Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
Speaker 1: my co host Matt Miller.
Speaker 2: Every business day we bring you interviews from CEOs, market pros,
Speaker 2: and Bloomberg experts, along with essential market moving news.
Speaker 1: Find the Bloomberg Markets podcast called Apple Podcasts or wherever
Speaker 1: you listen to podcasts, and at Bloomberg dot com slash podcast.
Speaker 3: Let's bring in our next guest. My question is for you, Molly,
Speaker 3: do the rich invest differently than Schmoe's like me?
Speaker 4: Well, you have to define the rich as our next
Speaker 4: guest is going to, because there are the mere mortal millionaires,
Speaker 4: and then there are billionaires, and then there's a nice
Speaker 4: group in between called the cent to millionaires. A lot
Speaker 4: more about them.
Speaker 3: Barbara Goodstein is the CEO at R three sixty, catering
Speaker 3: to the investment needs of high net worth individuals. Thanks
Speaker 3: for stopping buying the studio. What does R three sixty do?
Speaker 5: First of all, it's a community for ultra high net
Speaker 5: worth wealth creators and their fan families who are trying
Speaker 5: to navigate the challenges of having these very large family enterprises.
Speaker 5: And so we bring this community together and people meet
Speaker 5: and talk about opportunities and challenges.
Speaker 3: Why do they need to come together, Because when I
Speaker 3: become an ultra high net worth industry center, I don't
Speaker 3: want to talk to anybody.
Speaker 5: Well, you would be surprised you actually would want to
Speaker 5: talk to people because, first of all, that level of
Speaker 5: wealth can be isolating, but even more importantly, people are
Speaker 5: getting ideas from each other. We have some of the
Speaker 5: most successful people in the country and they're sharing ideas
Speaker 5: on macro global trends with each other, and then they're
Speaker 5: all benefiting from hearing those different ideas.
Speaker 4: So tell us about who some of these quote cent
Speaker 4: to millionaires are, and those are people that have at
Speaker 4: least one hundred million dollars in wealth, that's right.
Speaker 5: So one of the people that we have in our
Speaker 5: network is one of the largest hedge fund managers in
Speaker 5: the country, and he has been very vocal educating our
Speaker 5: group about the benefits of investing in bitcoin. And had
Speaker 5: I listened to him, I would have tripled my money.
Speaker 5: He told us that three things are going to happen.
Speaker 5: That bitcoin is going to be marked to market, and
Speaker 5: it was in January that ETFs were going to come
Speaker 5: out and they just did. And now we have a
Speaker 5: phenomena called having and that's going to happen in April
Speaker 5: of this year, and he told the group that this
Speaker 5: is going to generate enormous growth and opportunity in bitcoin.
Speaker 5: So that's the type of person that we have in
Speaker 5: the group.
Speaker 3: These are people who inherited their wealth or they actually
Speaker 3: made the money with hard work and starting a business.
Speaker 6: So it's actually both.
Speaker 5: We have a lot of wealth creators. We also have
Speaker 5: some people who have inherited the wealth and now they're
Speaker 5: extending the business that they inherited through the next generation.
Speaker 4: So we have both and these are so a lot
Speaker 4: of this is what they're talking about with each other.
Speaker 6: You said, like macro ideas.
Speaker 4: I don't think though that these people really want to
Speaker 4: share where their money's being invested though, right, Like does
Speaker 4: that all? Well?
Speaker 5: They actually are happy to share with each other. And
Speaker 5: that's the fascinating part about this community. Everybody sharing lots
Speaker 5: of information, personal information as well as investment information. And
Speaker 5: so again we've got another member who has written six
Speaker 5: books on theoretical physics and he's got a PhD in
Speaker 5: quantum computing.
Speaker 3: And I think I know who this is, and.
Speaker 5: He's been advising everybody to invest in quantum computing, that
Speaker 5: there's going to be an enormous rise there. Russia and
Speaker 5: China are creating something called hack proof quantum computing, and
Speaker 5: so we're now looking at investing in South Korea. Telecom
Speaker 5: has built an alternative to that.
