1 00:00:12,520 --> 00:00:16,320 Speaker 1: Hello, and welcome to What Goes Up, a weekly markets podcast. 2 00:00:16,400 --> 00:00:18,880 Speaker 1: My name is Mike Reagan. I'm a senior editor at 3 00:00:18,920 --> 00:00:21,560 Speaker 1: Bloomberg and I'm hold on a higher across acid reporter 4 00:00:21,600 --> 00:00:25,200 Speaker 1: at Bloomberg. And this week on the show, well, everyone 5 00:00:25,280 --> 00:00:28,000 Speaker 1: has been talking about how higher interest rates are causing 6 00:00:28,000 --> 00:00:30,840 Speaker 1: the sell off in technology stocks, but is that the 7 00:00:31,000 --> 00:00:34,560 Speaker 1: entire story? We'll talk with a veteran equity market strategist 8 00:00:34,560 --> 00:00:36,720 Speaker 1: who thinks there's more to it than just that, and 9 00:00:36,840 --> 00:00:39,400 Speaker 1: will also pick her brain about the upcoming earning season. 10 00:00:40,000 --> 00:00:42,599 Speaker 1: But first they'll thought, I've got a pop quiz for you. 11 00:00:42,840 --> 00:00:46,640 Speaker 1: Are you ready? Probably not, but okay, I know I 12 00:00:46,880 --> 00:00:48,320 Speaker 1: wonder you there would be a pop quiz and you 13 00:00:48,360 --> 00:00:51,040 Speaker 1: got very nervous. Did I've been nervous for the past 14 00:00:51,080 --> 00:00:56,440 Speaker 1: hour for I've been nervous for like the past thirty years, 15 00:00:57,400 --> 00:01:01,080 Speaker 1: but but especially nervous with pop quiz filed outa As 16 00:01:01,080 --> 00:01:03,520 Speaker 1: you know, to make a name for yourself in the 17 00:01:03,560 --> 00:01:08,039 Speaker 1: stock market, you really need to create an acronym of 18 00:01:08,160 --> 00:01:10,759 Speaker 1: your own. So I've got it. There's a new acronym 19 00:01:10,920 --> 00:01:12,920 Speaker 1: that I'm a big fan of. I'm gonna tell you 20 00:01:13,000 --> 00:01:15,040 Speaker 1: what it is, and you tell me what it stands for. 21 00:01:15,640 --> 00:01:26,119 Speaker 1: It's magma m A g m A. Okay, it's meta Amazon, Google, Microsoft, 22 00:01:26,240 --> 00:01:30,559 Speaker 1: Apple in some order and in in one of those orders, 23 00:01:30,560 --> 00:01:32,600 Speaker 1: it's pretty good. I'm not sure if you got them 24 00:01:32,640 --> 00:01:36,000 Speaker 1: all in the right order. Um, we'll find out. I 25 00:01:36,040 --> 00:01:39,080 Speaker 1: also I kind of feel bad for Alphabet. You know, 26 00:01:39,080 --> 00:01:41,360 Speaker 1: they're like, look, guys, we changed our name in alphabet 27 00:01:41,400 --> 00:01:45,440 Speaker 1: and everyone's like, no, you're still Google. Sorry. That consonant 28 00:01:46,000 --> 00:01:51,960 Speaker 1: in in our made it made its way into the acronym. 29 00:01:52,040 --> 00:01:54,240 Speaker 1: So I guess the lesson is, if you're going to 30 00:01:54,360 --> 00:01:56,720 Speaker 1: change your name, there's enough ase you need a you 31 00:01:56,760 --> 00:02:00,480 Speaker 1: need a constant. But luckily for us, that acronym acronym 32 00:02:00,560 --> 00:02:03,640 Speaker 1: is courtesy of this week's Yes, I think she created it. 33 00:02:03,680 --> 00:02:06,680 Speaker 1: Maybe maybe she can shed some light on that for us. 34 00:02:06,720 --> 00:02:09,520 Speaker 1: But well, obviously we'd like to have strategists on the 35 00:02:09,520 --> 00:02:11,960 Speaker 1: show a lot, and we're lucky enough to have one 36 00:02:11,960 --> 00:02:14,359 Speaker 1: of the best in the biz working for us right 37 00:02:14,360 --> 00:02:16,720 Speaker 1: here in house at Bloomberg and very excited ever on 38 00:02:16,760 --> 00:02:18,760 Speaker 1: the show. We really are. And I have noticed that 39 00:02:18,919 --> 00:02:21,320 Speaker 1: acronym in in her recent notes. So I want to 40 00:02:21,360 --> 00:02:24,919 Speaker 1: welcome back Gina Martin Adams. She's the chief equity strategist 41 00:02:24,960 --> 00:02:28,280 Speaker 1: at Bloomberg Intelligence. Thank you for joining us. Thank you. 42 00:02:28,520 --> 00:02:30,520 Speaker 1: And I have to say, if I have Deliver or 43 00:02:30,560 --> 00:02:33,160 Speaker 1: Die by Magma, I might be in trouble. Hopefully I 44 00:02:33,160 --> 00:02:35,560 Speaker 1: can make my name in some other way shape or 45 00:02:36,960 --> 00:02:39,360 Speaker 1: we did come up with Magma. And I'll tell you 46 00:02:39,400 --> 00:02:43,000 Speaker 1: why the G is still there because Google's ticker, Alphabet's 47 00:02:43,000 --> 00:02:45,760 Speaker 1: ticker is still G O O g L, so it's 48 00:02:45,800 --> 00:02:48,520 Speaker 1: based on the ticker. That's why we could still still 49 00:02:48,560 --> 00:02:50,960 Speaker 1: have the G in there. And yeah, our team came 50 00:02:51,040 --> 00:02:54,040 Speaker 1: up with Magma. I can't say it's catching fire, forgive 51 00:02:54,080 --> 00:02:57,200 Speaker 1: the pun, but we're trying to wait until the podcast 52 00:02:57,240 --> 00:03:00,760 Speaker 1: comes out. Yeah, you know, hopefully hopefully we can get magnetistic. 53 00:03:02,320 --> 00:03:04,160 Speaker 1: It's a good one. I've seen a lot of attempts 54 00:03:04,200 --> 00:03:09,400 Speaker 1: to recreate the acronym. You know. Another good one is 55 00:03:09,480 --> 00:03:12,560 Speaker 1: um ed Yar. Denny has a Magnificent seven he's been 56 00:03:12,639 --> 00:03:15,280 Speaker 1: out there with because it's really the top seven stocks 57 00:03:15,320 --> 00:03:17,639 Speaker 1: that everyone talks about instead of the top five anymore. 58 00:03:18,240 --> 00:03:20,680 Speaker 1: So I'll credit him with that one. We're all struggling 59 00:03:20,680 --> 00:03:23,400 Speaker 1: with how to describe this giant group of megacaps that 60 00:03:23,400 --> 00:03:27,519 Speaker 1: really dominates everything in the SNPI. Yeah for sure, and 61 00:03:27,800 --> 00:03:29,680 Speaker 1: we do want to talk to you about that because 62 00:03:29,680 --> 00:03:32,360 Speaker 1: you have been writing a lot of research reports about 63 00:03:33,200 --> 00:03:34,920 Speaker 1: the big tech companies. But I want to start with 64 00:03:34,960 --> 00:03:37,200 Speaker 1: just something that's happened this week, which is we heard 65 00:03:37,240 --> 00:03:39,880 Speaker 1: from Powell this week, and I wanted to ask you 66 00:03:39,920 --> 00:03:42,720 Speaker 1: if you feel like he actually ended up saying anything 67 00:03:43,120 --> 00:03:46,520 Speaker 1: new and why he's hearing in front of Congress sort 68 00:03:46,520 --> 00:03:49,600 Speaker 1: of helped stocks form a bottom from the recent sell 69 00:03:49,640 --> 00:03:52,080 Speaker 1: off that we've been seeing at least four for a 70 00:03:52,160 --> 00:03:54,640 Speaker 1: day or two. Yeah, Well, I think, um, you know, 71 00:03:54,720 --> 00:03:57,480 Speaker 1: did he really say anything new? I don't think so. 72 00:03:58,720 --> 00:04:01,240 Speaker 1: I think that the market is incredibly sensitive to anything 73 00:04:01,240 --> 00:04:03,400 Speaker 1: that happens with the FED. When they hear from the Fed, 74 00:04:03,440 --> 00:04:06,640 Speaker 1: they seem to feel better, right, Really, when the market 75 00:04:06,680 --> 00:04:09,120 Speaker 1: is freaking out is when everyone speculates about what does 76 00:04:09,160 --> 00:04:12,920 Speaker 1: the minutes mean? What did we read here? Uh? Forecaster 77 00:04:13,040 --> 00:04:15,080 Speaker 1: comes out and says we're gonna get six sites instead 78 00:04:15,080 --> 00:04:17,320 Speaker 1: of three, and that creates a lot of panics. So 79 00:04:18,000 --> 00:04:21,279 Speaker 1: I think that just hearing his voice and hearing him 80 00:04:21,440 --> 00:04:24,960 Speaker 1: restate that the FED is still going to be somewhat 81 00:04:25,000 --> 00:04:28,960 Speaker 1: measured in their approach. Um is still going to remain 82 00:04:29,080 --> 00:04:32,880 Speaker 1: vigilant and consider both sides of their mandate. Probably was 83 00:04:32,960 --> 00:04:35,159 Speaker 1: the trigger, but it did he really say anything new, 84 00:04:35,320 --> 00:04:37,919 Speaker 1: in my opinion, not necessarily. I think that they're pretty 85 00:04:37,960 --> 00:04:41,880 Speaker 1: consistent in their messaging. But in the days leading up 86 00:04:41,920 --> 00:04:45,320 Speaker 1: to his speech, the market had gone through a process 87 00:04:45,360 --> 00:04:48,160 Speaker 1: of perhaps getting a little bit too irrational with respect 88 00:04:48,160 --> 00:04:50,760 Speaker 1: to FED expectations. You know, we were pulling forward every 89 00:04:50,760 --> 00:04:53,720 Speaker 1: possible interest rate forecast, talking about fifty basis point moves 90 00:04:53,760 --> 00:04:56,719 Speaker 1: instead of twenty five basis point moves, and starting to 91 00:04:56,720 --> 00:04:59,120 Speaker 1: talk about QT and what that might mean, all in 92 00:04:59,160 --> 00:05:01,920 Speaker 1: the span of a very short time period. So I think, 93 00:05:01,920 --> 00:05:04,120 Speaker 1: if anything, it's sort of squelched a little bit of 94 00:05:04,120 --> 00:05:07,279 Speaker 1: the speculation and allowed the market a minute of a 95 00:05:07,320 --> 00:05:11,560 Speaker 1: minute to just start to breathe again. I'm glad you 96 00:05:11,560 --> 00:05:14,000 Speaker 1: brought that up too. You know, I've had that same thought. 