 is be physically responsible and going through some tough time. 0:08:43.600 --> 0:08:46.120 Do you actually think Washington would do something very tough? 0:08:46.280 --> 0:08:50.280 I think that is one thing that they are deficits 0:08:50.280 --> 0:08:54.200 in China is one thing. How common those two campaigns 0:08:54.240 --> 0:08:55.880 are on and how aligned they are. 0:08:56.080 --> 0:08:58.679 Unfortunately, at this point, if the deficit is one of 0:08:58.720 --> 0:09:02.160 your biggest concerns, especially on a US election, does it well? 0:09:02.200 --> 0:09:03.720 I guess what matters more for you is probably the 0:09:03.720 --> 0:09:04.760 composition of Congress. 0:09:04.760 --> 0:09:05.800 How are you thinking about that? 0:09:06.000 --> 0:09:07.960 I think the bas case, I think they're looking at 0:09:08.000 --> 0:09:10.640 the same numbers that you guys report on the dominal 0:09:10.679 --> 0:09:15.320 etcector as well. Uh, dead heat. But then you know 0:09:15.360 --> 0:09:18.520 centered and and and house would be split, which is 0:09:18.559 --> 0:09:21.120 actually not a bad thing for for deficits. Might be 0:09:21.320 --> 0:09:24.800 we might be looking at a Goldilocks, even treacherous goldilocks 0:09:24.800 --> 0:09:27.000 stable scenario from from. 0:09:27.120 --> 0:09:30.240 That's the least pan out, the least bud outcomes click Congress, 0:09:30.240 --> 0:09:33.080 because they won't make it too much worse basically, but 0:09:33.120 --> 0:09:34.720 not fix it. 0:09:34.720 --> 0:09:37.120 It's good to see you. I appreciate it. Thank you, Michelle. 0:09:37.480 --> 0:09:50.840 To that Morgan Stanley, sarahunt Vampine Saxon would sank with 0:09:50.880 --> 0:09:54.000 earning multiples of robust levels. Any faltering in the growth 0:09:54.040 --> 0:09:57.440 story could have negative consequences, even if it is more 0:09:57.480 --> 0:10:00.760 of a stable outcome versus a deterioration. Ernie's growth is 0:10:00.800 --> 0:10:03.560 key for equities. Sarah john Us Now for more, Sarah 0:10:03.600 --> 0:10:05.360 Goo Mornick, good morning. Good to see what you make 0:10:05.400 --> 0:10:07.680 of the banks so far. Big week of gains last 0:10:07.720 --> 0:10:09.720 week off the Bank of JP, Morgan and wels Fargo 0:10:09.760 --> 0:10:12.280 not just from Bank of America. About twenty minutes ago. 0:10:12.679 --> 0:10:14.400 I think that that is a good start, and I 0:10:14.400 --> 0:10:16.800 think that that is obviously been heralded fairly well, and 0:10:16.880 --> 0:10:18.280 you saw the other financials. 0:10:18.320 --> 0:10:20.120 Besides, if you're Morgan move higher on Friday. 0:10:20.360 --> 0:10:22.400 I think to your earlier discussion, it's going to be 0:10:22.480 --> 0:10:24.760 very interesting to see how the credit companies do or 0:10:24.800 --> 0:10:25.920 how the banks do. 0:10:25.880 --> 0:10:27.920 With the lower credit score folks, because I. 0:10:27.880 --> 0:10:30.440 Think that that's where you're seeing much more pressure and 0:10:30.520 --> 0:10:32.120 pain than you are seeing in the upper end. 0:10:32.320 --> 0:10:34.120 So it's going to see. We'll see how that goes. 0:10:34.120 --> 0:10:35.800 But I think that the fact that you're seeing enough 0:10:35.840 --> 0:10:37.679 spending and that the consumer looks good and even if 0:10:37.720 --> 0:10:39.520 you're looking for it, you're having trouble finding it. 0:10:39.559 --> 0:10:40.280 I think that's good news. 0:10:40.400 --> 0:10:43.120 Sets up retail sales on Thursday as well. Any reason 0:10:43.200 --> 0:10:45.320 to think that we come in soft on retail sales 0:10:45.360 --> 0:10:46.599 given where the consumer. 0:10:46.320 --> 0:10:49.520 Is, I think that's hard to see right now, But 0:10:49.559 --> 0:10:52.280 I mean you might have some areas of softness, but 0:10:52.320 --> 0:10:54.920 I think in general people are still spending fairly well. 0:10:54.960 --> 0:10:56.520 It's too early to catch up for all. 0:10:56.440 --> 0:10:59.040 The economic disruption that the hurricanes had, so I think 0:10:59.040 --> 0:11:01.280 that you probably are going to see reasonably good numbers. 