WEBVTT - Breaking Down Euro Elections and the Equity Rally 0:00:02.400 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.960 --> 0:00:15.560 This is the Bloomberg Surveillance Podcast. I'm Tom Keene along 0:00:15.600 --> 0:00:18.960 with Paul Sweeney. Join us each day for insight from 0:00:18.960 --> 0:00:23.119 the best in economics, finance, investment, and international relations. You 0:00:23.160 --> 0:00:26.520 can also watch the show live on YouTube. Visit the 0:00:26.520 --> 0:00:31.280 Bloomberg Podcast channel on YouTube to see the show weekday 0:00:31.280 --> 0:00:34.320 mornings from seven to ten am Eastern from our global 0:00:34.360 --> 0:00:39.000 headquarters in New York City. Subscribe to the podcast on Apple, Spotify, 0:00:39.360 --> 0:00:42.920 or anywhere else you listen and always I'm Bloomberg Radio, 0:00:43.080 --> 0:00:47.120 the Bloomberg Terminal, and the Bloomberg Business App. We're gonna 0:00:47.120 --> 0:00:49.360 get to the markets, but with the politics of the weekend, 0:00:49.600 --> 0:00:51.960 and there's just no one that can help us better 0:00:52.479 --> 0:00:55.440 on the broad vision of what in God's name is 0:00:55.480 --> 0:00:59.480 going on in the heat. I mean, first of all, Tina, 0:00:59.560 --> 0:01:04.080 let's cut of the chase Emma Reti Kanu. She tells 0:01:04.160 --> 0:01:07.320 Andy Murray she won't play doubles, then she goes out 0:01:07.400 --> 0:01:10.319 and loses it. Wimbledon, I mean, it's a It was 0:01:10.480 --> 0:01:14.120 saved for the United Kingdom by Sir Lewis Hamilton winning 0:01:14.120 --> 0:01:17.399 the British Grand Prix. How did Britain get through the weekend. 0:01:18.600 --> 0:01:21.559 Well, don't forget the European Football Championship. 0:01:21.640 --> 0:01:22.520 Oh boy, that's right. 0:01:22.760 --> 0:01:26.679 Yeah, the UK won there as well. Now it's it's 0:01:26.720 --> 0:01:30.000 it's a it's a good mood in London. Dare I say, 0:01:30.120 --> 0:01:34.720 despite the fact that it did pour all weekend, we 0:01:34.800 --> 0:01:39.200 had elections where nobody objected, and you know, and everybody 0:01:39.240 --> 0:01:42.360 politely handed over and the moving van has already come 0:01:42.400 --> 0:01:46.600 and taken Richisu next stuff. So that was very civilized. 0:01:46.760 --> 0:01:49.280 Paul was hit an umbrella and a drink on his deck. 0:01:49.320 --> 0:01:51.320 Here it's like one hundred and two degrees there, Tina 0:01:51.880 --> 0:01:54.320 and he and he said, get Tina ford him and 0:01:54.360 --> 0:01:59.120 he did so. Because the arch question in America Drive 0:01:59.240 --> 0:02:03.320 time this morning learning is what is the United Kingdom election? 0:02:03.520 --> 0:02:07.240 What does the French election mean for the first Tuesday 0:02:07.280 --> 0:02:11.040 of November in America? What do we take away? 0:02:11.919 --> 0:02:17.120 It's a million dollar question, or maybe more analysts are 0:02:17.240 --> 0:02:21.280 like traders, you know, we like to spot patterns, but 0:02:21.400 --> 0:02:25.920 it isn't very obvious what the implications might be for 0:02:26.080 --> 0:02:31.920 the US, except that surprises happen in democracies. In France, 0:02:32.000 --> 0:02:35.359 a surprise really happened. I mean, even though we observed 0:02:36.040 --> 0:02:39.760 how this very unusual to the American political mind, this 0:02:39.880 --> 0:02:45.480 collaboration between different parties of where candidates would drop out 0:02:45.520 --> 0:02:50.960 of races that were calculated so that the end goal 0:02:51.080 --> 0:02:54.520 of keeping out the far right would be achieved. Even then, 0:02:54.639 --> 0:02:58.760 the polls on Friday in France did not put this 0:02:59.040 --> 0:03:02.200 new left code in first place. And there we went 0:03:02.240 --> 0:03:08.079 into the weekend still thinking that the Front I can't 0:03:08.080 --> 0:03:12.880 remember what they're called now then would be the far 0:03:13.000 --> 0:03:15.720 right party would