WEBVTT - Wealthy Investing, Market Outlook 0:00:00.840 --> 0:00:04.000 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 0:00:04.080 --> 0:00:05.280 my co host Matt Miller. 0:00:05.640 --> 0:00:09.720 Every business day we bring you interviews from CEOs, market pros, 0:00:09.720 --> 0:00:13.640 and Bloomberg experts, along with essential market moving news. 0:00:14.200 --> 0:00:17.279 Find the Bloomberg Markets podcast called Apple Podcasts or wherever 0:00:17.360 --> 0:00:20.480 you listen to podcasts, and at Bloomberg dot com slash podcast. 0:00:21.720 --> 0:00:25.320 Let's bring in our next guest. My question is for you, Molly, 0:00:25.720 --> 0:00:29.360 do the rich invest differently than Schmoe's like me? 0:00:29.640 --> 0:00:32.000 Well, you have to define the rich as our next 0:00:32.000 --> 0:00:35.600 guest is going to, because there are the mere mortal millionaires, 0:00:35.920 --> 0:00:37.760 and then there are billionaires, and then there's a nice 0:00:37.800 --> 0:00:42.120 group in between called the cent to millionaires. A lot 0:00:42.159 --> 0:00:42.840 more about them. 0:00:43.000 --> 0:00:47.479 Barbara Goodstein is the CEO at R three sixty, catering 0:00:47.520 --> 0:00:51.000 to the investment needs of high net worth individuals. Thanks 0:00:51.040 --> 0:00:54.240 for stopping buying the studio. What does R three sixty do? 0:00:54.440 --> 0:00:58.120 First of all, it's a community for ultra high net 0:00:58.160 --> 0:01:01.680 worth wealth creators and their fan families who are trying 0:01:01.720 --> 0:01:06.840 to navigate the challenges of having these very large family enterprises. 0:01:07.000 --> 0:01:10.040 And so we bring this community together and people meet 0:01:10.040 --> 0:01:12.560 and talk about opportunities and challenges. 0:01:12.720 --> 0:01:14.760 Why do they need to come together, Because when I 0:01:14.840 --> 0:01:18.080 become an ultra high net worth industry center, I don't 0:01:18.080 --> 0:01:19.200 want to talk to anybody. 0:01:19.360 --> 0:01:21.600 Well, you would be surprised you actually would want to 0:01:21.640 --> 0:01:24.320 talk to people because, first of all, that level of 0:01:24.360 --> 0:01:28.600 wealth can be isolating, but even more importantly, people are 0:01:28.640 --> 0:01:31.479 getting ideas from each other. We have some of the 0:01:31.520 --> 0:01:35.080 most successful people in the country and they're sharing ideas 0:01:35.120 --> 0:01:38.480 on macro global trends with each other, and then they're 0:01:38.480 --> 0:01:40.800 all benefiting from hearing those different ideas. 0:01:41.040 --> 0:01:43.600 So tell us about who some of these quote cent 0:01:43.640 --> 0:01:45.600 to millionaires are, and those are people that have at 0:01:45.640 --> 0:01:48.080 least one hundred million dollars in wealth, that's right. 0:01:48.320 --> 0:01:50.800 So one of the people that we have in our 0:01:50.840 --> 0:01:54.360 network is one of the largest hedge fund managers in 0:01:54.360 --> 0:01:58.080 the country, and he has been very vocal educating our 0:01:58.080 --> 0:02:01.720 group about the benefits of investing in bitcoin. And had 0:02:01.720 --> 0:02:03.639 I listened to him, I would have tripled my money. 0:02:04.560 --> 0:02:07.520 He told us that three things are going to happen. 0:02:08.040 --> 0:02:10.560 That bitcoin is going to be marked to market, and 0:02:10.680 --> 0:02:14.240 it was in January that ETFs were going to come 0:02:14.240 --> 0:02:16.400 out and they just did. And now we have a 0:02:16.440 --> 0:02:19.200 phenomena called having and that's going to happen in April 0:02:19.240 --> 0:02:22.480 of this year, and he told the group that this 0:02:22.600 --> 0:02:26.600 is going to generate enormous growth and opportunity in bitcoin. 0:02:26.800 --> 0:02:29.080 So that's the type of person that we have in 0:02:29.120 --> 0:02:29.480 the group. 