Speaker 3: Okay, So as an individual investor myself, what can I
Speaker 3: learn from them?
Speaker 5: So I think you could learn about again macro global
Speaker 5: economic trends, things that are coming. So we are very
Speaker 5: focused on the defense area. We think that there's going
Speaker 5: to be an enormous increase in defense spending across the world,
Speaker 5: and we've already seen it. Poland just bought a thousand
Speaker 5: tanks from South Korea. That's more than Germany, France, and
Speaker 5: the UK combined, and that is small compared to what's
Speaker 5: about to happen in the United States and Russia. So
Speaker 5: if you're interested in global defense spending, there are a
Speaker 5: lot of opportunities in that space.
Speaker 4: What happens, Barbara, if your net worth changes so substantially
Speaker 4: that either you've been now minted as a billionaire or
Speaker 4: maybe you're less fortunate and fall into the low single
Speaker 4: digits of just millionaire status, can you still be in
Speaker 4: this club?
Speaker 5: So We actually have a lot of billionaires in the club.
Speaker 5: So the average networth is four hundred million dollars. The
Speaker 5: minimum requirement is one hundred million dollars, so we have
Speaker 5: a number of billionaires. And the priority in this group
Speaker 5: is to find people that share the same values. These
Speaker 5: are people who want to go from prosperity to purpose.
Speaker 5: They're going from having built extraordinary lives to building extraordinary legacies.
Speaker 5: So that's the priority, is finding people with the same
Speaker 5: values and the same interests.
Speaker 3: You're talking about philanthropic endeavors.
Speaker 5: Yes, many of these people are uniquely philanthropic. We have
Speaker 5: people that one couple is building the largest foundation to
Speaker 5: support cochleate ear implants in their states. We have another
Speaker 5: person who's the largest employer of people with disabilities in
Speaker 5: her state. So tremendous philanthropy. And one of the requirements
Speaker 5: is that people have the same values that they're not
Speaker 5: coming there to use each other. They're coming there to
Speaker 5: build this community and share with each other.
Speaker 3: Barbara, I wish we had more time. Barbara Goudstein, the
Speaker 3: CEO at R three sixty catering to the investment needs
Speaker 3: of high net worth individuals. Thanks for stumming by the studio.
Speaker 7: You're listening to the Team Ken's live program Bloomberg Markets
Speaker 7: weekdays at ten am easding on Bloomberg dot Com, the
Speaker 7: iHeartRadio app and the Bloomberg Business app, or listen on
Speaker 7: to that and wherever you get your podcast.
Speaker 3: Well, traders seem to be grappling with the timing of
Speaker 3: right cuts, Mollie even how many, And that's making for
Speaker 3: I'm gett a guess, a pretty bumpy road ahead for it's.
Speaker 4: A real toss up this year. Who the heck knows.
Speaker 3: James Denvert is chief investment officer at main Street Research,
Speaker 3: and it looks like he's in a loft in San
Speaker 3: Francisco somewhere. Do I have that right, James?
Speaker 8: That's a cool look office?
Speaker 3: All right, Do you have any Do you have any
Speaker 3: clarity for investors on the path forward? What's in the
Speaker 3: driver's seat?
Speaker 9: Yeah?
Speaker 10: I think the investors should stop fretting about the FED.
Speaker 10: I mean, that's that's over with and this economy is
Speaker 10: very resilient and in our view, we're entering an AI
Speaker 10: led super cycle and we sort of a lot of
Speaker 10: logic that we bake into that is that we're going
Speaker 10: into the era of a very different in the sense
Speaker 10: of enhanced productivity growth, something we haven't seen in a cycle,
Speaker 10: but we did see in the nineties, and so we
Speaker 10: see the opportunity here in a resilient economy with stocks cheap,
Speaker 10: that it's most likely a new business cycle, a new
Speaker 10: ball market. And of course, as I mentioned, AI tech
Speaker 10: led and so I think, you know, the FED will
Speaker 10: probably cut. I'm not sure they need to cut as
Speaker 10: much as people think they do, and I think that's
Speaker 10: because earnings are going to probably be better than expected this
Speaker 10: order and for the rest of the year. So I
Speaker 10: think people should maybe just stop so much with the
Speaker 10: FED talk, which has been really obviously consuming us all
Speaker 10: for the last two years. I think it's going to
Speaker 10: be more about earnings and prices of stocks.
