Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
Speaker 1: Bloomberg Quick Takes Tim Stanibek. We're here every day bringing
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Speaker 1: You can also listen to our radio show at two
Speaker 1: pm Eastern Time on Bloomberg Radio, or watch us on
Speaker 1: YouTube search Bloomberg Global News. Well, another batch of Wall
Speaker 1: Street big banks reporting today the news giving well it
Speaker 1: was giving a lift, another lift to the trade. We're
Speaker 1: talking about Goldman, Saxon, Bank of America. Thank you Apple
Speaker 1: for breaking the markets down. Yeah, as we said, uh, well,
Speaker 1: there's a lot going on, Carold, but let's stick with
Speaker 1: Bank of America. Excuse me, because that's a really important one.
Speaker 1: We got Katherine Doherty joining us now financi Report fort
Speaker 1: Bloomberg News. She's been in since the wee hours of
Speaker 1: the morning covering these companies, among them Bank of America.
Speaker 1: She's with us now in the Bloomberg Interactive Broker Studio.
Speaker 1: So Bank America is reaping the benefits of a rate rise,
Speaker 1: but they're also having to pay up for the use
Speaker 1: of unapproved personal devices. Give us the big takeaway from
Speaker 1: today's report. So big takeaway, it's actually reflective in Bank
Speaker 1: of America and then across Wall Street. We started to
Speaker 1: see this last week when first Morgan Stanley JP Morgan
Speaker 1: we're reporting, and then when Wells and City came out
Speaker 1: on Friday. We expected that the focus which it was
Speaker 1: today with Bank of America would be on an I
Speaker 1: I growth. So every time yes, net interest incomes. So
Speaker 1: now that rates have have risen, the banks are able
Speaker 1: to take in their their lending practices are becoming more profitable. UM,
Speaker 1: and we the estimates across the major banks for Morgan Stanley,
Speaker 1: Bank of America, JP, Morgan, they all exceeded analyst expectations. However,
Speaker 1: they've been impacted by expenses and fines. So you referenced UM.
Speaker 1: It really is particular to Bank of America, and the
Speaker 1: other banks have either already disclosed a two million dollar
Speaker 1: fine or they're starting to reference this probe with regulators
Speaker 1: with regards to device use. What the heck is this about?
Speaker 1: Just tell me because it's been coming across and we're like,
Speaker 1: what don't freaking text your friends about what you're doing
Speaker 1: at work from your mobile? Simply the use of personal devices? Yes,
Speaker 1: your cell phone, um, and if they're not disclosed or
Speaker 1: if it's outside of your your work phone. Um. So
Speaker 1: this is across all the banks, um. But we're just
Speaker 1: starting to see it really be talked about, and um
Speaker 1: that we're expecting a full settlement to come with the
Speaker 1: big number. Okay. What's surprising to me is that this
Speaker 1: is happening versus right, because it's not like you know,
Speaker 1: people were using We're talking like what's app signal? Any
Speaker 1: messaging service that we used to send messages to one another? Right?
Speaker 1: This is the same apps? So why why is this
Speaker 1: an issue now? And it was an issue seven years ago,
Speaker 1: but it was I thought it's such also a clampdown
Speaker 1: following the financial meltdown. The this SEC and the CFTC
Speaker 1: are are both. This is I think the closure of
Speaker 1: it all. They're just really honing in. And it was
Speaker 1: after Archegos we started to hear it talked about a
Speaker 1: little bit more that brought this back into the attention
Speaker 1: of regulators. Um so they basically went back to all
Speaker 1: the banks, saw that it was still a practice they
Speaker 1: need to clamp down on, and this is the end result.
Speaker 1: Does this also include when you guys talk with like
Speaker 1: folks in the financial community that they can't be talking
Speaker 1: to you on their cell phones and stuff like what like? Where?
Speaker 1: Does what does this encompass? Who are your sources? Cat?
Speaker 1: You know what I'm saying? Does that mean to in
Speaker 1: terms of how they communicate? Because that's an interesting area.