0:11:01.320 --> 0:11:02.920 So this is what a lot of people are expecting. 0:11:03.000 --> 0:11:05.160 That the consumers have plenty of money, and that any 0:11:05.200 --> 0:11:08.320 degree of weakening, even in the savings rate, has been 0:11:08.400 --> 0:11:11.560 really tampered down by some of the recent revisions. 0:11:12.000 --> 0:11:14.080 What's stopping you from just going full bull? 0:11:15.040 --> 0:11:16.880 Well, I think there's still a lot of things that 0:11:16.920 --> 0:11:19.319 we don't know. There's a lot of uncertainty out there. 0:11:19.320 --> 0:11:21.680 We've got an election coming up. Yes, it seems like 0:11:21.720 --> 0:11:23.360 things have calmed down a little bit in the Middle East, 0:11:23.400 --> 0:11:25.559 But is that calm going to remain And just because 0:11:25.559 --> 0:11:28.520 we've got reports of that doesn't necessarily mean that we 0:11:28.600 --> 0:11:30.160 know what the outcome is going to be yet. So 0:11:30.240 --> 0:11:32.520 I think that there is enough out there that you 0:11:32.559 --> 0:11:35.000 could be concerned about. And I think that you have 0:11:35.880 --> 0:11:38.160 next year a big expectation in earnings growth, so you 0:11:38.200 --> 0:11:41.000 want to see that economy continue to roll along fairly nicely. 0:11:41.040 --> 0:11:43.520 And I think that there's, like I said, there's enough out. 0:11:43.400 --> 0:11:45.599 There that that you could get yourself upset about or 0:11:45.600 --> 0:11:48.160 scared about, including the deficits and things that we're not 0:11:48.200 --> 0:11:49.120 talking about right now. 0:11:49.240 --> 0:11:51.960 But at the moment that's not the focus. So right now, 0:11:52.280 --> 0:11:53.360 you know that's good frequities. 0:11:53.400 --> 0:11:56.000 You basically describing the story of my life. I can 0:11:56.000 --> 0:11:57.520 go home and worry about a lot of stuff, but 0:11:57.559 --> 0:11:59.679 you come in the next day and nobody really seems 0:11:59.679 --> 0:12:02.040 to care about it. I am wondering whether we are 0:12:02.160 --> 0:12:06.000 seeing the risk getting skewed to the upside in terms 0:12:06.000 --> 0:12:08.160 of economic growth. We were talking to Max Kattner, who 0:12:08.200 --> 0:12:10.720 was talking about the real tail risk to him is 0:12:10.760 --> 0:12:14.920 actually an upside to inflation and a re ignition of 0:12:14.960 --> 0:12:16.920 some of the price increases that we saw. That this 0:12:16.960 --> 0:12:21.280 could actually create the doomsday scenario that could actually stop 0:12:21.360 --> 0:12:23.800 some of the euphoria that we're seeing in equity markets. 0:12:24.280 --> 0:12:27.040 Is that the risk to hedge right now, given the 0:12:27.160 --> 0:12:29.800 lack of visibility of any other risks, particularly with respect 0:12:29.840 --> 0:12:31.400 to the consumer, I think it's. 0:12:31.280 --> 0:12:31.839 A big issue. 0:12:31.880 --> 0:12:33.480 I think the fact that oil prices have come down 0:12:33.559 --> 0:12:36.200 so sharply that helps a little bit on the inflation front. 0:12:36.240 --> 0:12:37.920 But I think that that's one of the areas that 0:12:38.600 --> 0:12:41.280 if you see you saw an upward CPI print just 0:12:41.320 --> 0:12:45.200 a little bit and all the directionality shifted, and is 0:12:45.240 --> 0:12:46.000 it a full. 0:12:45.840 --> 0:12:47.040 Shift, is it a small shift. 0:12:47.240 --> 0:12:48.880 I think that is one of the bigger risks because 0:12:48.880 --> 0:12:51.240 that's going to keep the FED from acting as decisively 0:12:51.280 --> 0:12:52.880 as it could if you have any weakness in the 0:12:52.960 --> 0:12:53.480 labor market. 0:12:53.520 --> 0:12:55.839 So what do you want to be in equities right now? 0:12:56.000 --> 0:12:57.160 What's your favorite place to big? 0:12:57.679 --> 0:12:59.440 I think you want to be sort of across the board, 0:12:59.440 --> 0:13:01.200 which sounds really boring and annoying. 0:13:01.240 --> 0:13:02.360 Is that at least is equal weight. 