Speaker 4: Very refreshing to hear you say that as somebody who
Speaker 4: is my job it is to hang onto every word
Speaker 4: the FED says, so covering the economy and the FED.
Speaker 4: So I appreciate your perspective there for us, James, But
Speaker 4: this is really interesting, this AI led super cycle. I mean,
Speaker 4: take us through that and how like people are really
Speaker 4: going to get, you know, behind the idea that AI
Speaker 4: seems to be what you're saying, here will be the
Speaker 4: primary market driver.
Speaker 6: Rather than the FED.
Speaker 4: That's a kind of revolutionary idea.
Speaker 10: Well, it seems revolutionary because in the last two years
Speaker 10: that's all we hear about. But if you think about
Speaker 10: the longer term, I've been doing this for thirty five years,
Speaker 10: the FED is usually not the focus of the conversation
Speaker 10: all the time. It really is more about corporate profits
Speaker 10: or how what's the health of the economy. And that's
Speaker 10: why we think we're going to sort of move towards that,
Speaker 10: you know, the AI sort of supercycle that we envision.
Speaker 10: You know, you think about how companies and it's not
Speaker 10: just tech companies getting more productive with tech and AI.
Speaker 9: I think it's really going to go across all sectors.
Speaker 10: I mean, at the JP Morgan Healthcare conference last week,
Speaker 10: I am in San Francisco right now, even though I'm
Speaker 10: based in Manhattan, but last week the buzzword across the
Speaker 10: healthcare companies was AI. And I think investors should recognize
Speaker 10: AI is going to be crossing lots of different sectors
Speaker 10: and it's going to make these companies much more productive.
Speaker 10: And we think that earnings over the next five to
Speaker 10: seven years possibly triple and you know that that's what
Speaker 10: leads us to these large index focus points we have,
Speaker 10: like where the Dow will be seven to ten years
Speaker 10: from now. We think it's a triple one hundred thousand,
Speaker 10: one hundred thousand dow.
Speaker 3: Okay, we're going to hold you to that, believe.
Speaker 9: Well, yeah, I'll be back in ten years.
Speaker 3: Having lived through the dot com bubble, Yeah, there was
Speaker 3: a lot of flotsam and jetsam, uh, but eventually, yeah,
Speaker 3: it was a revolutionary the Internet for all of us.
Speaker 3: When does AI really start to jail in terms of
Speaker 3: productivity and in terms of sales for the companies that
Speaker 3: are doing AI? I guess, you know, in Nvidia one
Speaker 3: of the obvious choices there.
Speaker 10: Yeah, and I would like to say that today's a
Speaker 10: microcost of what I view over the next three to
Speaker 10: five years. You know, you see this big nastac move
Speaker 10: on Taiwan Semi's numbers, and you know, how long does
Speaker 10: it take for AI to really show up in the
Speaker 10: earnings and the profitability and productivity. It's a very good question.
Speaker 10: Now some places it's already showing up, and we've seen
Speaker 10: that in the earnings reports of the early adapters in technology.
Speaker 10: I'm talking about technology companies using the Nvidia chips, like
Speaker 10: a Microsoft or at Google, you're already seeing that, you know,
Speaker 10: affecting their bottom line. But you know, I think for
Speaker 10: it to be seen across a lot of the other
Speaker 10: sectors that we envision it affecting, investors are going to
Speaker 10: need to be patient. But you know one thing about
Speaker 10: the stock market that you both know, it's a discount mechanism.
Speaker 9: So you know, the stock market's not going to.
Speaker 10: Wait for the earnings to get a creative because of AI.