Speaker 1: It's full on communication. But I believe that the communication
Speaker 1: is with regards to deals that they are working on
Speaker 1: and if they're talking to you know, if it has
Speaker 1: it really depends on the party. There have to be
Speaker 1: a potential for like a possible financial payoff and not payoff,
Speaker 1: but you know what I mean, benefit or something. We
Speaker 1: haven't seen anything come out to to say that there
Speaker 1: has been instances that the regulators are going to point out.
Speaker 1: But perhaps in the future when a settlement is publicly
Speaker 1: disclosed and the regulators come out and say this is
Speaker 1: our findings, that's something we'll be looking for. It's so funny, Carrol,
Speaker 1: because if you think about just the way you know anectotally,
Speaker 1: the way that you and I interact. For example, sometimes
Speaker 1: I'll text you, sometimes I'll send you an I B.
Speaker 1: Sometimes I'll call you on your cell phone. And it's like,
Speaker 1: you know, if we were working at a bank, how
Speaker 1: might that be different? And we're always talking about the show,
Speaker 1: right exactly exactly, like couldn't you be having a meeting
Speaker 1: with somebody and put something on a napkin? So like
Speaker 1: you know what I'm saying, Like that's interesting. Then do
Speaker 1: people go back to those kinds of ways of commuting
Speaker 1: because compute I mean communicating, because it's you're never gonna
Speaker 1: You're never going to capture all communication, right, But I
Speaker 1: think that the main focus here is are you communicating
Speaker 1: on your work devices or your personal devices? And the
Speaker 1: regulators are concerned that they were seeing more use of
Speaker 1: the personal devices. Um that maybe it wasn't even you
Speaker 1: were doing something bad, they were just seeing that the
Speaker 1: use was up and that it was find work related.
Speaker 1: It was starting, I believe with some of these previous
Speaker 1: a year ago, two years ago probes that they started
Speaker 1: to see communication go offline. Okay, we only have thirty
Speaker 1: seconds left. What do we learn about the American consumer
Speaker 1: from Bank of America. They say the consumer is resilient. Okay, yes,
Speaker 1: that's good. We're printing up consumers are resilient T shirts. Yeah,
Speaker 1: but do not send messages that to the consumer is
Speaker 1: resilient on your personal consumers are resilient. And then you
Speaker 1: go on the back and the like. But for how long?
Speaker 1: R right? No, that's what we're watching for next. This
Speaker 1: is just the data from this this past three months.
Speaker 1: But we'll see what the second half of the year
Speaker 1: has to bring. This is fine, get some sleep, I know.
Speaker 1: Do you get some sleep tonight? Okay? Well, alright, Cat Doherty,
Speaker 1: she's finance reporter at Bloomberg News. I love our finance
Speaker 1: team all across Bloomberg. Man, you're listening to Bloomberg Business
Speaker 1: Week with Carol Messer and Bloomberg Takes Tim Stinovic on
Speaker 1: Bloomberg Radio among the most right on the Bloomberg terminal.
Speaker 1: It's also a story that will be featured the upcoming
Speaker 1: issue of Bloomberg Business Week, which is do out later
Speaker 1: this week on newsstands already, though, as we said on
Speaker 1: the Bloomberg Terminal and at Bloomberg dot com, slash business
Speaker 1: Week such a relevant story to our world. Tim It's
Speaker 1: about how the US is exporting inflation, and it's probably
Speaker 1: going to get worse because the Fed hikes Carol ben
Speaker 1: Holland writes all about it with our other colleagues, Ender
Speaker 1: Current and Alexander Webber. Ben joins us this afternoon from
Speaker 1: the economics editor for Bloomberg News. He's on the phone
Speaker 1: from our Washington d C. Bureau. Ben, what does it
Speaker 1: mean when you write that the US is exporting inflation?
Speaker 1: What does that mean? Well, so, I think it's happening
Speaker 1: in two ways. So the first thing is that all
Speaker 1: over the world and the pandemic, you had this kind
Speaker 1: of change in what people were buying. Right, So people
Speaker 1: weren't buying JIM memberships, they weren't buying restaurant meals, they
Speaker 1: weren't going on vacations so much as they were buying goods.
