WEBVTT - The Markets, The Cloud, The Merge, And A Rail Strike 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day, we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.040 at Bloomberg dot com slash podcast. A little bit of 0:00:22.040 --> 0:00:25.000 a calm feel to some of this early morning and 0:00:25.200 --> 0:00:28.120 trading after yesterday's rampant sell off, and I want to 0:00:28.120 --> 0:00:30.920 get some perspective here from someone who actually has been 0:00:30.920 --> 0:00:33.599 trading markets for decades. We can do that with Vince Signarella, 0:00:33.680 --> 0:00:37.280 Global Macro Strategies for Bloomberg News. Vince, what's your takeaway 0:00:37.360 --> 0:00:41.240 from yesterday? They weren't playing around yesterday, were they? No? No, 0:00:41.320 --> 0:00:43.800 not at all? That was that was quite a round. Um. 0:00:43.960 --> 0:00:45.960 I think it was some. I think what we saw 0:00:46.040 --> 0:00:50.559 yesterday was some really weak long positions which have been 0:00:50.600 --> 0:00:52.560 built up for about a week and a half after 0:00:53.200 --> 0:00:55.680 some week short positions. And I think that's what we're 0:00:55.680 --> 0:00:57.880 seeing a lot of going on, a lot of day trading, 0:00:58.840 --> 0:01:01.200 a lot of algo trading. We went through four thousand 0:01:01.280 --> 0:01:06.440 on the SMP yesterday was major capitulation, uh with with 0:01:06.560 --> 0:01:12.200 the sell off, al goes, driving stops lower, and we're 0:01:12.240 --> 0:01:15.000 seeing some of this going on today in this morning. 0:01:15.640 --> 0:01:17.160 It almost feels like the day is over and we 0:01:17.160 --> 0:01:20.720 should go home. Already of the trading is very very quiet. 0:01:20.760 --> 0:01:23.559 It's very modest. As I'm looking over at the tape 0:01:23.640 --> 0:01:26.160 right now, the average is giving back all of the 0:01:26.240 --> 0:01:29.240 morning games just about with the SMP cash up just 0:01:29.280 --> 0:01:34.520 about six. So Vince, you know you've been out there. 0:01:34.680 --> 0:01:36.200 I think with a call that says, you know, the 0:01:36.200 --> 0:01:39.520 Fed can really pause if at once to I mean, 0:01:39.560 --> 0:01:42.080 inflation in a lot of parts of the economy is 0:01:42.760 --> 0:01:45.280 has peaked, is rolling over. They don't need to be 0:01:45.319 --> 0:01:49.680 over the aggressive the market yesterday kind of said maybe 0:01:49.680 --> 0:01:51.600 that CPI print changes that a little bit. How do 0:01:51.600 --> 0:01:53.920 you how do you think you know the federal view 0:01:54.000 --> 0:01:56.720 all this stuff. I think the Fed is going to 0:01:56.760 --> 0:01:59.639 look past that one number, um and I would caution 0:01:59.680 --> 0:02:01.480 people to look past that one number as well. I 0:02:01.520 --> 0:02:03.920 know what. It obviously took a lot out of the 0:02:03.920 --> 0:02:07.000 street yesterday and wiped a lot of the market out, 0:02:07.360 --> 0:02:10.160 but it's potentially actually a good opportunity. I mean, the 0:02:10.400 --> 0:02:14.400 consumer inflation expectations, and you know, just as a reminder, 0:02:14.440 --> 0:02:17.920 inflation is an expect ation phenomenon. It's it's it's what 0:02:18.000 --> 0:02:20.720 people think is going to happen, and that kind of 0:02:20.760 --> 0:02:24.440 manifests itself into reality in the future. Inflation expectations on 0:02:24.480 --> 0:02:26.520 a euro of the year basis of continuing to drop, 0:02:27.280 --> 0:02:30.679 and we've basically been seeing producer prices drop as well. 0:02:31.320 --> 0:02:33.679 And you know, the trend in CPI on a month 0:02:33.720 --> 0:02:36.400 over month basis is lower also with the exception obviously 0:02:36.440 --> 0:02:40.239 off Tuesday's number. So I think what we really need 0:02:40.280 --> 0:02:44.560 to do is, like you know, as CPI, CPI which 0:02:44.639 --> 0:02:50.160 was Tuesday's trash, could be Thursday's fortune if retail sales 0:02:50.200 --> 0:02:52.800 comes in lower than expected, because what I expect to 0:02:52.800 --> 0:02:54.400 see as we go into the end of the year 0:02:55.360 --> 0:02:58.320 is slower growth. The set is definitely I think going 0:02:58.360 --> 0:03:00.720 to push us close to if not into whatever session 0:03:01.440 --> 0:03:06.360 um and prices and consumer expectations will fall. How about 0:03:06.440 --> 0:03:10.880 I mean again, just thinking about yesterday's action, was it 0:03:10.960 --> 0:03:14.000 a sense of the market overreacted yesterday, or as you 0:03:14.040 --> 0:03:16.240 may be suggested, there were just some week longs out there. 