Speaker 10: It's going to discount that before it happens. So I
Speaker 10: think investors should be really careful here about being too bearish,
Speaker 10: too fed centric, and just be like, okay, wait a minute,
Speaker 10: if this is real, if this is going to lead
Speaker 10: to productivity growth, higher margins, and in corporate profits, you
Speaker 10: want to kind of buy dips here. And even those
Speaker 10: dips might be shallow, as a recent one has been.
Speaker 10: So I think we should be really careful about being
Speaker 10: too bearish.
Speaker 3: You gave the doll for kit. What about the Nasdaq
Speaker 3: one hundred, Well, I.
Speaker 9: Think that's really where you as an investor.
Speaker 10: You can't ignore the magnificent seven in the Nasdaq one hundred.
Speaker 9: It's very important. I know people think, oh gosh, it's
Speaker 9: said nosed.
Speaker 3: Leaves just had like ten seconds left there leaed leaves.
Speaker 10: But these stocks are cheap relative through their growth, and
Speaker 10: video has gotten lower pe as the earnings.
Speaker 9: Have gone up this year.
Speaker 3: All right, that's I'm going to say. That's the San Francisco.
Speaker 4: View, the San Francisco loft view.
Speaker 3: That is James Stammerd, Chief investment officer at main Street Research,
Speaker 3: joining us from San Francisco.
Speaker 7: You're listening to the tape. Catch our live program Bloomberg
Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the
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Speaker 7: You can also listen live on Amazon Alexa from our
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Speaker 3: Well, a FED pivot seems to be underway, but the
Speaker 3: timing that's under question right now, how does this change
Speaker 3: your investment strategy? Let's put that question to our next
Speaker 3: guest this morning, Karen Murphy, chief investment officer with Castra
Speaker 3: Investment Management. Good to see you again. So this back
Speaker 3: and forth, you know, March now maybe June two cuts,
Speaker 3: six cuts. Who knows, I can't keep track? What does
Speaker 3: it do to your investment strategy?
Speaker 6: We're all having a little trouble keeping track. You know.
Speaker 11: The market has been all over the place on this one.
Speaker 11: You know, in December, as the Fed started to get
Speaker 11: more dubvish futures, markets started to price in five to
Speaker 11: six cuts for next year. You know, anybody who's been
Speaker 11: a FED watcher for a long time had to be
Speaker 11: a little suspicious about that prediction. And then, of course,
Speaker 11: more recently we've had jobs data come in a little
Speaker 11: bit more bullish, Retail spending today looked a little bit better.
Speaker 11: So there continues to be a remarkable amount of momentum
Speaker 11: on the services side of the economy, which has to
Speaker 11: give FED policy makers pause. So no surprise really that
Speaker 11: that cut for March is starting to be priced out
Speaker 11: of markets.
Speaker 6: And I think in.
Speaker 11: General what we're going to see is fewer cuts and
Speaker 11: later in the year than what the market had been
Speaker 11: predicting in December.
Speaker 4: You think that the momentum then is going to continue
Speaker 4: into later this year as well. Is that essentially the
Speaker 4: read through.
Speaker 6: On that we do.
Speaker 11: I mean, in general, we think that there's a fair
Speaker 11: amount of momentum in the economy and in the markets
Speaker 11: in general, so it's still a pretty good environment for investors.
Speaker 6: Probably not a repeat of what we saw twenty twenty.
Speaker 11: Three, but we are starting to see underlying momentum within
Speaker 11: the manufacturing sector, right that's been really beaten up last year.
Speaker 11: It seems to me maybe stabilizing, So that's potential tailwind
Speaker 11: heading into next year. And then of course, if you
Speaker 11: look at areas in the market outside you know, the
Speaker 11: mag seven, the ones that really drove returns last year,
Speaker 11: there are a lot of pretty interesting opportunities.
Speaker 6: So we think that there are some nice.
Speaker 11: You know, sort of tailwinds heading into the rest of
Speaker 11: twenty twenty four.
Speaker 3: Okay, so are you extending that outlook into smaller mid caps?
Speaker 11: Yeah, I mean that's an easy place to kind of look.