Speaker 1: They're buying exercise bikes and TV sets. But a ship
Speaker 1: was much bigger in the United States than in other countries.
Speaker 1: And it's the last seper longer. And it's been amplified
Speaker 1: by the way that some of the big U S
Speaker 1: resailers have been behaving because we know now that people
Speaker 1: a Walmart and Target built up huge inventories of staff,
Speaker 1: so they were basically buying even more stuff than American
Speaker 1: consumers wanted to buy, which was already a lot. Because
Speaker 1: supplies of all these goods, which were traded on global
Speaker 1: markets were constrained by COVID. The effect of Americans buying
Speaker 1: so much of them was to push their prices up
Speaker 1: for other countries to also joining us. Of course, is
Speaker 1: Joe Webber, editor Bloomberg Business Week, and he's here in
Speaker 1: our interactive broker studio. Hey, Joel hi so Ben, I
Speaker 1: wanted to ask you, you know, how is this manifesting itself.
Speaker 1: You know, we've seen what happens when you know, we
Speaker 1: get a glood of inventory in America, and if this
Speaker 1: is getting pushed out, like, how is it showing up elsewhere?
Speaker 1: So it does show up in the inflation numbers in
Speaker 1: other countries, but if you look at a place like Europe,
Speaker 1: then of course in the headline numbers it's this effect
Speaker 1: is swamp because you know, the biggest driver of higher
Speaker 1: inflation is energy and food, you know, a lot of
Speaker 1: which is the result of the Ukraine War. But you
Speaker 1: are seeing higher prices of important goods by comparison with
Speaker 1: goods that are produced domestically in European countries. And then
Speaker 1: the new side of it that we're starting to see now,
Speaker 1: of course, is that the fix to this, you know,
Speaker 1: this problem if you want a very strong American demand,
Speaker 1: is higher American interest rates. Well, that is knocking the
Speaker 1: dollar much higher. We now have like a very very
Speaker 1: strong dollar, and that makes the inflation problem for other
Speaker 1: countries even worse in a way because it means that
Speaker 1: stuff they buy from America, or stuff that is priced
Speaker 1: in dollars like oil and other commodities, also become more
Speaker 1: expensive for them. And I feel like, you know, this
Speaker 1: is not something that it's a touch and go ban ah.
Speaker 1: And this is why we continue to see the inflationary
Speaker 1: problems globally, you know, sticking with us even longer than
Speaker 1: maybe we had all hoped. Yeah, I think so, because
Speaker 1: this is something that could outlast some of the other
Speaker 1: causes of inflation. So even if europe European energy and
Speaker 1: food problems were to sort of magically disappear, or if
Speaker 1: they were you know that that inflation was to fade away,
Speaker 1: this other stuff caused by a strong dollar, for example,
Speaker 1: might still be around. And it might still keep inflation
Speaker 1: higher than the central magazine Europe would be comfortable with. Okay,
Speaker 1: so the Fed pretty much going to keep raising rereaths
Speaker 1: for a while. So how much worse is this, this
Speaker 1: is gonna this problem gonna get then, I mean, it
Speaker 1: could potentially get worse. I mean the caveat, of course
Speaker 1: is that you know, as I said, that the headline
Speaker 1: inflation in places like Europe is really is really an
Speaker 1: energy story. But it could be that even when that
Speaker 1: goes away, that they are still left with a problem
Speaker 1: which is caused by first strong American demand and then
Speaker 1: second the very strong dollar. That makes their life harder.
Speaker 1: And the thing to another thing to think about here
Speaker 1: is that it also makes the job of a central
Speaker 1: banker harder, because if you're the American, if you're the
Speaker 1: fair if you're the American central back, and you think
Speaker 1: that American inflation is at least partly being caused by
Speaker 1: strong American demand, while there's something you can do something
Speaker 1: about when you raise interest rates, you'll be addressing that.
Speaker 1: But it leaves the European Central Bank, for example, in
Speaker 1: the situation where their inflation is not being caused by
Speaker 1: America European consumers going out and buying lots of stuff,
Speaker 1: and yet they still feel like they have to raise
Speaker 1: rates and the result might be that they just slow
Speaker 1: their economy down without really doing much to address the
Speaker 1: root of the problem. Why did Americans buy stuff at
Speaker 1: a different rate than other countries during the pandemic? Ben?
