WEBVTT - Betting on a Value Revival 0:00:13.480 --> 0:00:17.600 Hello, and welcome to What Goes Up a weekly markets podcast. 0:00:17.840 --> 0:00:20.080 My name is Mike Reagan, and I'm a senior editor 0:00:20.120 --> 0:00:23.640 at Bloomberg and I'm Donna hick Across asid report at Bloomberg. 0:00:24.880 --> 0:00:27.159 This week on the show, well, whatever happened to that 0:00:27.240 --> 0:00:29.800 reopening trade that was supposed to lift all the stocks 0:00:29.840 --> 0:00:32.320 of the companies that would benefit when we all finally 0:00:32.400 --> 0:00:35.960 changed out of our sweatpants and got out of the house. Well, 0:00:36.120 --> 0:00:39.040 as the delta variant of the virus rages, many of 0:00:39.080 --> 0:00:41.480 us are back to wearing sweatpants, and many of those 0:00:41.479 --> 0:00:44.919 stocks have been going sideways at best for more than 0:00:45.000 --> 0:00:48.120 three months. Now. We're gonna talk to a fund manager 0:00:48.200 --> 0:00:50.320 who will explain why he's still sort of bullish on 0:00:50.400 --> 0:00:52.919 many of these type of companies and we should listen 0:00:52.960 --> 0:00:57.120 to him. He's got a very strongly performing fund. And 0:00:57.160 --> 0:00:59.720 by the way, stick around till the end, because for 0:01:00.000 --> 0:01:04.200 some reason, Vill Donna is very excited to reveal the 0:01:04.319 --> 0:01:07.520 question that Jeffrey Gundlock is asked the most. I don't 0:01:07.560 --> 0:01:09.160 know why that is, Vill Donna, but you are very 0:01:09.160 --> 0:01:11.560 excited to reveal that. Well, you'll you'll hear it when 0:01:11.640 --> 0:01:14.840 when you hear it. It's very it's very fun. It's 0:01:14.920 --> 0:01:17.640 very fun. Okay, we liked we like fun stuff. Yeah, 0:01:17.640 --> 0:01:20.560 it's very fun. All right. Well, well, Donna, before you 0:01:20.640 --> 0:01:22.480 bring the guests, and I've got a brief. I know 0:01:22.560 --> 0:01:25.000 you like stories about when I was a young young 0:01:25.040 --> 0:01:28.000 boy back in the eighteen hundreds, so I've got one 0:01:28.040 --> 0:01:30.560 free about my dad, Pops Reagan, who he had a 0:01:30.560 --> 0:01:34.839 famous catchphrase which was the black and whites never lie. 0:01:35.120 --> 0:01:36.520 And what he meant by the black and whites was 0:01:36.560 --> 0:01:39.160 the report cards we'd bring home. You know, my dad 0:01:39.160 --> 0:01:42.920 had six kids, all boys but one girl, and the 0:01:42.920 --> 0:01:45.920 black and whites were our report card. So if he 0:01:46.040 --> 0:01:49.320 was saw usloafing around the house or or goofing around 0:01:49.320 --> 0:01:51.600 and not studying, he'd be like, how school going, And 0:01:51.640 --> 0:01:53.520 we'd be like, Pops, it's going great. What are you 0:01:53.560 --> 0:01:55.960 worried about? And he'd say, well, the black and whites 0:01:55.960 --> 0:01:59.640 don't lie because obviously back then we only had black 0:01:59.640 --> 0:02:03.480 and white. They had invented color. Yet. Yeah I got that, Yeah, 0:02:03.640 --> 0:02:05.880 you got that. So I think of this every time 0:02:05.880 --> 0:02:07.920 we have a fund manager on because I love to 0:02:07.960 --> 0:02:10.919 look at their performance and I say, you know, the 0:02:10.960 --> 0:02:14.400 black and whites don't lie there either. So this week's guests, 0:02:14.400 --> 0:02:17.320 I think Pops Reagan would be proud of uh queer 0:02:17.520 --> 0:02:21.440 portfolio fund uh really killing the SMP five up almost 0:02:22.639 --> 0:02:25.919 for the year in the ninety four percentile of pure 0:02:25.960 --> 0:02:32.040 funds year to date, ninety one percentile over three years. So, uh, 0:02:32.120 --> 0:02:34.960 you know Pops would be proud, Bill Donna, And I'm 0:02:34.960 --> 0:02:38.000 also excited because I know he went to the University 0:02:38.000 --> 0:02:42.000 of Pennsylvania in Philadelphia, which means not only will he 0:02:42.080 --> 0:02:45.840 reveal his stock picks, but hopefully he'll reveal his cheesesteak 0:02:45.919 --> 0:02:48.079 picks as