1
00:00:06,160 --> 00:00:08,639
Speaker 1: Well, good to trilliance. I'm Joel Webber and I'm Eric Beltunas.

2
00:00:12,160 --> 00:00:14,800
Speaker 1: So this thing has been happening in the markets, eric Um,

3
00:00:15,040 --> 00:00:19,960
Speaker 1: things go up and suddenly things are going down and down, down, down, down, down, down,

4
00:00:20,120 --> 00:00:23,560
Speaker 1: downtown down, like seven weeks in a row. Now that

5
00:00:23,640 --> 00:00:25,680
Speaker 1: the SNP has comes a whole year basically, I mean

6
00:00:25,680 --> 00:00:27,640
Speaker 1: this year has just been bad and that what's made

7
00:00:27,640 --> 00:00:30,400
Speaker 1: this year can think unique is stocks and bonds down together,

8
00:00:30,480 --> 00:00:34,240
Speaker 1: which is unusual, although and crypto and crypto Like basically

9
00:00:34,280 --> 00:00:36,960
Speaker 1: everything is down. There's a couple of things doing okay.

10
00:00:37,000 --> 00:00:40,280
Speaker 1: But I think that's a little scary for people. Although

11
00:00:40,320 --> 00:00:42,879
Speaker 1: I try to remind people that, well, it went up

12
00:00:42,880 --> 00:00:45,839
Speaker 1: together for a while based on the FED and how

13
00:00:45,840 --> 00:00:49,320
Speaker 1: accommodative they were. But obviously if they're gonna pull back

14
00:00:49,840 --> 00:00:52,960
Speaker 1: and not help, then it stands to reason that they

15
00:00:53,040 --> 00:00:55,680
Speaker 1: might go down together for a little while. But anyway,

16
00:00:55,960 --> 00:00:58,200
Speaker 1: people freaking out. That's the big story this year, and

17
00:00:58,240 --> 00:01:00,240
Speaker 1: we need to address it. So to do so, we're

18
00:01:00,280 --> 00:01:04,440
Speaker 1: gonna have John Mayer, chief investment officer of global x

19
00:01:04,480 --> 00:01:07,039
Speaker 1: et F. He's actually been on the show before. Yeah,

20
00:01:07,080 --> 00:01:10,399
Speaker 1: we did an episode called gate Keepers. I believe it

21
00:01:10,480 --> 00:01:11,880
Speaker 1: was like I think we did. I think we played

22
00:01:11,880 --> 00:01:15,000
Speaker 1: off of Ghostbusters. It was y masters and gatekeepers. So

23
00:01:15,959 --> 00:01:20,399
Speaker 1: because they call people at the big wire houses like Meryl, Ubs, Wells,

24
00:01:20,440 --> 00:01:23,200
Speaker 1: Fargo gatekeepers and all the E t F fishers want

25
00:01:23,200 --> 00:01:25,760
Speaker 1: to get onto their shelves, so to speak, because they

26
00:01:25,800 --> 00:01:29,600
Speaker 1: have massive advisors connected to them that have billions of dollars.

27
00:01:29,600 --> 00:01:33,080
Speaker 1: So anyway, John was working at a gatekeeper, and so

28
00:01:33,200 --> 00:01:35,240
Speaker 1: is Marianna and John. Now is an issue where so

29
00:01:35,840 --> 00:01:38,680
Speaker 1: John not only was at Meryl, but he managed their

30
00:01:38,680 --> 00:01:41,880
Speaker 1: model portfolio. Um and now he's a Global X, which

31
00:01:41,920 --> 00:01:43,640
Speaker 1: is an E t F fisher, So he's going to

32
00:01:43,720 --> 00:01:47,360
Speaker 1: have a real handle on how people are handling itself,

33
00:01:47,360 --> 00:01:50,520
Speaker 1: the different player types, given you know, the E t

34
00:01:50,680 --> 00:01:53,320
Speaker 1: F perspective he sits from now and then we're also

35
00:01:53,360 --> 00:01:56,600
Speaker 1: going to have your boss on Gina Martin Adams, chief

36
00:01:57,280 --> 00:02:01,720
Speaker 1: equity analyst at Bloomberg Intelligence. Now that there's something missing there,

37
00:02:01,760 --> 00:02:04,880
Speaker 1: I want to say, macro strategist. You know, you just

38
00:02:04,920 --> 00:02:09,520
Speaker 1: call me whatever you want, really, chief faculty strategist. Technically

39
00:02:09,680 --> 00:02:15,000
Speaker 1: she is okay this time on trillions psychology of a

40
00:02:15,080 --> 00:02:20,600
Speaker 1: sell off. John, Gina, welcome to Trillians. Thank you, thanks

41
00:02:20,600 --> 00:02:23,519
Speaker 1: for having me. Good to be in person with you

42
00:02:23,919 --> 00:02:27,240
Speaker 1: and have you both back on the show. Like it's

43
00:02:27,240 --> 00:02:29,839
Speaker 1: been a little bit for for Gina and and it's

44
00:02:29,840 --> 00:02:32,200
Speaker 1: really been a second for for you. John. Yeah, it's

45
00:02:32,280 --> 00:02:36,480
Speaker 1: very two. It's very excited to just pinch yourself. Um,

46
00:02:36,560 --> 00:02:38,600
Speaker 1: do you know I want to start with you because, um,

47
00:02:38,680 --> 00:02:43,480
Speaker 1: we were just talking about how Eric um tends to

48
00:02:43,520 --> 00:02:47,120
Speaker 1: make a lot of bold calls and sometimes those calls

49
00:02:47,160 --> 00:02:51,120
Speaker 1: don't all go correctly, do they? And so I'm wondering

50
00:02:51,520 --> 00:02:54,800
Speaker 1: as we approach this midyear evil uh kind of season?

51
00:02:55,400 --> 00:03:01,000
Speaker 1: You know what kind of evil? Talk about? That? It

52
00:03:01,120 --> 00:03:04,440
Speaker 1: is one season exactly, So I just want to ask

53
00:03:04,520 --> 00:03:06,280
Speaker 1: you have to do my one eight maybe you know,

54
00:03:06,320 --> 00:03:09,520
Speaker 1: we'll see, but um, it's all anonymous, Eric, Uh, this

55
00:03:09,560 --> 00:03:12,440
Speaker 1: one won't be anonymous. But Eric got a FED call

56
00:03:12,560 --> 00:03:14,919
Speaker 1: kind of wrong, right, Gina? So what did what was

57
00:03:15,000 --> 00:03:17,000
Speaker 1: the call and how did it work out? You know?

58
00:03:17,280 --> 00:03:20,400
Speaker 1: Thankfully Eric is not responsible for the FED call for

59
00:03:20,440 --> 00:03:23,799
Speaker 1: Bloomberg intelligence, So we did we did call that one, right.

60
00:03:25,080 --> 00:03:28,640
Speaker 1: I'll let Eric explain his interesting FED theory which we

61
00:03:28,680 --> 00:03:30,800
Speaker 1: talked about the last time I was on here. I

62
00:03:30,880 --> 00:03:32,799
Speaker 1: was out of my depths for sure, But My theory

63
00:03:32,880 --> 00:03:36,520
Speaker 1: was the boomerati theory, which was that all of America's

64
00:03:36,520 --> 00:03:40,440
Speaker 1: retirement money is in stocks and bonds, and the people

65
00:03:40,480 --> 00:03:42,400
Speaker 1: who are in mutual funds to have the most money

66
00:03:42,400 --> 00:03:44,600
Speaker 1: are the boomers. I think, like, what of the of

67
00:03:44,640 --> 00:03:47,160
Speaker 1: all the stockhol otnership, I believe the boomers are seventy

68
00:03:47,520 --> 00:03:50,360
Speaker 1: of it. And who's in control of all the wrongs

69
00:03:50,400 --> 00:03:54,320
Speaker 1: of power in business in Walt Washington the boomers. So

70
00:03:54,360 --> 00:03:58,320
Speaker 1: whether you have a Republican president, a Democrat, or the

71
00:03:58,320 --> 00:04:00,480
Speaker 1: FED chief, they're all What they all share in common

72
00:04:00,520 --> 00:04:02,280
Speaker 1: is their boomers. And I thought they would do it

73
00:04:02,280 --> 00:04:08,680
Speaker 1: anything to protect their nest egg. Apparently inflations more important.

74
00:04:09,000 --> 00:04:12,080
Speaker 1: What the hell I totally missed that? Um I didn't

75
00:04:12,120 --> 00:04:14,839
Speaker 1: see it. Maybe the print I didn't. I just never

76
00:04:14,880 --> 00:04:16,560
Speaker 1: saw it. It It was like a black swan for me.

