Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Lisa Shellett has been
Speaker 1: around the black fourteen fifteen times. She was fourteen years old,
Speaker 1: she was at Alliance Bernstein working for Sandy Bernstein years ago.
Speaker 1: Drives a ship at Morgan Stanley. What I love about
Speaker 1: your note is you say, get over it. It's a
Speaker 1: complex situation. How do you sustain an investment plan given
Speaker 1: legitimate complexity.
Speaker 2: I think you can't sustain one plan. You can't be anchored.
Speaker 2: We're our watchword right now is hyper vigilance. One of
Speaker 2: the things that has been very interesting to us that
Speaker 2: has differentiated twenty twenty six from you know, really the
Speaker 2: first three years of this bull market has been underneath
Speaker 2: the surface of the index. We've had extraordinary dispersion of
Speaker 2: individual stock performance. So if you're a stock picker, which
Speaker 2: I grew up being and haven't really been able to
Speaker 2: do for the past fifteen seventeen years, this is you know, Christmas,
Speaker 2: and there's lots and lots of things to do below
Speaker 2: the surface, and so hypervigilance is one way to plan.
Speaker 2: But I think the second element of this tom is
Speaker 2: that you know, we're marveling at how little risk premia
Speaker 2: is really being priced into this market given the complexity.
Speaker 2: I mean, not to you know, venture into hyperbole, but
Speaker 2: you know, this is a situation that is currently militarily
Speaker 2: involving thirteen fourteen different countries. Now, I don't want to
Speaker 2: say the words world war, but you know this is
Speaker 2: this is the closest in my lifetime and so to me,
Speaker 2: you know, you know, putting that complexity together with the
Speaker 2: fact that we're now seeing you know, from the policy side,
Speaker 2: what feels to me like not just a response but
Speaker 2: almost a panic in terms of the global desire to
Speaker 2: release energy reserves and the IEA in particular, you know,
Speaker 2: going out after you know, twenty five to thirty percent
Speaker 2: of reserves.
Speaker 3: Ten days in.
Speaker 2: Yeah, that means you only have two two thirds left.
Speaker 1: The heritage of Morgan Stanley starts with a woman named
Speaker 1: Mary who used to put out a deck eighty pages.
Speaker 1: I hated or you had to read every page of it.
Speaker 1: You people own the analysis of technology, particularly on the
Speaker 1: Left coast. Is this the mother of all opportunities in
Speaker 1: a software AI scare?
Speaker 2: I don't know that I'd call it the mother of
Speaker 2: all opportunities. I mean twenty twenty two, the selloff in
Speaker 2: twenty twenty two is a pretty good opportunity because that
Speaker 2: was so focused on technology. But there are a lot
Speaker 2: of things to do, and we are, you know, picking
Speaker 2: through the rubble. We're picking through, you know, some of
Speaker 2: the software. We're funding it from some of the semiconductor makers.
Speaker 2: In fact, you know, I'm trying to remind people that
Speaker 2: semiconductors are actually cyclical and typically trade on normalized earnings,
Speaker 2: not peak earnings.
Speaker 3: People, Lisa, you are the CIO of Morgan Stanley Wealth Management,
Speaker 3: and you just wrote that US equity resilience in the
Speaker 3: face of Warren oil shocks is largely unprecedented, like such
Speaker 3: as like we're seeing and you're going back at least
Speaker 3: eighty years here. I mean the investors you're talking to, you,
Speaker 3: do you find more of them interested in bargain hunting
Speaker 3: in the current environment or looking to put on protection
Speaker 3: or looking for safe haven places to hide in the
Speaker 3: current environment. What have your conversations with client's been like, So.
Speaker 2: It really depends on where you sit. For much of
Speaker 2: our private wealth, business, family offices, ultra high net worth individuals,
Speaker 2: they're much more defensive. They're much more concerned about about,
Speaker 2: you know, risk premium about being defensive about having some
Speaker 2: cash on the sidelines. But you know, the more institutional folks,
Speaker 2: uh have still have some animal spirit here, and uh
Speaker 2: you know, have have kind of deep belief that this
Speaker 2: is going to be over quickly and that the underlying
Speaker 2: fundamental story of profit acceleration because of AI still lives.