Speaker 11: You can look elsewhere in the SMP, even outside those
Speaker 11: core group of names that have done remarkably well. But
Speaker 11: like small caps are a really great example in that
Speaker 11: if you look at the Russell two thousand versus S
Speaker 11: and P five hundred, we're really extreme levels of underperformance,
Speaker 11: extreme levels of lower evaluations relative to large caps.
Speaker 6: So you know, we have really really negative.
Speaker 11: Sentiment that's built into these small cap names. And even
Speaker 11: if you do have headwinds for there, you know how
Speaker 11: much is too much? How much pessimism is too much?
Speaker 11: And so we think over the medium term those small
Speaker 11: caps can actually offer some really nice re terms.
Speaker 3: Is there like a magnificent seven in the Russell two thousand?
Speaker 3: I'm sure?
Speaker 6: Yeah, who's out there that I don't know?
Speaker 5: Like that?
Speaker 6: He's not yet? Who knows?
Speaker 4: Who knows? They haven't announced themselves yet. Maybe you're crafts
Speaker 4: making business or whatever you're doing because you're so hand
Speaker 4: each John was just telling us that I'm not I
Speaker 4: really Anyways, we're going to ask Ka this smart question.
Speaker 4: So so Caar tell us that call in small caps?
Speaker 4: Would you say that's your highest conviction view for this year?
Speaker 11: So, I mean, we see opportunities in a number of
Speaker 11: different places, and that's sort of what I like about
Speaker 11: twenty twenty four and how it's setting up. Certainly, small
Speaker 11: caps look attractive, mid caps look attractive. Outside the US,
Speaker 11: you have similar issues right where non US versus US
Speaker 11: has had remarkable underperformance, remarkable low valuations. They're also you
Speaker 11: have the buffer of higher dividend yields, and then in
Speaker 11: fixed income as well. You know, we talked about maybe
Speaker 11: needing to get a little bit more cautious on when
Speaker 11: the FED starts to cut rates, but the fact is
Speaker 11: most asset classes within fixed income are starting at higher
Speaker 11: yields than we've seen in ten years. So even without
Speaker 11: FED rate cuts, I think you can have a pretty
Speaker 11: nice return on the fixed income side as well. So
Speaker 11: I think there are a number of areas where investors
Speaker 11: can play.
Speaker 3: I think I put this question to every guest that
Speaker 3: we say, but in a disinflationary environment or a deflationary environment,
Speaker 3: what does that do to earnings especially company sales?
Speaker 11: Yeah, so certainly as we start to see inflation levels
Speaker 11: come down, deflation is always a little bit of a
Speaker 11: dangerous monster. But let's assume we're in disinflation, those rates
Speaker 11: are coming down, it should slow top line. But what
Speaker 11: also typically happens is that valuations then do better, right,
Speaker 11: because you have more certainty about what those earnings levels
Speaker 11: are going to be further out. So even if earnings
Speaker 11: levels sort of come down a little bit, valuations then
Speaker 11: have more room to go on the upside.
Speaker 4: So we're only really just starting to knock on the
Speaker 4: door of earning season. Just had the big US Banks
Speaker 4: report in the past week, any know, big calls you
Speaker 4: know for this quarter in terms of themes to look
Speaker 4: out for, and you know, just generally where the momentum
Speaker 4: is heading into the new year.
Speaker 6: Yeah.
Speaker 11: So, you know, roun about the third quarter of last year,
Speaker 11: we started to see corporate earnings really bottom. So number one,
Speaker 11: in general, we want to make sure that those earnings
Speaker 11: are continuing to lift off of the bottom. I think
Speaker 11: another thing that we'll be looking for is being able
Speaker 11: to hear companies talk specifically help clear out some of
Speaker 11: the noise and the economic data that we've had. You know,
Speaker 11: we talked about labor, we talked about retail sales. Home builders'
Speaker 11: confidence has been increasing, but there's a ton of seasonal
Speaker 11: volatility in those numbers, both because of COVID and because
Speaker 11: of the holidays and whatnot. So hearing companies specifically talk
Speaker 11: about what they're seeing on the floors of their stores
Speaker 11: and whatnot is going to be really important.