0:03:17.360 --> 0:03:20.239 I think it's actually a little boatful. I think there 0:03:20.360 --> 0:03:23.280 was something of an overreaction. UM. I mean, let's face it, 0:03:23.360 --> 0:03:26.880 it really is just one number of all things being equal. Um. 0:03:26.919 --> 0:03:30.279 But at the same time, there's not a lot of confidence. 0:03:30.400 --> 0:03:32.400 I think either side of this market, you have a 0:03:32.400 --> 0:03:36.000 lot of people still in cash, not feeling good about equities. 0:03:36.200 --> 0:03:38.160 We got a little bit jammed up over the last 0:03:38.160 --> 0:03:41.880 week and a half after a major sell off, and 0:03:42.360 --> 0:03:45.440 I think those positions were wiped out. Remember going into 0:03:45.480 --> 0:03:48.160 the CPI number that that was up almost two fifty 0:03:48.280 --> 0:03:50.560 And I was talking to traders shows before the data 0:03:50.560 --> 0:03:52.240 and we were kind of like, what the heck are 0:03:52.240 --> 0:03:55.840 these people thinking that's pretty optimal, that's pretty optimistic going 0:03:55.880 --> 0:03:59.400 into a data print like this, And and I think 0:03:59.440 --> 0:04:01.800 that was a big part of it. To people would 0:04:01.840 --> 0:04:05.440 just so like worked up going into that number, and 0:04:05.480 --> 0:04:08.720 they absolutely got crushed. Vince, the traders you talked to, 0:04:08.840 --> 0:04:12.480 do they believe a soft landing is possible or are 0:04:12.520 --> 0:04:15.080 they just saying, you know what, it's either we're in 0:04:15.160 --> 0:04:17.920 or we're going into recession. It's just a question how 0:04:17.960 --> 0:04:20.400 deep where do you think the trader sentiment is these days? 0:04:20.680 --> 0:04:23.640 I don't I don't think there's a good feel about 0:04:23.640 --> 0:04:27.160 a soft landing, and I commented about a month ago 0:04:27.440 --> 0:04:29.600 the only soft landing we've seen the list twenty five 0:04:29.720 --> 0:04:33.000 years was slowly on the Hudson Um. Most most of 0:04:33.040 --> 0:04:35.400 the traders, most of the traders, if not all, of 0:04:35.440 --> 0:04:37.520 the traders I talked to, think that we're going to 0:04:37.640 --> 0:04:39.760 hit a wall, that the FED is going to push 0:04:39.839 --> 0:04:43.839 us into a recession. Of sorts, they buy and large 0:04:44.000 --> 0:04:45.800 sea equity is lower at the end of the year. 0:04:45.839 --> 0:04:48.760 I disagree with that notion, but I think I'm a 0:04:48.760 --> 0:04:50.680 little bit in a min already there. But by and 0:04:50.760 --> 0:04:54.520 large they see us going into a recession. They see 0:04:54.520 --> 0:04:58.480 the FED overreacting, if you will, um and pushing a 0:04:58.520 --> 0:05:01.680 little bit too hard on at and and things are 0:05:01.680 --> 0:05:04.039 going to be softer as we head into next year. 0:05:04.560 --> 0:05:06.960 So when we hear from the Fed next week, Vince, 0:05:07.000 --> 0:05:08.760 I mean, do you think we'll get any kind of 0:05:08.960 --> 0:05:13.039 body language as to we're gonna wait and see how 0:05:13.120 --> 0:05:15.800 We're gonna wait here and see how the past you know, 0:05:16.320 --> 0:05:18.440 rate hikes impact this economy, or do you think we 0:05:18.520 --> 0:05:21.560 might get some body language about Nope, we're still focused 0:05:21.560 --> 0:05:25.240 on inflation and we're signaling some more rate ikes. I 0:05:25.240 --> 0:05:28.000 think the latter it would be very surprising for me, 