well. Yeah, so I do want to bring 0:02:48.120 --> 0:02:51.040 the guests in. It's Andrew Slimmon. He's the managing director 0:02:51.160 --> 0:02:55.560 and he's a senior portfolio manager at Morgan Stanley Investment Management, 0:02:55.560 --> 0:02:57.760 and I'm thrilled to have him on the show this week. 0:02:58.440 --> 0:03:02.600 And I know, Andrew, you've written quite a bit recently, 0:03:02.639 --> 0:03:04.760 and you and I have chatted in the past before, 0:03:04.840 --> 0:03:07.560 but I do want to start out asking you about 0:03:08.240 --> 0:03:10.480 some of your your strategies and the way you're thinking 0:03:10.520 --> 0:03:13.080 about the market. I know in a recent note you 0:03:13.120 --> 0:03:16.920 had said that bond yields traditionally bottom in August and 0:03:16.960 --> 0:03:19.480 then they rise in the fourth quarter, and that the 0:03:19.560 --> 0:03:22.600 markets tend to get some sort of unfounded growth scare 0:03:22.639 --> 0:03:25.840 in the summer months, then we'll see the economy re 0:03:25.919 --> 0:03:28.240 accelerating in the fourth quarter. So can you maybe walk 0:03:28.320 --> 0:03:32.440 us through your thinking and through your strategy. Sure, happy, 0:03:32.560 --> 0:03:34.800 thank you, happy to happy to do it. Thanks for 0:03:34.840 --> 0:03:36.760 having me on. But before I start, we just have 0:03:36.840 --> 0:03:40.840 to get one thing straight. It's Adners. It's definitely as 0:03:41.520 --> 0:03:44.600 was my favorite chees Takes. In fact, I brought my 0:03:44.760 --> 0:03:47.200 kids to see the school I've got a couple of 0:03:47.240 --> 0:03:48.960 years ago, and I think we spent more time at 0:03:48.960 --> 0:03:53.720 Adners than we did walk. I spent a lot of 0:03:53.760 --> 0:03:55.600 time at that place. Kavanaughs. I don't know if that 0:03:55.680 --> 0:03:59.040 was there's uh that was famous. Phil Dona had had 0:03:59.040 --> 0:04:01.160 a mug night where you could bring in any mug 0:04:01.840 --> 0:04:03.840 that you want, So there's a competition to see you 0:04:03.880 --> 0:04:05.680 could bring in the biggest mug and they would fill 0:04:05.680 --> 0:04:08.280 it up. Guys are bringing like Stanley cup sized size 0:04:08.360 --> 0:04:14.720 mugs to with with your beverage of choice. Our just 0:04:14.720 --> 0:04:17.520 would be called cheap draft beer. But you know you 0:04:17.520 --> 0:04:20.120 could fill it up with frutuice. I guess if you 0:04:20.160 --> 0:04:26.040 want so, let me just jump to interest rates. UM, 0:04:26.080 --> 0:04:31.240 I'm amazed at how markets there's a consistency to markets. 0:04:31.680 --> 0:04:36.200 We get a growth scare usually in the summer, that 0:04:36.360 --> 0:04:40.240 happens over and over. Rates come down in the middle 0:04:40.240 --> 0:04:44.520 of the summer, and then they start to lift going 0:04:44.600 --> 0:04:47.400 into the fourth quarter. And this is this is exactly 0:04:47.440 --> 0:04:52.320 what's happened this time. Rates bottomed on August third, the 0:04:52.360 --> 0:04:55.240 ten year bottom one August there and the ten years 0:04:55.279 --> 0:04:59.680 back up to one thirty three today, the yield curve 0:05:00.040 --> 0:05:02.479 at and all through the spring and now starting to 0:05:02.480 --> 0:05:06.520 re steep. And so I think what's interesting fast, what 0:05:06.680 --> 0:05:11.680 fascinates me is that, um, the financial markets predicted a 0:05:11.839 --> 0:05:15.440 slowdown starting in the spring, and then we got the 0:05:15.480 --> 0:05:21.039 economic data that validated it this summer, and now the 0:05:21.040 --> 0:05:25.120 financial markets are starting to predict an improvement in the 0:05:25.160 --> 0:05:28.120 fourth quarter, but we haven't had the economic data to 0:05:28.200 --> 0:05:33.360 validate it yet. I'm fascinated by that type of seasonality 0:05:33.440 --> 0:05:35.279 thing that you see every down that I've noticed it 0:05:35.279 --> 0:05:38.120 what the economic surprise indexes to. They always tend to 0:05:38.200 --> 0:05:40.520 bottom out in the in