be the largest in parliament. We all 0:03:15.800 --> 0:03:19.680 were told that every pole Friday confirmed it, and that 0:03:19.720 --> 0:03:23.000 didn't happen. They ended up third. So first takeaway is 0:03:23.440 --> 0:03:29.359 your regular public service reminder, without slacking off polsters, that 0:03:30.280 --> 0:03:35.680 polls are imperfect, People change their minds, and human behavior 0:03:35.800 --> 0:03:40.120 is incredibly difficult to model. So that is something we 0:03:40.160 --> 0:03:44.200 should take away into the US elections when we still 0:03:44.280 --> 0:03:48.960 have such narrow margins within the margin for error. So 0:03:49.080 --> 0:03:55.000 that's point one. Surprises and polling errors are are with. 0:03:54.960 --> 0:03:58.520 Us, Tina. Given the elections of both in the UK 0:03:58.640 --> 0:04:01.760 and in France, what does it mean for the UK 0:04:02.040 --> 0:04:05.200 and the European Union in terms of their relationship? Can 0:04:05.240 --> 0:04:11.040 they be closer together or is Brexit still I guess 0:04:11.120 --> 0:04:14.200 kind of the issue for the two entities. 0:04:15.120 --> 0:04:18.440 Well, Brexit was the word that you know, dare not 0:04:18.640 --> 0:04:24.000 speak its name during the campaign. Caros Starmer, now, the 0:04:24.040 --> 0:04:28.800 Prime Minister, did not actively campaign on reversing Brexit or 0:04:28.800 --> 0:04:31.840 anything like it. In fact, he said the day before 0:04:32.000 --> 0:04:35.159 Britain went to the polls that he didn't foresee that 0:04:35.200 --> 0:04:38.320 the UK would return to being a member of the 0:04:38.320 --> 0:04:43.200 European Union in his lifetime, thereby crushing the hopes of many, 0:04:43.640 --> 0:04:46.200 given just what a negative impact it's had on the 0:04:46.279 --> 0:04:51.039 UK economy and everything else. But in the first hours 0:04:51.080 --> 0:04:55.599 and days of the Starmer government taking over, we've seen 0:04:55.640 --> 0:05:02.440 some very positive noises about strengthening to about a defense 0:05:02.640 --> 0:05:06.440 packed new Foreign Minister David Lammy went to Germany first, 0:05:06.839 --> 0:05:11.200 that was a clear signal, followed by Poland and Sweden, 0:05:11.520 --> 0:05:15.560 also very much with the NATO summit in mind. So 0:05:15.880 --> 0:05:20.760 the energy that this new British government is projecting is 0:05:21.000 --> 0:05:26.040 very much about strengthening the UK's relationship with its allies 0:05:26.120 --> 0:05:28.400 in the EU and in the United States. 0:05:29.320 --> 0:05:32.640 So in the UK right now, what is the to 0:05:32.760 --> 0:05:35.760 do list for this new government. Is it simply to 0:05:35.839 --> 0:05:39.719 project stability or are there certainly some things they want 0:05:39.760 --> 0:05:43.520 to get done here well, as. 0:05:43.480 --> 0:05:46.120 Is usually the case, of course in national elections, the 0:05:46.120 --> 0:05:50.920 focus was very domestic. It's the first UK election that 0:05:51.000 --> 0:05:54.480 I can recall in my twenty two years of being 0:05:54.600 --> 0:06:00.200 here where housing reform reformed to the planning process was 0:06:00.200 --> 0:06:05.240 was front and center, and also the UK's crumbling public services. 0:06:05.279 --> 0:06:10.920 These are in the top five concerns from British voters. 0:06:10.960 --> 0:06:14.240 So the new Chancellor of the Exchequer the equivalent of 0:06:14.360 --> 0:06:19.320 Treasury Secretary Rachel Reeves, is talking a lot about delivering growth. 0:06:19.400 --> 0:06:24.400 But interestingly for US political observers, one of the lessons 0:06:24.440 --> 0:06:29.520 that the Starmer team took away from Obamacare and from 0:06:29.640 --> 0:06:35.760 Biden's industrial policies was the observation that they delivered positive 0:06:35.839 --> 0:06:38.800 results but didn't get much credit from voters for it. 0:06:38.960 --> 0:06:43.760 So they've come out against what they call deliverism, which 0:06:43.800 --> 0:06:45.680 I think is going to be interesting to watch. 