0:13:02.800 --> 0:13:03.920 Well, it's I. 0:13:03.880 --> 0:13:05.480 Don't think you want to ignore the equal weight the 0:13:05.520 --> 0:13:07.240 way that you did the last time. Right so, before 0:13:07.240 --> 0:13:09.280 it was all about technology stocks, and if you underweight 0:13:09.320 --> 0:13:11.760 technology stocks, you were underperforming really badly. I think at 0:13:11.760 --> 0:13:15.000 this point the diversity and the fact that you need technology, 0:13:15.000 --> 0:13:16.440 but you also want to see what else is going 0:13:16.520 --> 0:13:18.280 on in the economy. I think that's really come back, 0:13:18.600 --> 0:13:20.200 and I think that that's why you want to be 0:13:20.520 --> 0:13:22.520 somewhat across the board as opposed to having all your 0:13:22.520 --> 0:13:24.000 eggs and the technology. 0:13:23.480 --> 0:13:25.199 Side is a theme that you want to run with. 0:13:25.400 --> 0:13:27.040 This is what my Wilson and Molke and Stanley was 0:13:27.040 --> 0:13:28.920 talking about on the show that we moved from GLP 0:13:29.040 --> 0:13:31.480 ones to AI, this big and video move over the 0:13:31.559 --> 0:13:32.160 last few years. 0:13:32.240 --> 0:13:33.760 Is there another theme you want to run with the 0:13:33.840 --> 0:13:34.600 works right now? 0:13:35.440 --> 0:13:37.920 I think that it's good to understand what is going 0:13:37.920 --> 0:13:39.559 on with the matic investing. I think that what you're 0:13:39.559 --> 0:13:41.959 seeing with the European carmakers right now is they're saying, hey, 0:13:41.960 --> 0:13:43.240 hang on a second, we're not going to be able 0:13:43.240 --> 0:13:44.600 to go full ev in ten years. 0:13:44.760 --> 0:13:45.640 That's not going to happen. 0:13:45.640 --> 0:13:47.480 I think understanding the fact that you're going to have 0:13:47.520 --> 0:13:49.840 an and on the energy front is going to be important. 0:13:50.040 --> 0:13:52.000 I think it's important on a thematic sense to look 0:13:52.040 --> 0:13:54.400 at companies that have continues to get balance sheets and 0:13:54.400 --> 0:13:56.960 can really generate cash, because that's what's going to be 0:13:57.240 --> 0:14:00.160 more problematic. Even if rates don't come down dramatically but 0:14:00.200 --> 0:14:02.079 stay a little bit higher, you're going to start to 0:14:02.120 --> 0:14:04.160 see some of those companies that can't survive on their 0:14:04.200 --> 0:14:06.440 own have more problems. And it hasn't really been an 0:14:06.440 --> 0:14:09.200 issue yet, and credit credits spreads are really tight. But 0:14:09.280 --> 0:14:12.080 I think that focusing on companies that are able to 0:14:12.120 --> 0:14:14.360 do things like buyveck their shares and paid dividends is 0:14:14.360 --> 0:14:15.720 going to continue to be very helpful. 0:14:15.800 --> 0:14:17.760 You mentioned the US election in your notes. You talk 0:14:17.800 --> 0:14:21.120 about the political risk of volatility for equities. What happens 0:14:21.120 --> 0:14:24.080 when we don't know the outcome for potentially days or weeks. 0:14:24.960 --> 0:14:26.840 I would not like to see that happen. I think 0:14:26.880 --> 0:14:28.880 that I don't think markets would like to see that happen. 0:14:28.960 --> 0:14:30.960 I think if it looks like any kind of protracted fight, 0:14:31.000 --> 0:14:32.080 I don't think that that's going. 0:14:32.000 --> 0:14:33.720 To be healthy for equity markets. 0:14:33.760 --> 0:14:36.560 But at the same time, we're almost in new It 0:14:36.640 --> 0:14:39.000 is not the right word, but we have had problems before, 0:14:39.240 --> 0:14:41.120 and we have gotten through them so to the extent 0:14:41.160 --> 0:14:43.920 that we've had challenges, and yet we all come back 0:14:43.920 --> 0:14:46.240 to a point where it's there is an acceptable answer. 0:14:46.480 --> 0:14:48.080 I don't think it's as bad as it could be, 0:14:48.120 --> 0:14:49.520 but I do not think that equity. 