the summer meeting. You know, 0:05:40.600 --> 0:05:43.080 the the data is missing estimates by the most of 0:05:43.080 --> 0:05:45.080 the year. In the summer. What if there's some human 0:05:45.160 --> 0:05:48.240 nature thing that you know, causes economists to be very 0:05:48.279 --> 0:05:50.640 optimistic at the beginning of the year and then you know, 0:05:50.720 --> 0:05:53.640 come come to their senses. But you know, answer to 0:05:53.640 --> 0:05:56.400 to bring it back to the fund um. You know 0:05:56.480 --> 0:05:59.479 that notion about rates creeping up. I wonder is is 0:05:59.520 --> 0:06:03.200 that sort of uh playing a large role into the 0:06:03.240 --> 0:06:06.080 picks and the fund I noticed a pretty decent heavyweight 0:06:06.120 --> 0:06:10.240 to banks and diversified financials. Um. Is it that simple 0:06:10.320 --> 0:06:13.920 that that macro input or or these sort of idiosyncratic 0:06:13.960 --> 0:06:16.240 reasons why you're here in each of these you know, 0:06:16.279 --> 0:06:19.520 a couple of regional banks. I noticed first Republic uh 0:06:19.720 --> 0:06:23.840 SVB a very prize. Is that part of it? Or 0:06:24.240 --> 0:06:26.800 is there other stories as well? Yeah, well, well look 0:06:26.839 --> 0:06:29.200 I'm up. So I went to pen but i also 0:06:29.240 --> 0:06:31.240 went to the Universe Chicago, So I've got a little 0:06:31.240 --> 0:06:33.200 bit of a quant bend as well. And I know 0:06:33.400 --> 0:06:37.760 that what defines a stocks performance is not only their 0:06:37.880 --> 0:06:40.279 fundamental what's going on at the company level, but also 0:06:40.560 --> 0:06:44.240 their quantitative factor exposure and those stocks that you all 0:06:44.240 --> 0:06:48.080 listed our value stocks, and they benefit from rising rates. 0:06:48.560 --> 0:06:50.280 And one of the reasons why we're having a very 0:06:50.279 --> 0:06:54.880 good year in our fund. Is simply that going into 0:06:54.920 --> 0:07:00.320 the spring, we were concerned about a seasonal slowdown in 0:07:00.360 --> 0:07:03.760 the economy, and so we downshifted some of those value 0:07:03.839 --> 0:07:07.000 names a little bit and we increased our exposure to 0:07:07.040 --> 0:07:09.880 a little bit more of the risk off the the 0:07:09.920 --> 0:07:14.560 defensive type names, and that worked very well. But at 0:07:14.840 --> 0:07:18.000 at now at we're at a juncture where you were 0:07:18.240 --> 0:07:22.080 going the other way. So we've increased those positions a 0:07:22.120 --> 0:07:25.920 little bit because we're anticipating that we get to the 0:07:25.920 --> 0:07:28.520 fourth quarter and then the economic data will say, oh, 0:07:28.760 --> 0:07:31.360 it's not so bad. You know what, the economy is 0:07:31.400 --> 0:07:34.280 picking up and it's no different. You mentioned Michael early 0:07:34.360 --> 0:07:38.720 on the reopening stuff. They did great last year into 0:07:38.760 --> 0:07:42.600 the spring, and then we also reduced those in anticipation 0:07:43.080 --> 0:07:45.080 that maybe in the summer we could have a little 0:07:45.080 --> 0:07:47.239 bit more of a risk off son, So I would 0:07:47.240 --> 0:07:52.000 not be selling those stocks right now. But having said that, 0:07:52.120 --> 0:07:55.760 we've actually been more competent in the rising rate environment 0:07:55.840 --> 0:07:59.560 than the reopening trade. So I think financials and then 0:07:59.640 --> 0:08:04.280 second energy will be the two best performing in the 0:08:04.320 --> 0:08:08.120 fourth quarter. That would be my area. So then can 0:08:08.160 --> 0:08:11.200 I ask actually ask you to to expand a bit 0:08:11.240 --> 0:08:15.800 on what you're thinking is around value stocks, because I 0:08:15.840 --> 0:08:18.320 know in one of your recent reports you had written 0:08:18.400 --> 0:08:22.520 that when value outperforms growth, overall growth does tend to 0:08:22.560 --> 0:08:25.960 outperform for a little bit of that cycle, for just 0:08:26.720 --> 0:08:29.520 enough to sort of shake out the nonbelievers. I believe 