Speaker 1: Bloomberg Audio Studios, podcasts, radio news, what you do and
Speaker 1: this is a queen of bullet points. Excuse me, Lizzie
Speaker 1: and Saunders out with not like a year foward's look,
Speaker 1: but a bullet point view here, Lizzie Sanders, I was
Speaker 1: talking to the derivatives expert Amy wu Silverman about at
Speaker 1: H what does all time high do to how we
Speaker 1: invest well?
Speaker 2: It certainly works through the psychological channels, especially for individual investors,
Speaker 2: and I think it helps stribes some of the momentum.
Speaker 2: But we also have to look at what's going on
Speaker 2: underneath the surface. And that's been a story we've been
Speaker 2: speaking about and writing about really for the past couple
Speaker 2: of years. Kind of this idea of a tale of
Speaker 2: two markets, or maybe the you know what Michael Kaine
Speaker 2: used to say about the duck, you know, calm on
Speaker 2: the surface and you know paddling like the dickens underneath.
Speaker 2: And you know, over the past year on a year
Speaker 2: to day basis, SMP hasn't even had ten percent correction.
Speaker 2: We've had you know, I tak a record breaking number
Speaker 2: of all time highs, but the average member within the
Speaker 2: SMP has had nearly a bear market level maximum draw down,
Speaker 2: and it's even more extreme for the NASDAK The average
Speaker 2: member maximum drawed down within the Nasdaq is forty seven
Speaker 2: percent this year. It's just happened through a lot of
Speaker 2: rotation and churn under the surface, which you wouldn't necessarily
Speaker 2: notice if you're only focused on cap weighted index level games,
Speaker 2: where we do sit still at our near all time highs.
Speaker 1: Well, you just heard folks worldwide and particularly across American
Speaker 1: exceptionalism bottle that what you just heard from liz Ane Saunders, Paul,
Speaker 1: you can be up this cap weighted, not cap weighted,
Speaker 1: but the internal churning, and you had that huge Nasdaq
Speaker 1: negative forty six percent statistically.
Speaker 3: Yep, Lizen. So if I just look at SBX up
Speaker 3: twenty five percent in you today, but the equal weighted
Speaker 3: S and P five hundred up eighteen percent, is that differential?
Speaker 3: How concerning is that to you? Or is that more
Speaker 3: in line with what we typically see?
Speaker 2: Well, really, since the mid July initial high in the
Speaker 2: market that then was immediately followed by a correction in
Speaker 2: the case of the Nasdaq and nearso in the case
Speaker 2: of the S and P five hundred, that really kicked
Speaker 2: in a period of better performance and relative terms for
Speaker 2: equal weight relative to cap weight. I think that that
Speaker 2: story still has legs. That doesn't mean equal weight's going
Speaker 2: to outperform cap weight, you know, every week or every month,
Speaker 2: but I think that there is some momentum and likely
Speaker 2: will continue to be in this I guess you would
Speaker 2: call it a story of broadening out, but it's in
Speaker 2: the context of what we continue to think will be
Speaker 2: fierce rotations at the sector level. Sector dispersion is really high,
Speaker 2: and I think taking an equal weight approach versus say,
Speaker 2: taking a cap weight X some sort of group X
Speaker 2: the magnificent seven, I think that's a little bit more
Speaker 2: dangerous and exercise if you're going to completely eliminate some
Speaker 2: of those megacap names that are high contribution to capuited returns.
Speaker 2: I think equal weight still gives you exposure there, but
Speaker 2: without that same concentration risk.
Speaker 1: So I think we got seven trillion in cash? Is
Speaker 1: that the number? Ziane Saunders? Do we enjoy eight trillion
Speaker 1: in cash next year?
Speaker 2: You know when you're in a FED cutting cycle. We
Speaker 2: don't know whether we're still in a FED cutting cycle.
Speaker 2: I suppose we'll know more at the December meeting. Surprisingly,
Speaker 2: perhaps flows tend to continue to be positive into money
Speaker 2: market funds. So when I hear this sort of cash
Speaker 2: on the sideline story suggesting that some are a lot
Speaker 2: of that money sitting in money market funds, is some
Speaker 2: immediate we're near term fuel for the equity market. I'm
Speaker 2: not so sure about that, especially now, given stickiness on
Speaker 2: the high side across the sort of yield structure, and
Speaker 2: I think some of that money may have actually come
Speaker 2: from riskier parts of the market, includingquities, when interest rates
Speaker 2: were moving up, and I'm not sure that that money
Speaker 2: quickly moves back into the equity market. So I think
Speaker 2: at least the money there there that's sticky. But I
Speaker 2: think if the FED it goes into pause mode and
Speaker 2: we don't see a continuation of this easing cycle, yes,
Speaker 2: I do think there could be more money that moves
Speaker 2: into my markets.
Speaker 3: Lizen talk to us about kind of your view of
Speaker 3: the earnings. We're just finishing up this earning cycle, and
Speaker 3: we've got a lot of companies or some companies providing
Speaker 3: guidance for the future. Did you take we're earning strong
Speaker 3: enough to support this market here or you have some
Speaker 3: concerns coming out.
Speaker 2: Of earnings well, you know, you saw estimates really get
Speaker 2: cut when you were in the aftermath of second quarter
Speaker 2: reporting season four third quarter. So we came into third
Speaker 2: quarter reporting season with an estimate of only four percent growth.
Speaker 2: We ended up more than doubling that when all was
Speaker 2: said and done. And that's just the classic example of
Speaker 2: the bar gets set low and the companies are able
Speaker 2: to exceed that bar. But you did see downward trend
Speaker 2: to fourth quarter estimates. There hasn't been much cutting yet
Speaker 2: for twenty twenty five estimates. I think that's the mo
Speaker 2: these days of analysts, they're kind of keeping those adjustments
Speaker 2: closer to the vest in terms of an out time frame.
Speaker 2: They'll make adjustments to one quarter out. What concerns me
Speaker 2: about twenty twenty five estimates is they're double digit for
Speaker 2: all four quarters and it assumes record breaking profit margins.
Speaker 2: That may be a bit tricky, especially given the uncertainty
Speaker 2: with regard to Tariff's.
Speaker 1: Two quick questions, what's your number one factor to study
Speaker 1: to analyze into twenty twenty.
Speaker 2: Five rate of change in terms of profitability factors versus level?
Speaker 1: Do you do cash flow as well?
Speaker 2: Yeah, you know, strong free cash flow, a high interest coverage,
Speaker 2: strong return on equity, those quality factors, I think, but
Speaker 2: I think the rate of change versus level is maybe
Speaker 2: more important this year.
Speaker 1: Hot Stovely, Kevin Gordon's a free agent. Are you going
Speaker 1: to bring him back for two thousand?
Speaker 2: Of course I'm bringing him back to twenty twenty five. Absolutely,
Speaker 2: does it charge?
Speaker 1: I mean, she's out there, you know, liz Ane's listening
Speaker 1: to led Zeppa. Gordon's doing all the work. That's the
Speaker 1: way it's Lizzie Saunders, Kevin Gordon, thank you so much.
Speaker 1: With Charles Schwab and Sanders as chief investment strategists there
Speaker 1: as well,