Speaker 1: Is it? I mean, look, we know Americans love their stuff.
Speaker 1: We know we have different lifestyles in terms of the
Speaker 1: type of houses that we live in and what we
Speaker 1: have inside those houses. But was it was it a
Speaker 1: function of the length of lockdowns or changing demographic patterns
Speaker 1: here in the US? Is there any explanation for it,
Speaker 1: because we're really good at delivery, sometimes we're not going
Speaker 1: to delivery startups. Well, I think, you know, as you said,
Speaker 1: part of it is just that the patterns of what
Speaker 1: people buy a different in different countries to start before
Speaker 1: the pandemic, but I think in the pan they make
Speaker 1: the Probably the biggest reason why that shift was, you know,
Speaker 1: it was bigger and longer lasting in America, was that
Speaker 1: the United States did a big episcal stimulus than the
Speaker 1: European countries, for example, Because it wasn't really it couldn't
Speaker 1: really have been that the other side of it, the
Speaker 1: supply staff. What's harder to do here because because you know,
Speaker 1: more restaurants proposed in Europe than the United States. Right, So, yeah,
Speaker 1: it's a really good point. And the differences, I mean,
Speaker 1: this is why we watch kind of global central bank
Speaker 1: policy right now, Like the differences that we will see
Speaker 1: around the world is going to create problems and certainly
Speaker 1: different investing environments as a result. One of the things
Speaker 1: I love in your stories you talk about the two economies,
Speaker 1: um may have similar rates of inflation you're talking about
Speaker 1: Europe and the US, but they have different kinds with
Speaker 1: major implications again for how the banks tackle the problem.
Speaker 1: But you talk about, you know, the distinction boiling down
Speaker 1: to how bigger share of price pressures is home grown
Speaker 1: and we really need to look at internally where the
Speaker 1: inflationary pressures are within each country. Yeah, and what you
Speaker 1: see when you do look at that, I think is
Speaker 1: really reinforces the point that you know, more of it
Speaker 1: is homegrown in the United States than Europe, and that
Speaker 1: you know, in a way that makes the job of
Speaker 1: the FED easier I think compared with the job or
Speaker 1: the central banks, because as I said, if If you
Speaker 1: think the part of your high inflation in America is
Speaker 1: caused by strong American demand, well that's something the American
Speaker 1: Central Bank can do something about. They can raise interest
Speaker 1: rates and they can cool down that demand. If you're
Speaker 1: Europe and none of your inflation is really being caused
Speaker 1: by strong European demand, but you still have very high
Speaker 1: inflation and you want to do something about it, and
Speaker 1: you're worried about expectations getting entrenched, the risk is that
Speaker 1: you raise interest rates, but all you're a really doing
Speaker 1: is slowing down your own economy and you're not really
Speaker 1: addressing any of the root causes of high prices. Did
Speaker 1: you just say the Fed has it easy? I love
Speaker 1: that they would. You spoke to a lot of an
Speaker 1: I think people here. Jason Furman at Harvard was one
Speaker 1: name that jumped out at me, who's an economics professor.
Speaker 1: They're just wondering, like, of all the people you spoke
Speaker 1: to on this one, what what really pupped for you?
Speaker 1: What was an insight that you didn't know going in.
Speaker 1: I think something that really jumped out of me was
Speaker 1: what Jason Furman said about the way that the world
Speaker 1: economy has kind of flipped. Um in the pandemic. So
Speaker 1: the problem used to be the you know, there used
Speaker 1: to be an abundance of goods. There were plenty of goods,
Speaker 1: and the problem that countries have was to find buyers
Speaker 1: for those goods, to find demand for it um And
Speaker 1: so you know, in that story, the bad guys are
Speaker 1: countries like Germany, for example, in China that we're running
Speaker 1: big trade surpluses and sort of piggybacking off of other
Speaker 1: people's demand. But in the pandemic this has kind of
Speaker 1: been flipped because now goods are not abundant, you know,
Speaker 1: they are scars. And in that world, the American trade deficit.