0:06:46.080 --> 0:06:49.440 One final question, do you trust the polls in the 0:06:49.520 --> 0:06:50.880 United States of America? 0:06:52.760 --> 0:06:56.680 I mean trust sounds sounds like you know, it's something. 0:06:56.440 --> 0:07:01.240 Almost are useful. They are. 0:07:01.440 --> 0:07:04.800 Any poster will tell you a poll is a snapshot, 0:07:04.960 --> 0:07:08.279 not a prediction. Everybody seems to forget this, It's a 0:07:08.279 --> 0:07:12.520 snapshot of where public opinion is today. Do I trust 0:07:12.560 --> 0:07:15.280 the polls? I certainly use them as the only available 0:07:15.360 --> 0:07:19.120 quantitative measure. And I think that most people's gut instincts 0:07:19.160 --> 0:07:23.000 are terrible when it comes to reading the public mood. 0:07:23.760 --> 0:07:27.480 But the same with prediction markets, Tom. They are always wrong, 0:07:27.520 --> 0:07:31.000 and yet they're cited in every single cell side research report. 0:07:31.680 --> 0:07:34.400 We're going to need to marshal as much data as 0:07:34.400 --> 0:07:36.160 we can, but I think we need to put it 0:07:36.200 --> 0:07:39.160 in historical context and we need to think outside of 0:07:39.160 --> 0:07:42.239 the box when it comes to this US election, because 0:07:42.280 --> 0:07:44.640 the playbook is going out the door. 0:07:45.160 --> 0:07:47.880 Tina, Thank you, Tina Fordham just excellent. Can't say enough 0:07:47.880 --> 0:07:50.880 about our Fordum Forum Global for site. It was sitting 0:07:50.960 --> 0:08:04.920 room for years as well. Joining us Now a young 0:08:05.000 --> 0:08:09.120 buck Terry Haynes with Pangaea policy and I'm sorry, Terriott 0:08:09.200 --> 0:08:13.600 really hit home and I'm not frail, but there you are. 0:08:14.200 --> 0:08:18.600 What is the frailty measurement of this president? This morning? 0:08:20.560 --> 0:08:23.880 I'm in the I'm on the large font club myself. Tom, 0:08:23.920 --> 0:08:26.800 So thank thank you all, thank you all for gathering 0:08:26.840 --> 0:08:29.560 this morning. Uh, the frailty quotion is I don't know 0:08:29.680 --> 0:08:32.200 you know, I'm not a doctor, but the uh, you know, 0:08:32.240 --> 0:08:34.840 you can be frail and with it and uh and 0:08:34.920 --> 0:08:39.040 you know he bed by by public view. He goes 0:08:39.120 --> 0:08:41.720 up and down, so you know, here we are. But 0:08:42.559 --> 0:08:44.800 he still knows how to give the middle finger to people. 0:08:44.800 --> 0:08:46.960 And he did that with some force on Friday night, 0:08:47.000 --> 0:08:50.040 because he gave the middle finger to the Democratic donor 0:08:50.080 --> 0:08:52.040 class and a lot of the political class that all 0:08:52.080 --> 0:08:53.719 of a sudden decided he's not up to it. 0:08:54.520 --> 0:08:58.679 Well, jump in here, Paul, I'm rattled by Rachel Bdard's 0:08:58.679 --> 0:08:59.560 wonderful essay. 0:09:00.080 --> 0:09:02.320 So, Terry, I think if you were to ask John 0:09:02.400 --> 0:09:04.679 Q Democrat out on the street who he or she 0:09:04.760 --> 0:09:07.880 wants to be the nominee for the Democrat Party, they 0:09:07.880 --> 0:09:12.520 would probably respond, whoever can bet former President Trump the 0:09:12.559 --> 0:09:16.360 Republican nominee. Do we have any idea who that is? Today? 0:09:17.559 --> 0:09:22.680 Well, based on Bloomberg Morning Consultu polling, it's Biden. Biden's 0:09:22.720 --> 0:09:28.000 right in there with an electoral college tally that is 0:09:28.040 --> 0:09:31.600 basically even with seventy seven unknown votes in the middle. 0:09:32.040 --> 0:09:35.120 And you know, he's right there and able to be 0:09:35.240 --> 0:09:37.600 able to right the ship. So this whole business that 0:09:38.600 --> 0:09:41.840 you know, Biden's going to tank was wrong. The whole 0:09:41.840 --> 0:09:44.400 business that Trump's going to take votes from Biden is wrong, 0:09:44.440 --> 0:09:45.320 and that's really wrong. 