77
00:04:16,640 --> 00:04:19,000
Speaker 1: But now that's all that matters to them, and they're

78
00:04:19,040 --> 00:04:23,240
Speaker 1: they've done yeah well. To be fair, we I think

79
00:04:23,240 --> 00:04:26,800
Speaker 1: that the financial markets were somewhat conditioned on this notion

80
00:04:26,920 --> 00:04:28,919
Speaker 1: that the FED would always swoop in and save the

81
00:04:28,960 --> 00:04:32,120
Speaker 1: financial markets as well, especially once we get past fifteen.

82
00:04:32,600 --> 00:04:35,880
Speaker 1: Kind of going towards corrections, the FEDS have become a

83
00:04:36,000 --> 00:04:38,880
Speaker 1: very reliable player in the market over the course of

84
00:04:38,880 --> 00:04:43,120
Speaker 1: the last decade, and change, always swooping in, always reversing

85
00:04:43,160 --> 00:04:46,000
Speaker 1: policy at those nice loans. It's called the FED put

86
00:04:46,040 --> 00:04:49,320
Speaker 1: for a reason. But the title of my current equity

87
00:04:49,360 --> 00:04:51,479
Speaker 1: market outlook for the US is life without a pet

88
00:04:51,520 --> 00:04:53,920
Speaker 1: FED put, because I do think things have changed. Things

89
00:04:53,920 --> 00:04:56,960
Speaker 1: have changed pretty precipitously over the course of the last year,

90
00:04:57,000 --> 00:04:59,080
Speaker 1: and your spot on the reason things have changed is

91
00:04:59,120 --> 00:05:03,560
Speaker 1: because of inflation nary conditions. The inflationary conditions combined with

92
00:05:03,640 --> 00:05:05,680
Speaker 1: something we talked about on a podcast not long ago,

93
00:05:05,760 --> 00:05:08,960
Speaker 1: which is the FEDS sort of temporary shift to a

94
00:05:09,000 --> 00:05:13,200
Speaker 1: mandate to achieve maximum employment not so long ago, that

95
00:05:13,279 --> 00:05:16,479
Speaker 1: combination has created a really messy environment for the FED

96
00:05:16,520 --> 00:05:19,240
Speaker 1: and they're now playing catch up to try to contain

97
00:05:19,320 --> 00:05:22,719
Speaker 1: those inflate. The inflation, which many people are now worried,

98
00:05:22,760 --> 00:05:24,960
Speaker 1: has gotten out of control and out of their grasp.

99
00:05:25,120 --> 00:05:27,800
Speaker 1: And one thing that I really it's set home. You

100
00:05:27,800 --> 00:05:29,599
Speaker 1: look at a graph I think it was on Nate

101
00:05:29,640 --> 00:05:33,599
Speaker 1: silver Sight. Most important issues in the election Number one

102
00:05:33,680 --> 00:05:36,960
Speaker 1: is inflation. Yeah, and I know the FEDS not political,

103
00:05:37,000 --> 00:05:38,760
Speaker 1: but come on, I mean, this is a big deal.

104
00:05:38,880 --> 00:05:42,479
Speaker 1: And do you think they might lighten up after mid terms. Um,

105
00:05:42,800 --> 00:05:44,800
Speaker 1: I think they are very data dependent at this point.

106
00:05:44,800 --> 00:05:47,800
Speaker 1: They may lighten up after mid terms if that coincides

107
00:05:47,839 --> 00:05:50,680
Speaker 1: with the material deceleration in the inflation prints, which are

108
00:05:50,720 --> 00:05:54,279
Speaker 1: definitely something they're worried about. But you know, it's no

109
00:05:54,400 --> 00:05:57,920
Speaker 1: surprise that the midterms are coming into focus, particularly with

110
00:05:57,960 --> 00:06:00,880
Speaker 1: inflationary conditions this fast, because it's the one thing that

111
00:06:01,040 --> 00:06:03,640
Speaker 1: everyone feels is how much does it cost for me

112
00:06:03,680 --> 00:06:05,080
Speaker 1: to go to the grocery store and how much does

113
00:06:05,120 --> 00:06:07,359
Speaker 1: it cost for me to fill up my car or

114
00:06:07,480 --> 00:06:10,839
Speaker 1: transport to and from where I need to go? And

115
00:06:11,200 --> 00:06:13,599
Speaker 1: so when you have that kind of inflationary landscape, it

116
00:06:13,680 --> 00:06:17,920
Speaker 1: usually impacts the president most. And then when things roll

117
00:06:18,000 --> 00:06:22,000
Speaker 1: downhill from the President to other folks in Washington, the

118
00:06:22,040 --> 00:06:25,680
Speaker 1: Fed can get a lot of pressure historically when we're

119
00:06:25,720 --> 00:06:29,000
Speaker 1: in this kind of economic environment because the president suffers.

120
00:06:29,040 --> 00:06:31,120
Speaker 1: I can't believe you're leaving the door cracked for Eric

121
00:06:31,160 --> 00:06:35,120
Speaker 1: to Lake. I know, let's there's going to be a

122
00:06:35,120 --> 00:06:37,359
Speaker 1: new theory here. Okay, So so John, I want to

123
00:06:37,360 --> 00:06:39,440
Speaker 1: bring you in. We've talked a little bit about the

124
00:06:39,480 --> 00:06:43,679
Speaker 1: inflationary environment. Markets doing what they do this this year, um,

125
00:06:43,720 --> 00:06:46,080
Speaker 1: which is go down as well as up. UM. What

126
00:06:46,200 --> 00:06:48,600
Speaker 1: has been something that sticks out to you and all

127
00:06:48,600 --> 00:06:51,159
Speaker 1: of this, Well, first of all, when when a big

128
00:06:51,160 --> 00:06:54,200
Speaker 1: self happens, it just never feels good, like you almost

129
00:06:54,200 --> 00:06:55,920
Speaker 1: don't think it's going to happen. Don't root for a

130
00:06:55,960 --> 00:07:00,560
Speaker 1: sell off. Nobody was for a shell so off. And

131
00:07:00,920 --> 00:07:03,440
Speaker 1: inflation is very high and the FED has to act.

132
00:07:03,800 --> 00:07:06,200
Speaker 1: We should have seen this coming. And all the FED

133
00:07:06,320 --> 00:07:09,760
Speaker 1: really can do is uh, work on the demand side,

134
00:07:10,000 --> 00:07:12,160
Speaker 1: and but they can't really work on the supply side.

135
00:07:12,160 --> 00:07:13,560
Speaker 1: And we know there's a lot of issues on the

136
00:07:13,600 --> 00:07:16,960
Speaker 1: supply side with respect to China and all the supply

137
00:07:17,040 --> 00:07:21,400
Speaker 1: chain issues and semiconductors and whatnot. But with respect to

138
00:07:21,440 --> 00:07:26,440
Speaker 1: what's going on is different market participants are acting differently. UM.

139
00:07:26,480 --> 00:07:30,840
Speaker 1: I would first say that that the the professional investors

140
00:07:30,840 --> 00:07:33,680
Speaker 1: hedge funds got it right earlier on. They were moving

141
00:07:33,680 --> 00:07:37,280
Speaker 1: out of the market pretty quickly, and retail was still buying,

142
00:07:37,400 --> 00:07:40,360
Speaker 1: and we saw a lot of flows into retail, and

143
00:07:40,400 --> 00:07:43,320
Speaker 1: then that started to come off more recently and at

144
00:07:43,520 --> 00:07:46,040
Speaker 1: the past few trading days, and this is the eighth

145
00:07:46,080 --> 00:07:49,480
Speaker 1: week of a down week. I think some have said

146
00:07:49,560 --> 00:07:52,160
Speaker 1: this is enough. I can't really handle the pain. As

147
00:07:52,200 --> 00:07:54,560
Speaker 1: you mentioned earlier, that there's boomers who are going to

148
00:07:54,640 --> 00:07:58,560
Speaker 1: retire um and I'm down. That's a lot, you know,

149
00:07:58,720 --> 00:08:01,240
Speaker 1: and maybe let's let's cut our losses because we've had

150
00:08:01,240 --> 00:08:04,560
Speaker 1: some pretty good years. But if you look at at

151
00:08:04,960 --> 00:08:07,440
Speaker 1: flows on the e t F side, e t f

152
00:08:07,520 --> 00:08:10,000
Speaker 1: s have been that flows has been pretty up, stable

153
00:08:10,400 --> 00:08:13,480
Speaker 1: and even growing in some instances in certain areas of

154
00:08:13,520 --> 00:08:17,160
Speaker 1: the market. Certainly in income we're seeing broad bar broad

155
00:08:17,240 --> 00:08:20,760
Speaker 1: market indexes are are holding up. So the core is

156
00:08:20,840 --> 00:08:24,720
Speaker 1: really holding up. And I do think that there's repositioning

157
00:08:24,960 --> 00:08:27,080
Speaker 1: on the edges, and there should be there always should

158
00:08:27,080 --> 00:08:31,320
Speaker 1: because of changing market conditions. But remarkably, at least on

159
00:08:31,360 --> 00:08:33,000
Speaker 1: the e t F side and neerk as you mentioned,

160
00:08:33,000 --> 00:08:35,680
Speaker 1: on the mutual fund fund side, there's a lot of outflows,

161
00:08:35,679 --> 00:08:37,400
Speaker 1: but the et F side is fair. They're holding up

162
00:08:37,400 --> 00:08:47,800
Speaker 1: well in terms of flows. I think this is somewhat generational.