0:08:29.560 --> 0:08:33.600 you said, so can you walk us through that? Sure? Yeah. 0:08:33.720 --> 0:08:37.240 So look, coming out of a recession, right, value stocks 0:08:37.280 --> 0:08:40.719 are cyclical, so they all get beaten down in recessions, 0:08:40.720 --> 0:08:44.400 worse than gross socks and defensive stocks. And then you 0:08:44.400 --> 0:08:46.679 get to a juncture somewhere in the middle of recessions 0:08:46.720 --> 0:08:49.200 where people say, oh wait and not every cyclical stock 0:08:49.280 --> 0:08:53.400 is going to fail, and they have a significant bounce 0:08:53.480 --> 0:08:58.120 back rally back because they're so cheap. And we saw 0:08:58.120 --> 0:09:01.720 it in the recession ninety, we saw it in two thousands, 0:09:01.760 --> 0:09:05.560 we saw it in two thousand nine. These stocks came 0:09:05.600 --> 0:09:10.400 back strong, and um, the average value cycle lasts about 0:09:10.480 --> 0:09:14.760 thirty three months. We're you know, twelve months in However, 0:09:15.280 --> 0:09:18.679 of those thirty three months, about eleven of those months 0:09:18.760 --> 0:09:22.920 on average, growth actually outperforms value. So you have it's 0:09:22.960 --> 0:09:27.440 not a straight line back up. There is twists and turns, 0:09:27.559 --> 0:09:30.280 and so I think at the very least. And again, 0:09:30.360 --> 0:09:33.520 I'm a core manager. I'm not here to just sell 0:09:33.600 --> 0:09:36.400 value strategies. I'm a core manager. I'm just trying to 0:09:36.400 --> 0:09:39.040 figure out where the fat pitches. And what I see 0:09:39.080 --> 0:09:41.560 is that value has made its way back up, but 0:09:41.640 --> 0:09:45.160 it's still pretty cheap versus growth. Now, I happen to 0:09:45.240 --> 0:09:48.800 believe that not only will value read price back to 0:09:48.840 --> 0:09:52.360 where normally is, but I think that the change in 0:09:52.400 --> 0:09:56.080 the tone out of the FED could lead to a 0:09:56.200 --> 0:09:59.800 period of time or value outperforms growth fro an extended period. 0:10:00.000 --> 0:10:10.760 I'm the way it in the nineties. You know, I 0:10:10.760 --> 0:10:12.760 was gonna ask you about that because it's you know, 0:10:12.800 --> 0:10:15.360 it sounded like you were doing some some very tactical 0:10:15.440 --> 0:10:17.920 type of adjustments there in the middle of the year. 0:10:18.280 --> 0:10:22.840 Um uh you know, is is that sort of a 0:10:22.880 --> 0:10:25.240 byproduct of the boom and bust COVID air that you 0:10:25.280 --> 0:10:27.160 have to be more tactical than you than you maybe 0:10:27.160 --> 0:10:30.000 would otherwise. Or were you guys always that sort of uh, 0:10:30.240 --> 0:10:34.400 you know, a tune to trying to time out performance 0:10:34.480 --> 0:10:38.920 within within any given year. Yeah. So look, I'm a 0:10:38.960 --> 0:10:42.120 long equity manager, so I don't go to cash because 0:10:42.120 --> 0:10:44.880 what I've learned is you know, so eraised five percent 0:10:44.960 --> 0:10:47.439 cast market goes out a lot, you're gonna lose money, right, 0:10:47.520 --> 0:10:50.079 And so the way we adjust is a debate at 0:10:50.080 --> 0:10:52.560 the risk in the portfolio. And what I've learned in 0:10:52.640 --> 0:10:55.080 this business from being in a long time is you 0:10:55.120 --> 0:10:57.640 want to lower the risk in the summer. Summer just 0:10:57.840 --> 0:11:00.960 always seems we've got these grows scares week And yes, 0:11:01.040 --> 0:11:03.520 the SMP didn't really go down this summer, but a 0:11:03.559 --> 0:11:05.840 lot of stocks and the SMP went down a lot. 0:11:06.320 --> 0:11:09.360 And so I just know that to reduce the risk 0:11:09.920 --> 0:11:12.720 and the reopening trades and the value trades they tend 0:11:12.760 --> 0:11:15.120 to have more risk than the defenses and some of 0:11:15.160 --> 0:11:19.240 the very MEGACP tech stocks. So that's just a seasonal 0:11:19.280 --> 0:11:21.839 bet that this time was not different and turned out 0:11:21.840 --> 0:11:24.280 to be, you know, the right call. And