0:02:29.760 --> 0:02:33.280 These are people who inherited their wealth or they actually 0:02:33.520 --> 0:02:36.240 made the money with hard work and starting a business. 0:02:36.560 --> 0:02:37.880 So it's actually both. 0:02:37.919 --> 0:02:40.320 We have a lot of wealth creators. We also have 0:02:40.440 --> 0:02:42.760 some people who have inherited the wealth and now they're 0:02:42.800 --> 0:02:46.600 extending the business that they inherited through the next generation. 0:02:46.800 --> 0:02:49.359 So we have both and these are so a lot 0:02:49.400 --> 0:02:52.960 of this is what they're talking about with each other. 0:02:52.960 --> 0:02:54.399 You said, like macro ideas. 0:02:54.960 --> 0:02:57.080 I don't think though that these people really want to 0:02:57.080 --> 0:02:59.760 share where their money's being invested though, right, Like does 0:02:59.760 --> 0:03:00.960 that all? Well? 0:03:01.000 --> 0:03:03.360 They actually are happy to share with each other. And 0:03:03.360 --> 0:03:07.600 that's the fascinating part about this community. Everybody sharing lots 0:03:07.639 --> 0:03:11.880 of information, personal information as well as investment information. And 0:03:11.919 --> 0:03:17.000 so again we've got another member who has written six 0:03:17.080 --> 0:03:21.000 books on theoretical physics and he's got a PhD in 0:03:21.120 --> 0:03:22.520 quantum computing. 0:03:22.240 --> 0:03:25.519 And I think I know who this is, and. 0:03:25.880 --> 0:03:30.280 He's been advising everybody to invest in quantum computing, that 0:03:30.520 --> 0:03:34.600 there's going to be an enormous rise there. Russia and 0:03:34.680 --> 0:03:38.600 China are creating something called hack proof quantum computing, and 0:03:38.680 --> 0:03:43.040 so we're now looking at investing in South Korea. Telecom 0:03:43.440 --> 0:03:45.360 has built an alternative to that. 0:03:45.560 --> 0:03:49.400 Okay, So as an individual investor myself, what can I 0:03:49.600 --> 0:03:51.080 learn from them? 0:03:51.600 --> 0:03:55.720 So I think you could learn about again macro global 0:03:55.760 --> 0:03:58.280 economic trends, things that are coming. So we are very 0:03:58.360 --> 0:04:01.120 focused on the defense area. We think that there's going 0:04:01.160 --> 0:04:04.400 to be an enormous increase in defense spending across the world, 0:04:04.440 --> 0:04:07.400 and we've already seen it. Poland just bought a thousand 0:04:07.400 --> 0:04:10.800 tanks from South Korea. That's more than Germany, France, and 0:04:10.840 --> 0:04:15.160 the UK combined, and that is small compared to what's 0:04:15.200 --> 0:04:17.160 about to happen in the United States and Russia. So 0:04:17.240 --> 0:04:20.280 if you're interested in global defense spending, there are a 0:04:20.279 --> 0:04:22.000 lot of opportunities in that space. 0:04:22.400 --> 0:04:27.080 What happens, Barbara, if your net worth changes so substantially 0:04:27.120 --> 0:04:30.680 that either you've been now minted as a billionaire or 0:04:30.760 --> 0:04:34.480 maybe you're less fortunate and fall into the low single 0:04:34.520 --> 0:04:36.800 digits of just millionaire status, can you still be in 0:04:36.839 --> 0:04:37.320 this club? 0:04:37.760 --> 0:04:40.119 So We actually have a lot of billionaires in the club. 0:04:40.200 --> 0:04:43.000 So the average networth is four hundred million dollars. The 0:04:43.040 --> 0:04:46.359 minimum requirement is one hundred million dollars, so we have 0:04:46.400 --> 0:04:49.719 a number of billionaires. And the priority in this group 0:04:49.880 --> 0:04:52.800 is to find people that share the same values. These 0:04:52.839 --> 0:04:56.640 are people who want to go from prosperity to purpose. 0:04:56.800 --> 0:05:01.760 They're going from having built extraordinary lives to building extraordinary legacies. 0:05:01.800 --> 0:05:04.320 So that's the priority, is finding people with the same 0:05:04.440 --> 0:05:05.919 values and the same interests. 