0:05:28.440 --> 0:05:32.640 uh to see them to see Powell shift from the 0:05:33.000 --> 0:05:35.760 jackson Hole speech just just a few weeks ago to 0:05:36.600 --> 0:05:40.200 a more modest, sort of neutral lean, if you will. 0:05:40.520 --> 0:05:43.560 I think he's going to stay where he was quite hawkish, 0:05:44.000 --> 0:05:47.040 which is what the market expects. UH. If he should 0:05:47.160 --> 0:05:50.320 lean to like we're waiting and seeing, we're probably see 0:05:50.320 --> 0:05:52.880 a massive rally, because that would be very very dubbish 0:05:52.920 --> 0:05:55.600 of him. But more likely than that, he's going to 0:05:55.640 --> 0:05:57.719 stay on the theme that he painted for jackson Hole. 0:05:58.040 --> 0:06:01.240 I would hope that the next set of months for 0:06:01.360 --> 0:06:06.159 soul of Data UH will be some moderation because let's 0:06:06.160 --> 0:06:08.440 face it, it does take six to twelve months for 0:06:08.480 --> 0:06:11.920 the monetary policy to get through the economy, and they're 0:06:11.920 --> 0:06:14.880 not really giving any they're not giving anything they've done 0:06:14.960 --> 0:06:18.400 any time. Yet there seems to be a panic on 0:06:18.480 --> 0:06:20.680 the part of the FLMC, and I think it has 0:06:20.720 --> 0:06:23.480 a lot to do with them totally missing the boat 0:06:23.520 --> 0:06:27.120 with their transient philosophy, and and now they're worried they're 0:06:27.120 --> 0:06:30.320 gonna lose credibility once again by not moving too quickly. 0:06:30.520 --> 0:06:34.280 And it's very possible they'll lose credibility by moving too quickly. Yeah, 0:06:34.400 --> 0:06:36.359 interesting to see. It feels like they're kind of playing 0:06:36.400 --> 0:06:39.240 catch up here and that might impact their decision making 0:06:39.240 --> 0:06:43.280 going forward. We shall see Vincenerella, Global macro Strategists for 0:06:43.440 --> 0:06:45.960 Bloomberg News giving us his thoughts. And it's just kind 0:06:45.960 --> 0:06:48.200 of had the call here that he thought that maybe 0:06:48.480 --> 0:06:50.679 we would get a pause here in the rates after 0:06:50.680 --> 0:06:53.599 this rate increase coming up next week, and that would 0:06:53.640 --> 0:06:55.720 be enough for risk assets. We'll have to see how 0:06:55.760 --> 0:06:58.200 that plays out. The consensus seems to be, you know, 0:06:58.279 --> 0:07:05.799 on the other side of that trade. Let's switch gears 0:07:05.800 --> 0:07:09.200 of technology again. We welcome to the Bloomberg Interactive Broker Studio. 0:07:09.200 --> 0:07:12.440 Amit Walia. He's the CEO of Informatica. Informatical is a 0:07:12.440 --> 0:07:15.080 public traded company on the New York Stock Exchange. I 0:07:15.600 --> 0:07:17.480 n f A is a ticker to put into your 0:07:17.720 --> 0:07:20.840 Bloomberg terminal. It's got a market cap of six billion dollars. 0:07:20.920 --> 0:07:24.800 Went public just last October. I p O a bunch 0:07:24.800 --> 0:07:27.400 of underraters there at twenty nine stock to twenty one 0:07:27.400 --> 0:07:29.360 and change. I mean, thanks so much for joining us 0:07:29.400 --> 0:07:32.560 here in our Bloomberg Interactive Broker Studio. Give us the story. 0:07:33.040 --> 0:07:35.800 The informatica story. Give us the thirty seconds what we 0:07:35.880 --> 0:07:38.160 need to know about your company and what you guys 0:07:38.200 --> 0:07:40.800 are doing in that big technology stack. First of all, 0:07:40.960 --> 0:07:43.880 thanks great to be here. Uh, you know, lots happening 0:07:43.960 --> 0:07:46.000 right now. If you think about us, you know we're 0:07:46.040 --> 0:07:49.240 in this next game years of digital transformation that will happen. 0:07:49.280 --> 0:07:51.360 By the way, last Dame it was all about digital modernization. 