163
00:08:48,320 --> 00:08:51,520
Speaker 1: Boomers are mostly in mutual funds. Do you really want

164
00:08:51,520 --> 00:08:54,000
Speaker 1: to watch this? You made so much money, might as

165
00:08:54,040 --> 00:08:57,120
Speaker 1: well just get out. So there's been two fifty billion

166
00:08:57,200 --> 00:09:00,680
Speaker 1: out of active mutual funds, but there's been about two

167
00:09:00,720 --> 00:09:03,400
Speaker 1: seventy into e t f s and passive, so we

168
00:09:03,480 --> 00:09:06,520
Speaker 1: see this every sell off, but inside the passive there

169
00:09:06,600 --> 00:09:09,440
Speaker 1: is a lot of tactical repositioning. So I think you know,

170
00:09:09,640 --> 00:09:12,440
Speaker 1: you guys have like thematic ETFs, right, that's something I

171
00:09:12,440 --> 00:09:15,680
Speaker 1: think people bought maybe in the bullmarket as you've seen

172
00:09:15,720 --> 00:09:17,959
Speaker 1: pullback there or the people hanging in there. That is

173
00:09:18,280 --> 00:09:19,760
Speaker 1: also I just wanted to ask, like, I mean, you

174
00:09:19,760 --> 00:09:22,160
Speaker 1: have this interesting thing at global X where you have

175
00:09:22,200 --> 00:09:25,960
Speaker 1: thematics but then also some really broad based products, right,

176
00:09:26,000 --> 00:09:29,360
Speaker 1: so how how does your portfolio perform during a sell

177
00:09:29,360 --> 00:09:32,079
Speaker 1: off like this? So you know, we if you look

178
00:09:32,120 --> 00:09:36,000
Speaker 1: at our assets, we have income or ETFs, income and thematics,

179
00:09:36,040 --> 00:09:39,280
Speaker 1: as well as country access on a few others. What

180
00:09:39,400 --> 00:09:42,320
Speaker 1: you're seeing is some outflows on the thematic side, but

181
00:09:42,400 --> 00:09:44,880
Speaker 1: not as much as you would expect because these are

182
00:09:44,880 --> 00:09:47,000
Speaker 1: e t f s and e t s or a

183
00:09:47,000 --> 00:09:50,680
Speaker 1: collection of companies, and not every company performs exactly the

184
00:09:50,720 --> 00:09:52,720
Speaker 1: same way. You know, you look back to the dot

185
00:09:52,760 --> 00:09:56,040
Speaker 1: com bubble and many of the companies just went away.

186
00:09:56,920 --> 00:10:00,800
Speaker 1: A few existed of Amazon and eBay and price line,

187
00:10:00,880 --> 00:10:02,920
Speaker 1: but you didn't know which one was gonna make it.

188
00:10:03,200 --> 00:10:06,040
Speaker 1: So not pets dot com not that's like not mail

189
00:10:06,120 --> 00:10:09,000
Speaker 1: dot com BOO or like all all sorts of news,

190
00:10:09,000 --> 00:10:11,280
Speaker 1: but you didn't know what was gonna make it. But

191
00:10:11,480 --> 00:10:14,000
Speaker 1: in eat, whether it be a cloud or cybersecurity, which

192
00:10:14,000 --> 00:10:16,600
Speaker 1: actually has some legs right now, you're putting a lot

193
00:10:16,679 --> 00:10:20,560
Speaker 1: of different companies and so there's actually some inherent diversification there.

194
00:10:20,840 --> 00:10:24,360
Speaker 1: But overall on the kind of the disruptive technology you're seeing,

195
00:10:24,520 --> 00:10:27,480
Speaker 1: you've seen some outflows for sure, but we're actually capturing

196
00:10:27,520 --> 00:10:30,240
Speaker 1: them on the income side. So when you're moving towards

197
00:10:30,280 --> 00:10:32,960
Speaker 1: more towards the value tilter, a covered call fund which

198
00:10:33,000 --> 00:10:35,480
Speaker 1: still providing you a twelve percent yield if it follows

199
00:10:35,480 --> 00:10:39,160
Speaker 1: the nastack or the SMP five less than that, but

200
00:10:39,520 --> 00:10:42,760
Speaker 1: a good yield, investors are saying, wow, yields are still

201
00:10:42,800 --> 00:10:45,480
Speaker 1: pretty low, even though short term rates are going up,

202
00:10:45,559 --> 00:10:48,160
Speaker 1: not necessarily long term rates. It depends, Uh, so we're

203
00:10:48,200 --> 00:10:50,480
Speaker 1: capturing some on the income side. So flows have been

204
00:10:50,480 --> 00:10:54,280
Speaker 1: pretty good, remarkably, Yeah, there, there's It depends where it's

205
00:10:54,320 --> 00:10:59,040
Speaker 1: been a certain sectors. Cash short dation bond et has

206
00:10:59,040 --> 00:11:01,360
Speaker 1: done pretty well. It reminds me of a typical sell

207
00:11:01,400 --> 00:11:02,959
Speaker 1: off here, to be honest, and I do think that

208
00:11:03,240 --> 00:11:06,080
Speaker 1: thematic ETFs probably have a little more tolerance these days,

209
00:11:06,200 --> 00:11:07,840
Speaker 1: because if you're in a cheap index fun of your

210
00:11:07,840 --> 00:11:10,360
Speaker 1: core and you have a thematic, you kind of have

211
00:11:10,440 --> 00:11:12,080
Speaker 1: your basis covered. You don't have to worry about your

212
00:11:12,160 --> 00:11:15,160
Speaker 1: kids retirement being in like the cybersecurity ETF, because it's

213
00:11:15,160 --> 00:11:19,320
Speaker 1: a small allocation. Gina, how much of this stuff, these flows?

214
00:11:20,600 --> 00:11:25,040
Speaker 1: How much does that UM work into the intel for

215
00:11:25,200 --> 00:11:28,000
Speaker 1: when you come up with sort of your overarching take

216
00:11:28,040 --> 00:11:31,160
Speaker 1: on the markets. Well, I view it as a sentiment

217
00:11:31,200 --> 00:11:35,840
Speaker 1: indicator more than anything. So equity markets UM certainly move

218
00:11:35,960 --> 00:11:38,800
Speaker 1: very quickly, but at lows, what you tend to find

219
00:11:39,040 --> 00:11:42,960
Speaker 1: is lows are formed by an outright capitulation and sentiment.

220
00:11:43,640 --> 00:11:46,040
Speaker 1: And so what you want to see to frame a

221
00:11:46,080 --> 00:11:48,240
Speaker 1: low in the equity market is nobody wants to own

222
00:11:48,240 --> 00:11:52,080
Speaker 1: any stocks anymore at all, and they generally just sell everything.

223
00:11:52,120 --> 00:11:55,000
Speaker 1: They sell not only the losers in their portfolio, but

224
00:11:55,040 --> 00:11:58,800
Speaker 1: the winners too. They just go to cash because they're terrified.

225
00:11:58,880 --> 00:12:01,480
Speaker 1: That usually is what happened set lows. So I use

226
00:12:01,520 --> 00:12:05,000
Speaker 1: it as a sentiment indicator. UM. Certainly, no one likes

227
00:12:05,040 --> 00:12:07,280
Speaker 1: to see flows out of the equity market, but when

228
00:12:07,280 --> 00:12:10,480
Speaker 1: we start to see those week after week after week, outflows.