0:05:06.120 --> 0:05:08.719 You're talking about philanthropic endeavors. 0:05:08.920 --> 0:05:12.120 Yes, many of these people are uniquely philanthropic. We have 0:05:12.279 --> 0:05:17.919 people that one couple is building the largest foundation to 0:05:18.279 --> 0:05:21.320 support cochleate ear implants in their states. We have another 0:05:21.360 --> 0:05:25.039 person who's the largest employer of people with disabilities in 0:05:25.080 --> 0:05:30.800 her state. So tremendous philanthropy. And one of the requirements 0:05:30.839 --> 0:05:33.880 is that people have the same values that they're not 0:05:33.960 --> 0:05:36.279 coming there to use each other. They're coming there to 0:05:36.520 --> 0:05:38.640 build this community and share with each other. 0:05:38.880 --> 0:05:41.200 Barbara, I wish we had more time. Barbara Goudstein, the 0:05:41.520 --> 0:05:44.839 CEO at R three sixty catering to the investment needs 0:05:44.880 --> 0:05:48.480 of high net worth individuals. Thanks for stumming by the studio. 0:05:49.520 --> 0:05:53.359 You're listening to the Team Ken's live program Bloomberg Markets 0:05:53.400 --> 0:05:56.480 weekdays at ten am easding on Bloomberg dot Com, the 0:05:56.560 --> 0:05:59.680 iHeartRadio app and the Bloomberg Business app, or listen on 0:05:59.720 --> 0:06:01.719 to that and wherever you get your podcast. 0:06:03.880 --> 0:06:06.680 Well, traders seem to be grappling with the timing of 0:06:06.760 --> 0:06:10.159 right cuts, Mollie even how many, And that's making for 0:06:10.680 --> 0:06:13.200 I'm gett a guess, a pretty bumpy road ahead for it's. 0:06:13.040 --> 0:06:15.160 A real toss up this year. Who the heck knows. 0:06:15.600 --> 0:06:19.880 James Denvert is chief investment officer at main Street Research, 0:06:20.560 --> 0:06:22.600 and it looks like he's in a loft in San 0:06:22.600 --> 0:06:24.719 Francisco somewhere. Do I have that right, James? 0:06:25.720 --> 0:06:27.200 That's a cool look office? 0:06:27.440 --> 0:06:29.360 All right, Do you have any Do you have any 0:06:29.360 --> 0:06:32.480 clarity for investors on the path forward? What's in the 0:06:32.560 --> 0:06:33.320 driver's seat? 0:06:34.360 --> 0:06:34.520 Yeah? 0:06:34.560 --> 0:06:38.080 I think the investors should stop fretting about the FED. 0:06:38.320 --> 0:06:41.200 I mean, that's that's over with and this economy is 0:06:41.440 --> 0:06:46.120 very resilient and in our view, we're entering an AI 0:06:46.320 --> 0:06:50.640 led super cycle and we sort of a lot of 0:06:50.680 --> 0:06:53.520 logic that we bake into that is that we're going 0:06:53.520 --> 0:06:56.239 into the era of a very different in the sense 0:06:56.240 --> 0:07:00.479 of enhanced productivity growth, something we haven't seen in a cycle, 0:07:00.520 --> 0:07:02.880 but we did see in the nineties, and so we 0:07:02.920 --> 0:07:07.159 see the opportunity here in a resilient economy with stocks cheap, 0:07:08.480 --> 0:07:11.200 that it's most likely a new business cycle, a new 0:07:11.280 --> 0:07:14.480 ball market. And of course, as I mentioned, AI tech 0:07:14.600 --> 0:07:17.880 led and so I think, you know, the FED will 0:07:17.920 --> 0:07:20.080 probably cut. I'm not sure they need to cut as 0:07:20.680 --> 0:07:24.440 much as people think they do, and I think that's 0:07:24.480 --> 0:07:27.920 because earnings are going to probably be better than expected this 0:07:28.160 --> 0:07:30.440 order and for the rest of the year. So I 0:07:30.440 --> 0:07:32.760 think people should maybe just stop so much with the 0:07:32.840 --> 0:07:36.520 FED talk, which has been really obviously consuming us all 0:07:36.560 --> 0:07:38.520 for the last two years. I think it's going to 0:07:38.560 --> 0:07:42.080 be more about earnings and prices of stocks. 