I also 0:11:24.400 --> 0:11:27.720 know that the fourth quarter once you know, it's still 0:11:28.000 --> 0:11:32.400 mid September, once we get through this period, um, you know, 0:11:32.440 --> 0:11:35.280 the market tends to do well kind of you know, 0:11:35.360 --> 0:11:38.880 mid October until mid December, and I think earnings are 0:11:38.880 --> 0:11:42.960 going to be strong. So the setup is there once again. Um, 0:11:43.040 --> 0:11:45.920 that seasonality I think is gonna work this year like 0:11:46.040 --> 0:11:49.880 it has so far. Can I ask you to expand 0:11:49.880 --> 0:11:52.320 on that as well, because one of the things I 0:11:52.320 --> 0:11:54.560 wanted to get your thoughts on is what's actually keeping 0:11:54.600 --> 0:11:57.880 dip buyers alive. So a lot of people had predicted 0:11:57.920 --> 0:12:00.679 that the summer would be choppy August it wasn't as 0:12:00.800 --> 0:12:04.320 terrible as many had projected. But it's a purely technical 0:12:04.360 --> 0:12:07.000 that we haven't really had a five percent pullback in 0:12:07.760 --> 0:12:11.120 so long I think it's been more than two hundred days. 0:12:11.360 --> 0:12:16.720 Or are there actually some real fundamental underpinnings for that. Yeah, 0:12:16.920 --> 0:12:20.079 great questions. So first of all, again, the cap weighted 0:12:20.360 --> 0:12:26.960 SMP is at a high because uh, those big, very 0:12:27.000 --> 0:12:29.559 big stocks are a little bit lower beited the lower 0:12:29.640 --> 0:12:33.600 risk they can survive a low growth environment. So I 0:12:33.600 --> 0:12:38.400 think that really held up SMP. One hundred outperformed the 0:12:38.440 --> 0:12:41.679 rest of the four hundred this summer, so that's held 0:12:41.760 --> 0:12:47.000 up the the SMP. But I think there's two key 0:12:47.080 --> 0:12:50.040 reasons why we haven't had a pull back. Number one 0:12:50.280 --> 0:12:54.640 is is that we're all talking about how strong the 0:12:54.720 --> 0:12:58.040 market is price wise this year. But I think what 0:12:58.160 --> 0:13:02.080 we spent less time discuss see is that actually the 0:13:02.120 --> 0:13:06.720 fundamentals are is have changed as good as the market 0:13:06.720 --> 0:13:09.600 has gone up. In other words, if I dialed the 0:13:09.640 --> 0:13:12.840 clock back to the beginning of this year and I 0:13:12.880 --> 0:13:15.880 took the Wall Street consensus, how much is the SMP 0:13:16.040 --> 0:13:18.120 going to earn this year? It was a hundred and 0:13:18.120 --> 0:13:21.040 sixty five dollars this year. That's the Wall Street consensus 0:13:21.040 --> 0:13:23.640 of all the stocks in the SP five one. That 0:13:23.760 --> 0:13:27.959 number is now a two d. So Wall Street has 0:13:28.000 --> 0:13:33.600 been too bearish by the magnitude about and loan behold 0:13:33.880 --> 0:13:38.600 the stock markets up. So I think that's good earnings reports. 0:13:38.720 --> 0:13:41.480 I've you know, I'm not you know, I've been this 0:13:41.520 --> 0:13:44.440 business long enough to know that when companies exceed estimates, 0:13:44.559 --> 0:13:48.000 stocks don't go down for long, and when companies miss estimates, 0:13:48.000 --> 0:13:50.280 stocks don't go up for long. Right, It's a very 0:13:50.320 --> 0:13:53.400 simple rule, But you know that that's the first thing. 0:13:53.559 --> 0:13:56.120 Number two is I think the other thing that's going on, 0:13:56.280 --> 0:13:59.400 and you know, again we talked to advisors, we talked 0:13:59.400 --> 0:14:02.079 to investors, is in our funds. And if I dial 0:14:02.120 --> 0:14:05.880 the clock back the last year about this time, the 0:14:06.080 --> 0:14:09.880 call that we were getting from investors and from advisors 0:14:09.920 --> 0:14:12.960 were I have clients that think they want to get 0:14:13.000 --> 0:14:16.360 out of the market, because again, again this is last 0:14:16.480 --> 0:14:19.080 year at this time because the markets had a big 0:14:19.160 --> 0:14:21.920 rally off the low. It's gonna be a covid re 0:14:22.120 --> 0:14:24.640 outbreak in the fall, and they think we're gonna have 0:14:24.680 --> 0:14:26.760 a double dip, so they want to get out, right. 