Speaker 4: You know. That kind of reminds me of a lot
Speaker 4: of what Michelle Bowman at the FES been saying of
Speaker 4: like just you know, being a bit cautious about the
Speaker 4: hard data and what the revisions might show. You think
Speaker 4: that's maybe something investors are also a bit wary of
Speaker 4: if this data is really maybe not as strong as
Speaker 4: it's been made out to be.
Speaker 11: I think investors should always be a little weary, particularly
Speaker 11: around this time of the year. And then we also
Speaker 11: have this issue that's been pretty consistent over the last
Speaker 11: couple of years about fewer and fewer people and businesses
Speaker 11: participating in these surveys.
Speaker 6: So just by.
Speaker 11: That alone, the quality of the data that we get
Speaker 11: today is lower than what it might have been a
Speaker 11: couple of years ago.
Speaker 3: Well, she's harping on the revisions.
Speaker 4: Now the response rates there, that's something that's been really
Speaker 4: poor with jolts in particular, which you know, that's what
Speaker 4: that one We really look at a ton for those
Speaker 4: job openings, and that one's already a bit difficult to
Speaker 4: interpret because it's reported with a month lag, so a
Speaker 4: lot of yeah, I mean, yeah, it's really more been
Speaker 4: the labor ones, though they're right. Care you think response rates.
Speaker 6: Cons confidence as well?
Speaker 11: Yeah, so consumer confidence, and again we've seen some weird
Speaker 11: responses in general.
Speaker 6: Some surveys are telling us that consumers remain very low
Speaker 6: in terms of confidence.
Speaker 11: Other ones are looking okay, but then if you look
Speaker 11: at the response rates within each of those are much
Speaker 11: lower than what they used to be, so it's hard
Speaker 11: to know how much stake to put in those. So
Speaker 11: it's consistent across a lot of different economic data.
Speaker 3: Before you go, can you give us name individual names,
Speaker 3: I don't if you do that, or just sectors or
Speaker 3: I don't know, let's do energy in general sectors.
Speaker 11: Yeah, Well, we actually think over the medium term energy
Speaker 11: is actually fairly interesting. You know, the underlying commodities have
Speaker 11: kind of have their own cycle, but if we look
Speaker 11: at investment levels in those companies, they've been remarkably low,
Speaker 11: which often presages a pretty good kind of medium term
Speaker 11: return environment. Valuation levels are half of what their historic
Speaker 11: levels are. So again, over a couple of year period,
Speaker 11: we think you can find a lot of interesting opportunities there.
Speaker 4: I was hoping you might say some names and we
Speaker 4: would hear with the magnificent seven Russell are.
Speaker 7: Yes, yes, we'll all right.
Speaker 3: Karen, thanks a lot, appreciate it. Arah Murphy, good to
Speaker 3: see again, Chief investment officer with Castra Investment Management.
Speaker 7: You're listening to the tape, can't our live program Bloomberg
Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the
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Speaker 7: flagship New York station. Just say Alexa play Bloomberg eleven thirty.
Speaker 3: We'll Mascaviz as CEO and portfolio manager at Heartland Advisors.
Speaker 3: So what is what is your method for valuing stocks?
Speaker 3: Let's start there, because I think I know what your
Speaker 3: answer is.
Speaker 8: Well, thanks for the opportunity to be here.
Speaker 12: Our process is our ten principles of value invested, and
Speaker 12: we utilize it to keep our exposures and check. There's
Speaker 12: a lot of uncertain in the marketplace today, the election, geopolitical, hardsoft, no.
Speaker 8: Landing, et cetera.
Speaker 12: So we want to be mindful of where we're exposed, overweight, underweight,
Speaker 12: given the uncertainties out there, then use our process, our
Speaker 12: ten principles of value to keep those at check.