0:07:51.440 --> 0:07:53.600 So it's all going to be about transforming a business 0:07:53.600 --> 0:07:55.520 with the help of tech, and it's all about cloud 0:07:55.600 --> 0:07:57.800 data any I. What we do is we sit in 0:07:57.840 --> 0:08:01.400 the middle called data management, this whole fragmentation of data, 0:08:01.480 --> 0:08:04.080 many types of data. How do you basically help companies 0:08:04.160 --> 0:08:07.040 understand the data, figuring out customer child supply chain, figuring 0:08:07.040 --> 0:08:09.880 out the data governance and privacy problems, figuring out what 0:08:09.960 --> 0:08:12.760 if analysis to run their businesses with analytics. That's what 0:08:12.840 --> 0:08:14.760 we do in the middle. Were the only platform company 0:08:14.760 --> 0:08:17.280 at scale running with a billion dollars subscription there are 0:08:17.320 --> 0:08:19.240 and a cloud platform. That's what we do. How do 0:08:19.280 --> 0:08:21.440 you say it too? I mean Paul gets this because 0:08:21.480 --> 0:08:25.240 he ran basically a data business um when he put 0:08:25.280 --> 0:08:28.559 together Bloomberg Intelligence. Right, you're bringing in all the data 0:08:28.600 --> 0:08:31.240 feeds to your analysts at a Princeton and spreading around 0:08:31.280 --> 0:08:35.080 the world. Somebody at a dinner party maybe says, I, 0:08:35.360 --> 0:08:37.240 you know, I don't understand the word you just said. 0:08:37.280 --> 0:08:39.360 I heard data, and I get what data is. I 0:08:39.360 --> 0:08:42.360 know what the cloud is kind of platform. You're sort 0:08:42.360 --> 0:08:44.360 of losing me. What what do you do? They take 0:08:44.400 --> 0:08:47.880 two examples. Take take something uniliver ninety six countries running 0:08:47.880 --> 0:08:51.120 the supply chain. They want to understand they make Hellman's mayonnaise. 0:08:52.440 --> 0:08:54.760 But how do I bring the suppliers to bring the 0:08:54.760 --> 0:08:57.480 products to my customers as fast as I can? That's 0:08:57.480 --> 0:09:00.160 a data problem. That's what we help. On the other side, rover, 0:09:00.280 --> 0:09:01.760 how do I bring the right products on the right 0:09:01.800 --> 0:09:03.480 shelf at the right time so I can save costs 0:09:03.520 --> 0:09:06.080 by not losing money by wasted product, as well as 0:09:06.360 --> 0:09:08.680 good customers side by getting the right project. That's the 0:09:08.800 --> 0:09:11.239 kind of data problems we solve on a daily basis. 0:09:11.320 --> 0:09:13.280 Or Twitch a gaming company, how do I make sure 0:09:13.280 --> 0:09:15.839 the gamers get real time understanding of what the games 0:09:15.840 --> 0:09:18.319 are doing. That's the kind of problems we solve. So 0:09:18.360 --> 0:09:21.720 how are you making money then out of that? Or uh, 0:09:22.400 --> 0:09:25.719 you know, do you plan to be making money out 0:09:25.720 --> 0:09:27.680 of that soon. Oh well, So the thing is that 0:09:27.679 --> 0:09:30.560 we have a profitable company running twenty plus points of 0:09:30.600 --> 0:09:33.880 operating margin and cash flow. And so that's We've been 0:09:33.880 --> 0:09:36.240 a profitable company throughout. We went private, we came out 0:09:36.280 --> 0:09:38.480 of the privatization, we run eighty points of gross margin. 0:09:38.720 --> 0:09:42.320 We never lost sight of we run a profitable company, 0:09:42.520 --> 0:09:45.559 and you've never I'm just looking for I was looking 0:09:45.559 --> 0:09:48.040 for a pe ratio, right, and I don't see that 0:09:48.080 --> 0:09:50.280 because the E is still minus if you look forward. 0:09:50.280 --> 0:09:52.040 I'm looking at the f A function. We've got the 0:09:52.160 --> 0:09:57.800 twentys forecast for this year, um, and ninety cents next yeah, 0:09:57.880 --> 0:10:00.280 and ninety cents next year. So we've seen that whole 0:10:00.320 --> 0:10:03.920 text space. Really this year get hammered. Your stock is 0:10:03.960 --> 0:10:08.079 not immune to that. Tell us about your business today. 