Speaker 1: You know, it used to be that the US was
Speaker 1: the kind of world's consumer of last resort and other
Speaker 1: when America ran a trade deficit. This help of Rick,
Speaker 1: and now that's kind of been turned on its head
Speaker 1: applies a lot more stuff in the rest of the world. Right, Yeah,
Speaker 1: it's makes you wonder how it plays out. Till Webber,
Speaker 1: Ben Holland, thank you so much. Check this out in
Speaker 1: the new issue upcoming issue a Business Week. This is
Speaker 1: Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes,
Speaker 1: Tim Stinovic on Bloomberg Radio. There's a story we wanted
Speaker 1: to bring you since it hit the Bloomberg terminal last week.
Speaker 1: It's about the noted short seller Carson Block. And I
Speaker 1: gotta say it's very telling and a very revealing story.
Speaker 1: And perhaps that's why I mentioned that, you know, quote
Speaker 1: unquote broke Twitter, of course, an expression meaning you know,
Speaker 1: when I log into Twitter in the morning and see
Speaker 1: what people are are writing about. This was certainly one
Speaker 1: of those things. Katia Portnski is US News Legal Team
Speaker 1: reporter for Bloomberg News. She joins us on the phone
Speaker 1: from New York City. Katya, Um, I want to get
Speaker 1: to the just the crazy anecdote in this story that
Speaker 1: I think you know is one that certainly needs to
Speaker 1: be explained. But but first off, we're talking about Muddy
Speaker 1: water 's founder, Carson Block. Who is he? So Carson
Speaker 1: is a really interesting character on UM. I wouldn't say
Speaker 1: he's on Wall Street because he's in Austin, Texas. But
Speaker 1: he he's a short seller, meaning like he's known for
Speaker 1: putting out parish reports on companies and he has delisted
Speaker 1: um or his reports have gotten eight companies delisted over
Speaker 1: the course of his career. He has a legal background,
Speaker 1: UM finance background. He's really well known because he he
Speaker 1: made his name going after Chinese frauds, a space that
Speaker 1: not many people were looking at, and there were a
Speaker 1: lot of Chinese frauds and so he was right about
Speaker 1: a lot of these UM and he's just become really
Speaker 1: famous in the space over the last ten years, UM
Speaker 1: making his firm, which started as a research shop now
Speaker 1: into a hedge fund. Right, And I feel like he's
Speaker 1: very well known to the Bloomberg audience. And when he
Speaker 1: often writes about something or put up some research, you know,
Speaker 1: you often see a name move UM. You mentioned he's
Speaker 1: been right about a lot of names. Has he been
Speaker 1: more right than wrong in his trades? Because I feel
Speaker 1: like when we you know this cat, when we talk
Speaker 1: about a short cellars, feels like everybody gets so nervous,
Speaker 1: But it's another side of the trade. So bottom line,
Speaker 1: has he been right in a lot of his research
Speaker 1: and his calls? He has UM, But it's it's there's
Speaker 1: it's complicated, it's complicated, and there's different types of short
Speaker 1: reports right that that exists. There are ones that UM
Speaker 1: are saying that the a company is overvalued, and then
Speaker 1: there are ones that say this company is a fraud.
Speaker 1: And what he and his firm do specifically is they
Speaker 1: really try to go afterwards. I mean, they go through
Speaker 1: a lot, they do a lot of different types of
Speaker 1: short reports, but they're well known because they pick out
Speaker 1: frauds and they have UM you know, they do this
Speaker 1: like forensic analysis, and they go through all the struggle
Speaker 1: and they have researchers around the world and they coordinate
Speaker 1: with a lot of people. But they've been under a
Speaker 1: lot of heat, um lately, and UM you know, there's
Speaker 1: a lot of chatter about them and what they do
Speaker 1: as an institution, and not just them, but in the
Speaker 1: short the short uh market in general, the way they
Speaker 1: go about doing their work, UM in a more controversial way. Right. Well,
Speaker 1: sometimes you do your work under duress. We have to
Speaker 1: get to how you start off your story, and I
Speaker 1: feel like it's very telling maybe about who Carson Block
Speaker 1: is in that he shared with you a very revealing
Speaker 1: and very personal story. Do you mind going there in
Speaker 1: terms of how you kick off your story? Sure? UM,
Speaker 1: you know, so we uh we went down to um to,
Speaker 1: Texas to meet with Carson and UM get a little
Speaker 1: bit of an understanding of how he does his work.