0:14:26.840 --> 0:14:28.880 That was the call that we're getting over and over 0:14:28.960 --> 0:14:31.320 last year. We're not getting that call right now. The 0:14:31.440 --> 0:14:35.720 call we're getting is when is a pullback coming? I 0:14:35.800 --> 0:14:39.720 have so much cash, you know, and on my books, 0:14:39.800 --> 0:14:42.960 and so what I see happening is that when the 0:14:43.000 --> 0:14:46.200 market pulls back, we're getting money into our funds. Right, 0:14:46.240 --> 0:14:48.480 We're getting money that's coming in because people are trying 0:14:48.520 --> 0:14:52.600 to buy the debts. So um that I think is 0:14:52.680 --> 0:14:56.320 another thing that's supporting the market. And I guess if 0:14:56.320 --> 0:14:58.440 I had to so a third is, you know, the 0:14:58.480 --> 0:15:01.920 FED hasn't changed policy. Don't fight the Fed. Boy, oh boy, 0:15:02.080 --> 0:15:04.160 has that worked? So I think those are the the 0:15:04.360 --> 0:15:07.480 key fundamentals are better, there's a lot of liquidity, and 0:15:07.520 --> 0:15:10.760 the FED still your friend. You know, I wanted to 0:15:10.800 --> 0:15:12.960 ask you about that. It's it's a great point you make, 0:15:13.160 --> 0:15:15.920 because you know, we can all analyze to death the 0:15:15.960 --> 0:15:19.520 fundamentals of the economy and all the companies, but there 0:15:19.600 --> 0:15:21.560 is that other side of the equation. And that's the 0:15:21.600 --> 0:15:25.760 fundamentals of the investing class, you know, whether whether it 0:15:25.840 --> 0:15:29.840 be individual investors or you know, institutional money or even 0:15:29.880 --> 0:15:33.040 companies themselves that have sort of beefed up their balance sheets, uh, 0:15:33.320 --> 0:15:35.960 you know, sort of preparing for anything, uh last year 0:15:36.360 --> 0:15:40.400 and now maybe have some more cash two buy back shares. 0:15:41.040 --> 0:15:43.480 Does that go into your thinking much? You know, as 0:15:43.520 --> 0:15:46.360 far as you know, look at the personal savings rate 0:15:46.360 --> 0:15:49.240 in the US last year just went absolutely through the roof. 0:15:50.000 --> 0:15:52.840 So you know when you look at you know, the 0:15:53.080 --> 0:15:57.160 deposits at commercial banks or the money is sitting in 0:15:57.160 --> 0:16:00.080 in uh money market funds that's just doing nothing. And 0:16:00.640 --> 0:16:05.040 you know, does that influence sort of your your opinion 0:16:05.040 --> 0:16:08.120 on where the market's going? Is the fundamentals of the 0:16:08.120 --> 0:16:13.560 investor class and perhaps explain why maybe when you reflect 0:16:13.600 --> 0:16:16.040 back that on the fundamentals of the market itself, that 0:16:16.440 --> 0:16:18.840 they could you know, those ratios that we all sort 0:16:18.840 --> 0:16:21.760 of have our eyes glued on could get stretched beyond 0:16:21.960 --> 0:16:25.720 what might otherwise be considered reasonable because there is all 0:16:25.760 --> 0:16:31.000 this cash sitting around. Well, yeah, there's a lot of question. 0:16:31.800 --> 0:16:34.800 That's my specialty. Andre I. I I pack it in there. Yeah, 0:16:34.880 --> 0:16:37.760 you say, you pack it. You start with corporate and 0:16:37.800 --> 0:16:40.240 I want to just touch that. I do think that 0:16:40.400 --> 0:16:44.920 if if fundamounts of corporations at the earnings levels, great, 0:16:44.960 --> 0:16:47.320 because they're just buying back a lot of stock. I 0:16:47.320 --> 0:16:49.600 don't think that the market will reward that as much 0:16:49.640 --> 0:16:51.720 as revenue growth. So, first of all, when I see 0:16:51.760 --> 0:16:55.320 a strong revenuance, but as it pertains to the individual, 0:16:55.880 --> 0:16:59.520 I wouldn't necessarily bank on just because there's a lot 0:16:59.560 --> 0:17:02.240 of cal ash. It means you can't have a market 0:17:02.320 --> 0:17:05.879 go down. But I think that that