0:09:45.440 --> 0:09:46.360 We've talked about that. 0:09:46.440 --> 0:09:50.120 I mean, whoever tentative Biden voters are, they don't want 0:09:50.160 --> 0:09:53.480 to go to Trump. And you're in a situation now 0:09:53.520 --> 0:09:57.160 where the apparently the wheels aren't falling off, and I 0:09:57.160 --> 0:09:59.960 imagine that's part of the President's calculations too, in them 0:10:00.000 --> 0:10:02.400 middle finger Friday night, Well. 0:10:02.320 --> 0:10:04.880 The President is out with a letter just this morning, 0:10:05.040 --> 0:10:08.760 addressed to Democratic lawmakers and released by his campaign. Bloomberg 0:10:08.800 --> 0:10:11.720 News is reporting and it's quote I am firmly committed 0:10:11.720 --> 0:10:13.960 to staying in this race, to running this race to 0:10:14.000 --> 0:10:17.400 the end into beating Donald Trump end quote. So there, 0:10:17.440 --> 0:10:20.200 I guess that says it all there, Terry, Is that 0:10:20.280 --> 0:10:21.920 kind of where we leave it at this point? 0:10:22.760 --> 0:10:25.160 Well, I find it interesting that everybody wants to give 0:10:25.960 --> 0:10:28.880 the smoke and mirrors on the political and donor side 0:10:28.920 --> 0:10:31.800 all the credence in the world, and Biden none of 0:10:31.800 --> 0:10:34.520 the credence. And Biden was I thought, very direct on 0:10:34.600 --> 0:10:37.160 Friday night. Regardless of what you think about the directness 0:10:37.280 --> 0:10:41.360 or you know, how you know whether it's advisable or not. 0:10:41.480 --> 0:10:44.960 I mean, that's where it is. And unless there's another 0:10:45.080 --> 0:10:47.480 glitch of the kind that existed in that debate, he's 0:10:47.520 --> 0:10:49.080 going to stay in. And that's what he said. 0:10:49.800 --> 0:10:53.360 Terry Nick Thompson at The Atlantic had a brilliant observation. 0:10:53.480 --> 0:10:55.240 I'm going to paraphrase it here. I want to be 0:10:55.320 --> 0:10:59.920 very careful, holl I do this. He said, we've become 0:11:00.160 --> 0:11:05.359 parties plural, but in the Democratic Party of an anointment 0:11:05.520 --> 0:11:10.800 by an inside group, you know, Clinton, Clinton's plural, Obamas plural, 0:11:10.840 --> 0:11:14.200 et cetera. The Bushes on the other side, maybe mister Trump, 0:11:14.240 --> 0:11:18.120 et cetera. How do we get back to our ute 0:11:18.240 --> 0:11:22.280 where they actually, you know, really had a debate with 0:11:22.480 --> 0:11:25.640 delegates involved. Do we get back to that or is 0:11:25.640 --> 0:11:26.280 it just gone? 0:11:28.160 --> 0:11:31.400 It can come back pretty easily. Actually, you only need 0:11:31.720 --> 0:11:34.040 you only need one rule change, and that's the that's 0:11:34.080 --> 0:11:37.120 the rule change that since nineteen seventy two for Democrats 0:11:37.400 --> 0:11:41.640 nineteen seventy six for Republicans, requires the delegate vote to 0:11:41.720 --> 0:11:44.720 be an assignment to be binding on the first ballot. 0:11:45.360 --> 0:11:47.920 You take that away and you get the old style 0:11:48.000 --> 0:11:51.319 conventions where people assemble and all of a sudden figure 0:11:51.360 --> 0:11:53.440 out you know what, I don't like any of these people. 0:11:53.679 --> 0:11:55.960 We want to do something else, and that used to 0:11:55.960 --> 0:11:58.679 happen a lot, It can happen again, might even happen 0:11:58.720 --> 0:11:59.480 this summer yet. 0:12:00.320 --> 0:12:02.600 So I guess that goes to the next question to her. 0:12:02.640 --> 0:12:05.479 Should Tom and I be paying attention to these conventions 0:12:05.480 --> 0:12:05.920 this summer? 0:12:07.320 --> 0:12:08.240 Sure? Absolutely? 