0:07:42.440 --> 0:07:44.640 Very refreshing to hear you say that as somebody who 0:07:44.760 --> 0:07:47.080 is my job it is to hang onto every word 0:07:47.120 --> 0:07:50.760 the FED says, so covering the economy and the FED. 0:07:50.880 --> 0:07:53.760 So I appreciate your perspective there for us, James, But 0:07:54.160 --> 0:07:57.840 this is really interesting, this AI led super cycle. I mean, 0:07:58.280 --> 0:08:00.920 take us through that and how like people are really 0:08:00.920 --> 0:08:04.760 going to get, you know, behind the idea that AI 0:08:04.960 --> 0:08:07.000 seems to be what you're saying, here will be the 0:08:07.040 --> 0:08:08.520 primary market driver. 0:08:08.480 --> 0:08:09.440 Rather than the FED. 0:08:09.560 --> 0:08:11.920 That's a kind of revolutionary idea. 0:08:13.400 --> 0:08:16.520 Well, it seems revolutionary because in the last two years 0:08:16.520 --> 0:08:18.440 that's all we hear about. But if you think about 0:08:18.440 --> 0:08:20.920 the longer term, I've been doing this for thirty five years, 0:08:21.440 --> 0:08:24.000 the FED is usually not the focus of the conversation 0:08:24.080 --> 0:08:26.320 all the time. It really is more about corporate profits 0:08:26.400 --> 0:08:28.640 or how what's the health of the economy. And that's 0:08:28.680 --> 0:08:31.240 why we think we're going to sort of move towards that, 0:08:31.880 --> 0:08:35.160 you know, the AI sort of supercycle that we envision. 0:08:35.520 --> 0:08:38.200 You know, you think about how companies and it's not 0:08:38.280 --> 0:08:41.880 just tech companies getting more productive with tech and AI. 0:08:42.679 --> 0:08:44.720 I think it's really going to go across all sectors. 0:08:44.800 --> 0:08:48.160 I mean, at the JP Morgan Healthcare conference last week, 0:08:48.320 --> 0:08:50.000 I am in San Francisco right now, even though I'm 0:08:50.040 --> 0:08:54.280 based in Manhattan, but last week the buzzword across the 0:08:54.320 --> 0:08:58.720 healthcare companies was AI. And I think investors should recognize 0:08:58.880 --> 0:09:02.360 AI is going to be crossing lots of different sectors 0:09:02.520 --> 0:09:05.040 and it's going to make these companies much more productive. 0:09:05.360 --> 0:09:08.240 And we think that earnings over the next five to 0:09:08.320 --> 0:09:12.880 seven years possibly triple and you know that that's what 0:09:13.080 --> 0:09:18.160 leads us to these large index focus points we have, 0:09:18.360 --> 0:09:20.920 like where the Dow will be seven to ten years 0:09:20.960 --> 0:09:23.800 from now. We think it's a triple one hundred thousand, 0:09:24.000 --> 0:09:25.240 one hundred thousand dow. 0:09:25.600 --> 0:09:27.839 Okay, we're going to hold you to that, believe. 0:09:28.200 --> 0:09:29.760 Well, yeah, I'll be back in ten years. 0:09:30.640 --> 0:09:34.560 Having lived through the dot com bubble, Yeah, there was 0:09:34.600 --> 0:09:39.280 a lot of flotsam and jetsam, uh, but eventually, yeah, 0:09:39.320 --> 0:09:42.440 it was a revolutionary the Internet for all of us. 0:09:43.480 --> 0:09:47.200 When does AI really start to jail in terms of 0:09:47.200 --> 0:09:51.240 productivity and in terms of sales for the companies that 0:09:51.360 --> 0:09:54.120 are doing AI? I guess, you know, in Nvidia one 0:09:54.120 --> 0:09:55.520 of the obvious choices there. 0:09:56.760 --> 0:09:59.360 Yeah, and I would like to say that today's a 0:09:59.440 --> 0:10:02.560 microcost of what I view over the next three to 0:10:02.640 --> 0:10:05.000 five years. You know, you see this big nastac move 0:10:05.360 --> 0:10:09.080 on Taiwan Semi's numbers, and you know, how long does 0:10:09.120 --> 0:10:11.480 it take for AI to really show up in the 0:10:11.520 --> 0:10:15.240 earnings and the profitability and productivity. It's a very good question. 0:10:15.360 --> 0:10:18.080 Now some places it's already showing up, and we've seen 0:10:18.120 --> 0:10:22.280 that in the earnings reports of the early adapters in technology. 