Speaker 3: So what about some of these I'm going to go there,
Speaker 3: quantum computing, bitcoin mining, flying taxi companies, new energy, all
Speaker 3: these kind of you know, small cap growth stocks, all
Speaker 3: these meme themes. What are your thoughts there? I mean,
Speaker 3: do you still tell investors, hey, you know you want
Speaker 3: to you know, you have to be exposed in order
Speaker 3: to benefit from it, right, I mean, like, is it
Speaker 3: is it a non non zero probability that you're basically
Speaker 3: telling investors, hey, you know you can't just run and
Speaker 3: hide from some of these some of these sectors.
Speaker 2: So absolutely, we are fundamental believers in thematic investing. I know,
Speaker 2: you know, Tom has my colleague Ellen Zentner on very often,
Speaker 2: and she's she's running thematic for us. But what we're
Speaker 2: doing is we're trying to access those opportunities more in
Speaker 2: venture capital today and in growth private equity than we
Speaker 2: are in the public market. What we've said is that
Speaker 2: public small cap, we believe is really experienced adverse selection.
Speaker 2: That the level of the lack of profitability in the
Speaker 2: Russell two thousand, for example, is just so uninspiring.
Speaker 1: I'll say my book. Folks, Listen carefully to what Michelle
Speaker 1: just said. There, profit is everything. Yeah, this is from
Speaker 1: late magdal Lord to side at lcre Well.
Speaker 3: I guess what we're saying is that in some of
Speaker 3: those sectors, Tom, you know, the real companies, the real
Speaker 3: profit orient the ones who are actually making money and
Speaker 3: are going to benefit, they're not publicly traded.
Speaker 1: Came up in Phoenix with Cam Dawson the other day.
Speaker 1: Great panel. I'm sorry. Profit matters. It's all there is
Speaker 1: to it. So here's what I did, Lise. I did
Speaker 1: this just for you. I pulled up the Dow. It's
Speaker 1: a winsor war chart Herman vagg Okay nineteen thirty nine
Speaker 1: all the way out to nineteen forty six. I lectured
Speaker 1: about the Guadalcanal low of nineteen forty two, the absolute
Speaker 1: bottom of a perfect war, and then a moonshot for
Speaker 1: equities off of nineteen forty two. Do stocks go up
Speaker 1: in war.
Speaker 2: It depends. But I think look, fundamentally, yes, you know, fundamentally,
Speaker 2: wars are reflationary, right, whether we're talking about you know,
Speaker 2: just a world based on the inflation and the nominals,
Speaker 2: or we're talking about defense spending and quote unquote the
Speaker 2: military industrial complex. Wars get economies moving and doing things well.
Speaker 3: For audience, If you ever have the benefit of reading
Speaker 3: Lisa Shallitt's work, you know you're going to see that
Speaker 3: she knows everything from equities to fixed income, to commodities,
Speaker 3: you name it. But hidden within her note is a
Speaker 3: little bit on emerging markets, tom and she is suggesting
Speaker 3: that investors focus on Latin America as opposed to Asia.
Speaker 3: And I'm curious, is that more driven by what's going
Speaker 3: on in the energy markets, the fact that Asian economies
Speaker 3: tend to be oil importers, or is there something else there?
Speaker 2: So there's something else going on. Certainly the oil and
Speaker 2: energy dynamics have reinforced that dichotomy between Latin and and Asia.
Speaker 2: But what had gotten our attention really is, you know,
Speaker 2: the the change in US policy to the extent that
Speaker 2: that uh, you know, the new Monroe doctrine or or
Speaker 2: new implementation of it. That that creates backing for a
Speaker 2: more business centric or or business oriented and less progressive
Speaker 2: governments down there that are stable, that are are attracting
Speaker 2: investment that is sponsored by US, development of supply chains.
Speaker 2: That's a good thing, and uh you know, that's part
Speaker 2: of our thesis of of why you should be looking
Speaker 2: down there.
Speaker 1: Lisa, thank you so much for coming. I really appreciate the.
Speaker 2: Stem my pleasure
Speaker 1: Sporting Morgan stand Lisa driving all of their wealth management
Speaker 1: uh work here