0:12:08.720 --> 0:12:10.560 You know, right now I don't think there's I mean, 0:12:10.840 --> 0:12:12.280 right now, Trump's going to be the nominee on the 0:12:12.360 --> 0:12:15.120 Republican side right now, Biden's going to be the nominee 0:12:15.120 --> 0:12:18.040 on the Democratic side because nobody can tell him no, apparently, 0:12:18.920 --> 0:12:22.240 and you know, you've got the political class on the 0:12:22.280 --> 0:12:24.680 other side saying, well, he's got to make a decision 0:12:24.720 --> 0:12:28.240 by this Friday. Let's let's think about that. This Friday 0:12:28.480 --> 0:12:31.040 is just after the NATO summit and just before the 0:12:31.080 --> 0:12:34.960 Republican convention. So the look you want Democrats and the 0:12:35.000 --> 0:12:38.240 press is you want Biden to capitulate the Trump on 0:12:38.280 --> 0:12:41.640 the eve of Trump's convention. That's what you want. Biden's 0:12:41.800 --> 0:12:45.880 going to Biden's not going to do that. So there's not. 0:12:45.960 --> 0:12:48.679 Because of time too. I got to squeeze this in. 0:12:49.040 --> 0:12:52.839 You led with a single sentence that I've heard many 0:12:52.840 --> 0:12:56.600 others say now that all that matters is the polls. 0:12:56.920 --> 0:13:00.280 When do we see polls besides a Bloomberg pole it 0:13:00.440 --> 0:13:06.040 was out, When do we see polls that quantifies pro 0:13:06.200 --> 0:13:10.040 Biden anti Biden, for that matter, pro Trump anti Trump. 0:13:11.520 --> 0:13:13.560 I think you see them trickle in later this week, 0:13:13.600 --> 0:13:17.040 and there's probably another big trash coming just before the 0:13:17.080 --> 0:13:20.120 Republican Convention. I would urge you all to pay attention 0:13:20.160 --> 0:13:22.800 to only two things, what's actually going on in the 0:13:22.840 --> 0:13:25.840 swing states, and whether they are registered voter or likely 0:13:25.920 --> 0:13:29.559 voter polls. Likely voter polls are what matters, and registered 0:13:29.640 --> 0:13:31.760 voter polls are pretty much all you're getting right now. 0:13:32.160 --> 0:13:34.560 This has been brilliant. Terry Haynes is always thank you 0:13:35.000 --> 0:13:42.559 so much. With Pangaea policy. Everybody leaning on what Brian 0:13:42.640 --> 0:13:45.560 Bilski says. He's one of the pinatas on the street. 0:13:45.600 --> 0:13:48.280 He's been a bull, he's been correct the bears at 0:13:48.400 --> 0:13:51.800 m he joins us here from BEMO Capital Markets. We 0:13:51.840 --> 0:13:55.160 were talking about Michael Mobison and you were way out 0:13:55.200 --> 0:13:56.719 front of this. I think it was in his year 0:13:56.800 --> 0:13:59.160 he was at OpCo. He was still getting carted in 0:13:59.200 --> 0:14:03.240 bars downtown. Brian, I want to just talk about capital 0:14:03.240 --> 0:14:07.120 efficiency and the Graham Dot and Coddle doesn't work in 0:14:07.200 --> 0:14:12.440 our analysis. Now, what are we missing about the capital allocation? 0:14:13.200 --> 0:14:16.480 Capital efficiency of these technology stocks? 0:14:16.720 --> 0:14:18.640 Well, thanks for asking, Thank you so much for having 0:14:18.720 --> 0:14:21.240 us too. I mean, I think that so many investors, 0:14:21.360 --> 0:14:24.400 meaning analysts or hedge funds or whatever, have gotten away 0:14:24.440 --> 0:14:27.120 from looking at balance sheets and cash flow and everything. 0:14:27.120 --> 0:14:29.640 They don't even know what capital allocation is. And these 0:14:29.680 --> 0:14:35.320 companies have become so massively efficient. Tom, and I think 0:14:35.360 --> 0:14:40.680 that really began actually twenty two years ago this month, 0:14:41.800 --> 0:14:44.280 if you remember, you know, we were still trying to 0:14:44.280 --> 0:14:46.080 buy the dip in two thousand and one, two thousand 0:14:46.080 --> 0:14:48.440 and two, and I remember John Chambers coming out and 0:14:48.480 --> 0:14:51.520 talking about second corner earnings for Cisco and he said, 0:14:51.520 --> 0:14:53.040 we have no forecast in the market. 0:14:53.520 --> 0:14:55.720 This I was at a meeting. 0:14:55.960 --> 0:14:58.240 I was I was a strategist at Piper Jeffrey at 0:14:58.280 --> 0:15:00.680 the time, and I was having a meeting and Morgan 0:15:00.760 --> 0:15:03.920 Stanley when they moved up in the McGrath Hill building. 