97 00:05:14,000 --> 00:05:15,800 Speaker 1: I wish someone could almost study that. I don't know 98 00:05:15,839 --> 00:05:17,400 Speaker 1: how you would do it, but it's like, it seems 99 00:05:17,440 --> 00:05:20,039 Speaker 1: like if you were to print out a speech and 100 00:05:20,120 --> 00:05:22,600 Speaker 1: send it out into the market and print form, you'd 101 00:05:22,600 --> 00:05:24,800 Speaker 1: have one reaction. But if you had pal just read 102 00:05:24,839 --> 00:05:26,800 Speaker 1: it in front of the cameras, who would be a 103 00:05:26,800 --> 00:05:29,800 Speaker 1: completely different reaction. There's something about his soothing tone, I think, yeah, 104 00:05:29,800 --> 00:05:32,520 Speaker 1: And I think that already one's really there's there's something 105 00:05:32,560 --> 00:05:35,840 Speaker 1: about the hearing someone say it rather than reading it. 106 00:05:35,720 --> 00:05:38,320 Speaker 1: It comes across more certain. I totally agree. And I 107 00:05:38,360 --> 00:05:40,640 Speaker 1: think it's a legacy aspect too, because if you think 108 00:05:40,640 --> 00:05:42,719 Speaker 1: about how the FED used to operate, you know, you'd 109 00:05:42,720 --> 00:05:45,440 Speaker 1: have teams of people inside banks trying to figure out 110 00:05:45,960 --> 00:05:48,760 Speaker 1: every little language change in a FED statement and what 111 00:05:48,839 --> 00:05:52,279 Speaker 1: that might mean for future interest rate increases and what 112 00:05:52,320 --> 00:05:55,200 Speaker 1: that might mean for future FED policy, and in the 113 00:05:55,240 --> 00:05:58,359 Speaker 1: open era of communication. Really, just the last twenty thirty 114 00:05:58,440 --> 00:06:02,400 Speaker 1: years here, we've become much more accustomed to constant communication, 115 00:06:02,480 --> 00:06:05,800 Speaker 1: and we really crave that constant messaging. And so I 116 00:06:05,800 --> 00:06:07,680 Speaker 1: think there's something to be said for the fact that 117 00:06:07,760 --> 00:06:10,320 Speaker 1: the personal message, we need it, we want it, we 118 00:06:10,360 --> 00:06:13,120 Speaker 1: want to hear it all the time. We've gotten very 119 00:06:13,120 --> 00:06:17,400 Speaker 1: spoiled by it. And when we're there's a vacuum of messaging, 120 00:06:17,560 --> 00:06:20,680 Speaker 1: the market is tendent, has a tendency to revert to 121 00:06:20,760 --> 00:06:25,280 Speaker 1: its worst self and start to extract the late extreme 122 00:06:25,320 --> 00:06:28,080 Speaker 1: potential outcomes. Runs me. In the old days, didn't they 123 00:06:28,160 --> 00:06:30,000 Speaker 1: used to look and try to figure out how heavy 124 00:06:30,000 --> 00:06:36,280 Speaker 1: green spans briefly exactly. But let's let's get into it 125 00:06:36,400 --> 00:06:40,560 Speaker 1: about interest rates in tech and I was noticed that 126 00:06:40,600 --> 00:06:42,000 Speaker 1: in one of your recent notes. I think it's a 127 00:06:42,920 --> 00:06:46,080 Speaker 1: really important topic to kind of dissect a little bit. 128 00:06:46,120 --> 00:06:48,400 Speaker 1: I mean, I think may and maybe it's partly the 129 00:06:48,400 --> 00:06:51,360 Speaker 1: media's fault. We we tend to shorthand this notion of 130 00:06:51,920 --> 00:06:54,760 Speaker 1: rates are up, tech is selling off. You know, it's 131 00:06:54,800 --> 00:06:59,159 Speaker 1: obviously causing effect there, but uh, your work, you you 132 00:06:59,200 --> 00:07:01,240 Speaker 1: seem to think there's more to it. I mean, obviously 133 00:07:01,720 --> 00:07:05,160 Speaker 1: tech long duration stocks are are clearly sensitive interest rates, 134 00:07:05,400 --> 00:07:07,400 Speaker 1: but in your opinion, it's it's and and the work 135 00:07:07,400 --> 00:07:09,080 Speaker 1: you've done, it seems like you think there's a little 136 00:07:09,120 --> 00:07:11,080 Speaker 1: bit more to it, that that's not the whole story. 137 00:07:11,160 --> 00:07:12,640 Speaker 1: Can you can you talk to us a little bit 138 00:07:12,680 --> 00:07:15,840 Speaker 1: about what, um, you know, what is really the story 139 00:07:15,880 --> 00:07:18,640 Speaker 1: with tech and this sort of mini correct Yeah, I 140 00:07:18,960 --> 00:07:21,400 Speaker 1: think it is multifaceted, and I thank you for giving 141 00:07:21,440 --> 00:07:23,360 Speaker 1: me the air time to discuss it because I do. 142 00:07:23,520 --> 00:07:26,760 Speaker 1: I do believe that there is absolutely a tendency, particularly 143 00:07:26,800 --> 00:07:30,160 Speaker 1: in this environment where rates volatility is coming to the forefront, 144 00:07:30,720 --> 00:07:33,000 Speaker 1: where the market is naturally going to trade on duration. 145 00:07:33,120 --> 00:07:35,600 Speaker 1: So your longest duration stocks like the tech and the 146 00:07:35,680 --> 00:07:39,040 Speaker 1: high growth stocks, the stocks with much longer dated cash 147 00:07:39,080 --> 00:07:42,400 Speaker 1: flow growth are likely to perform much worse than the 148 00:07:42,440 --> 00:07:45,320 Speaker 1: lower duration stocks like the financials and the energies of 149 00:07:45,360 --> 00:07:49,480 Speaker 1: the world. That's just a given. That said, when we 150 00:07:49,520 --> 00:07:52,840 Speaker 1: really analyze what's been happening with tech, and specifically what's 151 00:07:52,840 --> 00:07:55,600 Speaker 1: been happening with the Magma, the biggest of the tech stocks, 152 00:07:56,280 --> 00:08:00,600 Speaker 1: we saw this extreme flight into this group throughout twenty 153 00:08:00,640 --> 00:08:05,080 Speaker 1: and much of one, at least the early part of one, 154 00:08:05,240 --> 00:08:10,080 Speaker 1: really in and sort of seeking safety, and that resulted 155 00:08:10,120 --> 00:08:14,000 Speaker 1: in this tremendous valuation premium for this group. Not necessarily 156 00:08:14,040 --> 00:08:19,240 Speaker 1: related to interest rates, right, because for most of one 157 00:08:19,320 --> 00:08:22,240 Speaker 1: long term interest rates have been slowly rising, albeit in 158 00:08:22,360 --> 00:08:26,680 Speaker 1: fits and starts. We're certainly off of our lows. So 159 00:08:26,800 --> 00:08:30,040 Speaker 1: if it were all about duration, why would these stocks 160 00:08:30,040 --> 00:08:32,680 Speaker 1: have been performing so well when interest rates were initially 161 00:08:32,760 --> 00:08:34,480 Speaker 1: rising and now all of a sudden not that's not 162 00:08:34,559 --> 00:08:39,079 Speaker 1: the entire story, right, So we saw this incredible valuation 163 00:08:39,240 --> 00:08:41,760 Speaker 1: sort of premium get built into these stocks when there 164 00:08:41,800 --> 00:08:44,040 Speaker 1: was just an absence of growth, in an absence of 165 00:08:44,080 --> 00:08:47,679 Speaker 1: confidence everywhere else. Really, over the course of the last 166 00:08:47,800 --> 00:08:50,439 Speaker 1: six months or so, we've started to see that valuation 167 00:08:50,640 --> 00:08:53,960 Speaker 1: premium compressed as the market has become a little bit 168 00:08:54,000 --> 00:08:58,120 Speaker 1: more confident in growth prospects for everyone else outside of 169 00:08:58,120 --> 00:09:02,280 Speaker 1: this space, and a little less confident that these providers 170 00:09:02,520 --> 00:09:05,960 Speaker 1: are going to be the dominant providers in the marketplace. 171 00:09:06,000 --> 00:09:08,240 Speaker 1: As you've had new entrance to the market, you've had 172 00:09:08,240 --> 00:09:11,079 Speaker 1: a lot more competitive you know, the competitive environment has 173 00:09:11,160 --> 00:09:14,640 Speaker 1: changed so dramatically and the like. On top of that, 174 00:09:15,040 --> 00:09:18,720 Speaker 1: we did see a pretty consequential technical indicator developed in 175 00:09:18,800 --> 00:09:22,880 Speaker 1: November where the tech space in particular had gotten so 176 00:09:23,040 --> 00:09:27,560 Speaker 1: extremely overbought that we were inevitably due for some sort 177 00:09:27,600 --> 00:09:29,840 Speaker 1: of correction. I mean, it was really clear in that 178 00:09:29,960 --> 00:09:34,400 Speaker 1: late October early November rip when everyone just rushed right 179 00:09:34,440 --> 00:09:37,199 Speaker 1: back into tech, that this was a sector that was 180 00:09:37,280 --> 00:09:39,600 Speaker 1: overbought in prime for some degree of correction. So we've 181 00:09:39,640 --> 00:09:41,880 Speaker 1: been really since the middle of November in a period 182 00:09:41,920 --> 00:09:44,880 Speaker 1: of time in which this space has been sort of 183 00:09:44,960 --> 00:09:48,800 Speaker 1: rationalizing that extreme as well. So you've got this multiple 184 00:09:48,960 --> 00:09:53,040 Speaker 1: faceted that this multifaceted story going on with tech. It's 185 00:09:53,080 --> 00:09:55,480 Speaker 1: not just about rates. While I think rates are certainly 186 00:09:55,480 --> 00:09:59,080 Speaker 1: playing a heavy part, you know, it's a longer term story. 187 00:09:59,320 --> 00:10:03,320 Speaker 1: It's also at technical story. It's a story of valuations 188 00:10:03,440 --> 00:10:06,679 Speaker 1: and how those are adjusting to a new reality and 189 00:10:06,800 --> 00:10:10,520 Speaker 1: also earning strenths. Frankly, so, so how do you see 190 00:10:10,520 --> 00:10:13,520 Speaker 1: that all playing out sort of in the longer term? 191 00:10:13,640 --> 00:10:17,480 Speaker 1: You know, um, you know, my my guess is that really, 192 00:10:18,080 --> 00:10:22,560 Speaker 1: you know, high growth tech is always gonna command some 193 00:10:22,559 --> 00:10:25,400 Speaker 1: some sort of multiple premium um in a sort of 194 00:10:25,440 --> 00:10:30,000 Speaker 1: normalized environment where you know, inflations normal below two and 195 00:10:30,080 --> 00:10:32,400 Speaker 1: g d p s you know two or whatever, not 196 00:10:32,480 --> 00:10:36,120 Speaker 1: these off the charts, uh numbers we've seen. I mean, 197 00:10:36,200 --> 00:10:39,320 Speaker 1: is that is that a safe bet? And let me 198 00:10:39,400 --> 00:10:41,120 Speaker 1: let me do one more question on there. I'm making 199 00:10:41,160 --> 00:10:43,600 Speaker 1: a two party But um, the other thing to me 200 00:10:43,679 --> 00:10:46,600 Speaker 1: seems to be that, um, you know what we think 201 00:10:46,600 --> 00:10:49,640 Speaker 1: about is growth really isn't growth anymore? You know, the 202 00:10:49,679 --> 00:10:53,839 Speaker 1: magmas aren't really putting up the the eye popping growth 203 00:10:53,840 --> 00:10:56,040 Speaker 1: that they once did. Is that is that part of 204 00:10:56,040 --> 00:10:58,000 Speaker 1: this is absolutely part of the story, is how do 205 00:10:58,040 --> 00:11:00,720 Speaker 1: you really define these magma companies? Are they growth companies? 