0:10:08.080 --> 0:10:11.120 What are your customers telling you. We've got rising interest rates, 0:10:11.160 --> 0:10:13.240 we've got the threat of a recession. What are your 0:10:13.240 --> 0:10:15.800 customers telling you? I think, look, no doubt there's uncertainty 0:10:15.800 --> 0:10:18.040 out there, but customers are also figuring out that if 0:10:18.080 --> 0:10:20.920 they don't focus on the long term mission critical transformasion, 0:10:20.920 --> 0:10:22.720 they won't get out of this. A great example, by 0:10:22.760 --> 0:10:25.480 the ways in the COVID times in April, American airlines 0:10:25.559 --> 0:10:27.360 bet on our platform and I spoke to them like 0:10:27.400 --> 0:10:29.920 airlines were grounded, why are not? And the goal was 0:10:30.000 --> 0:10:32.559 if I don't understand my customers churned during this time, 0:10:32.600 --> 0:10:34.280 when I come out on the other side, I'll be 0:10:34.360 --> 0:10:36.439 left holding the bag. They won the innovation awarded a 0:10:36.480 --> 0:10:39.560 customer conference, so large customers are thinking like that. Yes, 0:10:39.640 --> 0:10:43.760 there's absolute you know, elongated sales cycles across the board, 0:10:43.880 --> 0:10:46.160 but transformation of that scale is not going to slow down. 0:10:46.600 --> 0:10:50.199 So what happened? I mean, your stock was fine high 0:10:50.240 --> 0:10:52.160 after the I p O. You got up to almost 0:10:52.240 --> 0:10:55.920 forty share and with everyone else at the beginning of 0:10:55.960 --> 0:10:59.800 this year, UM investors started to sell and now your 0:10:59.800 --> 0:11:02.400 train eating for half that? So what what happened? Do 0:11:02.440 --> 0:11:04.840 you think, not just to you, but to the entire market. 0:11:05.080 --> 0:11:07.160 But look, there is needless to say, a huge amount 0:11:07.160 --> 0:11:09.080 of multiple correction you guys were talking about right, there 0:11:09.120 --> 0:11:11.400 was obviously an all time high for across the board tech. 0:11:11.800 --> 0:11:13.760 I think we got caught up from our side in 0:11:13.840 --> 0:11:15.800 the growth at all stock kind of story. We're not 0:11:15.840 --> 0:11:18.800 a growth at all or growth at all cost kind 0:11:18.800 --> 0:11:20.720 of company. I do think that there is an element 0:11:20.720 --> 0:11:22.400 of that going on. But as long as you keep 0:11:22.559 --> 0:11:24.839 growing at our scale a billion dollars of subscriptions in 0:11:25.000 --> 0:11:27.240 our mid thirties, and you keep printing cash flow and 0:11:27.280 --> 0:11:29.680 operating margin, you will get to that. Now. Of course, 0:11:29.679 --> 0:11:32.800 we're all sitting in this middle seeing markets change. You've 0:11:32.800 --> 0:11:35.760 got to keep your eye on solving customer problems. We're 0:11:35.800 --> 0:11:37.400 all going to come out on the other side with 0:11:37.480 --> 0:11:41.000 things correct itself. For sure. I'm looking at my PGeo 0:11:41.120 --> 0:11:44.480 functional Bloomer Traumil just shows from geography where you get 0:11:44.520 --> 0:11:47.040 your revenue most of its outside the the U s 0:11:47.080 --> 0:11:48.640 for you guys. Is that right? No, that's not true. 0:11:48.760 --> 0:11:52.400 That's not true about US US. Okay, So how is 0:11:52.440 --> 0:11:54.880 your non US business doing? Because I think about Europe, 0:11:54.880 --> 0:11:58.040 I think about Asia with the lockdowns and all companies 0:11:58.040 --> 0:12:00.200 that have to deal with those types of markets. What 0:12:00.240 --> 0:12:02.559 are you saying there? Actually, Europe in Asia did pretty 0:12:02.559 --> 0:12:05.040 fine for US so far. I think barrying FX that's 0:12:05.040 --> 0:12:07.600 obviously surprising all of us. You can't control how strong 0:12:07.640 --> 0:12:10.079 the dollar is right now in terms of road demand. 0:12:10.400 --> 0:12:12.960 Europe actually helped pretty well for US even last quarter. 0:12:13.000 --> 0:12:14.559 And even so, I mean, actually, I'm flying up to 0:12:14.600 --> 0:12:16.480 London as we speak over at the by the end 0:12:16.520 --> 0:12:19.080 of this week, we haven't seen demand for the funeral. 