Speaker 1: And because we have written a lot about a d
Speaker 1: J investigation into short sellers UM and have reported about
Speaker 1: Carson being um UH person and his firm being one
Speaker 1: of the firms that are being looked at by the
Speaker 1: Justice Department UM for potential market manipulation or coordinated trading. UM.
Speaker 1: We're not actually sure what precise believe the d o
Speaker 1: J is looking at at this stage, but they have
Speaker 1: taken an interest in a lot of firms and Muddy
Speaker 1: Waters is one of them. So we went down and
Speaker 1: we wanted to know more about, you know, the wild
Speaker 1: West of short selling and what goes on there. You know,
Speaker 1: a lot of these firms, aren't, you know, they're they're
Speaker 1: they're they're they're a little bit different from the traditional
Speaker 1: hedge fund managers that you that that we may all
Speaker 1: be more familiar with, the more buttoned up or whatever.
Speaker 1: And these are a lot of independent researchers that sell
Speaker 1: their work to funds and move markets. UM. So we
Speaker 1: wanted to know a little bit about what that life
Speaker 1: was from that world was like and asked if you know,
Speaker 1: he had in the experience with wrongdoing in that in
Speaker 1: that space. UM. You know, CD practices, and he talked
Speaker 1: very openly about a time that he believes he was
Speaker 1: front run by UM, uh you know, UH, an individual
Speaker 1: he suspects UM leaked his information of the information about
Speaker 1: an upcoming report. He was on his way to present
Speaker 1: a short on tal education at a conference, and UM,
Speaker 1: on his way on the flight, he saw UM there
Speaker 1: was a there was a a mysterious interloper in the
Speaker 1: market building a position that would profit off of him
Speaker 1: getting up on stage and saying, go short this position.
Speaker 1: And UM. It was such a stressful moment that a
Speaker 1: hemorrhoid first. UM, well, well he was on the flight.
Speaker 1: All right, We're gonna have to leave it there, Which
Speaker 1: is a perfect reason that you want to go read
Speaker 1: the rest of this story, because it's just I feel
Speaker 1: like it just gives you an indication of kind of
Speaker 1: the pressure, the intensity of who this person is. Katia
Speaker 1: we gotta run Katia Porzakonski, she's US Legal News team leader.
Speaker 1: Check the story out on the Bloomberg Journal. Yeah, but
Speaker 1: you let me drive? Oh no, no, no no, non, please,
Speaker 1: I'll do the ride revels. I want to drive. It's
Speaker 1: a good question. Drive is the drive to the Clobe
Speaker 1: Music on Bluebird Radio, and we've got just about ten
Speaker 1: and a half minutes left in today's trading session, and
Speaker 1: as Charlie mentioned, we are at our lows, are just
Speaker 1: off our lows when it comes to the equity trade
Speaker 1: here with a few minutes to go out performance though, Tim,
Speaker 1: we're seeing it in the energy materials names, bottom of
Speaker 1: the pack, healthcare names, they're down about one point seven percent.