206 00:11:00,720 --> 00:11:02,880 Speaker 1: Are are are they value companies? Because a few of them 207 00:11:02,920 --> 00:11:06,120 Speaker 1: are actually in the value indices, which is kind of 208 00:11:06,160 --> 00:11:10,440 Speaker 1: compelling information Uh, so, how are they really growth or not? 209 00:11:10,600 --> 00:11:13,920 Speaker 1: You know, I think that the real clarity you can 210 00:11:14,000 --> 00:11:16,120 Speaker 1: you can direct some real clarity by actually looking at 211 00:11:16,120 --> 00:11:18,679 Speaker 1: the duration of stocks, right, And you can even go 212 00:11:18,720 --> 00:11:21,680 Speaker 1: into the tech sector and decompose what are the highest 213 00:11:21,760 --> 00:11:26,080 Speaker 1: duration versus lowest duration stocks. The Magmas are not necessarily 214 00:11:26,080 --> 00:11:28,160 Speaker 1: the highest duration stocks in tech. If you think about 215 00:11:28,160 --> 00:11:30,800 Speaker 1: what's sold off the most over the course of this 216 00:11:30,920 --> 00:11:34,160 Speaker 1: most recent rip and rates, it's really been some of 217 00:11:34,200 --> 00:11:36,400 Speaker 1: the fintech companies, some of the recent I p O, 218 00:11:36,559 --> 00:11:38,760 Speaker 1: some of the non cash companies, right, the companies that 219 00:11:38,800 --> 00:11:42,520 Speaker 1: aren't even generating cash flow yet aren't even posting positive 220 00:11:42,559 --> 00:11:45,040 Speaker 1: earnings growth, right, those are the companies that are most 221 00:11:45,120 --> 00:11:49,720 Speaker 1: at risk, whereas Magma's kind of a safety play. But 222 00:11:49,840 --> 00:11:54,440 Speaker 1: relative to the entire s MP five, they are higher duration, Right, 223 00:11:54,559 --> 00:11:57,400 Speaker 1: So I think that it's all it's all relative and 224 00:11:57,480 --> 00:11:59,680 Speaker 1: what the universe the universe that you're speaking to that 225 00:11:59,760 --> 00:12:02,240 Speaker 1: really matters. But I think you make a good point 226 00:12:02,240 --> 00:12:05,640 Speaker 1: because when we really look at the growth prospects for Magma, 227 00:12:06,160 --> 00:12:09,840 Speaker 1: that was probably what created the valuation bubble that I 228 00:12:09,880 --> 00:12:13,960 Speaker 1: alluded to. When you think about sort of pre crisis, 229 00:12:14,000 --> 00:12:16,320 Speaker 1: these stocks actually traded at a discount to the rest 230 00:12:16,320 --> 00:12:20,200 Speaker 1: of the SMP five Post crisis, they've traded at a 231 00:12:20,200 --> 00:12:23,319 Speaker 1: massive premium. Why have they traded at a premium? Is 232 00:12:23,320 --> 00:12:26,520 Speaker 1: it really just about interest Rate's probably not. It's mostly 233 00:12:26,559 --> 00:12:29,360 Speaker 1: because they were pumping through double digit cash flow growth, 234 00:12:29,400 --> 00:12:33,160 Speaker 1: really strong earnings growth, still posting revenue growth in an 235 00:12:33,240 --> 00:12:36,240 Speaker 1: environment where many companies were in complete distress and weren't 236 00:12:36,240 --> 00:12:40,720 Speaker 1: you know, we're posting negative earnings in some cases. So 237 00:12:40,880 --> 00:12:44,280 Speaker 1: as we get to an environment where more opportunities emerge 238 00:12:44,320 --> 00:12:46,720 Speaker 1: and other companies in the SMP five hundred and the 239 00:12:46,760 --> 00:12:50,480 Speaker 1: broader markets at large can produce the learnings growth, the 240 00:12:50,840 --> 00:12:54,640 Speaker 1: competitive set for investor dollars suddenly changes. Right, there's oh, 241 00:12:54,679 --> 00:12:57,480 Speaker 1: there are energy companies that I might consider buying now, 242 00:12:57,640 --> 00:13:00,079 Speaker 1: or financial companies that I might consider buying now that 243 00:13:00,600 --> 00:13:05,000 Speaker 1: two years ago I thought might actually go out of business. Um, 244 00:13:05,040 --> 00:13:06,840 Speaker 1: So I think that that's a big part of it. 245 00:13:06,880 --> 00:13:08,960 Speaker 1: But when we look, for instance, over the course of 246 00:13:09,000 --> 00:13:11,600 Speaker 1: this year, this subset of companies that just that five 247 00:13:11,679 --> 00:13:15,920 Speaker 1: Magma companies is expected to still produce faster revenue growth 248 00:13:15,960 --> 00:13:19,160 Speaker 1: than the rest of the SMP five hundred, but slower 249 00:13:19,200 --> 00:13:22,080 Speaker 1: earnings growth than the rest of the SMP five hundred, 250 00:13:22,120 --> 00:13:24,000 Speaker 1: and that's a pretty big contrast to where we were 251 00:13:24,000 --> 00:13:27,680 Speaker 1: two years ago, where they were producing much faster earnings 252 00:13:27,720 --> 00:13:29,679 Speaker 1: growth and revenue growth than the rest of the index. 253 00:13:29,720 --> 00:13:31,679 Speaker 1: So that tells you that margins are Another part of 254 00:13:31,720 --> 00:13:36,120 Speaker 1: the story is these companies, while their margins are high, 255 00:13:36,360 --> 00:13:40,600 Speaker 1: they're not getting higher and you've still got margin growth, 256 00:13:40,679 --> 00:13:44,080 Speaker 1: really exponential margin growth for some segments of the SMP 257 00:13:44,200 --> 00:13:48,000 Speaker 1: five hundred to enjoy in this early part of the expansion, 258 00:13:48,080 --> 00:13:51,800 Speaker 1: where this group doesn't have that natural benefits. So I 259 00:13:51,840 --> 00:13:54,360 Speaker 1: think that that's another headwind that we've got to consider 260 00:13:54,520 --> 00:13:57,360 Speaker 1: for this group just in the short term. Doesn't mean 261 00:13:57,400 --> 00:13:59,160 Speaker 1: that over the long run they might not be great 262 00:13:59,200 --> 00:14:01,520 Speaker 1: investment idea US, right, But in the short term, when 263 00:14:01,520 --> 00:14:04,320 Speaker 1: we're thinking three, six, twell months down the road, it 264 00:14:04,360 --> 00:14:07,040 Speaker 1: could be pretty choppy for some of these um you know, 265 00:14:07,240 --> 00:14:18,600 Speaker 1: really big stalwart positions in the SMP. So I was hoping, 266 00:14:18,640 --> 00:14:21,960 Speaker 1: actually that you would dig into the earnings trends for 267 00:14:22,080 --> 00:14:24,360 Speaker 1: some of these companies because I was looking at one 268 00:14:24,400 --> 00:14:27,800 Speaker 1: of your notes and I watched one of your recent 269 00:14:27,960 --> 00:14:30,840 Speaker 1: Boomark TV interviews and you had said that if we 270 00:14:30,880 --> 00:14:34,000 Speaker 1: look at earnings trends. Tech is likely to lag over 271 00:14:34,040 --> 00:14:37,280 Speaker 1: the course of two and your note said the EPs 272 00:14:37,320 --> 00:14:41,040 Speaker 1: growth pace for these companies may remain below the INDEXUS 273 00:14:41,120 --> 00:14:44,239 Speaker 1: into the fourth quarter, and that that sort of diminishes 274 00:14:44,320 --> 00:14:47,360 Speaker 1: some of these the magma's appeal. So can you can 275 00:14:47,400 --> 00:14:50,440 Speaker 1: you go over that? Yeah? Yeah, absolutely So when we 276 00:14:50,480 --> 00:14:53,040 Speaker 1: look out over the landscape of two and this is 277 00:14:53,080 --> 00:14:57,400 Speaker 1: just referencing what is currently in consensus, a couple of 278 00:14:57,480 --> 00:15:00,320 Speaker 1: things are working against Tech number one company. These are 279 00:15:00,360 --> 00:15:03,440 Speaker 1: guiding us to expect less. So this is something that 280 00:15:03,480 --> 00:15:06,400 Speaker 1: really evolved within the October earning season as all of 281 00:15:06,440 --> 00:15:10,400 Speaker 1: a sudden. Whereas in the early part of this recovery, 282 00:15:10,400 --> 00:15:13,840 Speaker 1: companies were persistently guiding analysts to expect more out of 283 00:15:13,880 --> 00:15:16,920 Speaker 1: them and it's a really positive tailwind for stock prices, 284 00:15:17,560 --> 00:15:20,560 Speaker 1: in the third quarter, companies suddenly started saying, hey, analysts, 285 00:15:20,560 --> 00:15:23,720 Speaker 1: maybe you're a little too optimistic, and that really is 286 00:15:23,720 --> 00:15:26,840 Speaker 1: a reversion to normal times pre crisis, that was the norm. 287 00:15:26,880 --> 00:15:29,160 Speaker 1: Companies constantly told analysts, you might be a little bit 288 00:15:29,200 --> 00:15:31,720 Speaker 1: too optimistic. While we all know this earnings game where 289 00:15:31,720 --> 00:15:33,640 Speaker 1: they guide analysts to expect a little less so they 290 00:15:33,640 --> 00:15:36,440 Speaker 1: can beat every quarter. We seem to have reverted back 291 00:15:36,480 --> 00:15:40,280 Speaker 1: to that norm, but that was particularly a profound change 292 00:15:40,320 --> 00:15:43,440 Speaker 1: for tech, where that's where the vast majority of the 293 00:15:43,480 --> 00:15:45,920 Speaker 1: negative guidance started to come from. As all of a sudden, 294 00:15:45,920 --> 00:15:47,720 Speaker 1: the tech companies themselves were saying, you know what, the 295 00:15:47,800 --> 00:15:49,880 Speaker 1: supply chain of stress is gonna last a little longer 296 00:15:49,920 --> 00:15:53,880 Speaker 1: than we were hoping. And even though our sales are 297 00:15:53,880 --> 00:15:55,720 Speaker 1: pretty strong, they may not be as strong as you 298 00:15:55,760 --> 00:15:58,800 Speaker 1: were hoping for. And no, we're not going to be 299 00:15:58,880 --> 00:16:01,280 Speaker 1: able to be as efficient as you had hoped and 300 00:16:01,320 --> 00:16:04,080 Speaker 1: produced that bottom line earnings growth with margin expansion to 301 00:16:04,120 --> 00:16:07,720 Speaker 1: degree that you're expecting. And we see that throughout all 302 00:16:08,240 --> 00:16:11,840 Speaker 1: most of tech, but especially for the Magma companies because 303 00:16:11,840 --> 00:16:13,920 Speaker 1: they are so in the spotlight and they did have 304 00:16:14,000 --> 00:16:17,440 Speaker 1: such a gigantic valuation premium developed. But if you're just 305 00:16:17,480 --> 00:16:20,200 Speaker 1: looking at over the next four quarters, for example, that 306 00:16:20,320 --> 00:16:23,640 Speaker 1: Magma group is expected to post about eight hundred basis 307 00:16:23,680 --> 00:16:27,120 Speaker 1: points slower EPs growth than the s MP five at large, 308 00:16:27,720 --> 00:16:32,640 Speaker 1: so significantly slower EPs growth, which is anomalous. Right. This 309 00:16:32,720 --> 00:16:35,880 Speaker 1: is a group that really persistently beat the SNP five 310 00:16:35,960 --> 00:16:37,920 Speaker 1: hundred terms of earning growth right through the middle of 311 00:16:40,520 --> 00:16:43,600 Speaker 1: that seems like a very weird scenario to me, where 312 00:16:43,680 --> 00:16:46,760 Speaker 1: companies are guiding lower and analysts are raising their reestimates. 