0:12:20.679 --> 0:12:22.360 I'm going to figure out if I can drive into 0:12:22.360 --> 0:12:24.200 the city of London. But it's gonna be it's gonna 0:12:24.200 --> 0:12:26.960 be busy. It's gonna be busy. So demand hasn't slowed 0:12:26.960 --> 0:12:29.440 down there. FX definitely a big headwind for all of us. 0:12:29.679 --> 0:12:34.160 F X has been amazing to watch and we thought 0:12:34.160 --> 0:12:35.840 it was going to turn around a little bit on Monday, 0:12:35.880 --> 0:12:39.199 but now the king dollar is back with a vengeance. 0:12:39.600 --> 0:12:43.840 Does that make it easier for you or more difficult, 0:12:43.840 --> 0:12:47.240 because the volatility actually makes up both top line obviously harder, 0:12:47.280 --> 0:12:49.839 no doubt. But we are also a very well heaped company. 0:12:49.880 --> 0:12:51.880 We have our presence across the globe. We have a 0:12:51.880 --> 0:12:53.719 lot of opics sitting outside the U s U S 0:12:53.720 --> 0:12:55.440 as well. We have a big development center in India 0:12:55.440 --> 0:12:57.600 as an example. So the strong dollar helps us there. 0:12:57.840 --> 0:13:00.040 So what we have, the headwind on the top in 0:13:00.120 --> 0:13:03.000 on effex becomes actually a dab on the glass side 0:13:03.040 --> 0:13:05.280 for us. All right, I mean, thank you so much, 0:13:05.280 --> 0:13:08.920 we appreciate it. I met Walia, CEO of Informatica, joining 0:13:08.960 --> 0:13:10.960 us here on a Bloomberg interactor broker student getting the 0:13:11.040 --> 0:13:14.520 update on his company. Informatica Again, I n F A 0:13:15.280 --> 0:13:19.439 H is the symbol into that software space, which has been, uh, 0:13:19.480 --> 0:13:22.200 you know, such a source of growth for investors for 0:13:22.240 --> 0:13:24.720 such a long time. A lot of these stocks, these 0:13:24.760 --> 0:13:27.200 technology stocks, in addition to the market in general taking 0:13:27.240 --> 0:13:30.280 on the on the gin, but certainly the technology socks 0:13:30.320 --> 0:13:32.480 are really bearing the brunt here on this rising interest 0:13:32.559 --> 0:13:34.680 rate environment. But what you've got to think about the 0:13:34.720 --> 0:13:38.240 long term growth trends associated with tech spending a lot there. 0:13:41.160 --> 0:13:43.640 It's gotta Robert Teter, he's head of Investment Policy and 0:13:43.640 --> 0:13:49.320 Strategy group at Silvercrest Asset Management. Boy, Robert, yesterday, if 0:13:49.360 --> 0:13:52.920 you're an head of investment policy and strategy group, everybody's 0:13:52.960 --> 0:13:55.880 looking to you at the four oh one yesterday, what 0:13:55.920 --> 0:13:58.760 would you tell your team? Yeah, it's a great question, 0:13:58.800 --> 0:14:00.720 and it was a you know, did one of the 0:14:00.760 --> 0:14:02.959 wildest days to the downside in a long time. I 0:14:03.000 --> 0:14:04.959 think one of the themes that we've focused on has 0:14:04.960 --> 0:14:07.400 been something we've focused on really from the beginning of 0:14:07.400 --> 0:14:10.280 this pandemic era, which is patients and taking some context 0:14:10.280 --> 0:14:13.559 and I think, as many others have noted, yesterday's move 0:14:13.640 --> 0:14:15.920 was really only a reversal of about one week's worth 0:14:15.960 --> 0:14:18.000 of gains in the prior week, and so that's something 0:14:18.000 --> 0:14:20.320 that we really focused in on of saying, yes, there's 0:14:20.320 --> 0:14:22.560 been a change here. Yes, the inflation number was worse 0:14:22.560 --> 0:14:26.640 than expected. Our work shows that inflation versus expectations is 0:14:26.680 --> 0:14:29.640 a really critical reading for forward returns in that month 0:14:29.680 --> 0:14:33.280 window between uh CPI readings. But overall, it really took 0:14:33.320 --> 0:14:35.120 us back just about a week in terms of where 0:14:35.120 --> 0:14:36.640 the S and P had been, And so that says 0:14:36.680 --> 0:14:38.600 that there was a lot of optimism built into that 0:14:38.680 --> 0:14:41.200 report didn't come through quite as planned, But I think 0:14:41.200 --> 0:14:44.480 the CPI print wasn't quite as bad as yesterday's numbers 0:14:44.480 --> 0:14:46.200 in isolation would have made it out to be