0:10:22.320 --> 0:10:26.080 I'm talking about technology companies using the Nvidia chips, like 0:10:26.120 --> 0:10:29.520 a Microsoft or at Google, you're already seeing that, you know, 0:10:29.559 --> 0:10:34.200 affecting their bottom line. But you know, I think for 0:10:34.320 --> 0:10:36.600 it to be seen across a lot of the other 0:10:36.640 --> 0:10:40.839 sectors that we envision it affecting, investors are going to 0:10:40.920 --> 0:10:42.960 need to be patient. But you know one thing about 0:10:42.960 --> 0:10:46.160 the stock market that you both know, it's a discount mechanism. 0:10:46.480 --> 0:10:48.360 So you know, the stock market's not going to. 0:10:48.320 --> 0:10:51.320 Wait for the earnings to get a creative because of AI. 0:10:52.000 --> 0:10:54.360 It's going to discount that before it happens. So I 0:10:54.400 --> 0:10:57.360 think investors should be really careful here about being too bearish, 0:10:57.800 --> 0:11:01.160 too fed centric, and just be like, okay, wait a minute, 0:11:01.280 --> 0:11:03.439 if this is real, if this is going to lead 0:11:03.440 --> 0:11:07.840 to productivity growth, higher margins, and in corporate profits, you 0:11:07.920 --> 0:11:09.960 want to kind of buy dips here. And even those 0:11:10.000 --> 0:11:13.440 dips might be shallow, as a recent one has been. 0:11:14.000 --> 0:11:16.160 So I think we should be really careful about being 0:11:16.160 --> 0:11:17.120 too bearish. 0:11:17.120 --> 0:11:19.400 You gave the doll for kit. What about the Nasdaq 0:11:19.440 --> 0:11:21.760 one hundred, Well, I. 0:11:21.679 --> 0:11:23.960 Think that's really where you as an investor. 0:11:24.040 --> 0:11:28.079 You can't ignore the magnificent seven in the Nasdaq one hundred. 0:11:28.520 --> 0:11:30.720 It's very important. I know people think, oh gosh, it's 0:11:30.679 --> 0:11:31.400 said nosed. 0:11:31.240 --> 0:11:34.120 Leaves just had like ten seconds left there leaed leaves. 0:11:34.600 --> 0:11:37.880 But these stocks are cheap relative through their growth, and 0:11:38.040 --> 0:11:40.520 video has gotten lower pe as the earnings. 0:11:40.160 --> 0:11:41.000 Have gone up this year. 0:11:41.160 --> 0:11:44.199 All right, that's I'm going to say. That's the San Francisco. 0:11:43.800 --> 0:11:46.120 View, the San Francisco loft view. 0:11:46.280 --> 0:11:50.400 That is James Stammerd, Chief investment officer at main Street Research, 0:11:50.480 --> 0:11:52.199 joining us from San Francisco. 0:11:52.440 --> 0:11:55.599 You're listening to the tape. Catch our live program Bloomberg 0:11:55.640 --> 0:11:59.160 Markets weekdays at ten am Eastern on Bloomberg Radio, the 0:11:59.320 --> 0:12:02.559 tune in app, Bloomberg dot Com, and the Bloomberg Business App. 0:12:02.559 --> 0:12:05.400 You can also listen live on Amazon Alexa from our 0:12:05.400 --> 0:12:10.320 flagship New York station, Jo Say Alexa play Bloomberg eleven thirty. 0:12:12.000 --> 0:12:14.480 Well, a FED pivot seems to be underway, but the 0:12:15.360 --> 0:12:19.480 timing that's under question right now, how does this change 0:12:19.520 --> 0:12:23.040 your investment strategy? Let's put that question to our next 0:12:23.080 --> 0:12:26.360 guest this morning, Karen Murphy, chief investment officer with Castra 0:12:26.600 --> 0:12:30.120 Investment Management. Good to see you again. So this back 0:12:30.160 --> 0:12:34.400 and forth, you know, March now maybe June two cuts, 0:12:34.440 --> 0:12:38.200 six cuts. Who knows, I can't keep track? What does 0:12:38.240 --> 0:12:39.880 it do to your investment strategy? 0:12:40.840 --> 0:12:43.080 We're all having a little trouble keeping track. You know. 0:12:43.120 --> 0:12:45.600 The market has been all over the place on this one. 0:12:45.920 --> 0:12:48.400 You know, in December, as the Fed started to get 0:12:48.400 --> 0:12:51.400 more dubvish futures, markets started to price in five to 0:12:51.440 --> 0:12:54.400 six cuts for next year. You know, anybody who's been 0:12:54.400 --> 0:12:56.000 a FED watcher for a long time had to be 0:12:56.000 --> 0:12:59.400 a little suspicious about that prediction. And then, of course, 0:12:59.440 --> 0:13:01.760 more recently we've had jobs data come in a little 0:13:01.800 --> 0:13:05.600 bit more bullish, Retail spending today looked a little bit better. 