313 00:16:46,760 --> 00:16:48,840 Speaker 1: Have you ever seen that before? And I mean it 314 00:16:48,880 --> 00:16:52,000 Speaker 1: sounds like you're kind of perhaps uh side more at 315 00:16:52,000 --> 00:16:55,120 Speaker 1: the analysts than the than the management. Yeah. So there's 316 00:16:55,160 --> 00:16:58,440 Speaker 1: always these interesting dichotomies that emerge where companies there are 317 00:16:58,440 --> 00:17:01,280 Speaker 1: more companies guiding lower than positive, but we never get 318 00:17:01,800 --> 00:17:05,119 Speaker 1: one of companies giving us guidance as well, right, So 319 00:17:05,160 --> 00:17:08,520 Speaker 1: we can only derive so much of our expectations from guidance. 320 00:17:08,560 --> 00:17:12,639 Speaker 1: For tech, it's usually pretty good as an indicator because 321 00:17:13,000 --> 00:17:16,680 Speaker 1: more tech companies guide than any other sector save consumer 322 00:17:16,720 --> 00:17:20,480 Speaker 1: discretionary UM, so we get some pretty good guidance out 323 00:17:20,480 --> 00:17:22,919 Speaker 1: of tech. We don't get guidance for all of the 324 00:17:23,000 --> 00:17:24,800 Speaker 1: SMP five hundred though. As a matter of fact, we 325 00:17:24,800 --> 00:17:26,960 Speaker 1: get guidance from less than a hundred companies in the 326 00:17:27,080 --> 00:17:29,640 Speaker 1: SMP five hundreds, So you can only get so much 327 00:17:29,640 --> 00:17:34,359 Speaker 1: out of it. But shifting direction can be meaningful as 328 00:17:34,400 --> 00:17:39,600 Speaker 1: long as analyst expectations are still moving higher. That's generally 329 00:17:39,800 --> 00:17:43,280 Speaker 1: the factor that matters more for equity prices and for 330 00:17:43,359 --> 00:17:47,520 Speaker 1: equity markets at large, because that revision momentum reflects the 331 00:17:47,800 --> 00:17:51,280 Speaker 1: entire herd of the analyst community for all SMP five 332 00:17:51,359 --> 00:17:55,240 Speaker 1: hundred companies that large, So it's a much bigger um 333 00:17:55,320 --> 00:18:00,359 Speaker 1: and broader and deeper indicator than guidances. That said, items 334 00:18:00,359 --> 00:18:03,040 Speaker 1: can be meaningful for certain companies, and we certainly want 335 00:18:03,080 --> 00:18:06,440 Speaker 1: to pay attention to it to some degree, but revisions 336 00:18:06,440 --> 00:18:10,000 Speaker 1: are more important to follow. And frankly, the other thing 337 00:18:10,040 --> 00:18:12,920 Speaker 1: to consider from a guidance perspective is just what does 338 00:18:12,960 --> 00:18:15,720 Speaker 1: it really mean for guidance to be more negative than positive? 339 00:18:16,560 --> 00:18:19,280 Speaker 1: And as I suggested earlier, we were in a really 340 00:18:19,359 --> 00:18:23,480 Speaker 1: abnormal position when guidance was more positive than negative. That's 341 00:18:23,600 --> 00:18:28,240 Speaker 1: where that almost never happens. That's what happened in one 342 00:18:28,560 --> 00:18:31,120 Speaker 1: And I think a big part of why stocks just 343 00:18:31,240 --> 00:18:34,520 Speaker 1: ripped so hard over the last two years is nobody 344 00:18:34,560 --> 00:18:38,440 Speaker 1: thought we could do this well, including companies themselves, and 345 00:18:38,520 --> 00:18:42,879 Speaker 1: so it came as such an incredible shock. Yeah, it 346 00:18:42,960 --> 00:18:45,679 Speaker 1: wasn't that there was a situation where so many companies 347 00:18:45,800 --> 00:18:49,239 Speaker 1: just either pull their guidance or give any because they 348 00:18:49,280 --> 00:18:51,720 Speaker 1: just got up, stay through the cards in the errands, 349 00:18:52,040 --> 00:18:55,879 Speaker 1: get it fold. Yeah, Yeah, which makes me wonder, you know, 350 00:18:56,080 --> 00:19:01,240 Speaker 1: I assume, okay, and you know in on I don't 351 00:19:01,240 --> 00:19:05,000 Speaker 1: think anyone, Uh, you know, it's sort of in your 352 00:19:05,160 --> 00:19:07,760 Speaker 1: type of seat who has to make projections and estimates 353 00:19:07,800 --> 00:19:10,920 Speaker 1: and and sort of predict the future. Uh, and correct 354 00:19:10,920 --> 00:19:13,480 Speaker 1: me if I'm wrong, But I'm assuming your confidence level 355 00:19:13,720 --> 00:19:16,160 Speaker 1: and everything was sort of lower than what it would 356 00:19:16,160 --> 00:19:19,600 Speaker 1: have been, you know in a non pandemic environment. Certainly, 357 00:19:20,320 --> 00:19:23,760 Speaker 1: where's your confidence level now in what you're analyzing for 358 00:19:23,520 --> 00:19:26,120 Speaker 1: the for the future. Has it gotten back to that 359 00:19:26,359 --> 00:19:28,840 Speaker 1: you know pre COVID level? Is it halfway there? You know? 360 00:19:30,000 --> 00:19:32,200 Speaker 1: How do you think about how confident you are in 361 00:19:32,200 --> 00:19:34,880 Speaker 1: in what your actually um? You know, your confidence level 362 00:19:34,920 --> 00:19:38,680 Speaker 1: and predicting market valuations is always low. You know, it's 363 00:19:38,760 --> 00:19:42,760 Speaker 1: just we all struggled for the holy grail of trying 364 00:19:42,800 --> 00:19:45,880 Speaker 1: to find that perfect model that tells you where valuations 365 00:19:45,920 --> 00:19:48,680 Speaker 1: should be. But on my regression models, for example, that 366 00:19:48,760 --> 00:19:51,600 Speaker 1: try to predict the earning side of the SMP five 367 00:19:51,680 --> 00:19:55,760 Speaker 1: hundred equation versus the multiple side, the earnings model is 368 00:19:55,760 --> 00:19:59,480 Speaker 1: is roughly two thirds better than the multiple model, And 369 00:19:59,680 --> 00:20:01,959 Speaker 1: there's is no way to know because when you're predicting 370 00:20:01,960 --> 00:20:04,879 Speaker 1: the multiple, you're predicting sentiment to a certain degree. Obviously, 371 00:20:04,960 --> 00:20:06,520 Speaker 1: how much our investor is going to be willing to 372 00:20:06,520 --> 00:20:10,000 Speaker 1: pay for this cash flow over time. I will say 373 00:20:10,040 --> 00:20:12,560 Speaker 1: that the earnings model I I would argue that you 374 00:20:12,560 --> 00:20:15,199 Speaker 1: should be more confident that earnings growth will be at 375 00:20:15,240 --> 00:20:17,720 Speaker 1: least stable to close to double digit growth over the 376 00:20:17,760 --> 00:20:20,000 Speaker 1: course of this year. And I would say I'm more 377 00:20:20,040 --> 00:20:22,280 Speaker 1: confident in our earnings model than i have been in 378 00:20:22,320 --> 00:20:26,480 Speaker 1: the most recent past because things have finally normalized when 379 00:20:26,480 --> 00:20:29,160 Speaker 1: you're coming right into recovery. Our earnings model is based 380 00:20:29,160 --> 00:20:32,560 Speaker 1: on macroeconomic inputs, so we take things like where is 381 00:20:32,560 --> 00:20:35,720 Speaker 1: the unemployment rate trending? Well. When the unemployment rate was 382 00:20:35,720 --> 00:20:40,960 Speaker 1: trending back to five that created a lot of distortion 383 00:20:41,000 --> 00:20:44,240 Speaker 1: in the model, as you might imagine, And now that 384 00:20:44,280 --> 00:20:47,360 Speaker 1: we're back to more normalized conditions of unemployment, we can 385 00:20:47,480 --> 00:20:50,400 Speaker 1: use a model more effectively when it's driven that way. 386 00:20:50,440 --> 00:20:52,280 Speaker 1: And it's the same with durable goods orders. I have 387 00:20:52,359 --> 00:20:55,680 Speaker 1: reasonable confidence that at this stage of the economic cycle 388 00:20:55,720 --> 00:20:59,120 Speaker 1: will probably get pretty strong durable goods orders growth. That's 389 00:20:59,119 --> 00:21:02,120 Speaker 1: an input to the mall at all. Um The things 390 00:21:02,160 --> 00:21:04,720 Speaker 1: that are more uncertain right now are really more multiple 391 00:21:04,720 --> 00:21:07,560 Speaker 1: and valuation based, which you know is kind of an 392 00:21:07,640 --> 00:21:12,760 Speaker 1: environment of normal again. You know what was abnormal was 393 00:21:12,800 --> 00:21:18,160 Speaker 1: an environment where the FED was printing money, more money 394 00:21:18,160 --> 00:21:21,280 Speaker 1: than we'd ever seen. The balance she was expansion expanding 395 00:21:21,400 --> 00:21:23,919 Speaker 1: faster than we've ever seen. Now we're moving into a 396 00:21:23,960 --> 00:21:28,160 Speaker 1: more normalized environment, So hopefully the valuation model proves itself 397 00:21:28,200 --> 00:21:30,639 Speaker 1: to be a little bit more predictable as well. But 398 00:21:31,640 --> 00:21:34,760 Speaker 1: you know, interest rates I think are the big question 399 00:21:34,800 --> 00:21:38,639 Speaker 1: mark for this year as opposed to economic conditions, and 400 00:21:38,720 --> 00:21:41,440 Speaker 1: usually economic conditions drive the earnings models, so we should 401 00:21:41,440 --> 00:21:45,240 Speaker 1: have a little bit more confidence there. Yeah, well, that 402 00:21:45,320 --> 00:21:47,600 Speaker 1: seems like the data has been coming in. You know, 403 00:21:47,600 --> 00:21:51,840 Speaker 1: the magnitude of the beats or mrs is uh come 404 00:21:51,880 --> 00:21:54,000 Speaker 1: back to to earth to some degree. You know, we 405 00:21:54,040 --> 00:21:57,800 Speaker 1: saw CPI at seven right on the those this week, 406 00:21:57,880 --> 00:22:00,640 Speaker 1: So I guess that helps build a confidence I hope, 407 00:22:00,640 --> 00:22:06,720 Speaker 1: so knock on. So, Gina, speaking of earnings, that we 408 00:22:06,840 --> 00:22:10,840 Speaker 1: have the earning season kicking off this week, and I 409 00:22:10,880 --> 00:22:12,960 Speaker 1: was looking through one of your notes and you said 410 00:22:13,000 --> 00:22:16,240 Speaker 1: analysts are raising their forecast for the coming season despite 411 00:22:16,480 --> 00:22:20,639 Speaker 1: company guidance moving in the opposite direction. You mentioned EPs 412 00:22:20,680 --> 00:22:24,199 Speaker 1: growth everybody's expecting, but your guidance space model says an 413 00:22:24,320 --> 00:22:28,760 Speaker 1: even higher is likely, and you said, analyst revenue outlooks 414 00:22:28,760 --> 00:22:32,200 Speaker 1: continue to stun So what will you be looking for 415 00:22:32,600 --> 00:22:34,560 Speaker 1: this season? I know a lot has been made over 416 00:22:34,600 --> 00:22:36,920 Speaker 1: the last couple of quarters of you know, just even 417 00:22:36,960 --> 00:22:40,879 Speaker 1: tallying up how many times people mention inflation or or 418 00:22:41,040 --> 00:22:45,399 Speaker 1: the word transitory on on quarterly calls. So what what 419 00:22:45,440 --> 00:22:48,119 Speaker 1: should we be looking Yeah, it's a great question. I 420 00:22:48,680 --> 00:22:51,120 Speaker 1: we also have been in that involved in that game 421 00:22:51,160 --> 00:22:54,800 Speaker 1: of tallying up inflation mentions and supply chain mentions, as 422 00:22:54,840 --> 00:22:58,480 Speaker 1: you know, and it has been kind of stunning to follow. 423 00:22:58,600 --> 00:23:00,600 Speaker 1: But the thing that I think is most important to 424 00:23:00,640 --> 00:23:04,520 Speaker 1: watch really is what are analysts forecasts and company guidance 425 00:23:04,560 --> 00:23:09,679 Speaker 1: around operating margins going into and beyond, because that's the 426 00:23:09,720 --> 00:23:13,399 Speaker 1: real trigger that I think changed a lot in the 427 00:23:13,440 --> 00:23:17,879 Speaker 1: markets as of last quarter um Where every other quarter 428 00:23:17,960 --> 00:23:20,679 Speaker 1: of this recovery process has been all about a persistent 429 00:23:20,720 --> 00:23:24,639 Speaker 1: beat top line bottom line margin beat everything, and a 430 00:23:24,840 --> 00:23:28,879 Speaker 1: rage to top line bottom line margins. The third quarter 431 00:23:28,960 --> 00:23:32,879 Speaker 1: earning season, which was between you know, mid October and 432 00:23:32,920 --> 00:23:35,680 Speaker 1: mid November, was different in that, all of a sudden 433 00:23:36,240 --> 00:23:39,920 Speaker 1: we started to see some real change in analysts confidence 434 00:23:40,920 --> 00:23:44,360 Speaker 1: going forward, and by that I mean the revenue estimates 435 00:23:44,400 --> 00:23:48,840 Speaker 1: continue to rise, but their earnings estimates stopped rising, and 436 00:23:48,880 --> 00:23:52,000 Speaker 1: those earnings estimates, you know, or at least slowed down 437 00:23:52,160 --> 00:23:54,520 Speaker 1: the pace of increase. And a lot of that is 438 00:23:54,560 --> 00:23:58,720 Speaker 1: because operating margin forecasts kind of hit a ceiling where 439 00:23:58,840 --> 00:24:02,879 Speaker 1: analysts were persistingly increasing their forecast for operating margins for 440 00:24:02,920 --> 00:24:05,919 Speaker 1: the SMP five hundred prior to that season. In the 441 00:24:06,000 --> 00:24:09,640 Speaker 1: third quarter season, we saw roughly half of SMP five 442 00:24:09,680 --> 00:24:14,479 Speaker 1: hundred estimates for forward operating margins fall. So it's not 443 00:24:14,520 --> 00:24:18,320 Speaker 1: that analysts are expecting margins themselves to drop, but they're saying, 444 00:24:18,359 --> 00:24:21,240 Speaker 1: you know what, I'm going to rationalize my expectations for 445 00:24:21,280 --> 00:24:25,720 Speaker 1: the future, and that rationalization ultimately creates a little bit 446 00:24:25,760 --> 00:24:27,800 Speaker 1: of friction for stock crisis. We just want to watch 447 00:24:27,840 --> 00:24:30,520 Speaker 1: how much does it rationalize and does it ultimately manifest 448 00:24:30,600 --> 00:24:34,480 Speaker 1: itself in a reduction in operating margin expectations are not 449 00:24:35,160 --> 00:24:38,199 Speaker 1: I think that's absolutely the biggest key to this earning season. 450 00:24:38,280 --> 00:24:40,399 Speaker 1: We'll have more on that in our our notes for 451 00:24:40,520 --> 00:24:44,040 Speaker 1: next week after a couple of financials report for Friday, 452 00:24:44,080 --> 00:24:47,359 Speaker 1: So certainly look out for that, but I do think 453 00:24:47,440 --> 00:24:49,960 Speaker 1: it's the most important factor to watch and It's not 454 00:24:50,040 --> 00:24:53,639 Speaker 1: just important because I care about company fundamentals and the 455 00:24:53,680 --> 00:24:56,200 Speaker 1: other thing I think to note about operating margin forecasts. 456 00:24:56,359 --> 00:25:01,640 Speaker 1: They're a magnificent timing indicator. So you know, just historically, 457 00:25:01,840 --> 00:25:04,880 Speaker 1: if you go back over the last ten years, all 458 00:25:04,920 --> 00:25:11,479 Speaker 1: of those major corrections in the equity market, excluding the 459 00:25:11,520 --> 00:25:15,439 Speaker 1: coronavirus related correction obviously, but those three major peaks and 460 00:25:15,520 --> 00:25:18,080 Speaker 1: stocks which proceeded in near twenty percent correction in the 461 00:25:18,200 --> 00:25:22,440 Speaker 1: SNP five, we're all accurately forecast by a peak in 462 00:25:22,480 --> 00:25:26,000 Speaker 1: operating margin estimates as well. So I pay a very 463 00:25:26,119 --> 00:25:29,880 Speaker 1: very close attention to this indicator. And should we continue 464 00:25:29,880 --> 00:25:32,640 Speaker 1: to see sort of a material down draft and expectations 465 00:25:32,680 --> 00:25:36,520 Speaker 1: for margins, you would anticipate a much weaker market climate 466 00:25:36,680 --> 00:25:39,639 Speaker 1: to emerge. Um. You know, I'm hopeful that we can 467 00:25:39,720 --> 00:25:41,760 Speaker 1: kind of hold in there and companies can guide us 468 00:25:41,800 --> 00:25:44,879 Speaker 1: that some of these supply chain frictions are easing, some 469 00:25:44,960 --> 00:25:48,040 Speaker 1: of the inflation pressures are easing. But you know, I'm 470 00:25:48,040 --> 00:25:50,560 Speaker 1: not a hundred percent certain that we're we can be 471 00:25:50,680 --> 00:25:56,800 Speaker 1: that rose colored glasses UM kind of optimistic. Yeah, this uh, 472 00:25:56,960 --> 00:25:59,800 Speaker 1: supply chain issues seem to be lingering longer than anyone 473 00:26:00,240 --> 00:26:03,600 Speaker 1: really expected. You know, and now flaring up again with 474 00:26:03,640 --> 00:26:06,840 Speaker 1: the with this new variant of the virus. You know, 475 00:26:06,880 --> 00:26:08,800 Speaker 1: I wanted to rewind a little bit, and you mentioned how, 476 00:26:09,040 --> 00:26:12,280 Speaker 1: you know, interest rates or obviously you know, first and 477 00:26:12,320 --> 00:26:15,720 Speaker 1: foremost on on most people's minds, uh this year. And 478 00:26:15,760 --> 00:26:17,520 Speaker 1: I think we've talked about this in the past, about 479 00:26:17,560 --> 00:26:19,800 Speaker 1: how it's it's often sort of that rate of change 480 00:26:20,119 --> 00:26:22,320 Speaker 1: of interest rates. You know, if if it looks like 481 00:26:22,359 --> 00:26:24,840 Speaker 1: it's a disorderly sell off in the bond market and 482 00:26:24,960 --> 00:26:28,719 Speaker 1: rates jump really quickly quickly, that's really the scariest thing 483 00:26:28,760 --> 00:26:31,119 Speaker 1: to equity investors, I think, I mean, is it is 484 00:26:31,119 --> 00:26:33,720 Speaker 1: it that simple? You know, Could a sort of a 485 00:26:33,760 --> 00:26:38,840 Speaker 1: slow grind higher in rates uh be digested at least 486 00:26:38,840 --> 00:26:42,080 Speaker 1: from the index level, uh, you know, by the equity 487 00:26:42,119 --> 00:26:45,200 Speaker 1: market and sort of a quiet rotation that that keeps 488 00:26:45,240 --> 00:26:48,679 Speaker 1: the index a float, we're you know, Or does a 489 00:26:48,720 --> 00:26:52,399 Speaker 1: grind higher eventually tighten financial conditions enough that uh, you know, 490 00:26:52,440 --> 00:26:56,080 Speaker 1: either the FED has to stall its plans and sort 491 00:26:56,080 --> 00:26:58,560 Speaker 1: of backtrack a little bit or that week. You know, 492 00:26:58,600 --> 00:27:01,280 Speaker 1: I think it's a complicated question, and honestly, I would 493 00:27:01,320 --> 00:27:04,080 Speaker 1: like to say that a slow grind higher should be 494 00:27:04,240 --> 00:27:08,040 Speaker 1: relatively easily absorbed by equities. But a lot of that 495 00:27:08,119 --> 00:27:12,600 Speaker 1: depends on what's happening with the curve um as well 496 00:27:12,640 --> 00:27:15,720 Speaker 1: as what's happening with growth amid that slow grind higher. 497 00:27:15,960 --> 00:27:18,119 Speaker 1: And I think that this is what the equity market 498 00:27:18,160 --> 00:27:20,520 Speaker 1: is going to grapple with over the course of the year. 499 00:27:20,600 --> 00:27:23,919 Speaker 1: Is okay. You know, when we throw into our model 500 00:27:24,040 --> 00:27:26,040 Speaker 1: that we're likely to get a two to two point 501 00:27:26,040 --> 00:27:31,160 Speaker 1: to five ten year treasury yield through two that's not 502 00:27:31,280 --> 00:27:35,720 Speaker 1: particularly impactful to stocks. It's you know, it's relatively meaningless. 