0:14:49.240 --> 0:14:50.640 Markets would like that very much at all. 0:14:50.680 --> 0:14:53.200 But are they even pricing in this probability right now? 0:14:53.280 --> 0:14:55.160 I do not think that. No, I don't think so. 0:14:55.200 --> 0:14:57.040 I think that they're not even pricing in a probability 0:14:57.040 --> 0:14:58.320 of a sweep of one side or the other. 0:14:58.480 --> 0:15:00.800 I think they're still pricing in a probability of a mixed. 0:15:00.640 --> 0:15:03.600 Government because that's generally better for equities because things don't 0:15:03.600 --> 0:15:05.840 move as fast, right, you can't make us changes as quickly, So. 0:15:05.800 --> 0:15:09.240 The equity market is pricing in what they would like 0:15:09.320 --> 0:15:11.840 to be the outcome, not potentially what is the going 0:15:11.880 --> 0:15:12.600 to be the outcome. 0:15:13.360 --> 0:15:15.640 Yeah, that's very equity market like though, isn't it. 0:15:15.640 --> 0:15:17.520 I mean, isn't that what equity markets do. It's what 0:15:17.560 --> 0:15:18.880 do we want to happen. We're going to try to 0:15:18.880 --> 0:15:20.240 telegraph that and make it happen. 0:15:20.440 --> 0:15:22.360 You know, if we keep moving this way, maybe thus 0:15:22.400 --> 0:15:22.800 it will be. 0:15:22.880 --> 0:15:25.440 So we are deep in the heart or getting to 0:15:25.480 --> 0:15:28.360 the heart of earning season A. Which sector are you 0:15:28.440 --> 0:15:29.960 most interested to hear from? 0:15:30.320 --> 0:15:31.720 We've already heard from some of the banks. 0:15:31.720 --> 0:15:33.360 We're going to be done with basically the big bank 0:15:33.400 --> 0:15:37.080 earnings by the end of tomorrow. Which really will be 0:15:37.560 --> 0:15:40.040 the company or slew of companies that give you the 0:15:40.040 --> 0:15:42.840 best sense of whether people are a little bit over 0:15:42.880 --> 0:15:44.240 their skis in terms of risk. 0:15:45.560 --> 0:15:47.720 If you think about what's going to drive what we 0:15:47.760 --> 0:15:49.640 think about the consumer, you're going to be looking on 0:15:50.160 --> 0:15:52.160 all the consumer side stuff. But if I think about 0:15:52.200 --> 0:15:54.000 the entire economy, I want to hear what the industrials 0:15:54.040 --> 0:15:55.200 have to say, and I want to see what they 0:15:55.240 --> 0:15:56.960 have to say about margins, what they have to say 0:15:56.960 --> 0:16:00.160 about labor costs, material costs, because that's going to set 0:16:00.240 --> 0:16:02.160 us up for twenty twenty five. And that's I think 0:16:02.200 --> 0:16:04.280 the big question is, like, Okay, we've seen some really 0:16:04.320 --> 0:16:06.600 good earnings growth in twenty twenty four, We're expecting more 0:16:06.640 --> 0:16:08.800 earning growth in twenty twenty five. Do we have the 0:16:09.040 --> 0:16:12.400 underpinning ability to do that and to get those earnings through? 0:16:12.400 --> 0:16:14.920 Because if we do, then the bullishness is not wrong. 0:16:15.000 --> 0:16:16.760 But if you're starting to see cracks in that and 0:16:16.800 --> 0:16:19.160 you saw individual is that intiosyncratic? 0:16:19.240 --> 0:16:21.120 Is Nike having a problem because Nike's having a problem. 0:16:21.160 --> 0:16:22.040 Is this having a problem. 0:16:22.400 --> 0:16:25.320 If we see broader problems like that, I think that 0:16:25.400 --> 0:16:26.680 then the question starts. 0:16:26.440 --> 0:16:27.760 To come what's happening next year? 0:16:28.120 --> 0:16:31.240 If you don't and you see much more stability and 0:16:31.280 --> 0:16:33.080 you see companies saying, hey, you know what, we've really 0:16:33.080 --> 0:16:34.920 got to handle on these costs and we're able to 0:16:34.960 --> 0:16:37.480 push prices just a little just enough to keep margins 0:16:37.480 --> 0:16:39.120 in good shape or growing a little bit, I think 0:16:39.120 --> 0:16:40.160 that's going to be important. 0:16:40.240 --> 0:16:42.000 Is there any sector that you're just completely avoiding? 0:16:43.560 --> 0:16:45.280 Not at the moment, but I think that there are 0:16:45.280 --> 0:16:47.560 places where you want to be careful and you're always 0:16:47.560 --> 0:16:51.120