0:15:04.400 --> 0:15:07.240 And I remember that day in particular, and that was 0:15:07.240 --> 0:15:10.520 the bottom in the tech sector. And then from that 0:15:11.040 --> 0:15:16.480 place that time frame, tech stocks had a massive secular 0:15:16.560 --> 0:15:19.880 change in terms of how they manage their capital, how 0:15:19.920 --> 0:15:22.120 they looked at cash flow. 0:15:21.760 --> 0:15:23.520 And I think the key key thing with that. 0:15:23.600 --> 0:15:26.680 Is that through that, through the cash flow and then 0:15:26.880 --> 0:15:30.080 filtering into the income statement, how their earnings actually became 0:15:30.520 --> 0:15:32.560 massively discernible and steady. 0:15:32.640 --> 0:15:34.600 That was the key thing, Paul. Paul, you lived this 0:15:34.680 --> 0:15:36.240 as well. I mean the three of us lived as 0:15:36.280 --> 0:15:39.080 Lisa was she was in fourth grade or something like that. 0:15:39.120 --> 0:15:42.160 But Paul, what's so important here is when I say 0:15:42.440 --> 0:15:45.800 these companies are running like nineteenth century merchant banks in 0:15:45.880 --> 0:15:51.720 Hong Kong, they're running for profit, not the normal securities 0:15:51.760 --> 0:15:52.920 analysis we grew. 0:15:52.880 --> 0:15:54.040 Up with, so Brian. 0:15:54.120 --> 0:15:56.240 But there is the risk here of concentration here. How 0:15:56.240 --> 0:15:58.480 do you get comfortable with this concentration risk in the 0:15:58.520 --> 0:15:59.040 s and P five. 0:15:59.080 --> 0:16:02.480 We've done a lot of concentration work in the past, 0:16:02.720 --> 0:16:05.040 and people just kind of poop pooed it. We've shown 0:16:05.040 --> 0:16:08.840 that markets can do well out of this super concentration. 0:16:09.000 --> 0:16:11.640 We are worried, quite frankly, on a near term basis, Paul, 0:16:11.680 --> 0:16:14.240 that the market has gotten a little ahead of itself. 0:16:14.280 --> 0:16:16.240 I think that's pretty clear, and we. 0:16:16.240 --> 0:16:19.200 Have not had a correction more than three percent, and 0:16:19.240 --> 0:16:22.000 we need in the second year of this cyclical bull market. 0:16:22.040 --> 0:16:26.760 Remember our call has been resolute since twenty ten that 0:16:27.200 --> 0:16:30.400 stocks entered a secular bull market, US stocks having a 0:16:30.440 --> 0:16:33.000 secular bowl market in two thousand and ninths or got 0:16:33.000 --> 0:16:34.360 another ten years to go if you want to do 0:16:34.400 --> 0:16:37.640 the quick math. But we need a nine On average, 0:16:37.640 --> 0:16:40.400 we see a nine point four percent correction in the 0:16:40.400 --> 0:16:42.320 second year of a bull market. So we think that 0:16:42.360 --> 0:16:44.400 we can see a correction and that'll be your next 0:16:44.480 --> 0:16:46.560 great entry point. And oh, by the way, from a 0:16:46.560 --> 0:16:49.840 sentiment perspective, everybody and their mother, brothers, sister, cousin, uncle's 0:16:49.840 --> 0:16:52.760 bullish everybody and the bears are getting kicked down to 0:16:52.800 --> 0:16:55.600 the ground. And that's okay. By the way, remember bulls 0:16:55.600 --> 0:16:57.560 making money. Bears are really smart. But at the end 0:16:57.600 --> 0:16:59.000 of the day, at the end of the day, we 0:16:59.000 --> 0:17:00.760 need a bit of a refrad I think that's your 0:17:00.800 --> 0:17:04.000 next great buying opportunity in this next big secular market. 0:17:04.119 --> 0:17:06.000 All right, you are at the Bank of Montreal. Let's 0:17:06.040 --> 0:17:08.760 throw a boone to our friends up in Canada. Opportunities 0:17:08.760 --> 0:17:09.720 in Canadian equities. 0:17:09.800 --> 0:17:12.120 Oh my gosh, you know, I think you know I've 0:17:12.119 --> 0:17:13.679 been a beaman on twelve and a half years and 0:17:13.720 --> 0:17:15.840 what I've learned is it's a great stock picking market. 0:17:15.840 --> 0:17:18.639 But I've learned also that it's a massively contrarian market. 