503 00:27:35,760 --> 00:27:40,320 Speaker 1: Does constrain the multiple from moving higher, but doesn't necessarily, 504 00:27:41,000 --> 00:27:43,800 Speaker 1: you know, crush the market by any stretch of the imagination, 505 00:27:44,480 --> 00:27:49,040 Speaker 1: as long as the two year treasury remains somewhat anchored 506 00:27:49,080 --> 00:27:52,000 Speaker 1: and only goes up incrementally. We have three hikes in 507 00:27:52,040 --> 00:27:53,919 Speaker 1: the in the Fed funds rate over the course of 508 00:27:53,960 --> 00:27:58,719 Speaker 1: the year, and economic growth conditions remain intact. Right, So 509 00:27:58,800 --> 00:28:02,600 Speaker 1: it's really almost imposed usible to just isolate that tenure 510 00:28:02,640 --> 00:28:07,520 Speaker 1: and say here's its impact by itself, because it really 511 00:28:07,600 --> 00:28:11,840 Speaker 1: is why is the tenure rising, what's happening with the 512 00:28:11,880 --> 00:28:15,600 Speaker 1: shorter end of the curve, and is it rising because 513 00:28:15,720 --> 00:28:19,439 Speaker 1: you know, investors are freaking out about inflation while growth 514 00:28:19,520 --> 00:28:22,800 Speaker 1: is plumbing because that's a really tough environment for stocks. 515 00:28:23,440 --> 00:28:26,800 Speaker 1: Or is it rising because inflation pressures are still high 516 00:28:26,840 --> 00:28:31,159 Speaker 1: and growth is skyrocketing, because that's a great environment for stocks. 517 00:28:31,160 --> 00:28:36,560 Speaker 1: So I just think it's all about context. And unfortunately, UM, 518 00:28:36,600 --> 00:28:38,360 Speaker 1: you know, we can isolate it, and we do. We 519 00:28:38,480 --> 00:28:42,000 Speaker 1: isolated in our models, and certainly a three percent tenure 520 00:28:42,040 --> 00:28:47,360 Speaker 1: considering our economic forecast would be pretty restrictive to equity 521 00:28:47,400 --> 00:28:51,240 Speaker 1: multiple valuations at this point in time. But if a 522 00:28:51,280 --> 00:28:54,680 Speaker 1: three percent tenure comes along because you've got forty earnings growth, 523 00:28:54,680 --> 00:28:57,600 Speaker 1: that's a totally different environment, right, And and so I 524 00:28:57,640 --> 00:29:00,080 Speaker 1: think that you do have to kind of consider a 525 00:29:00,160 --> 00:29:04,840 Speaker 1: context from in which those rates are moving higher. Speaking 526 00:29:04,880 --> 00:29:07,880 Speaker 1: of your outlook, I do want to ask you about 527 00:29:07,920 --> 00:29:10,880 Speaker 1: what you're actually foreseeing for the SMP five hundred for 528 00:29:11,680 --> 00:29:14,240 Speaker 1: this year, because just about everybody I talked to has 529 00:29:14,240 --> 00:29:16,240 Speaker 1: been saying it's going to be just so much more 530 00:29:16,520 --> 00:29:20,840 Speaker 1: choppier than it's been. In what I hear over and 531 00:29:20,880 --> 00:29:23,840 Speaker 1: over again, is there storm clouds on the horizon to 532 00:29:23,920 --> 00:29:26,880 Speaker 1: grapple with or some sort of iteration of of of 533 00:29:27,000 --> 00:29:30,160 Speaker 1: that sentiment. And I know in your year head outlook, 534 00:29:30,160 --> 00:29:32,120 Speaker 1: you said the path is likely to take its fair 535 00:29:32,120 --> 00:29:36,040 Speaker 1: share of twists and turns as the economy transitions to expansion. 536 00:29:36,120 --> 00:29:38,600 Speaker 1: So what do you foresee for the SMP fire and 537 00:29:38,760 --> 00:29:41,000 Speaker 1: feel free to break it down into sort of, you know, 538 00:29:41,040 --> 00:29:43,560 Speaker 1: the first half in the second half, as Chris Harvey 539 00:29:43,600 --> 00:29:46,440 Speaker 1: did on the podcast last week where he said, we 540 00:29:46,560 --> 00:29:49,840 Speaker 1: might see this cathartic up chuck in the first half 541 00:29:49,840 --> 00:29:52,080 Speaker 1: of the year, which I love and so I want 542 00:29:52,080 --> 00:29:55,320 Speaker 1: to bring it back with. So what what are you think? Um? Well, 543 00:29:55,360 --> 00:29:58,640 Speaker 1: I can't promise any clever equips like cathartic up check 544 00:29:58,880 --> 00:30:02,160 Speaker 1: up chuck, I can't even say it. Forgive me for that, 545 00:30:02,240 --> 00:30:05,720 Speaker 1: But what you know, I I think the consensus that 546 00:30:05,800 --> 00:30:09,320 Speaker 1: we're pretty close to consensus. Frankly, we've got low slow, 547 00:30:09,480 --> 00:30:12,800 Speaker 1: slow growth and choppy growth in the SMP are most 548 00:30:12,920 --> 00:30:16,440 Speaker 1: likely outcome for stocks over the course of this year. 549 00:30:16,520 --> 00:30:21,960 Speaker 1: I'd say the likelihood that I'm too bullish is lower 550 00:30:21,960 --> 00:30:24,360 Speaker 1: than the likelihood that I'm too bearish. I do think 551 00:30:24,360 --> 00:30:27,800 Speaker 1: that most likely, if I'm wrong, I'm wrong because I'm 552 00:30:27,840 --> 00:30:32,080 Speaker 1: too um too cautious. That may be a function of 553 00:30:32,120 --> 00:30:34,560 Speaker 1: hanging out with you guys all day long, constantly, you know, 554 00:30:35,440 --> 00:30:38,320 Speaker 1: asking me to really question whether or not I should 555 00:30:38,360 --> 00:30:41,360 Speaker 1: be so bullish or not. But I, you know, I 556 00:30:41,360 --> 00:30:43,719 Speaker 1: I do think it's going to be a function of 557 00:30:43,760 --> 00:30:48,120 Speaker 1: where we end up on operating margins that largely determines 558 00:30:48,960 --> 00:30:53,520 Speaker 1: what happens this year and can companies withstand inflation pressure. 559 00:30:54,200 --> 00:30:59,280 Speaker 1: Will we see wage growth start to overcome? Um, it's 560 00:30:59,280 --> 00:31:03,280 Speaker 1: start to over well other categories of inflation. While wages 561 00:31:03,320 --> 00:31:06,240 Speaker 1: have been very very dormant over the last several years, 562 00:31:06,440 --> 00:31:07,920 Speaker 1: all of a sudden, we're seeing a little bit of 563 00:31:07,960 --> 00:31:10,880 Speaker 1: wage growth. And that's one factor that I think we 564 00:31:10,960 --> 00:31:13,239 Speaker 1: probably don't pay enough attention to is what will that 565 00:31:13,320 --> 00:31:17,360 Speaker 1: mean for operating margins going forward? Um? I think that's 566 00:31:17,440 --> 00:31:20,080 Speaker 1: so far what the market has done is absorbed a 567 00:31:20,120 --> 00:31:24,240 Speaker 1: pretty rocky move and interest rates and a pretty significant 568 00:31:24,280 --> 00:31:26,640 Speaker 1: sell off in tech with relative ease. I mean, I 569 00:31:26,640 --> 00:31:28,760 Speaker 1: think that you've got to take the signals from the 570 00:31:28,920 --> 00:31:32,080 Speaker 1: rally in financials and energy for what they are, and 571 00:31:32,120 --> 00:31:35,959 Speaker 1: they're very bullish. Uh So, if we can continue that 572 00:31:36,040 --> 00:31:39,160 Speaker 1: kind of environment where you know, maybe we rationalize our 573 00:31:39,200 --> 00:31:42,960 Speaker 1: expectations or valuations in some bloated sectors, but start to 574 00:31:43,040 --> 00:31:46,000 Speaker 1: keep start to see more investment flowing into some of 575 00:31:46,000 --> 00:31:50,360 Speaker 1: these cyclical spaces, we could have a much better market 576 00:31:50,440 --> 00:31:54,840 Speaker 1: landscape than I think many of us are anticipating. Um. 577 00:31:54,880 --> 00:31:58,000 Speaker 1: You know, I think the likelihood for recession is very, 578 00:31:58,160 --> 00:32:01,280 Speaker 1: very low. I think the said if anything, will air 579 00:32:01,360 --> 00:32:03,920 Speaker 1: on the side of caution as opposed to too much aggression. 580 00:32:03,960 --> 00:32:06,160 Speaker 1: Even though the market is worried they might get aggressive, 581 00:32:06,200 --> 00:32:10,200 Speaker 1: they've shown very little sign of of thinking about getting 582 00:32:10,200 --> 00:32:13,000 Speaker 1: too hawkish. And as long as those are your baseline conditions, 583 00:32:13,600 --> 00:32:16,760 Speaker 1: I think you've got to be pretty constructive toward risk assets. 584 00:32:16,840 --> 00:32:19,640 Speaker 1: And then I go back to one other thing, and 585 00:32:19,680 --> 00:32:22,360 Speaker 1: that is the fact that there is just no evidence 586 00:32:22,400 --> 00:32:25,440 Speaker 1: that households are overly bullish towards equities. If anything, they 587 00:32:25,480 --> 00:32:28,479 Speaker 1: just don't want to own stocks. They'd rather throw everything 588 00:32:28,520 --> 00:32:31,200 Speaker 1: at crypto and n f T s and some of 589 00:32:31,240 --> 00:32:34,120 Speaker 1: these other risk assets and just leave the poor stock 590 00:32:34,200 --> 00:32:37,160 Speaker 1: market behind, as if it just doesn't matter anymore. You know. 591 00:32:37,200 --> 00:32:39,040 Speaker 1: I hate to sound like the red headed stepchild, but 592 00:32:39,080 --> 00:32:40,840 Speaker 1: I kind of am and have been for a long 593 00:32:40,880 --> 00:32:44,000 Speaker 1: time now, where people just don't want to own stocks 594 00:32:44,040 --> 00:32:47,560 Speaker 1: that much. So as the bond market becomes less and 595 00:32:47,640 --> 00:32:50,720 Speaker 1: less investable, you know, as they start to lose a 596 00:32:50,720 --> 00:32:52,840 Speaker 1: little bit money in in the bond market, they start 597 00:32:52,920 --> 00:32:55,760 Speaker 1: to think about where are my other investment opportunities, And 598 00:32:55,800 --> 00:32:58,040 Speaker 1: some of that capital could continue to trickle into the 599 00:32:58,040 --> 00:33:02,280 Speaker 1: equity market kicking and screaming. But nonetheless it ultimately lands 600 00:33:02,280 --> 00:33:04,440 Speaker 1: in the equity market, and that could produce more upside 601 00:33:04,440 --> 00:33:07,760 Speaker 1: than we're anticipating as well. So I'm not, you know, 602 00:33:08,360 --> 00:33:13,240 Speaker 1: overly worried about a major shift in stocks occurring this year, 603 00:33:13,320 --> 00:33:15,760 Speaker 1: except for with respect to margins. It's the one thing 604 00:33:15,760 --> 00:33:18,840 Speaker 1: that I really want to watch very carefully for risk emersion. 