0:13:05.800 --> 0:13:08.760 So there continues to be a remarkable amount of momentum 0:13:08.760 --> 0:13:11.520 on the services side of the economy, which has to 0:13:11.559 --> 0:13:16.480 give FED policy makers pause. So no surprise really that 0:13:16.480 --> 0:13:18.800 that cut for March is starting to be priced out 0:13:18.800 --> 0:13:19.520 of markets. 0:13:19.800 --> 0:13:20.400 And I think in. 0:13:20.360 --> 0:13:23.320 General what we're going to see is fewer cuts and 0:13:23.440 --> 0:13:25.200 later in the year than what the market had been 0:13:25.280 --> 0:13:26.319 predicting in December. 0:13:26.600 --> 0:13:28.840 You think that the momentum then is going to continue 0:13:28.920 --> 0:13:31.560 into later this year as well. Is that essentially the 0:13:31.600 --> 0:13:32.199 read through. 0:13:32.040 --> 0:13:34.000 On that we do. 0:13:34.080 --> 0:13:35.719 I mean, in general, we think that there's a fair 0:13:35.760 --> 0:13:38.680 amount of momentum in the economy and in the markets 0:13:38.679 --> 0:13:41.960 in general, so it's still a pretty good environment for investors. 0:13:42.240 --> 0:13:44.719 Probably not a repeat of what we saw twenty twenty. 0:13:44.480 --> 0:13:48.280 Three, but we are starting to see underlying momentum within 0:13:48.960 --> 0:13:52.400 the manufacturing sector, right that's been really beaten up last year. 0:13:52.440 --> 0:13:55.560 It seems to me maybe stabilizing, So that's potential tailwind 0:13:55.600 --> 0:13:58.000 heading into next year. And then of course, if you 0:13:58.040 --> 0:14:00.280 look at areas in the market outside you know, the 0:14:00.280 --> 0:14:03.400 mag seven, the ones that really drove returns last year, 0:14:03.640 --> 0:14:05.719 there are a lot of pretty interesting opportunities. 0:14:05.760 --> 0:14:07.400 So we think that there are some nice. 0:14:07.160 --> 0:14:10.280 You know, sort of tailwinds heading into the rest of 0:14:10.320 --> 0:14:11.320 twenty twenty four. 0:14:11.600 --> 0:14:15.960 Okay, so are you extending that outlook into smaller mid caps? 0:14:17.240 --> 0:14:20.000 Yeah, I mean that's an easy place to kind of look. 0:14:20.080 --> 0:14:22.840 You can look elsewhere in the SMP, even outside those 0:14:22.920 --> 0:14:25.760 core group of names that have done remarkably well. But 0:14:25.840 --> 0:14:28.560 like small caps are a really great example in that 0:14:28.640 --> 0:14:30.640 if you look at the Russell two thousand versus S 0:14:30.680 --> 0:14:35.160 and P five hundred, we're really extreme levels of underperformance, 0:14:35.320 --> 0:14:39.320 extreme levels of lower evaluations relative to large caps. 0:14:39.720 --> 0:14:43.640 So you know, we have really really negative. 0:14:43.200 --> 0:14:46.440 Sentiment that's built into these small cap names. And even 0:14:46.440 --> 0:14:49.200 if you do have headwinds for there, you know how 0:14:49.280 --> 0:14:52.120 much is too much? How much pessimism is too much? 0:14:52.400 --> 0:14:54.600 And so we think over the medium term those small 0:14:54.600 --> 0:14:56.960 caps can actually offer some really nice re terms. 0:14:57.160 --> 0:14:59.760 Is there like a magnificent seven in the Russell two thousand? 0:15:01.440 --> 0:15:01.960 I'm sure? 0:15:04.040 --> 0:15:05.400 Yeah, who's out there that I don't know? 0:15:05.640 --> 0:15:05.800 Like that? 0:15:06.040 --> 0:15:07.280 He's not yet? Who knows? 0:15:07.360 --> 0:15:11.400 Who knows? They haven't announced themselves yet. Maybe you're crafts 0:15:11.400 --> 0:15:13.960 making business or whatever you're doing because you're so hand 0:15:14.000 --> 0:15:18.080 each John was just telling us that I'm not I 0:15:18.440 --> 0:15:20.800 really Anyways, we're going to ask Ka this smart question. 