really 0:14:46.200 --> 0:14:48.480 more reversal of the prior week. So again this concept 0:14:48.560 --> 0:14:50.680 of patients and sort of looking through the numbers a 0:14:50.680 --> 0:14:52.280 little bit, things are going to take some time to 0:14:52.280 --> 0:14:55.600 settle down. Do you think there was do you think 0:14:55.600 --> 0:14:58.920 there were opportunities created yesterday? Or do we still need 0:14:59.000 --> 0:15:05.040 to Harry Shilling, who normally is very conservative, He's very reserved. Um, 0:15:05.040 --> 0:15:07.280 he's a he's a very polite man. I've known him 0:15:07.320 --> 0:15:11.200 for forty eight years now. Yeah, I grew up with him. 0:15:11.280 --> 0:15:14.720 But yesterday or no, on Monday, he said, we haven't 0:15:14.720 --> 0:15:19.040 seen the market puke yet. And until that kind of 0:15:19.080 --> 0:15:24.880 regurgitation happens, until um, your average investor sells his last 0:15:24.920 --> 0:15:28.600 stock and says I'm never gonna buy one again. Um, 0:15:28.920 --> 0:15:32.880 then you then you're not gonna see this. Um these 0:15:32.960 --> 0:15:35.960 drops can um stop? What do you think? I think 0:15:36.040 --> 0:15:38.440 yesterday was a pretty good indication of that. You certainly 0:15:38.480 --> 0:15:41.440 had very high readings in terms of stocks trading down 0:15:41.560 --> 0:15:44.800 versus up near you know, near record levels in my view, 0:15:44.800 --> 0:15:47.080 to really firmly get into that campus feeling that we're 0:15:47.080 --> 0:15:49.360 out of the woods. Um, it will take another two 0:15:49.400 --> 0:15:51.920 to three solid prints on cp I. Again, I don't 0:15:51.960 --> 0:15:54.320 think yesterday was quite as bad as it seemed, but 0:15:54.320 --> 0:15:56.040 it sort of resets the clock a little bit in 0:15:56.160 --> 0:15:59.520 terms of expectations. And I think CPI inflation really is 0:15:59.600 --> 0:16:02.600 the mos critical indicator on the on the short term outlook. UM. 0:16:02.600 --> 0:16:04.440 I think as we think ahead to two next year 0:16:04.440 --> 0:16:06.160 and things like that, earnings are a bit more important. 0:16:06.160 --> 0:16:08.480 But in the short term it's all about inflation here 0:16:08.480 --> 0:16:11.360 and all about that process of forward rates. We think 0:16:11.400 --> 0:16:15.400 there's a really strong relationship between the forward rate curve 0:16:15.440 --> 0:16:18.040 and expectations on the terminal rate versus how the market 0:16:18.040 --> 0:16:20.120 has been trading in the short term, and that's something 0:16:20.120 --> 0:16:21.880 that we've got a very close eye on as as 0:16:21.880 --> 0:16:25.000 we look at these these interim periods in between CPI readings, 0:16:25.000 --> 0:16:27.560 which really have become the most important metric in the 0:16:27.600 --> 0:16:30.240 markets in the short term. How about valuation, I'm an 0:16:30.240 --> 0:16:33.840 old equities analyst. How do you guys think about valuation 0:16:33.840 --> 0:16:36.560 in this market right here, particularly after yesterday's sell off. 0:16:36.600 --> 0:16:40.640 I know a lot of people still have earnings concerns, uh, 0:16:40.800 --> 0:16:42.640 you know, the back half of this year going into 0:16:42.640 --> 0:16:45.120 early next year. What's the valuation call for you guys? 0:16:45.160 --> 0:16:48.840 And do you do you care more about price book 0:16:49.000 --> 0:16:51.440 or price sales than price earnings? What are the metrics 0:16:51.440 --> 0:16:54.000 that you care about? Yes, so I focus mostly on 0:16:54.040 --> 0:16:57.000 price earnings and thinking about forward earnings at this point. 