Speaker 4: So you know something that John's been wanting to ask
Speaker 4: a lot of our guests here is who is the
Speaker 4: Magnificent seven. I'm just saying I think if John wants
Speaker 4: to know, then someone else does do you were a
Speaker 4: man of the people. So if anyways, the question for
Speaker 4: you then will what is the magnificent seven of the
Speaker 4: Russell two thousand. We'd all love to know.
Speaker 12: Well, that's a great question. I'm not sure that there
Speaker 12: is a mag seven within the rust of two thousand.
Speaker 12: It's a benchmark that's populated with a significant chunk of
Speaker 12: companies that are unprofitable. I think that creates lots of
Speaker 12: opportunities that said, too, for active investors to pick off
Speaker 12: those businesses that are high quality that are getting caught
Speaker 12: up in the near term uncertainty and create value through
Speaker 12: for our client's longer term.
Speaker 3: Okay, let's get more into the differentiation between the smaller caps,
Speaker 3: the mids and the mega camps at this and the
Speaker 3: advantages to investors at this point.
Speaker 8: Well, I think that's the make has had some big
Speaker 8: ex ecues.
Speaker 12: We have some wonderful companies within it, but there's also
Speaker 12: wonderful companies in MidCap and small cap places. You know,
Speaker 12: we're optimistic on JBI Hunt they report later today. It's
Speaker 12: in the industrial space. It's a leader in the intermodal offering.
Speaker 12: Their scale and their relationship with Berlin General, and it
Speaker 12: is second to none, and we see this as a
Speaker 12: classic self help opportunity or catalyty.
Speaker 3: And I see their trucks on the road on the turnpike.
Speaker 3: They're a shipper or what are they do again?
Speaker 12: They provide that container on the back of that tractor.
Speaker 12: They're the leader in that space. They have a long
Speaker 12: term agreement with Berlinton Northernd that container that goes on
Speaker 12: a rail. The cost advantages of intermodal relative truckloader are
Speaker 12: very significant. The broader space has been challenged because of
Speaker 12: rail service issues. We think that's in the rear mirror,
Speaker 12: and we think that intermodal in general is going to
Speaker 12: continue to take share away from truckle That I would
Speaker 12: obviously be very positive for Jbhunt, which we think is
Speaker 12: in the cards.
Speaker 4: So would you say you're pretty bullish on that sector
Speaker 4: more broadly or it's really just this name and if so,
Speaker 4: where maybe some other areas you're looking at too well.
Speaker 12: I think it's important for investors, back to that earlier
Speaker 12: commentary of understanding your exposures. Everyone wants to talk about
Speaker 12: what they're overweight, what the opportunity is. It's equally important
Speaker 12: all maybe even more so, to understand that downside. Are
Speaker 12: you comfortable with those underweights?
Speaker 8: JB.
Speaker 12: Hunt falls within industrials. We actually have an active underweight
Speaker 12: there that's unique for us. We've historically added value there,
Speaker 12: but right now that universe in terms of the risk
Speaker 12: reward of the broader big cap industrial space is not
Speaker 12: super compelling. We do find opportunities Bill or if I
Speaker 12: think there's an opportunity in JA behind another active underweight
Speaker 12: we have has been with financials. That's a big component
Speaker 12: of both the big cap and small cap. Russell Indsy's
Speaker 12: our benchmarks.
Speaker 8: If you will.
Speaker 12: One name that we're excited about, it's down today and
Speaker 12: report is Northern Trust. That's a duration catalyst. Expectations we
Speaker 12: believe are very low and we think we don't know
Speaker 12: what the Fed's going to do, we don't know where
Speaker 12: the economy is going to go, but all likeli that
Speaker 12: we're probably going to see some cret deteriorate here in
Speaker 12: the cores at Northern Trust should be a relative winner
Speaker 12: within the financial space that also have a significant degree
Speaker 12: of higher fee based revenue. And we see a cell
Speaker 12: self help story here too, as they're addressing perhaps some
Speaker 12: cost float associated with the significant wage pressure. We're there
Speaker 12: right now they are prey tax margins or somewhere on
Speaker 12: the mid twenty percent range. We see a pathway to
Speaker 12: thirty percent or guys their long term guidance and we
Speaker 12: think that is that is byside and sales side expectations
Speaker 12: adopt that that should be very positive for Northern Trust.