Speaker 1: All right, let's get into it with Chris Saccarelli, chief
Speaker 1: investment officer at Independent Advisor Alliance. Chris joins us this
Speaker 1: afternoon on the phone from Charlotte, North Carolina. Chris, how
Speaker 1: are you well? How about yourself? We're doing pretty well. Look,
Speaker 1: we're not debating right now seventy five versus one hundred
Speaker 1: basis points because you know, we're not hearing from FED speakers,
Speaker 1: and it does seem like seventy is going to be
Speaker 1: what it is. Still, though, there's a lot of consternation
Speaker 1: when it comes to the global macro economic environment with
Speaker 1: energy crisis in playing out in Europe and of course
Speaker 1: inflation crisis playing out here. How do you see things? Yeah,
Speaker 1: I think that's about right. I mean, we're in the
Speaker 1: FED quiet period and seventy five basis points looks to
Speaker 1: be what we're going to see next week. I think
Speaker 1: that's what everyone was was pricing in prior to those
Speaker 1: really high CPI prints. But if you look at the
Speaker 1: Bloomberg applied probability for the FED rate hikes, to your
Speaker 1: point one percent was only for a very short period
Speaker 1: of time when people have that knee jerk reaction. But ultimately,
Speaker 1: we think a lot of the same headwinds are are
Speaker 1: with us right now that we have the beginning of
Speaker 1: the year. As far as inflation continues to be a problem,
Speaker 1: the FED is gonna be raising rates and tightening financial conditions,
Speaker 1: and you're considering to have those recession fears. I think
Speaker 1: today is very illustrative about what's happening in terms of
Speaker 1: a recession on the horizon. So if I look at
Speaker 1: since the beginning of the third quarters, so I'm looking
Speaker 1: at since the end of June. If I look at
Speaker 1: the SMP five of the big cap names, Chris, Uh,
Speaker 1: your performance so far this month has come from consumer
Speaker 1: discretion are It's at UH five point six percent. Information technology,
Speaker 1: so you know we're talking about growth names. They're up
Speaker 1: more than three percent. UH Communication services, financials, consumer staples.
Speaker 1: I mean, we it does feel like high vall stocks
Speaker 1: are all of a sudden, we're seeing out performance. You
Speaker 1: have told us do you feel comfortable putting cash to work?
Speaker 1: Where do you feel comfortable putting cash to work in
Speaker 1: this market environment and what seems to be some changes
Speaker 1: and where we're seeing out performance. Well, we've definitely been
Speaker 1: dollar cost averaging. I don't know that we've been comfortable
Speaker 1: trying to pick a bottom, but we've We've absolutely been
Speaker 1: putting cash to work. We've really tried to stay with
Speaker 1: a balanced portfolio. We've been balancing between value and growth.
Speaker 1: We've been recognizing the fact that with the market down
Speaker 1: about year to date, that offers value, but we haven't
Speaker 1: been trying to predict when and if we're going to
Speaker 1: hit that bottom. We do think a recession is more
Speaker 1: likely a little farther down the road. We're not quite
Speaker 1: as worried about recession in two because of the strong
Speaker 1: consumer spending and you've seen a little bit of that
Speaker 1: in the consumer discrationary stocks. I think if you heard
Speaker 1: a little bit of the Bank of America commentary, they
Speaker 1: talked about how spending has remained strong. But then you
Speaker 1: have that news out of Apple today about employment, and
Speaker 1: that's really the other half of the picture. And so
Speaker 1: we do think that there was a recession more likely
Speaker 1: in four. Ultimately, you know, you kind of have to
Speaker 1: take advantage of the levels that you have at the
Speaker 1: time you have them. So I appreciate hearing your macro
Speaker 1: views here, but I do wonder where you you know,
Speaker 1: ultimately you could of figure out where to put your
Speaker 1: client's money to work. So where do you you say
Speaker 1: this balance between value and growth? What? More specifically, um,
Speaker 1: what is what? What sectors? Where are you doing it? Yeah,
Speaker 1: so more specifically within the value side of things, we
Speaker 1: have been adding to some energy news over the last
Speaker 1: few months. We're looking within oil and gas. We do
Speaker 1: think having an inflation hedge in the portfolio is important.
Speaker 1: We've also been looking at some consumer staples and in
Speaker 1: order to make sure that we have some more resilient
Speaker 1: earnings on the value side. On the growth side, we're
Speaker 1: looking for those those larger tech names, ones that have
Speaker 1: sold off a lot um potentially could go down farther,
Speaker 1: but we think have durable businesses. And ultimately, if you
Speaker 1: have Netflix, which has really been beaten up, and we're
Speaker 1: gonna get a check on their results. Is that a
Speaker 1: name that you feel confident enough to play into. We
Speaker 1: we we more sick with probably the larger tech names
Speaker 1: in terms of like Apple, Amazon, Microsoft, some of some
Speaker 1: of the bigger players that have those bigger franchises. Without
Speaker 1: a doubt, Netflix is a large company, but we view
Speaker 1: Netflix as both an entertainment and consumer discretionary play, not
Speaker 1: just the technology play in the typical hardware software way
Speaker 1: of thinking. So Apple, which came out and really brought
Speaker 1: the market down, our Mark German exclusive about them slowing
Speaker 1: hiring and maybe where they're going to be investing as
Speaker 1: they look at the economic outlook that's down two percent?