605 00:33:33,600 --> 00:33:36,760 Speaker 1: Everyone spends so much time and effort analyzing sort of 606 00:33:36,800 --> 00:33:39,600 Speaker 1: the fundamentals of the companies and the economy, and and 607 00:33:39,680 --> 00:33:41,800 Speaker 1: not a lot of time looking at the fundamentals of 608 00:33:41,800 --> 00:33:44,640 Speaker 1: the investors in the world. You know that this savings 609 00:33:44,720 --> 00:33:47,880 Speaker 1: rate that went through the roof and corporate balance sheets 610 00:33:47,920 --> 00:33:50,880 Speaker 1: that are really in many cases very strong, and and 611 00:33:50,960 --> 00:33:54,600 Speaker 1: could you know, boost buy back and dividend programs, um, 612 00:33:54,760 --> 00:33:57,480 Speaker 1: is that come more into your thinking, you know, the 613 00:33:57,640 --> 00:34:01,280 Speaker 1: sort of the fundamentals of the of the bye side. Yeah, 614 00:34:01,320 --> 00:34:04,160 Speaker 1: it's something I think about quite a lot. Actually, um. 615 00:34:04,200 --> 00:34:06,160 Speaker 1: We do a lot of work on supply and demand 616 00:34:06,240 --> 00:34:09,960 Speaker 1: for stocks, because I think it's something that we possibly 617 00:34:10,000 --> 00:34:13,160 Speaker 1: really underappreciate it over the course of the last ten years. 618 00:34:13,280 --> 00:34:15,960 Speaker 1: Is this idea that stocks didn't go up because people 619 00:34:16,000 --> 00:34:20,799 Speaker 1: bought them. Stocks went up because corporates bought them right 620 00:34:20,960 --> 00:34:24,320 Speaker 1: and and fewer corporates issued stock than bought back share. 621 00:34:24,440 --> 00:34:27,880 Speaker 1: So ultimately that net supply and demand balance worked in 622 00:34:27,920 --> 00:34:31,160 Speaker 1: favor of stocks, not because everybody had to own them, 623 00:34:31,200 --> 00:34:34,680 Speaker 1: but because corporates bought them back and didn't issue us 624 00:34:34,719 --> 00:34:38,319 Speaker 1: new ones. So there's just no supply. Now. I think 625 00:34:38,320 --> 00:34:40,760 Speaker 1: that's some some things have changed over the last two years, 626 00:34:40,920 --> 00:34:42,640 Speaker 1: many of them are very healthy, and that we have 627 00:34:42,800 --> 00:34:45,640 Speaker 1: finally had new issuance of share class you know shares. 628 00:34:45,680 --> 00:34:47,640 Speaker 1: We've had some I p O s come to the market. 629 00:34:47,640 --> 00:34:50,960 Speaker 1: It's not all kind of trapped in private hands anymore. 630 00:34:51,560 --> 00:34:54,920 Speaker 1: There is the capacity for new equity ownership UM in 631 00:34:54,960 --> 00:34:58,120 Speaker 1: the public markets with new IPO issuance, but it's still 632 00:34:58,880 --> 00:35:01,839 Speaker 1: the supply of new share is is still largely underwhelming 633 00:35:01,840 --> 00:35:04,200 Speaker 1: how much companies are buying back in the form of 634 00:35:04,280 --> 00:35:07,880 Speaker 1: demand UM. So it's something we watch very carefully. And 635 00:35:07,920 --> 00:35:10,920 Speaker 1: then when I think about, you know, sort of getting 636 00:35:10,920 --> 00:35:14,640 Speaker 1: a handle on what the real retail investment community holds 637 00:35:14,680 --> 00:35:17,759 Speaker 1: for equities. I just look at household ownership in the 638 00:35:17,760 --> 00:35:21,120 Speaker 1: flow of funds data because it's the biggest, most comprehensive database. 639 00:35:21,200 --> 00:35:23,640 Speaker 1: I mean, a lot of people follow things like e 640 00:35:23,800 --> 00:35:25,719 Speaker 1: t F flows, but et f s are a third 641 00:35:25,760 --> 00:35:27,640 Speaker 1: of the overall market, so you can't really get a 642 00:35:27,680 --> 00:35:32,520 Speaker 1: feel for what what ownership looks like. Um And if 643 00:35:32,520 --> 00:35:36,440 Speaker 1: you look at household ownership of equities, they've increased on net, 644 00:35:36,520 --> 00:35:39,319 Speaker 1: you know, excluding gains from the equity market themselves, of 645 00:35:39,440 --> 00:35:41,760 Speaker 1: roughly one percent a year for the last two years, 646 00:35:42,280 --> 00:35:45,360 Speaker 1: so they have started to add ownership. But over the 647 00:35:45,440 --> 00:35:49,160 Speaker 1: last ten it's point three percent per year, So we've 648 00:35:49,160 --> 00:35:52,160 Speaker 1: started to see some real interest gathering for the equity market. 649 00:35:52,280 --> 00:35:54,839 Speaker 1: But if you go back to the nineties, we were 650 00:35:54,880 --> 00:35:58,560 Speaker 1: looking at nearly two percent net increases in ownership every 651 00:35:58,600 --> 00:36:02,239 Speaker 1: single year for a decade. So there's just there, just 652 00:36:02,239 --> 00:36:04,560 Speaker 1: seems to me this enormous potential for all of a 653 00:36:04,640 --> 00:36:08,279 Speaker 1: sudden people might actually like stocks again. You know, how 654 00:36:08,320 --> 00:36:10,799 Speaker 1: do I capture that in a model really tough to do, 655 00:36:11,040 --> 00:36:13,640 Speaker 1: But I want to respect the data for what it 656 00:36:13,800 --> 00:36:16,960 Speaker 1: is and acknowledge that if people start to come back 657 00:36:16,960 --> 00:36:19,600 Speaker 1: to stocks. It could produce incredible upside that none of 658 00:36:19,680 --> 00:36:24,560 Speaker 1: us are forecasting. Yeah, and demographics, I guess make it 659 00:36:24,680 --> 00:36:27,520 Speaker 1: tough too, with the you know, the baby boomers on 660 00:36:27,520 --> 00:36:30,919 Speaker 1: one side of the barbell and the millennials. Maybe these 661 00:36:30,920 --> 00:36:35,400 Speaker 1: millennials like l Donna will find I'll just take some 662 00:36:35,480 --> 00:36:39,120 Speaker 1: of that, honestly, if you know, unless you have I 663 00:36:39,200 --> 00:36:41,279 Speaker 1: checked a bit coming with it doing so great so 664 00:36:41,560 --> 00:36:43,680 Speaker 1: stock work, it looks to be doing all right right now. 665 00:36:43,880 --> 00:36:48,960 Speaker 1: Maybe maybe we'll get a little bit of that. Well, 666 00:36:49,000 --> 00:36:51,160 Speaker 1: speaking of getting a little bit of that, love, Vildonna, 667 00:36:51,200 --> 00:36:53,279 Speaker 1: you know what time it is, I know exactly what 668 00:36:53,360 --> 00:36:56,239 Speaker 1: time it is. Stand clear of the craziest things we 669 00:36:56,280 --> 00:36:59,399 Speaker 1: saw in markets this week, Jed, I think I gave 670 00:36:59,440 --> 00:37:01,720 Speaker 1: you I I I hopefully I gave you enough notice 671 00:37:01,760 --> 00:37:06,640 Speaker 1: about our craziest thing. Gimmick, uh not gimmick. Pardon pardon 672 00:37:06,760 --> 00:37:10,920 Speaker 1: my lack of voca. Our tradition, it's a tradition we do. 673 00:37:11,160 --> 00:37:13,279 Speaker 1: You kick us off. What's your craziest thing you saw 674 00:37:13,280 --> 00:37:15,920 Speaker 1: in markets this week? Well? So, as Jina mentioned, cryptocurrencies 675 00:37:15,960 --> 00:37:20,959 Speaker 1: have been under pressure recently, but there's one coin that's 676 00:37:21,080 --> 00:37:24,759 Speaker 1: up a hundred percent so far this year. I don't 677 00:37:24,760 --> 00:37:28,520 Speaker 1: know if either of you are aware of it. I 678 00:37:28,560 --> 00:37:31,799 Speaker 1: feel like I should know this. I did read the story, 679 00:37:31,800 --> 00:37:34,000 Speaker 1: but I can't remember they all They all blur together 680 00:37:34,040 --> 00:37:36,400 Speaker 1: in my mind. It's one of the silly meme coins, 681 00:37:36,440 --> 00:37:40,000 Speaker 1: isn't You could put baby dog baby does. That's right, 682 00:37:40,280 --> 00:37:42,439 Speaker 1: put dog in there somewhere and you and your guests 683 00:37:42,440 --> 00:37:44,920 Speaker 1: would be really good. It's called baby does. When I 684 00:37:44,960 --> 00:37:47,440 Speaker 1: was checking how much it actually had gone up, and 685 00:37:47,920 --> 00:37:49,880 Speaker 1: when I checked, it was more than a dred percent. 686 00:37:50,000 --> 00:37:54,120 Speaker 1: But there were so many decimals involved. I knew you 687 00:37:54,120 --> 00:37:57,759 Speaker 1: would love this. It was like zero point zero zero 688 00:37:57,920 --> 00:38:05,120 Speaker 1: zero zero zero zero zero zero zero seven one. Yes, 689 00:38:05,920 --> 00:38:13,040 Speaker 1: how many cents is that? It's like one billion? You 690 00:38:13,080 --> 00:38:16,759 Speaker 1: could buy so many of them. Yeah, what's the whole 691 00:38:16,760 --> 00:38:20,000 Speaker 1: crypto experience I'd like for you? Is it? You know? 692 00:38:20,040 --> 00:38:21,839 Speaker 1: I feel like a lot of us kind of just 693 00:38:22,400 --> 00:38:24,799 Speaker 1: ignored it, hope it would go away at some point. 694 00:38:24,840 --> 00:38:27,719 Speaker 1: I mean, have you finally had to engage as an 695 00:38:27,760 --> 00:38:32,120 Speaker 1: equity strategist um to some degree? And you know I 696 00:38:32,640 --> 00:38:35,080 Speaker 1: say that investors are you know, forced into the equity 697 00:38:35,080 --> 00:38:37,480 Speaker 1: market kicking and screaming. I've been forced to pay attention 698 00:38:37,520 --> 00:38:42,239 Speaker 1: to crypto kicking Because I am an equity strategist. I 699 00:38:42,280 --> 00:38:44,279 Speaker 1: kind of live in breathe stocks and what's happening, and 700 00:38:44,320 --> 00:38:46,400 Speaker 1: even then in the most boring stocks in the SMP 701 00:38:46,520 --> 00:38:49,719 Speaker 1: five hundred, So I'm I'm tend not to be on 702 00:38:49,800 --> 00:38:53,880 Speaker 1: these sort of fringey risk assets spectrum. That's said, we 703 00:38:54,000 --> 00:38:57,040 Speaker 1: got to a point where the equity market and the 704 00:38:57,120 --> 00:39:01,360 Speaker 1: crypto market we're trading pretty closely together, hand in hand, 705 00:39:01,400 --> 00:39:03,320 Speaker 1: so I do have to respect it as a measure 706 00:39:03,320 --> 00:39:06,760 Speaker 1: of risk tolerance. I am a little bit worried about 707 00:39:06,800 --> 00:39:10,640 Speaker 1: just how much ownership there is in crypto and how 708 00:39:10,680 --> 00:39:13,680 Speaker 1: many you know, real dollars have moved into the crypto 709 00:39:13,800 --> 00:39:17,400 Speaker 1: universe over the course of the last five years or so. 710 00:39:17,440 --> 00:39:20,960 Speaker 1: It's pretty phenomenal. And what that might mean for economic growth. 