0:17:18.680 --> 0:17:20.960 When everybody's talking about one thing, go the other way. 0:17:21.440 --> 0:17:25.480 So everybody hates TD in Canada. That's my pick to click. 0:17:25.560 --> 0:17:27.840 I mean TD to twenty twenty four in Canada is 0:17:27.840 --> 0:17:30.560 what City Group was the America in twenty twenty three. 0:17:30.560 --> 0:17:32.160 Everybody hated the City Group Ember a year ago. 0:17:32.320 --> 0:17:34.160 When they're cutting costs, I think TD is a great 0:17:34.200 --> 0:17:36.560 place to be from a contraying perspective. I think from 0:17:36.600 --> 0:17:39.240 a stockpicking perspective to Paul is that you want to 0:17:39.240 --> 0:17:42.520 look at the Canadian consumer and stocks like a Ritzia 0:17:42.840 --> 0:17:47.480 in koush Tard which is circle K. You know that brand, 0:17:48.359 --> 0:17:51.280 very very strong names and Dollar Rama for that matter. 0:17:51.359 --> 0:17:54.000 So the Canadian consumer names look really really interesting to 0:17:54.080 --> 0:17:55.240 us from a longer term size. 0:17:55.280 --> 0:17:57.359 So does that mean the Canadian consumer is in pretty 0:17:57.359 --> 0:18:00.600 good shape? Well, you know, all work shows that they 0:18:00.600 --> 0:18:02.440 have a big home ownership issues. 0:18:02.119 --> 0:18:04.159 Big home ownership issues, big debt issues. 0:18:04.200 --> 0:18:06.760 But what our work shows from a back testing perspective 0:18:06.800 --> 0:18:09.040 is that the content can consumer does very well. If 0:18:09.080 --> 0:18:11.520 the market thinks they're heading into a recession. Now the 0:18:11.520 --> 0:18:13.800 Bank can is probably going to cut again, So the 0:18:13.840 --> 0:18:16.320 Bank of Canada thinks so that Canada is going into 0:18:16.520 --> 0:18:18.080 maybe a little bit of a recession. That's when you 0:18:18.119 --> 0:18:19.440 want to buy consumer discretionary. 0:18:19.480 --> 0:18:21.840 Now you got an election in the way, is well, 0:18:22.000 --> 0:18:26.840 Brian Belski, you mentioned being contrarian looking at consensus. Right now, 0:18:26.880 --> 0:18:30.800 the hedge funds zeitgeist is out of tech more towards 0:18:30.920 --> 0:18:33.239 energy and materials. How do you interpret that? 0:18:33.520 --> 0:18:39.480 Well, technically, from our US strategy perspective, we're underweight both 0:18:39.520 --> 0:18:41.080 materials and energy. 0:18:41.080 --> 0:18:41.600 Here's why. 0:18:42.920 --> 0:18:46.359 You know, when inflation's going down, the commodity price goes down, 0:18:46.400 --> 0:18:48.600 and that means the underlying fundamentals are going to be 0:18:48.640 --> 0:18:50.320 going down in energy materials. If you take a look 0:18:50.359 --> 0:18:52.400 at other areas of the world, the other there's other 0:18:52.440 --> 0:18:55.320 places to buy energy and materials, especially Canada relative to 0:18:55.359 --> 0:18:58.399 the US. And so while we own Freeport Macmaran, and 0:18:58.440 --> 0:19:00.879 we own Chevron and Exxon and some in Chesapeake and 0:19:00.920 --> 0:19:03.359 certain equity portfolios, we're not going to be overweight the 0:19:03.400 --> 0:19:04.320 sector anytime soon. 0:19:04.680 --> 0:19:08.199 What are you doing with the glory stocks at the moment? Like, 0:19:09.000 --> 0:19:11.520 if you want to talk individual stocks. Grade is a 0:19:11.560 --> 0:19:14.560 general statement, what are you doing with those stocks as 0:19:14.600 --> 0:19:15.679 you listen to their earnings? 0:19:15.760 --> 0:19:17.639 The Glory seven, I think we shouldn't come up the 0:19:17.640 --> 0:19:19.920 Glory stocks. I like, I come the Super seven. I 0:19:19.920 --> 0:19:23.040 think the Super seven could be your kind of consumer staples. 0:19:23.359 --> 0:19:26.280 They'll they'll be your core holdings. And I think whoever 0:19:26.320 --> 0:19:28.760 thought that a trade down into a five hundred or 0:19:28.880 --> 0:19:32.520 eight hundred billion dollar company like Oracles a trade down? 0:19:32.560 --> 0:19:34.040 I mean, how pathetic is that? 0:19:34.320 --> 0:19:36.840 So retail is saying these are conservative stocks, and hedge 0:19:36.840 --> 0:19:40.240 funds are saying they're a volatility of a certain persuasion. 