229
00:12:10,520 --> 00:12:13,480
Speaker 1: It's one indicator we definitely would consider in the arsenal

230
00:12:13,480 --> 00:12:18,280
Speaker 1: of indicators. How close to that moment are we We're

231
00:12:18,440 --> 00:12:22,240
Speaker 1: getting closer. I can't say that we're there yet. I mean,

232
00:12:22,280 --> 00:12:25,239
Speaker 1: you know, we use a whole laundry list of indicators,

233
00:12:25,240 --> 00:12:28,960
Speaker 1: but just a couple that are really getting close. It's like, oh,

234
00:12:29,040 --> 00:12:31,920
Speaker 1: things are falling and they're still falling, but like the

235
00:12:31,960 --> 00:12:34,800
Speaker 1: sky hasn't fallen yet. They haven't, right. So, just over

236
00:12:34,840 --> 00:12:37,200
Speaker 1: the last week, we started to sign finally see some

237
00:12:37,240 --> 00:12:40,560
Speaker 1: signs of capitulation in the income oriented stocks and the

238
00:12:40,600 --> 00:12:44,440
Speaker 1: low volatility stocks, the stocks that everyone flees to saying, Okay,

239
00:12:44,480 --> 00:12:46,200
Speaker 1: this is just a short term correction and I'm going

240
00:12:46,240 --> 00:12:49,360
Speaker 1: to get defensive. They finally started selling those off, mostly

241
00:12:49,400 --> 00:12:52,400
Speaker 1: because Walmart missed earnings expectations and really just kind of

242
00:12:52,440 --> 00:12:56,760
Speaker 1: obliterated everyone's confidence in the retail sector. But we have

243
00:12:56,880 --> 00:12:59,440
Speaker 1: not seen it as much in energy stocks. For example,

244
00:12:59,559 --> 00:13:03,400
Speaker 1: one percent to the constituents of the spenergy sector are

245
00:13:03,480 --> 00:13:07,880
Speaker 1: up this year. That's extremely anomalous. So instead, investors seem

246
00:13:07,960 --> 00:13:12,559
Speaker 1: to still be rotating into inflation hedges. Within the equity market.

247
00:13:12,640 --> 00:13:14,960
Speaker 1: It's a teeny tiny space within the stock market, but

248
00:13:15,000 --> 00:13:18,920
Speaker 1: it's nonetheless an area where investors are hanging on. And

249
00:13:19,120 --> 00:13:22,400
Speaker 1: you know, frankly, at lows, you very consistently see less

250
00:13:22,400 --> 00:13:24,400
Speaker 1: than five percent of the stocks in the SNP five

251
00:13:24,800 --> 00:13:28,480
Speaker 1: trading above their fifty day moving average. You see momentum

252
00:13:28,480 --> 00:13:32,520
Speaker 1: among the entire market crash, and we haven't seen that yet,

253
00:13:32,559 --> 00:13:35,680
Speaker 1: so it's very anomalous. It doesn't feel like a true

254
00:13:35,679 --> 00:13:39,800
Speaker 1: capitulation Low. That said, the bond market may be the

255
00:13:39,840 --> 00:13:43,000
Speaker 1: ultimate indicator here, and bond yields do appear to have

256
00:13:43,120 --> 00:13:45,839
Speaker 1: peaked potentially in the short run, and that may be

257
00:13:46,120 --> 00:13:50,760
Speaker 1: enough to relieve investors concerns because, first and foremost, this

258
00:13:50,800 --> 00:13:53,880
Speaker 1: equity market correction is a correction because of the volatility

259
00:13:53,880 --> 00:13:56,240
Speaker 1: that we're experiencing in the bond market, which reflects that

260
00:13:56,280 --> 00:13:59,800
Speaker 1: inflation outlook. It's a very different type of correction than

261
00:13:59,840 --> 00:14:03,839
Speaker 1: we've had in the past, and typically the corrections we've

262
00:14:03,840 --> 00:14:07,360
Speaker 1: had over the last decade and change, the bond market

263
00:14:07,640 --> 00:14:10,080
Speaker 1: rallies when the equity market is selling off. And I

264
00:14:10,080 --> 00:14:12,080
Speaker 1: think this is a really important point that Eric made

265
00:14:12,120 --> 00:14:15,680
Speaker 1: earlier this year. That's what's truly different about this correction

266
00:14:15,920 --> 00:14:19,040
Speaker 1: is the bond market is selling off and that's the

267
00:14:19,560 --> 00:14:22,600
Speaker 1: that's the creator of risk for the equity market right now.

268
00:14:23,080 --> 00:14:25,760
Speaker 1: And just to go on mutual funds, bond mutual funds

269
00:14:25,760 --> 00:14:28,000
Speaker 1: are it's a total blood bath over there. I mean,

270
00:14:28,040 --> 00:14:30,880
Speaker 1: we're talking a hundred and seven billion dollars out this year,

271
00:14:31,080 --> 00:14:34,400
Speaker 1: thirteen straight weeks of inflows. And they these funds always

272
00:14:34,440 --> 00:14:37,040
Speaker 1: taken money, but they've had the life of Riley over

273
00:14:37,080 --> 00:14:39,320
Speaker 1: the past fifteen years because rates have been low and lower.

274
00:14:39,800 --> 00:14:42,280
Speaker 1: But it's looking bad and I don't see how this

275
00:14:42,480 --> 00:14:45,000
Speaker 1: ends because again they're owned by boomers. That's a constant

276
00:14:45,040 --> 00:14:47,680
Speaker 1: selling pressure on bonds. So until I see that charco

277
00:14:47,760 --> 00:14:51,040
Speaker 1: from red to green, Um, I'm pretty skittish on everything.

278
00:14:51,080 --> 00:14:53,880
Speaker 1: I just feel like that's the constant selling pressure on

279
00:14:53,960 --> 00:14:57,200
Speaker 1: bonds will just sort of permeate into everything else, like

280
00:14:57,280 --> 00:15:00,680
Speaker 1: almost like a wet blanket. Um. And on, let's talk

281
00:15:00,720 --> 00:15:04,440
Speaker 1: about if you were let's say you're running Meryl's model, Um,

282
00:15:04,520 --> 00:15:06,960
Speaker 1: what are you doing this year? Like what what theoretically

283
00:15:07,000 --> 00:15:09,760
Speaker 1: would you be doing? Because I only see the flows,

284
00:15:09,800 --> 00:15:11,840
Speaker 1: but models are a big part of the flows now,

285
00:15:11,920 --> 00:15:14,280
Speaker 1: so what what what would you do? Yeah, that's a

286
00:15:14,280 --> 00:15:17,840
Speaker 1: good question. And what I I, Well, we're actually you know,

287
00:15:17,880 --> 00:15:20,840
Speaker 1: we have modeled portfolios at Ovalex as well, and I'm

288
00:15:20,880 --> 00:15:23,520
Speaker 1: sure they're not doing anything vastly different on the acid

289
00:15:23,560 --> 00:15:28,720
Speaker 1: allocation models is increasing quality uh companies with strong cash

290
00:15:28,720 --> 00:15:31,560
Speaker 1: flows that are less relied on the capital markets as

291
00:15:31,600 --> 00:15:35,480
Speaker 1: short term rates rise. Uh So funding costs could be

292
00:15:35,520 --> 00:15:39,520
Speaker 1: a problem for uh more growthier companies, but an Apple

293
00:15:39,720 --> 00:15:43,360
Speaker 1: or Microsoft which they don't necessarily have to borrow. Um.

294
00:15:43,400 --> 00:15:46,480
Speaker 1: So you're looking for those stable companies. So although those

295
00:15:46,520 --> 00:15:49,680
Speaker 1: are not necessarily value, but companies with strong cash flow,

296
00:15:49,760 --> 00:15:52,720
Speaker 1: stable dividends, potentially rising dividends. It's an area that you

297
00:15:52,760 --> 00:15:56,160
Speaker 1: certainly want to be in in this market. Um. And

298
00:15:56,920 --> 00:16:02,240
Speaker 1: with regards to on the fixed stincom side shorter duration,

299
00:16:02,400 --> 00:16:05,000
Speaker 1: I mean, we don't know exactly where long rates are

300
00:16:05,040 --> 00:16:07,960
Speaker 1: gonna end up, so hold on time out now here.