711 00:39:21,120 --> 00:39:24,719 Speaker 1: If the fate of a certain investor is really tied 712 00:39:24,760 --> 00:39:28,200 Speaker 1: to crypto and we have a pretty big crash like 713 00:39:28,239 --> 00:39:30,920 Speaker 1: the one we've had, can they hang on or how 714 00:39:31,000 --> 00:39:33,919 Speaker 1: much of their overall income and spending base is really 715 00:39:33,960 --> 00:39:36,440 Speaker 1: dependent upon this asset. I don't know, and I think 716 00:39:36,440 --> 00:39:39,040 Speaker 1: there's a lot of uncertainty there, but I do pay 717 00:39:39,080 --> 00:39:43,920 Speaker 1: attention to it. I still try not to, admittedly, but 718 00:39:44,000 --> 00:39:46,080 Speaker 1: it's hard not to. I mean, there's just there's a 719 00:39:46,080 --> 00:39:48,600 Speaker 1: lot going on. It's it's driving a lot of trends 720 00:39:48,920 --> 00:39:51,239 Speaker 1: um in fintech as well, so I think we have 721 00:39:51,360 --> 00:39:56,479 Speaker 1: to pay attention. It's it's turning into a real macro. Yeah, 722 00:39:56,600 --> 00:39:59,960 Speaker 1: I am a little worried it might be. Have you 723 00:40:00,040 --> 00:40:02,840 Speaker 1: seen anything crazy this week up there in the Peppers genius? 724 00:40:02,880 --> 00:40:05,040 Speaker 1: I think our first strategist joining us from there there 725 00:40:05,040 --> 00:40:10,640 Speaker 1: we go see excited about that. That's a differentiating factor. Um, 726 00:40:11,000 --> 00:40:13,319 Speaker 1: you know the thing that's really a couple of things 727 00:40:13,320 --> 00:40:15,560 Speaker 1: have struck me this week and again, live and breathe 728 00:40:15,560 --> 00:40:17,600 Speaker 1: in the equity market. But I think the biggest thing 729 00:40:17,680 --> 00:40:22,279 Speaker 1: is this just kind of return of the old school financials. Right. 730 00:40:22,480 --> 00:40:24,800 Speaker 1: If you think about what's happening in the financial sector, 731 00:40:24,840 --> 00:40:29,960 Speaker 1: all of these disruptors are really losing out to old 732 00:40:30,000 --> 00:40:33,120 Speaker 1: financial companies like coin based, square Hood all of them 733 00:40:33,160 --> 00:40:37,799 Speaker 1: making new lows, while Goldman, master Card, Schwab all of 734 00:40:37,840 --> 00:40:41,000 Speaker 1: them making new highs. I thought was really fascinating and 735 00:40:41,040 --> 00:40:44,399 Speaker 1: a pretty big divergence. At the same time, your best 736 00:40:44,440 --> 00:40:47,479 Speaker 1: performing spaces energy, that's the space nobody wants to own. 737 00:40:47,640 --> 00:40:51,560 Speaker 1: Good old fashion energy companies like these are the oil 738 00:40:51,640 --> 00:40:54,719 Speaker 1: producers of the world's um, you know, these are the 739 00:40:54,760 --> 00:40:59,600 Speaker 1: gas pump station owners. Right, It's like, Wow, what an 740 00:40:59,640 --> 00:41:05,279 Speaker 1: interest thing world we've moved into from metaverse and all 741 00:41:05,320 --> 00:41:08,879 Speaker 1: of the height flying growth fintech stocks really taking all 742 00:41:08,920 --> 00:41:11,480 Speaker 1: of our mind share for so long. I mean, I 743 00:41:11,520 --> 00:41:14,200 Speaker 1: have to say, it's a very comfortable world for me. 744 00:41:14,480 --> 00:41:18,880 Speaker 1: I'm really enjoying this transition. Um but but it's been 745 00:41:18,920 --> 00:41:22,520 Speaker 1: fascinating to watch just how much things have really shifted 746 00:41:22,520 --> 00:41:26,960 Speaker 1: over the course of just a week. Yeah. Absolutely, the 747 00:41:27,080 --> 00:41:32,520 Speaker 1: old what's that old expression is? I gess that's pretty good? 748 00:41:32,960 --> 00:41:36,879 Speaker 1: All right, I'll give you mine. I'm inspired by you. 749 00:41:36,880 --> 00:41:39,799 Speaker 1: You seem to think anything involving any public company's fair 750 00:41:39,800 --> 00:41:44,680 Speaker 1: game for crazy questure. All right, So I'm gonna go 751 00:41:44,760 --> 00:41:47,560 Speaker 1: with Remember it was a few days ago there was 752 00:41:47,600 --> 00:41:51,520 Speaker 1: this big traffic jam on in Virginia. It's snowed like 753 00:41:51,680 --> 00:41:54,640 Speaker 1: seven inches in Virginia. People were stuck in traffic for 754 00:41:54,719 --> 00:41:59,520 Speaker 1: like twenty four hours. One poor guy was stuck in 755 00:41:59,560 --> 00:42:03,120 Speaker 1: that trapp thick in an uber with the meter running 756 00:42:03,320 --> 00:42:07,759 Speaker 1: in an uber. Which but when you think about it, though, 757 00:42:07,800 --> 00:42:10,440 Speaker 1: you know, you hit the uber and you get a price, 758 00:42:10,840 --> 00:42:13,560 Speaker 1: you're expecting that to be your your price that you get. 759 00:42:13,680 --> 00:42:15,600 Speaker 1: But no, they can apparently jack it up if it 760 00:42:15,640 --> 00:42:19,120 Speaker 1: takes too long to get there, to get to their destination. Uh, 761 00:42:19,360 --> 00:42:21,560 Speaker 1: they will. They will add some fees on onto it. 762 00:42:21,680 --> 00:42:25,319 Speaker 1: So this guy was stuck in an uber for nine 763 00:42:25,360 --> 00:42:29,520 Speaker 1: hours and that that snowstorm, so as you know, it's 764 00:42:29,560 --> 00:42:31,480 Speaker 1: time to play prices. Right, what do you think the 765 00:42:31,480 --> 00:42:37,560 Speaker 1: bill was for a nine hour uber ride? What do 766 00:42:37,560 --> 00:42:39,799 Speaker 1: you think they hit him? This is really good? This 767 00:42:39,880 --> 00:42:44,600 Speaker 1: is this is your best one ever? Wow? Um, okay, 768 00:42:44,640 --> 00:42:47,920 Speaker 1: let's let me think. I mean, but there must come 769 00:42:47,960 --> 00:42:51,920 Speaker 1: a point where you could even like fight Uber for 770 00:42:52,520 --> 00:42:56,640 Speaker 1: like capping it, right, I don't know. I'm gonna say 771 00:42:56,480 --> 00:42:59,000 Speaker 1: that he did. He did, and he got a refund. 772 00:42:59,120 --> 00:43:01,040 Speaker 1: But but what would you guess they tried to tried 773 00:43:01,120 --> 00:43:05,400 Speaker 1: to build. Okay, I'll go with six hundred and seventy dollars. Okay, 774 00:43:05,680 --> 00:43:07,680 Speaker 1: I'm gonna keep a poker face. You know, what do 775 00:43:07,719 --> 00:43:13,759 Speaker 1: you think dollars? I would have gone. I would have 776 00:43:13,800 --> 00:43:15,640 Speaker 1: thought that too. I would have thought they would have 777 00:43:16,480 --> 00:43:18,880 Speaker 1: you know, because I don't know, you try to do 778 00:43:18,920 --> 00:43:20,640 Speaker 1: the math in your head of what's a fifteen minute 779 00:43:20,719 --> 00:43:23,080 Speaker 1: uber ride? But they tried to hit him for a six. 780 00:43:26,640 --> 00:43:30,800 Speaker 1: Can't believe it. I usually am like really under really 781 00:43:30,800 --> 00:43:34,160 Speaker 1: really I would have I would have I would have 782 00:43:34,200 --> 00:43:36,000 Speaker 1: bid what geta I would have been in Genus camp. 783 00:43:36,000 --> 00:43:37,880 Speaker 1: I would have thought it would have been in the thousands, 784 00:43:37,960 --> 00:43:41,200 Speaker 1: but still a heavy bill. And the guy complained and 785 00:43:41,239 --> 00:43:44,080 Speaker 1: they gave him. They gave him a refund, but they 786 00:43:44,080 --> 00:43:46,680 Speaker 1: won't say how much they but it was originally supposed 787 00:43:46,680 --> 00:43:49,600 Speaker 1: to be a two D ride, so pretty pretty expensive. 788 00:43:51,520 --> 00:43:53,799 Speaker 1: So the I think the morale for all of us 789 00:43:53,880 --> 00:43:56,760 Speaker 1: is checked that weather forecast before you get in an uber. 790 00:43:57,160 --> 00:43:59,239 Speaker 1: Uh you know, I imagine if that was a New 791 00:43:59,280 --> 00:44:01,680 Speaker 1: York taxi app for nine hours, that would have been 792 00:44:01,719 --> 00:44:07,839 Speaker 1: like a Hopefully you know, then they got along. Maybe 793 00:44:07,840 --> 00:44:11,319 Speaker 1: they're best friends now, you know, there could be a 794 00:44:11,360 --> 00:44:15,239 Speaker 1: silver lining to this. Well, yeah, we'll have to reach 795 00:44:15,239 --> 00:44:18,279 Speaker 1: out to this guy. This was via USA Today, who 796 00:44:18,360 --> 00:44:20,480 Speaker 1: got it from w t op news whatever that is, 797 00:44:20,480 --> 00:44:25,120 Speaker 1: So maybe they'll follow up. Hopefully. This is really speak 798 00:44:25,160 --> 00:44:27,720 Speaker 1: of fobs, Gina. We're gonna have to get you back again, 799 00:44:28,080 --> 00:44:30,520 Speaker 1: uh soon. Always a pleasure to catch up at you. 800 00:44:30,640 --> 00:44:32,319 Speaker 1: We haven't. We don't get to talk to Geno much 801 00:44:32,360 --> 00:44:35,880 Speaker 1: anymore since we're all hiding in uh well, thank you 802 00:44:36,000 --> 00:44:37,520 Speaker 1: very much for having me. It was a great, a 803 00:44:37,520 --> 00:44:48,520 Speaker 1: great pleasure. Thank you, Gina. What Goes Up. We'll be 804 00:44:48,520 --> 00:44:50,600 Speaker 1: back next week and so then you can find us 805 00:44:50,600 --> 00:44:53,880 Speaker 1: on the Bloomberg Terminal, website and app where wherever you 806 00:44:53,920 --> 00:44:56,360 Speaker 1: get your podcasts. We love it if you took the 807 00:44:56,400 --> 00:44:58,840 Speaker 1: time to rate and review the show on Apple podcast 808 00:44:59,000 --> 00:45:01,440 Speaker 1: so more listeners can us and you can find us 809 00:45:01,480 --> 00:45:05,160 Speaker 1: on Twitter, follow me at ing anonymous. Bildona high Rich 810 00:45:05,400 --> 00:45:08,440 Speaker 1: is at Bildonna high Rich. You can also follow Bloomberg 811 00:45:08,520 --> 00:45:12,640 Speaker 1: podcasts at podcasts at Fact. You to Charlie Pallada Bloomberg Radio. 812 00:45:13,200 --> 00:45:16,560 Speaker 1: What Goes Up is produced by Magnus Hendrickson. The head 813 00:45:16,560 --> 00:45:20,040 Speaker 1: of Bloomberg podcast is Francesco Levie. 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