0:15:20.920 --> 0:15:23.240 So so Caar tell us that call in small caps? 0:15:23.240 --> 0:15:26.280 Would you say that's your highest conviction view for this year? 0:15:27.520 --> 0:15:29.440 So, I mean, we see opportunities in a number of 0:15:29.520 --> 0:15:31.760 different places, and that's sort of what I like about 0:15:31.760 --> 0:15:34.400 twenty twenty four and how it's setting up. Certainly, small 0:15:34.400 --> 0:15:38.400 caps look attractive, mid caps look attractive. Outside the US, 0:15:38.480 --> 0:15:42.800 you have similar issues right where non US versus US 0:15:42.840 --> 0:15:48.680 has had remarkable underperformance, remarkable low valuations. They're also you 0:15:48.720 --> 0:15:52.320 have the buffer of higher dividend yields, and then in 0:15:52.400 --> 0:15:55.200 fixed income as well. You know, we talked about maybe 0:15:55.320 --> 0:15:57.200 needing to get a little bit more cautious on when 0:15:57.200 --> 0:15:59.840 the FED starts to cut rates, but the fact is 0:16:00.080 --> 0:16:03.680 most asset classes within fixed income are starting at higher 0:16:03.800 --> 0:16:07.280 yields than we've seen in ten years. So even without 0:16:07.360 --> 0:16:09.160 FED rate cuts, I think you can have a pretty 0:16:09.240 --> 0:16:11.360 nice return on the fixed income side as well. So 0:16:11.600 --> 0:16:13.400 I think there are a number of areas where investors 0:16:13.400 --> 0:16:13.840 can play. 0:16:13.960 --> 0:16:15.800 I think I put this question to every guest that 0:16:15.840 --> 0:16:21.120 we say, but in a disinflationary environment or a deflationary environment, 0:16:21.560 --> 0:16:24.880 what does that do to earnings especially company sales? 0:16:26.640 --> 0:16:29.440 Yeah, so certainly as we start to see inflation levels 0:16:29.480 --> 0:16:31.800 come down, deflation is always a little bit of a 0:16:32.160 --> 0:16:36.000 dangerous monster. But let's assume we're in disinflation, those rates 0:16:36.000 --> 0:16:39.880 are coming down, it should slow top line. But what 0:16:40.000 --> 0:16:43.440 also typically happens is that valuations then do better, right, 0:16:43.480 --> 0:16:45.840 because you have more certainty about what those earnings levels 0:16:45.840 --> 0:16:48.240 are going to be further out. So even if earnings 0:16:48.320 --> 0:16:50.840 levels sort of come down a little bit, valuations then 0:16:50.880 --> 0:16:52.600 have more room to go on the upside. 0:16:52.760 --> 0:16:54.720 So we're only really just starting to knock on the 0:16:54.760 --> 0:16:57.360 door of earning season. Just had the big US Banks 0:16:57.400 --> 0:17:01.040 report in the past week, any know, big calls you 0:17:01.080 --> 0:17:04.000 know for this quarter in terms of themes to look 0:17:04.000 --> 0:17:08.560 out for, and you know, just generally where the momentum 0:17:08.600 --> 0:17:09.720 is heading into the new year. 0:17:10.920 --> 0:17:11.120 Yeah. 0:17:11.240 --> 0:17:13.880 So, you know, roun about the third quarter of last year, 0:17:13.880 --> 0:17:17.239 we started to see corporate earnings really bottom. So number one, 0:17:17.359 --> 0:17:19.600 in general, we want to make sure that those earnings 0:17:19.600 --> 0:17:22.560 are continuing to lift off of the bottom. I think 0:17:22.600 --> 0:17:25.160 another thing that we'll be looking for is being able 0:17:25.200 --> 0:17:27.960 to hear companies talk specifically help clear out some of 0:17:28.000 --> 0:17:30.760 the noise and the economic data that we've had. You know, 0:17:30.800 --> 0:17:34.000 we talked about labor, we talked about retail sales. Home builders' 0:17:34.000 --> 0:17:37.520 confidence has been increasing, but there's a ton of seasonal 0:17:37.600 --> 0:17:41.000 volatility in those numbers, both because of COVID and because 0:17:41.040 --> 0:17:44.160 of the holidays and whatnot. So hearing companies specifically talk 0:17:44.160 --> 0:17:46.080 about what they're seeing on the floors of their stores 0:17:46.080 --> 0:17:47.680 and whatnot is going to be really important. 