301
00:16:08,000 --> 00:16:09,600
Speaker 1: I don't get the shorter I mean I get it

302
00:16:10,040 --> 00:16:13,200
Speaker 1: because oh, you know cash is safe, right, But is

303
00:16:13,240 --> 00:16:15,600
Speaker 1: it safe if inflation is what eight nine percent? Aren't

304
00:16:15,600 --> 00:16:19,000
Speaker 1: you immediately losing that? And isn't that where the Fed

305
00:16:19,080 --> 00:16:21,120
Speaker 1: is raising rates? So I don't is it or is

306
00:16:21,160 --> 00:16:23,760
Speaker 1: it that bad? That's that's actually the best spot is

307
00:16:23,800 --> 00:16:26,600
Speaker 1: to sit there and lose eight percent. Well, I mean, yes,

308
00:16:26,680 --> 00:16:29,320
Speaker 1: there's the inflation argument, but you don't want to lose money, right,

309
00:16:29,360 --> 00:16:32,880
Speaker 1: So like if you're could be worth space treasure this

310
00:16:32,960 --> 00:16:34,800
Speaker 1: year and I would you rather be in cash or down.

311
00:16:35,960 --> 00:16:39,480
Speaker 1: So that's why for now short duration. At some point

312
00:16:39,480 --> 00:16:42,440
Speaker 1: we'll go alonger on duration. But you know, if we

313
00:16:42,480 --> 00:16:44,400
Speaker 1: are not at the bottom on the equity markets and

314
00:16:44,480 --> 00:16:48,040
Speaker 1: volatility is pretty low, Um, there's a lot of volatility

315
00:16:48,400 --> 00:16:51,880
Speaker 1: with respect to equities on the right side, it's high,

316
00:16:52,240 --> 00:16:54,560
Speaker 1: So there's I think there is some room to run

317
00:16:54,800 --> 00:16:58,760
Speaker 1: on the equity side. But if that happens, then they're

318
00:16:58,760 --> 00:17:01,600
Speaker 1: gonna play. Everyone's gonna plow on a treasuries. You mentioned

319
00:17:01,600 --> 00:17:05,280
Speaker 1: how the professional investor sort of saw this coming and

320
00:17:05,320 --> 00:17:07,159
Speaker 1: sold off already and it was retailed that was a

321
00:17:07,160 --> 00:17:10,200
Speaker 1: little a little late to that, And I'm wondering, like

322
00:17:10,320 --> 00:17:14,120
Speaker 1: when what are the professionals watching right now, and especially

323
00:17:14,280 --> 00:17:16,719
Speaker 1: you know, the global X kind of institutional clients, Like

324
00:17:17,560 --> 00:17:20,800
Speaker 1: when does this become a buying opportunity again? Yeah, I

325
00:17:20,800 --> 00:17:24,040
Speaker 1: mean it's it's I don't think we're there yet. Um,

326
00:17:24,080 --> 00:17:26,159
Speaker 1: today you're getting a little bit of a bounce because

327
00:17:26,359 --> 00:17:28,480
Speaker 1: that's you know, just what happens when you have eight

328
00:17:28,560 --> 00:17:34,080
Speaker 1: straight weeks of declines. But when you see for more capitulation,

329
00:17:34,760 --> 00:17:37,840
Speaker 1: that's when I think there'll be some bottom fishing. I think,

330
00:17:37,880 --> 00:17:40,800
Speaker 1: you know, when you see some bell weathers go down further,

331
00:17:41,440 --> 00:17:43,399
Speaker 1: then I think there'll be some buying in the market

332
00:17:43,560 --> 00:17:47,639
Speaker 1: and that will kind of lift all boats. Capitulation. It

333
00:17:47,760 --> 00:17:49,680
Speaker 1: is the word of the year, and people on Twitter

334
00:17:49,800 --> 00:17:52,640
Speaker 1: us it all the times, like, oh, capitulation told you,

335
00:17:52,760 --> 00:17:55,600
Speaker 1: Like the bears are loving this. They're like, oh, not enough.

336
00:17:55,680 --> 00:17:58,719
Speaker 1: Like I. Sometimes I show ARC and sometimes that's it's,

337
00:17:58,800 --> 00:18:02,199
Speaker 1: you know, inflow week here and there, like see they

338
00:18:02,240 --> 00:18:06,880
Speaker 1: haven't capitulated yet. Anyway. You know what's worsky about that, though,

339
00:18:06,920 --> 00:18:09,640
Speaker 1: is that everybody's talking about it. Because I can remember

340
00:18:09,680 --> 00:18:13,400
Speaker 1: in at the Lows and when we were talking about

341
00:18:13,400 --> 00:18:16,119
Speaker 1: our capitulation indicators, and we were talking about the fact

342
00:18:16,160 --> 00:18:20,399
Speaker 1: that at that point only two two percent of stocks

343
00:18:20,400 --> 00:18:23,480
Speaker 1: were trading above their fifty day moving average and rs

344
00:18:23,560 --> 00:18:26,560
Speaker 1: I had just crashed through the floor and no stocks

345
00:18:26,600 --> 00:18:29,920
Speaker 1: were rising, And we're putting notes out talking about we're here,

346
00:18:29,960 --> 00:18:32,280
Speaker 1: this is a capitulation moment. The FED is swooping in.

347
00:18:32,320 --> 00:18:34,639
Speaker 1: The FED and the fiscal policy makers are swooping in

348
00:18:34,680 --> 00:18:36,800
Speaker 1: at the same time, now is the time to buy,

349
00:18:36,880 --> 00:18:40,239
Speaker 1: And everyone told me I was crazy. Now everybody's on

350
00:18:40,240 --> 00:18:42,960
Speaker 1: this train of look for the capitulation. This worries me

351
00:18:43,000 --> 00:18:45,600
Speaker 1: because it means to me that people are hoping for

352
00:18:45,640 --> 00:18:47,919
Speaker 1: a bottom to form, and you have to get to

353
00:18:47,960 --> 00:18:50,359
Speaker 1: a point to have a true sentiment wash out. You

354
00:18:50,359 --> 00:18:52,000
Speaker 1: have to get to a point where there's no hope

355
00:18:52,000 --> 00:18:55,240
Speaker 1: for a bottom left. That's that's how you find a

356
00:18:55,240 --> 00:18:57,320
Speaker 1: low in the equity market. I know this is so dull,

357
00:18:59,119 --> 00:19:02,200
Speaker 1: but that's realistic. Like that's where you were. That's where

358
00:19:02,240 --> 00:19:05,679
Speaker 1: you were in People were telling me when I was

359
00:19:05,720 --> 00:19:09,760
Speaker 1: at Wells Fargo, this is the next financial crisis, right,

360
00:19:09,840 --> 00:19:14,440
Speaker 1: that's the darkness is overwhelming, and people who get bullish

361
00:19:14,480 --> 00:19:18,399
Speaker 1: at that moment are completely villainous. So basically, we need

362
00:19:18,520 --> 00:19:22,119
Speaker 1: to find Twitter mentions of the word capitulation and if

363
00:19:22,200 --> 00:19:24,720
Speaker 1: when it starts to go down, that's in the moment

364
00:19:26,600 --> 00:19:29,360
Speaker 1: that word is used, the more it's actually not capitulation.

365
00:19:30,080 --> 00:19:32,240
Speaker 1: Do I have that right? Yeah, because they're looking for it.

366
00:19:32,520 --> 00:19:34,520
Speaker 1: This is the other thing I get. So many questions

367
00:19:34,520 --> 00:19:36,960
Speaker 1: come my way right now, saying, well, when is the

368
00:19:36,960 --> 00:19:40,200
Speaker 1: FED put Finally, everybody has given up and said there

369
00:19:40,280 --> 00:19:42,800
Speaker 1: is no FED put anymore. That's the time to move.

370
00:19:43,400 --> 00:19:47,119
Speaker 1: You have to get this outright existential crisis. Yeah, complete,

371
00:19:47,440 --> 00:19:49,920
Speaker 1: I give up. I can't make any money in stocks anymore.

372
00:19:50,040 --> 00:19:52,840
Speaker 1: But there's so many fundamental things that we just haven't

373
00:19:52,880 --> 00:19:56,480
Speaker 1: fully lived through yet. There's inflation, has it peaked? Um?