0:19:40.320 --> 0:19:40.600 They are. 0:19:40.640 --> 0:19:43.240 And think about this Bill O'Neill, which I learned the 0:19:43.280 --> 0:19:45.760 business from a long time ago, and then Lisa was 0:19:45.760 --> 0:19:47.160 in first grade or something like that. 0:19:47.280 --> 0:19:48.320 Let's just be clear on that. 0:19:48.440 --> 0:19:51.520 But he said that the social money's a smart money 0:19:51.520 --> 0:19:54.160 and retails of dumb money. It's the exact opposite. Now, 0:19:54.200 --> 0:19:57.000 So institutional is all about what you did for me yesterday. 0:19:57.320 --> 0:19:59.879 Retail and private weal, it's all about longer terms of 0:20:00.000 --> 0:20:02.119 what I have at wealth we think is very well positioned. 0:20:02.800 --> 0:20:06.520 All right, So we're gonna have earnings starting actually Thursday. 0:20:06.560 --> 0:20:08.600 Some of the airlines come out and then Friday, JP 0:20:08.680 --> 0:20:11.159 Morgan and some of the other big banks. What are 0:20:11.160 --> 0:20:12.880 you looking for? What do you think this market has 0:20:12.960 --> 0:20:14.119 to see in this earning cycle. 0:20:14.560 --> 0:20:17.480 Well, we've said that we could see a nineteen ninety 0:20:17.480 --> 0:20:21.640 six type event. Nineteen ninety six, Micron missed earnings, and 0:20:21.800 --> 0:20:24.440 if you remember back the second half of ninety five, 0:20:24.880 --> 0:20:27.200 the last quarter ninety five into ninety six, that's when 0:20:27.240 --> 0:20:29.800 the kind of tech got going, and it was earnings 0:20:29.880 --> 0:20:33.320 and fundamentally driven. Then it was momentum in dot dot 0:20:33.359 --> 0:20:37.159 com driven, and that caused a pretty decent correction in 0:20:37.200 --> 0:20:38.520 the summer of ninety six. 0:20:38.560 --> 0:20:39.640 I think that could happen again. 0:20:39.640 --> 0:20:39.720 Now. 0:20:39.720 --> 0:20:40.720 A lot of people are giving. 0:20:40.560 --> 0:20:44.040 Me crap about looking at earnings so closely, but these 0:20:44.040 --> 0:20:45.880 stocks are priced to perfection. It's going to be more 0:20:45.880 --> 0:20:48.480 about what they're going to say going forward into into 0:20:48.800 --> 0:20:50.880 twenty twenty five and twenty twenty six in terms. 0:20:50.680 --> 0:20:51.679 Of their growth rates. 0:20:51.840 --> 0:20:53.280 So I think we could see a bit of a 0:20:53.320 --> 0:20:56.000 correction there. But listen, I think earnings on the financial 0:20:56.040 --> 0:20:59.600 side are understated. I think healthcare earnings are understated, so 0:20:59.640 --> 0:21:02.280 we could see a kick there. I think financials with 0:21:02.359 --> 0:21:05.400 respect to return on equity is way understated as well, 0:21:05.440 --> 0:21:06.760 and I think you're going to see it a surprise 0:21:06.840 --> 0:21:08.760 up there, especially in wealth management in the capital market. 0:21:08.840 --> 0:21:12.000 What's a Belskie correction looked like? I mean in this world, 0:21:12.720 --> 0:21:16.480 you know, pull a pullback three percent blogey correction. 0:21:17.600 --> 0:21:17.800 Yeah. 0:21:17.880 --> 0:21:20.440 Yeah, we need a healthy type thing that will scare people. 0:21:20.480 --> 0:21:23.560 I think anything over five to six will scare people, 0:21:23.760 --> 0:21:25.880 and then you'll have a little bit of capitulation, let's 0:21:25.920 --> 0:21:28.119 call it. In this type of market, two PM. 0:21:28.600 --> 0:21:29.360 Let's feel some pain. 0:21:29.520 --> 0:21:31.720 Just goes out to twenty five or thirty the good 0:21:31.720 --> 0:21:32.960 old days, the good old days. 0:21:33.000 --> 0:21:34.400 We don't want people to lose money. 0:21:34.480 --> 0:21:36.640 Let's be clear. We don't like it when people lose money. 0:21:36.640 --> 0:21:38.400