0:16:57.040 --> 0:16:59.360 Starting to think about earnings for next year, I think 0:16:59.360 --> 0:17:02.040 consensus is a round plus seven or eight percent or so. 0:17:02.200 --> 0:17:04.399 We're probably more in the camp of about five percent 0:17:04.480 --> 0:17:06.880 up on earnings, just thinking that there's still some lingering 0:17:06.920 --> 0:17:09.080 problems here that the markets are fighting through and there's 0:17:09.080 --> 0:17:11.560 still certainly some downward pressure to come on the economy 0:17:11.600 --> 0:17:14.200 because of the rate cycle, but purely in terms of 0:17:14.200 --> 0:17:16.919 of pees, peas have come down quite a bit, so uh, 0:17:16.960 --> 0:17:20.040 in terms of next year's earnings on consensus forecast s andps, 0:17:20.080 --> 0:17:22.520 it's just a little bit over sixteen times, which is 0:17:22.560 --> 0:17:25.760 pretty compelling, even with rates headed a bit higher. So 0:17:26.000 --> 0:17:27.280 you know, we and others have done a lot of 0:17:27.320 --> 0:17:30.439 work on historical rates versus p s, and if you 0:17:30.560 --> 0:17:33.600 take the FED at their words, take the forward curve, 0:17:33.640 --> 0:17:35.760 it it's in its word, and say that the terminal 0:17:35.840 --> 0:17:37.960 rate will settle in somewhere maybe four in a quarter 0:17:38.040 --> 0:17:40.280 or something like that. Um that implies a PE of 0:17:40.320 --> 0:17:42.640 around eighteen. So we think a little bit of progress 0:17:42.640 --> 0:17:44.560 on earnings in the next year, a little bit of 0:17:44.600 --> 0:17:47.320 recovery evaluation as you get some stabilization, and c p 0:17:47.480 --> 0:17:49.879 I sort of sets the backdrop for again this patient, 0:17:49.920 --> 0:17:52.800 longer term outlook of some decent returns to be had 0:17:52.840 --> 0:17:55.880 over the next year or two. All right, Robert, thank 0:17:55.880 --> 0:17:58.160 you so much. We appreciate it as always. Robert Teeter, 0:17:58.280 --> 0:18:01.640 head of Investment Policy and Strategy about Silver Crest Asset Management, 0:18:01.720 --> 0:18:04.359 got his undergraduate economic Stree from Bucknell. Do you know 0:18:04.440 --> 0:18:08.960 the mascot for Bucknell. M this is a bear. It 0:18:09.200 --> 0:18:12.400 is Bucky the Bison. Oh it's a bison. Yes, well 0:18:12.400 --> 0:18:15.159 that's pretty pretty close. Pretty close. Yes, so it's not 0:18:15.400 --> 0:18:18.560 the University of Richmond spiders, but the bison is pretty cool. 0:18:19.080 --> 0:18:22.040 Spiders are unique. My favorite has to be the banana slug, 0:18:22.080 --> 0:18:24.879 which I think Santa Barbara or Santa Cruz, Santa Cruz, 0:18:24.960 --> 0:18:28.480 Santa Santa CRUs. Banana slugs just awesome. Apparently there is 0:18:28.480 --> 0:18:31.040 a thing bananas. Sure, sure, I guess you can't find 0:18:31.040 --> 0:18:34.240 it and they can live through a lot. Just don't 0:18:34.320 --> 0:18:40.600 put any salt on them. No, okay, good stuff. That 0:18:40.720 --> 0:18:43.480 would so emerge. Thing the kids were talking about the 0:18:43.560 --> 0:18:47.440 merge emerged for me is doing a deal and acquisitions. 0:18:47.440 --> 0:18:49.040 But that's what I'm talking about, is it? Well, it 0:18:49.080 --> 0:18:52.840 is a deal if you're wealthy crypto person who's going 0:18:52.920 --> 0:18:58.359 to be staking and taking this network. So basically Ethereum, 0:18:58.400 --> 0:19:02.120 which is kind of the all so ran cryptocurrency after 0:19:02.160 --> 0:19:05.720 Bitcoin obviously, which is the o G, is going to 0:19:05.800 --> 0:19:09.960 move from proof of work mining, which the kids are 0:19:10.119 --> 0:19:12.800 very unhappy about how much energy it uses to proof 0:19:12.880 --> 0:19:15.640 of steak mining, and then the energy uses just going 0:19:15.680 --> 0:19:19.800 to drop point nine percent. I've been told UM to 0:19:20.080 --> 0:19:23.879 verify a transaction so that means each transaction, instead of 0:19:23.920 --> 0:19:27.160 taking instead of using the energy it takes to run 0:19:27.200 --> 0:19:30.240 a house for a week, it will use the energy 0:19:30.400 --> 0:19:33.800 it takes to boil a kettle of tea. Katie Gretfeld 0:19:33.880 --> 0:19:36.159 joins us in our Bloomberg Interactive Broker studio. She's a 0:19:36.160 --> 0:19:40.560 cross asset reporter. Is what Matt said remotely accurate? No, 0:19:40.760 --> 0:19:43.840 he got it right that he got all the headlines 0:19:43.880 --> 0:19:46.520