374
00:19:56,560 --> 00:20:00,919
Speaker 1: What's going on with China and slower growth in China? Um,

375
00:20:00,960 --> 00:20:03,920
Speaker 1: We've just started on the interest rate cycle seventy five

376
00:20:03,960 --> 00:20:06,240
Speaker 1: basis points, you know, I think we could go to

377
00:20:06,400 --> 00:20:09,200
Speaker 1: three even four, and they're gonna go that high to

378
00:20:09,240 --> 00:20:12,880
Speaker 1: stop inflation because they obviously this is not the seventies

379
00:20:12,880 --> 00:20:16,120
Speaker 1: when you had inflation for ten years. But Howell does

380
00:20:16,160 --> 00:20:18,800
Speaker 1: not want to be known as the inflation guy, so

381
00:20:18,880 --> 00:20:22,080
Speaker 1: he's gonna squash inflation. There's a war, But what if

382
00:20:22,119 --> 00:20:24,960
Speaker 1: that doesn't happen, dude, Like, there's the case that, you know,

383
00:20:25,119 --> 00:20:28,560
Speaker 1: we raise interest rates and inflation doesn't get tamed, and

384
00:20:28,600 --> 00:20:31,560
Speaker 1: then the bottom then they raise the war. Yeah, I

385
00:20:31,600 --> 00:20:35,120
Speaker 1: mean they crushed demands. Yeah, so I mean, and then

386
00:20:35,160 --> 00:20:38,000
Speaker 1: you have potentially like a vocal moment in all of this, right, Like,

387
00:20:38,040 --> 00:20:42,200
Speaker 1: it does make you feel like this could be a long, long,

388
00:20:42,320 --> 00:20:45,359
Speaker 1: long year it does. I think a lot of things

389
00:20:45,359 --> 00:20:48,400
Speaker 1: have been priced into the equity market frankly, but there

390
00:20:48,480 --> 00:20:52,040
Speaker 1: is this lingering degree of hope. Um And you know,

391
00:20:52,080 --> 00:20:53,960
Speaker 1: I get a lot of people tell me about Russia

392
00:20:54,000 --> 00:20:57,359
Speaker 1: and China and the fundamentals are terrible, even though the

393
00:20:57,359 --> 00:21:00,520
Speaker 1: fundamentals are fine, you know. So there's a lot. There

394
00:21:00,640 --> 00:21:02,840
Speaker 1: is a lot of capitulation out there. The equity market

395
00:21:02,880 --> 00:21:06,400
Speaker 1: recognizes a tremendous amount of risk, but there's that lingering

396
00:21:06,480 --> 00:21:08,800
Speaker 1: amount of hope that just needs to be wiped out

397
00:21:08,800 --> 00:21:11,000
Speaker 1: of the market and then you finally have your sentiment

398
00:21:11,040 --> 00:21:19,800
Speaker 1: wash out. So here's a question I have. So in

399
00:21:19,960 --> 00:21:23,560
Speaker 1: past sell offs, the role of passive hasn't been as big,

400
00:21:23,640 --> 00:21:26,919
Speaker 1: especially in two thousand eight. So take someone like me, Okay,

401
00:21:27,000 --> 00:21:30,560
Speaker 1: I've got a mortgage, two kids saving for college. Where

402
00:21:30,560 --> 00:21:32,520
Speaker 1: the money that matters I have. I'm in low cost

403
00:21:32,600 --> 00:21:34,359
Speaker 1: index funds, right, And I think it's a lot of

404
00:21:34,359 --> 00:21:37,879
Speaker 1: people now, um am I part of the capitulation because

405
00:21:37,960 --> 00:21:40,840
Speaker 1: I am resigned to this being the best deal I

406
00:21:40,880 --> 00:21:42,680
Speaker 1: want to be in stocks. I believe over the long

407
00:21:42,760 --> 00:21:45,560
Speaker 1: term they work for me. I'm not selling. Do I

408
00:21:45,640 --> 00:21:49,359
Speaker 1: need to sell for capitulation to happen? Or are you

409
00:21:49,400 --> 00:21:52,040
Speaker 1: looking at more of the active players. I'm looking more

410
00:21:52,080 --> 00:21:54,359
Speaker 1: of the active players because I actually don't see that

411
00:21:54,400 --> 00:21:57,560
Speaker 1: the institutions have capitulated. I think the retail universe has,

412
00:21:58,359 --> 00:22:00,520
Speaker 1: so I see it a little bit differently, say retail

413
00:22:00,600 --> 00:22:05,600
Speaker 1: universal again we are talking about the non sort of vanguardian. Yeah,

414
00:22:05,720 --> 00:22:08,040
Speaker 1: now I'm looking at more the traders. Right, So, if

415
00:22:08,240 --> 00:22:11,280
Speaker 1: if I'm looking at retail and retails impact on the

416
00:22:11,359 --> 00:22:14,000
Speaker 1: day to day movements in the equity market, it's the traders,

417
00:22:14,000 --> 00:22:15,960
Speaker 1: and the traders left the market starting a year ago

418
00:22:16,119 --> 00:22:18,359
Speaker 1: and they haven't come back. They've just you know, they

419
00:22:18,440 --> 00:22:20,359
Speaker 1: got wiped out with the meme craze, they got further

420
00:22:20,440 --> 00:22:23,080
Speaker 1: wiped out through the through the contraction in the first

421
00:22:23,119 --> 00:22:26,600
Speaker 1: quarter of this year, and they've largely just left the building.

422
00:22:27,119 --> 00:22:29,359
Speaker 1: But when we look when we actually analyzed buys and

423
00:22:29,480 --> 00:22:32,119
Speaker 1: cells and the flows of the institutional accounts, there's a

424
00:22:32,160 --> 00:22:34,440
Speaker 1: survey that State Street actually does which is quite good

425
00:22:34,440 --> 00:22:39,360
Speaker 1: at this and that survey of UM institutional sentiment has

426
00:22:39,400 --> 00:22:43,960
Speaker 1: historically reached the level of about seventy. It is currently

427
00:22:44,000 --> 00:22:47,119
Speaker 1: at ninety above a hundred. As a risk to the

428
00:22:47,160 --> 00:22:51,560
Speaker 1: market for you know, tops forming, So we're ninety. Now

429
00:22:51,600 --> 00:22:54,439
Speaker 1: we've come down below hundred, but we haven't gotten to seventy,

430
00:22:54,480 --> 00:22:56,920
Speaker 1: which is the typical low point. So I think you've

431
00:22:56,960 --> 00:23:00,960
Speaker 1: got more institutional selling that actually needs to happen to

432
00:23:01,200 --> 00:23:04,399
Speaker 1: really create that big, long term low. I think the

433
00:23:04,440 --> 00:23:08,119
Speaker 1: retail investors that are going to leave have left. The

434
00:23:08,200 --> 00:23:11,399
Speaker 1: rest just stick around, and they always stick around like

435
00:23:11,480 --> 00:23:14,000
Speaker 1: I too, don't sell my exposure because I've got to

436
00:23:14,040 --> 00:23:15,800
Speaker 1: work for the next forty years to get my kids

437
00:23:15,800 --> 00:23:17,919
Speaker 1: through college. So I'm just going to hang on. And

438
00:23:17,960 --> 00:23:19,960
Speaker 1: I do think that's somewhat different than the back in

439
00:23:20,000 --> 00:23:22,200
Speaker 1: the day you're in an active fund that's under performing

440
00:23:22,200 --> 00:23:23,919
Speaker 1: and your thought as well, I should go to a

441
00:23:23,920 --> 00:23:27,520
Speaker 1: manager who's outperforming. Now in an index fund, you never

442
00:23:27,560 --> 00:23:29,119
Speaker 1: have that thought. You're like, man, I'm not going to

443
00:23:29,200 --> 00:23:32,280
Speaker 1: go chase something. I'm fine. I again, as you know,

444
00:23:32,320 --> 00:23:33,960
Speaker 1: I study this topic all the time. I don't know

445
00:23:34,000 --> 00:23:37,520
Speaker 1: if that effect will create a more stable base, which

446
00:23:37,560 --> 00:23:41,159
Speaker 1: could have the effect of drawing this out longer, because

447
00:23:41,160 --> 00:23:44,600
Speaker 1: there won't be that total vomit moment because there are

448
00:23:44,640 --> 00:23:47,359
Speaker 1: going to be the vanguard flows always coming in and

449
00:23:47,440 --> 00:23:49,359
Speaker 1: having some sort of bit on the market and maybe

450
00:23:49,400 --> 00:23:53,480
Speaker 1: making hope stay alive for longer. It's very difficult to

451
00:23:53,520 --> 00:23:56,800
Speaker 1: get the whole sentiment for the retail universe in one number. Right.

452
00:23:57,480 --> 00:24:00,359
Speaker 1: I think the retail trader feels terrible about the market.