0:17:47.800 --> 0:17:49.360 You know. That kind of reminds me of a lot 0:17:49.359 --> 0:17:51.840 of what Michelle Bowman at the FES been saying of 0:17:51.960 --> 0:17:54.159 like just you know, being a bit cautious about the 0:17:54.200 --> 0:17:56.520 hard data and what the revisions might show. You think 0:17:56.560 --> 0:17:59.800 that's maybe something investors are also a bit wary of 0:18:00.040 --> 0:18:02.840 if this data is really maybe not as strong as 0:18:02.840 --> 0:18:03.760 it's been made out to be. 0:18:05.160 --> 0:18:08.320 I think investors should always be a little weary, particularly 0:18:08.359 --> 0:18:10.560 around this time of the year. And then we also 0:18:10.640 --> 0:18:13.000 have this issue that's been pretty consistent over the last 0:18:13.040 --> 0:18:16.000 couple of years about fewer and fewer people and businesses 0:18:16.080 --> 0:18:18.000 participating in these surveys. 0:18:18.320 --> 0:18:19.640 So just by. 0:18:19.440 --> 0:18:21.360 That alone, the quality of the data that we get 0:18:21.400 --> 0:18:23.280 today is lower than what it might have been a 0:18:23.280 --> 0:18:24.120 couple of years ago. 0:18:24.320 --> 0:18:27.320 Well, she's harping on the revisions. 0:18:27.240 --> 0:18:29.880 Now the response rates there, that's something that's been really 0:18:29.920 --> 0:18:33.159 poor with jolts in particular, which you know, that's what 0:18:33.280 --> 0:18:34.880 that one We really look at a ton for those 0:18:34.960 --> 0:18:38.280 job openings, and that one's already a bit difficult to 0:18:38.320 --> 0:18:41.359 interpret because it's reported with a month lag, so a 0:18:41.400 --> 0:18:44.000 lot of yeah, I mean, yeah, it's really more been 0:18:44.040 --> 0:18:46.919 the labor ones, though they're right. Care you think response rates. 0:18:47.080 --> 0:18:48.560 Cons confidence as well? 0:18:48.960 --> 0:18:52.040 Yeah, so consumer confidence, and again we've seen some weird 0:18:52.400 --> 0:18:53.480 responses in general. 0:18:53.640 --> 0:18:56.960 Some surveys are telling us that consumers remain very low 0:18:57.160 --> 0:18:58.200 in terms of confidence. 0:18:58.240 --> 0:19:01.080 Other ones are looking okay, but then if you look 0:19:01.080 --> 0:19:03.160 at the response rates within each of those are much 0:19:03.200 --> 0:19:05.240 lower than what they used to be, so it's hard 0:19:05.320 --> 0:19:07.800 to know how much stake to put in those. So 0:19:08.080 --> 0:19:11.160 it's consistent across a lot of different economic data. 0:19:11.320 --> 0:19:13.640 Before you go, can you give us name individual names, 0:19:13.680 --> 0:19:15.480 I don't if you do that, or just sectors or 0:19:16.200 --> 0:19:19.000 I don't know, let's do energy in general sectors. 0:19:20.160 --> 0:19:23.479 Yeah, Well, we actually think over the medium term energy 0:19:23.560 --> 0:19:28.359 is actually fairly interesting. You know, the underlying commodities have 0:19:28.600 --> 0:19:30.480 kind of have their own cycle, but if we look 0:19:30.520 --> 0:19:34.440 at investment levels in those companies, they've been remarkably low, 0:19:34.520 --> 0:19:37.600 which often presages a pretty good kind of medium term 0:19:37.640 --> 0:19:41.400 return environment. Valuation levels are half of what their historic 0:19:41.480 --> 0:19:43.800 levels are. So again, over a couple of year period, 0:19:43.880 --> 0:19:46.280 we think you can find a lot of interesting opportunities there. 0:19:46.720 --> 0:19:48.440 I was hoping you might say some names and we 0:19:48.520 --> 0:19:53.240 would hear with the magnificent seven Russell are. 0:19:56.160 --> 0:19:58.520 Yes, yes, we'll all right. 0:19:58.640 --> 0:20:00.760 Karen, thanks a lot, appreciate it. Arah Murphy, good to 0:20:00.800 --> 0:20:05.200