Speaker 3: It's safe to say these are more domestically oriented stocks
Speaker 3: because they are smaller cap as such, does that mean
Speaker 3: they're immune from some of the concerns that we see
Speaker 3: with the larger cap stocks, whether it be geopolitical or
Speaker 3: I don't know whatever.
Speaker 12: I think the reality is we're an intertwined world of
Speaker 12: every business in some shape or form is going to
Speaker 12: be impacted from higher commodity prices. Obviously, which was an
Speaker 12: occurrence associated with the Rusher who came conflict. Now we're
Speaker 12: having challenges with the container rates, with the issues that
Speaker 12: we're seeing in the Red Sea, et cetera. So you
Speaker 12: just have to be aware of those exposures, understand them,
Speaker 12: and make sure you're comfortable with them in terms of
Speaker 12: that over and underweight and balancing it out with your process.
Speaker 4: Tell us then about maybe the risk from election perspectives,
Speaker 4: That certainly got to be a domestic one on your mind.
Speaker 8: That's a great question.
Speaker 12: If I think, if you sticking with the two names
Speaker 12: that we talked about, if Trump wins, I suspect that
Speaker 12: would be good for Hunt. I think we'll continue to
Speaker 12: see this reshoring trend. He was obviously big on tariffs,
Speaker 12: discussing trade, You're going to continue to see businesses invest
Speaker 12: back at here in the United States.
Speaker 8: That should be good for HUNT.
Speaker 12: I don't know this for certain, but I think his
Speaker 12: victory would probably lift CEO confidence, high net worth confidence
Speaker 12: because there'd be thinking that there'd be less regulation coming
Speaker 12: out of the Beltway.
Speaker 8: That should be good for Northern Trust.
Speaker 12: If Biden gets re elected, I'm not sure what the
Speaker 12: headwinds would be for JAB in the near term. Northern
Speaker 12: Trust being a financial suspect that there'd be continued regulatory
Speaker 12: screwtiny across the broader financial space, although I don't think
Speaker 12: Northern Trust would be you know, under the microscope.
Speaker 3: All right, where do you see your benchmarks? Time to
Speaker 3: put you on the spot. Year end. I mean, everybody's
Speaker 3: told us what they think about the S and P
Speaker 3: five hundred five thousand. This year benchmark is what the Russell?
Speaker 12: Yeah, the Russell two thousand value for our small cat
Speaker 12: products and the Russell MidCap value for our MidCat product.
Speaker 8: We don't have a long.
Speaker 12: Term target for either of those, but we're going to
Speaker 12: continue to focus on taking what the market gives us.
Speaker 12: A good example of this, you know, we're talking about
Speaker 12: the FED a little bit here too. If you rewind
Speaker 12: the clock back to August of twenty twenty two, hol
Speaker 12: had a very aggressive, intense presentation in Jackson Hold early
Speaker 12: cyclical stocks sold off into the vault. We pounced on
Speaker 12: that opportunity in our shareholders of benefit. I suspect whether
Speaker 12: the FED raises, folds or cuts rates, there's going to
Speaker 12: be volatility. So stick to your process, understand how your
Speaker 12: portfolio is exposed, capitalize on those opportunities that can present
Speaker 12: it to you.
Speaker 3: All Right, Thanks, well, nice to talk to you. A
Speaker 3: great discussion. Will Nascovitzi's the CEO portfolio manager at Heartline Heartlam,
Speaker 3: the advisors making the case for MIA and smaller cap stocks.
Speaker 2: Thanks for listening to the Bloomberg Markets podcasts. You can
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Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter
Speaker 2: at Matt Miller nineteen seventy three, and I'm fall Sweeney.
Speaker 1: I'm on Twitter at pt Sweeney. Before the podcast, you
Speaker 1: can always catch us worldwide at Bloomberg Radio