Speaker 1: Is that a buying opportunity in your view? It all
Speaker 1: the times on your time horizon, if you have you know,
Speaker 1: a one to three to five year time horizon or longer. Absolutely,
Speaker 1: we think Apple at this price is going to provide
Speaker 1: really good returns going forward. But if you're a trader,
Speaker 1: you're looking up for the next couple of weeks, even
Speaker 1: even for this year, it's gonna be challenging. Clearly, day
Speaker 1: by day as the news comes out, there's there there
Speaker 1: can be more downside ahead. And if we go into recession,
Speaker 1: and it's a deeper recession than most of the stock
Speaker 1: markets are going to go to farther. It's just it's
Speaker 1: impossible to know on any given day how soon that
Speaker 1: will happen. And again, if you have a long enough
Speaker 1: time horizon, we think there is a lot there are
Speaker 1: a lot of good companies on sale right now. And
Speaker 1: I'm sure we're not the only ones thinking that way,
Speaker 1: but it all depends on your audience, right if you
Speaker 1: have short term traders versus longer term investors. How when
Speaker 1: you say there are a lot of companies on sale
Speaker 1: right now, how are you valuing them? Are you valuing
Speaker 1: them based on what their earnings are are? Are you
Speaker 1: know what they said about forward earnings lately? Are you
Speaker 1: valuing them like? How are how are you getting to
Speaker 1: that price where you're saying they're good value? So for
Speaker 1: for us, we're typically again longer term investors were not
Speaker 1: necessarily going to look at what this quarters earnings are
Speaker 1: gonna be, with this year is going to be, We're
Speaker 1: looking more franchise values, just kind of looking over a
Speaker 1: whole cycle. You find those companies with great franchises. I
Speaker 1: think Apple and Micros for great examples where yeah, cyclically
Speaker 1: their earnings could be down if we go into recession,
Speaker 1: but if you think over the next five, ten, twenty years,
Speaker 1: we think it's very likely they'll continue to grow those earnings.
Speaker 1: So we'd be looking more at earnings of our last
Speaker 1: let's say five to ten years, projecting, you know, through
Speaker 1: a few a full business cycle going forward, less so
Speaker 1: quarter by quarter or even you know, calendar year where
Speaker 1: don't you want to be? So right now, we still
Speaker 1: think you don't want to be in those speculative names,
Speaker 1: those ones with either extremely high price to earnings ratios
Speaker 1: or ones without price to earnings ratio because there aren't
Speaker 1: earnings if we are going to go through a recession,
Speaker 1: do you ever really want to be there? To be
Speaker 1: quite honest with our in our investment styles, But but
Speaker 1: I do understand that there's a time for momentum, there's
Speaker 1: a time for speculation. We think if there ever was
Speaker 1: a time for that, that time has passed. You won't
Speaker 1: see that again until we actually are in recession. All right,
Speaker 1: We're gonna leave it on that now. Hey, listen, we
Speaker 1: covered a lot of ground. Uh, And when I said
Speaker 1: do you ever want to be there? Teams like yeah,
Speaker 1: want to be there. Yeah, you wanted to be there
Speaker 1: until you didn't write exactly. The problem is is a
Speaker 1: lot of people don't know when you know when to
Speaker 1: pull from those rights in the timing right. Chris Ecarelli,
Speaker 1: thank you so much, Chief Investment Officer to Independent Advisor Lliance,
Speaker 1: joining us on the phone from Charlotte, North Carolina. Thanks
Speaker 1: for listening to Bloomberg Business Week. Download the podcast on iTunes, SoundCloud,
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