453
00:24:00,640 --> 00:24:02,440
Speaker 1: I think the long term investor is just going to

454
00:24:02,560 --> 00:24:05,360
Speaker 1: hang on. And you do have I think, yeah, yeah

455
00:24:05,440 --> 00:24:07,760
Speaker 1: it is. It's pretty bad, right, but you have you

456
00:24:08,040 --> 00:24:10,600
Speaker 1: bring up the generational divides all the time. So I'll

457
00:24:10,640 --> 00:24:12,800
Speaker 1: get on that bandwagon and talk about the boomers who

458
00:24:12,800 --> 00:24:16,080
Speaker 1: are retiring, who are more accustomed to calling up their

459
00:24:16,119 --> 00:24:18,440
Speaker 1: broker when they want to buy and sell in any

460
00:24:18,480 --> 00:24:22,080
Speaker 1: any individual stock. Those people are just getting their first

461
00:24:22,160 --> 00:24:24,879
Speaker 1: quarter statements, absorbing those statements now, and we might be

462
00:24:24,920 --> 00:24:28,320
Speaker 1: at that moment where they say, oh wow, this is

463
00:24:28,320 --> 00:24:31,359
Speaker 1: actually happening. You know, the doctors and lawyers and people

464
00:24:31,400 --> 00:24:33,000
Speaker 1: that have better things to do than to look at

465
00:24:33,000 --> 00:24:35,560
Speaker 1: the financial market on a daily basis. They're feeling it

466
00:24:35,600 --> 00:24:37,560
Speaker 1: at the pump, and they're feeling it at the grocery store,

467
00:24:37,560 --> 00:24:39,320
Speaker 1: and they're feeling it when they go out to restaurants.

468
00:24:39,760 --> 00:24:41,960
Speaker 1: But they probably really haven't paid that much attention to

469
00:24:42,000 --> 00:24:44,400
Speaker 1: financial markets because they don't have to like we do.

470
00:24:45,000 --> 00:24:48,199
Speaker 1: So they're just now starting to absorb the first quarter losses,

471
00:24:48,240 --> 00:24:50,800
Speaker 1: and we may see that dump in some of those

472
00:24:50,800 --> 00:24:54,040
Speaker 1: positions yet to come. I totally agree. You talk to

473
00:24:54,240 --> 00:24:57,360
Speaker 1: friends who are not in the financial business and yeah,

474
00:24:57,400 --> 00:25:00,399
Speaker 1: there you're aware of what's going on in terms, but

475
00:25:00,480 --> 00:25:03,000
Speaker 1: they haven't looked at their statements. They don't often look

476
00:25:03,040 --> 00:25:04,840
Speaker 1: at their statements and they're like, oh, I don't come back.

477
00:25:04,960 --> 00:25:08,400
Speaker 1: We've lived through this before. But when you see down

478
00:25:08,400 --> 00:25:10,359
Speaker 1: and who knows what some people have, it could be

479
00:25:10,400 --> 00:25:13,399
Speaker 1: it could be more than that. That could be, you know,

480
00:25:13,880 --> 00:25:16,600
Speaker 1: caused for further selling. What about this idea if you

481
00:25:16,640 --> 00:25:18,720
Speaker 1: go back and look at the past five years, even

482
00:25:18,800 --> 00:25:22,400
Speaker 1: with this year, the S and P is up eleven annualized,

483
00:25:22,920 --> 00:25:25,199
Speaker 1: but you're historically you're only supposed to get like eight

484
00:25:25,280 --> 00:25:28,720
Speaker 1: or nine percent. So I mean, isn't shouldn't we like,

485
00:25:29,040 --> 00:25:31,240
Speaker 1: are we a little coddled and spoiled here with the markets?

486
00:25:31,240 --> 00:25:34,360
Speaker 1: Shouldn't we just be like, look, this year should suck um,

487
00:25:34,480 --> 00:25:36,800
Speaker 1: and that's gonna get us back to the nine percent average.

488
00:25:36,800 --> 00:25:39,200
Speaker 1: That's what I was promised, and the volatilities the price

489
00:25:39,200 --> 00:25:41,959
Speaker 1: of admission. Um. Do you think more people are kind

490
00:25:42,000 --> 00:25:44,760
Speaker 1: of mentally getting to that space or do you think

491
00:25:44,760 --> 00:25:46,600
Speaker 1: it's the same old thing where it's like, oh my god,

492
00:25:46,640 --> 00:25:49,320
Speaker 1: the numbers read, let me sell. I think there there's

493
00:25:49,359 --> 00:25:51,720
Speaker 1: a lot of fomo. You know, during the pandemic we're

494
00:25:51,760 --> 00:25:55,119
Speaker 1: sitting at home. Many people had extra money because of

495
00:25:55,160 --> 00:25:58,760
Speaker 1: all the stimulus programs. They're investing in meme stocks. There,

496
00:25:58,800 --> 00:26:02,280
Speaker 1: things were going out you wanted to get in. I

497
00:26:02,320 --> 00:26:05,119
Speaker 1: think a lot of that is being wiped out, realizing

498
00:26:05,200 --> 00:26:08,920
Speaker 1: that yeah, with cryptos, I'm not people who are in

499
00:26:08,960 --> 00:26:11,880
Speaker 1: cryptos are not making money at this point, so maybe

500
00:26:11,880 --> 00:26:14,080
Speaker 1: I'm not going to go that route. Um and some

501
00:26:14,119 --> 00:26:16,440
Speaker 1: of the meme stocks, well that was kind of fun.

502
00:26:16,480 --> 00:26:17,879
Speaker 1: But now I'm back to work and I have to

503
00:26:17,880 --> 00:26:21,360
Speaker 1: commute and I have to whatnot. So I think more

504
00:26:21,440 --> 00:26:24,679
Speaker 1: normalized returns are coming back into people's mind, but again

505
00:26:24,840 --> 00:26:28,000
Speaker 1: still painful that when it happens, you know, you go

506
00:26:28,080 --> 00:26:30,320
Speaker 1: to a certain level on on your you look at

507
00:26:30,320 --> 00:26:33,760
Speaker 1: your statement, and then you lose. You don't you think

508
00:26:33,800 --> 00:26:38,040
Speaker 1: you lost? You know, you don't. You don't put into

509
00:26:38,080 --> 00:26:41,320
Speaker 1: annualized ten year return. Now it's like it's I do,

510
00:26:41,480 --> 00:26:44,960
Speaker 1: but what happened yesterday? What's what am I gonna get tomorrow?

511
00:26:45,000 --> 00:26:48,840
Speaker 1: I play ment psychological games with myself. You know, I'm

512
00:26:48,960 --> 00:26:51,800
Speaker 1: I'm glad you brought up bit coiner crypto John, because

513
00:26:51,800 --> 00:26:54,800
Speaker 1: I think that that has a really firm place in

514
00:26:54,880 --> 00:26:58,760
Speaker 1: today's psychology and today's sentiments. And I do worry that

515
00:26:58,880 --> 00:27:03,159
Speaker 1: the crypto fanatic do watch daily prices and they do

516
00:27:03,280 --> 00:27:07,080
Speaker 1: feel the pain because they're they're fanatical about their positions.

517
00:27:07,119 --> 00:27:12,159
Speaker 1: They're not like the long only sm investor like you

518
00:27:12,240 --> 00:27:13,960
Speaker 1: and I, Eric, who are just going to hold on

519
00:27:14,040 --> 00:27:16,920
Speaker 1: into perpetuity under the guys that it will eventually come back.

520
00:27:17,440 --> 00:27:20,560
Speaker 1: They're much more emotionally invested in this as an idea.

521
00:27:21,440 --> 00:27:25,680
Speaker 1: And I do worry about the psychological impact of losses

522
00:27:25,760 --> 00:27:29,800
Speaker 1: in that market following onto or feeding into losses in

523
00:27:29,840 --> 00:27:33,240
Speaker 1: the equity market, because they might have exposure in the

524
00:27:33,280 --> 00:27:36,920
Speaker 1: equity market, Their parents might have exposure in the equity market.