plays into why 0:17:06.119 --> 0:17:10.440 we're not getting this you know, ten percent plus correction 0:17:10.880 --> 0:17:14.280 because there's too much cash out there. So I think, 0:17:14.480 --> 0:17:17.080 you know, to me, the most important thing is really 0:17:17.160 --> 0:17:21.440 followed fundamentals of companies, and I just think that we're 0:17:21.480 --> 0:17:24.280 gonna have. You know, we've had a great second quarter 0:17:24.960 --> 0:17:26.959 and I've learned. I look at that there there's no 0:17:27.040 --> 0:17:29.120 question costs of going up. But what I hear when 0:17:29.119 --> 0:17:32.040 we talk to companies and we listen to companies, I'm 0:17:32.080 --> 0:17:35.200 almost shocked at how cavalier they are. We're going to 0:17:35.240 --> 0:17:38.879 pass on those costs increases. So there's this this very 0:17:38.960 --> 0:17:43.680 high level confidence that as consumers, we're all gonna pay 0:17:44.400 --> 0:17:48.680 higher prices um and so I don't think that third 0:17:48.760 --> 0:17:52.480 quarter is going to be disappointing because I think companies 0:17:52.480 --> 0:17:55.399 will pass on the cost. And secondly, maybe this is 0:17:55.440 --> 0:17:57.600 just a little bit cynical. I've learned in this business. 0:17:57.640 --> 0:18:00.240 If a company blows out a quarter, they obviously something 0:18:00.280 --> 0:18:02.240 in the tank. They all have got, you know, they've 0:18:02.240 --> 0:18:04.399 got a little extra. So they're not going to go 0:18:04.520 --> 0:18:07.520 from great earnings in the second quarter to completely missed 0:18:07.520 --> 0:18:10.479 the course. So I think the revisions are going up. 0:18:10.880 --> 0:18:13.040 And to the extent that your question is, you have 0:18:13.200 --> 0:18:17.960 consumer buying power that kind of supports a market price. Now, 0:18:18.359 --> 0:18:24.320 let's face it, with a tenure at one three, the 0:18:24.440 --> 0:18:27.560 multiple in the market could be much higher than it is. 0:18:27.960 --> 0:18:30.520 But I think what the market is saying is, well, 0:18:30.520 --> 0:18:33.000 we know that's a little bit artificial. We know that 0:18:33.040 --> 0:18:35.840 the FED has been buying. Rates are probably should be 0:18:35.960 --> 0:18:38.320 high if it wasn't for the FED. So I think 0:18:38.359 --> 0:18:41.440 that you know that that that's that's you know that 0:18:41.440 --> 0:18:45.680 that certainly supports the market where it is. But i'm 0:18:46.080 --> 0:18:50.560 i'm i'm. I think people focus a lot on stock prices, 0:18:51.280 --> 0:18:53.960 right because you know, look, Michael, if you go you 0:18:53.960 --> 0:18:56.120 know you go to that, you go to an auto dealership, 0:18:56.160 --> 0:18:58.520 you get in the car, you can try the car out. 0:18:58.520 --> 0:19:01.160 If you go to the super arc, you can smell 0:19:01.280 --> 0:19:03.560 the food and look at it. But we you know, 0:19:03.800 --> 0:19:06.320 stock prices are aligned on them in a statement, so 0:19:06.440 --> 0:19:09.199 we spend a lot more time on price discovery and 0:19:09.320 --> 0:19:12.520 less on fundamental discovery. And that's the point, is that 0:19:13.600 --> 0:19:16.680 coming out of recessions, companies tend to do better than 0:19:16.720 --> 0:19:19.840 what Wall Street happen thanks and if stock prices the 0:19:19.880 --> 0:19:24.120 present vout future expectations, I just think stock companies are 0:19:24.119 --> 0:19:27.879 doing better than what's expected until proven otherwise. That's going 0:19:27.920 --> 0:19:29.800 to drive the market higher. And if you've got this 0:19:29.960 --> 0:19:34.639 liquidity behind it, that's going to push continue push stocks higher. 0:19:35.359 --> 0:19:39.280 I know you mentioned earnings revisions have been trending higher. 