525
00:27:36,960 --> 00:27:39,919
Speaker 1: They have to cover their children's positions, and there's a

526
00:27:39,920 --> 00:27:42,000
Speaker 1: lot of risk taking that's gone on in that market

527
00:27:42,600 --> 00:27:45,760
Speaker 1: that I think we're really struggling to totally capture. And

528
00:27:45,800 --> 00:27:49,240
Speaker 1: it certainly has a great potential to have psychological impacts,

529
00:27:49,320 --> 00:27:53,000
Speaker 1: behavioral impacts. You can get up in the middle of

530
00:27:53,040 --> 00:27:56,040
Speaker 1: the night and check. The people used to like that,

531
00:27:56,080 --> 00:28:00,400
Speaker 1: now they don't like it, but isn't there are there

532
00:28:00,560 --> 00:28:03,640
Speaker 1: is the hope here actually returned to normal and those

533
00:28:03,680 --> 00:28:05,919
Speaker 1: traders that you mentioned that are on the sidelines, and

534
00:28:05,920 --> 00:28:08,359
Speaker 1: I've been on the sidelines forever, like I'm out for

535
00:28:08,400 --> 00:28:11,119
Speaker 1: a while, but like, is there a version of this, Yeah,

536
00:28:11,200 --> 00:28:15,720
Speaker 1: that normal emerges again. Yeah, that's the one shining sort

537
00:28:15,720 --> 00:28:19,080
Speaker 1: of silver lining of any corrective process, in particular, this

538
00:28:19,119 --> 00:28:21,680
Speaker 1: one is I do believe it is deflating any mini

539
00:28:21,720 --> 00:28:24,040
Speaker 1: bubbles that may have developed during the pandemic. I mean,

540
00:28:24,040 --> 00:28:26,720
Speaker 1: we have a lot of concentration risks that developed in

541
00:28:26,720 --> 00:28:30,680
Speaker 1: the SMP five. Really everybody wanted to own a handful

542
00:28:30,760 --> 00:28:34,159
Speaker 1: of stocks and that's it. We had retail investors that

543
00:28:34,200 --> 00:28:37,200
Speaker 1: were dabbling in a market that they've never even touched before,

544
00:28:37,840 --> 00:28:40,640
Speaker 1: got burned and probably won't dabble so much. May become

545
00:28:40,680 --> 00:28:43,800
Speaker 1: longer term investors really sort of rationalize their exposure a

546
00:28:43,880 --> 00:28:46,920
Speaker 1: little bit. You probably had, you know, a whole group

547
00:28:46,960 --> 00:28:50,240
Speaker 1: of people jump into the crypto markets one after the

548
00:28:50,280 --> 00:28:54,520
Speaker 1: magnificent gains, have now suffered losses and are learning, you know,

549
00:28:54,640 --> 00:28:58,160
Speaker 1: investment lessons that will hopefully last a lifetime and lead

550
00:28:58,200 --> 00:29:00,720
Speaker 1: to a degree of rationality that didn't exist for the

551
00:29:00,800 --> 00:29:05,320
Speaker 1: last two years, but there were certainly some mini bubbles

552
00:29:05,320 --> 00:29:09,120
Speaker 1: that developed during that pandemic experience that are now being deflated,

553
00:29:09,200 --> 00:29:12,760
Speaker 1: which leaves us at a position of more equilibrium, if

554
00:29:12,760 --> 00:29:14,800
Speaker 1: you will, when we're all when this is all said

555
00:29:14,800 --> 00:29:17,760
Speaker 1: and done. But you also have a situation where we're

556
00:29:17,800 --> 00:29:20,080
Speaker 1: not likely not going to be reliant on the FED

557
00:29:20,160 --> 00:29:24,120
Speaker 1: going forward. So with the FED removing liquidity, rolling off

558
00:29:24,160 --> 00:29:27,120
Speaker 1: their balance sheet, um just in a few weeks, raising

559
00:29:27,240 --> 00:29:30,480
Speaker 1: rates and likely there's there's not gonna be monetary policy,

560
00:29:30,840 --> 00:29:35,040
Speaker 1: uh and fiscal policy that will support the consumer, and

561
00:29:35,080 --> 00:29:37,160
Speaker 1: the consumer is going to be stretched. So we're gonna

562
00:29:37,200 --> 00:29:39,880
Speaker 1: go into a period of adjustment, and I think over

563
00:29:39,920 --> 00:29:42,320
Speaker 1: the long term we'll have much lower returns than we've

564
00:29:42,360 --> 00:29:46,000
Speaker 1: had even since two thou because the Fed's been there.

565
00:29:46,400 --> 00:29:50,080
Speaker 1: The SNP was flat during the two thousand's right about. Oh,

566
00:29:50,120 --> 00:29:51,960
Speaker 1: it had a great run from two thousand two to

567
00:29:51,960 --> 00:29:56,080
Speaker 1: two thousand seven. You gotta you can, like you you

568
00:29:56,120 --> 00:29:58,160
Speaker 1: could have a decade where it just doesn't go up.

569
00:29:59,480 --> 00:30:02,160
Speaker 1: You can you can have a very volatile decade. It

570
00:30:02,200 --> 00:30:06,600
Speaker 1: could work, could just be a nice not nice, but

571
00:30:06,800 --> 00:30:16,000
Speaker 1: a long slow normal. Yeah, a lot of people you know,

572
00:30:16,040 --> 00:30:18,880
Speaker 1: it's like the patient doesn't have the drug anymore and

573
00:30:18,880 --> 00:30:21,480
Speaker 1: it has to like going through withdrawal. It's got to

574
00:30:21,520 --> 00:30:25,640
Speaker 1: live to like work without that FED hit, which I

575
00:30:25,640 --> 00:30:27,840
Speaker 1: think is probably the moral of the story. So other

576
00:30:27,960 --> 00:30:31,360
Speaker 1: regular things matter now, which is probably good, right clash flow, Yeah,

577
00:30:31,400 --> 00:30:36,400
Speaker 1: I mean, look the alternative, the alternative here. I think

578
00:30:36,440 --> 00:30:38,760
Speaker 1: that the alternative is it could be a lot worse

579
00:30:38,800 --> 00:30:42,880
Speaker 1: if the FED warrant addressing the inflationary scenario. But they

580
00:30:42,920 --> 00:30:45,760
Speaker 1: are addressing it. They are committed to it. They need

581
00:30:45,800 --> 00:30:47,920
Speaker 1: to remain committed to it to get it as you know,

582
00:30:48,080 --> 00:30:50,960
Speaker 1: right size and normalized policy to the degree possible because

583
00:30:51,000 --> 00:30:53,719
Speaker 1: they were behind the curve. They have to do this

584
00:30:53,880 --> 00:30:56,200
Speaker 1: or we risk having a much more volatile long term

585
00:30:56,200 --> 00:30:59,240
Speaker 1: economic climate than we've ever faced. But to the degree

586
00:30:59,240 --> 00:31:01,400
Speaker 1: that they can write as policy and remove some of

587
00:31:01,400 --> 00:31:03,720
Speaker 1: this sort of sugar high that we had developed in

588
00:31:03,800 --> 00:31:07,440
Speaker 1: this you know, bubbly market. The faster we can get

589
00:31:07,440 --> 00:31:10,600
Speaker 1: that done and sort of cleanse the access and move on,

590
00:31:10,880 --> 00:31:13,480
Speaker 1: the better. But if they were to delay it, it

591
00:31:13,520 --> 00:31:16,000
Speaker 1: would be much more painful a year, two years, three

592
00:31:16,040 --> 00:31:19,960
Speaker 1: years from now. There there's some other things that get

593
00:31:20,160 --> 00:31:21,720
Speaker 1: in the shot in the short term that I think

594
00:31:21,720 --> 00:31:25,880
Speaker 1: could help the market. Um, perhaps if the Biden administration

595
00:31:25,960 --> 00:31:28,560
Speaker 1: removes the Towers of China, that certainly could be helpful.

596
00:31:28,920 --> 00:31:32,720
Speaker 1: Maybe a gas tax holiday. That's those are short term things,

597
00:31:33,040 --> 00:31:36,320
Speaker 1: not speaking to your your long term thesis. But in

598
00:31:36,360 --> 00:31:39,000
Speaker 1: the short run there's there's some events that that could

599
00:31:39,120 --> 00:31:41,520
Speaker 1: make the stock market pop. And the end of the war. Yeah,

600
00:31:41,680 --> 00:31:43,400
Speaker 1: end of the war could be a huge catalyst. I

601
00:31:43,440 --> 00:31:47,160
Speaker 1: totally agree. Not for energy. All right, we'll leave it there,

602
00:31:47,320 --> 00:31:49,200
Speaker 1: John Gina, thanks so much for joining us in Trillian.

603
00:31:49,880 --> 00:31:59,120
Speaker 1: Thank you, thanks for listening to Trilliance. Until next time.

604
00:31:59,240 --> 00:32:02,080
Speaker 1: You can find us on the Bomberg terminal, Bloomberg dot com,

605
00:32:02,120 --> 00:32:05,480
Speaker 1: Apple Podcast, Spotify, and wherever else you'd like to listen.

606
00:32:05,920 --> 00:32:08,400
Speaker 1: We'd love to hear from you. We're on Twitter, I'm

607
00:32:08,480 --> 00:32:12,840
Speaker 1: at Joel Webber Show. He's at aerb faltrainess. This episode

608
00:32:12,840 --> 00:32:16,640
Speaker 1: of Trillions was produced by Stacy Wong. Francesca Leed is

609
00:32:16,640 --> 00:32:29,680
Speaker 1: the head of Boomberg Podcast. Bye