0:19:39.400 --> 0:19:42.639 There's a couple of examples of companies that have revised 0:19:43.080 --> 0:19:45.200 guidance lower. And then at the same time, I keep 0:19:45.240 --> 0:19:48.080 seeing all of these surveys from portfolio managers who are 0:19:48.119 --> 0:19:52.000 downgrading their views on growth. So I'm wondering what you 0:19:52.080 --> 0:19:55.280 might say to somebody who is looking through the rest 0:19:55.280 --> 0:19:58.880 of the year and is thinking that growth could be 0:19:59.040 --> 0:20:01.840 slowing or be as robust is maybe they had thought 0:20:02.200 --> 0:20:06.560 earlier this year my responses they might be right, but 0:20:06.680 --> 0:20:09.040 they have been right so far. I mean, you know, 0:20:09.160 --> 0:20:11.720 like I'm not. You know, it's like the report card, 0:20:11.760 --> 0:20:14.600 the black and white report card, you know, like this is. 0:20:15.320 --> 0:20:18.360 You know, all I'm doing is looking at the revisions 0:20:18.400 --> 0:20:23.480 that come out every week, and the revisions keep bubbling up. 0:20:23.560 --> 0:20:27.200 So people that have predicted that revisions are going are 0:20:27.280 --> 0:20:30.360 peaking and they're gonna head down. They have been right 0:20:30.440 --> 0:20:33.719 so far. They haven't been right, and so you know, 0:20:33.800 --> 0:20:36.240 am I smart enough to know what when that will happen? 0:20:36.320 --> 0:20:38.480 I don't think so. But I also know that they 0:20:38.520 --> 0:20:42.400 have been very smart and predicting that so until proven otherwise, 0:20:43.480 --> 0:20:46.000 and listening to companies and what the confidence that they 0:20:46.000 --> 0:20:49.840 are exuding. I'm I'm going to bet that we're not 0:20:50.240 --> 0:20:53.119 done with this, and don't forget. When you get to 0:20:53.200 --> 0:20:57.680 the end of this year, the market won't worry about 0:20:57.720 --> 0:21:00.760 two one estimate. They will speak in the price off 0:21:00.800 --> 0:21:04.520 two thousand twenty two, and I think that will further 0:21:04.640 --> 0:21:07.200 justify It doesn't mean you can't have corrections. I mean, 0:21:07.240 --> 0:21:10.200 we could have a correction here, but I think with 0:21:10.640 --> 0:21:15.080 positive revisions and strong fundamentals and liquidity behind it. It 0:21:15.240 --> 0:21:35.080 sets up for a very good fourth quarter. All right, Andrew, Uh, 0:21:35.440 --> 0:21:37.240 you know in the press, we we I think we're 0:21:37.280 --> 0:21:40.960 the biggest culprit of of building the wall of wherey 0:21:41.040 --> 0:21:44.480 in the market, so to speak. So uh, let me 0:21:44.560 --> 0:21:47.200 lay out every brick or some of the main bricks 0:21:47.200 --> 0:21:48.919 of the wall of where he let me know if 0:21:49.000 --> 0:21:51.280 if any of them are spoken to you or sort 0:21:51.280 --> 0:21:54.320 of how you would uh think about what the main 0:21:54.440 --> 0:21:57.440 risks are. Obviously you mentioned tapering and the FED that's coming. 0:21:57.480 --> 0:22:01.360 That's that's one of them. Um. The tell went from 0:22:01.600 --> 0:22:06.000 fiscal policy is also sort of wearing off. You know, 0:22:06.040 --> 0:22:12.240 the enhanced unemployment benefits are are going away, the foreclosure 0:22:12.440 --> 0:22:16.320 moratorium is all that type of thing. Um. Obviously we 0:22:16.400 --> 0:22:21.040 got the debt ceiling issue coming again. Uh, we've got 0:22:21.080 --> 0:22:24.879 COVID flaring up again. Um. Any of these keeping you 0:22:24.880 --> 0:22:28.159 you awaken night or even ones I didn't mention I 0:22:28.280 --> 0:22:33.240 always First of all, kind of geopolitics are really hard 0:22:33.280 --> 0:22:36.959 to predict. And could that come out of you know, 0:22:37.040 --> 0:22:40.719 the blue and that that could be an issue? Yes, Um, 0:22:40.760 --> 0:22:44.600 I think oil actually at seventy two seventy two is 0:22:44.640 --> 0:22:46.480 no big deal. But you start to get another ten 0:22:46.560 --> 0:22:50.080 bucks higher, and you know, higher OREL prices can slow 0:22:50.119 --> 0:22:53.119 economy very quickly, so that that to me would be 0:22:53.680 --> 0:22:57.480 um a bigger risk. I happen to think that tapering 0:22:57.560 --> 0:23:00.480 is going to be so slow and oh minding, so 0:23:00.520 --> 0:23:02.240