WEBVTT - Surveillance: Mini Bond Bear Market with Jones 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane along 0:00:09.240 --> 0:00:13.080 with Jonathan Ferroll and Lisa brown Witz Jailey. We bring 0:00:13.119 --> 0:00:17.159 you insight from the best and economics, finance, investment, and 0:00:17.280 --> 0:00:23.280 international relations. Find Bloomberg Surveillance on Apple podcast, Suncloud, Bloomberg 0:00:23.360 --> 0:00:29.600 dot Com, and of course on the Bloomberg terminal. Right now, 0:00:29.640 --> 0:00:32.040 and this is a joy. Kathy Jones joins his chief 0:00:32.040 --> 0:00:35.080 fixed income Strategies at Charles Swab. John and Lisa got 0:00:35.080 --> 0:00:37.919 some sixty thou foot questions. Kathy, I want to go 0:00:38.000 --> 0:00:42.479 to the scrub retail investor. I have a Vanilla total fund. 0:00:42.520 --> 0:00:45.600 It's got sovereign credit in it. It's a blended portfolio. 0:00:46.120 --> 0:00:49.120 Forget about the yield. On a price basis, it's down 0:00:49.159 --> 0:00:54.800 five percent. Analyzed it's down twelve percent for for retail. 0:00:55.040 --> 0:00:57.600 That feels like a bond bear market to me. Are 0:00:57.600 --> 0:01:01.640 we on the cusp of a bond bear market? Well, 0:01:01.680 --> 0:01:04.000 I'd say we're in sort of a mini bond bear 0:01:04.080 --> 0:01:07.600 market already, because, as you say, it very unusual to 0:01:07.600 --> 0:01:10.839 get draw down in an excessive two or three percent 0:01:10.880 --> 0:01:13.520 in the bond market and kind of writ large. So 0:01:13.600 --> 0:01:17.720 when you're down five percent, it's certainly probably qualifies as 0:01:17.720 --> 0:01:20.679 a bond bear market. Now we're not in the campus 0:01:20.720 --> 0:01:23.120 says this is kind of regime change and we're going 0:01:23.120 --> 0:01:26.880 into a ten year bond bear market or even perhaps 0:01:26.880 --> 0:01:29.560 a one year bond bear market. But we've certainly seen 0:01:29.600 --> 0:01:32.520 a significant define now as you would expect when you 0:01:32.560 --> 0:01:34.759 start to see rates move the way the half Lisa 0:01:34.840 --> 0:01:37.319 under see. If a level to a bond bear market 0:01:37.400 --> 0:01:40.319 is defined by when you open your monthly statements three 0:01:40.319 --> 0:01:43.680 months in a row, in itself, that's a bond bear market, right, 0:01:43.680 --> 0:01:45.920 And the question is whether that's a self fulfilling, self 0:01:45.920 --> 0:01:49.280 fulfilling prophecy, whether people see the red and they withdraw 0:01:49.400 --> 0:01:52.040 more cash, or whether some people say, you know what, 0:01:52.120 --> 0:01:54.440 we want to hide out in some of these securities, 0:01:54.760 --> 0:01:57.480 especially if we are concerned about the consequence of rate 0:01:57.520 --> 0:01:59.840 hikes and cathy. That has been part of your thesis. 0:01:59.840 --> 0:02:02.320 How how much are you continuing to double down on 0:02:02.360 --> 0:02:07.320 that duration call. Yeah, we've had a short duration call 0:02:07.440 --> 0:02:10.240 for you know, really a long time, probably a couple 0:02:10.240 --> 0:02:14.840 of years. Now we're actually starting to um advocate taking 0:02:14.880 --> 0:02:17.440 on a bit more duration as yields move up. So 0:02:17.880 --> 0:02:20.000 one of the things we see is is you get 0:02:20.040 --> 0:02:23.240 into a rate hike cycle, the yield curve flattens, you 0:02:23.320 --> 0:02:26.720 get tues tents below about fifty basis points, and you're 0:02:26.760 --> 0:02:30.360 probably pretty near the peak in ten years. So as 0:02:30.440 --> 0:02:32.959 we get into the rate HiPE cycle and we see 0:02:32.960 --> 0:02:36.040 that yield curve flattening, we're actually advocating starting to take 0:02:36.040 --> 0:02:38.679 out a little bit more duration, not not jump into 0:02:38.720 --> 0:02:41.200 thirty year rounds here, but to start to add to 0:02:41.240 --> 0:02:44.400 that duration because there's nearly the market's gone a long 0:02:44.480 --> 0:02:47.720 way already to build in this rate hiking cycle. Um, 0:02:47.760 --> 0:02:50.839 we're already saying financial conditions start to tighten a little bit. 0:02:50.919 --> 0:02:54.720 So we're on the verge of probably hitting at the 0:02:55.160 --> 0:02:57.400 at least an interim peak. All right, in a new 0:02:57.520 --> 0:02:59.320 interim peak. But can you sit on that for just 0:02:59.360 --> 0:03:01.440 a minute. We had that ten uere yield now at 0:03:01.440 --> 0:03:04.919 the highest level is going back to late one nine. 0:03:06.240 --> 0:03:09.080 This is a near term peak and interim peak. But 0:03:09.120 --> 0:03:13.680 do you think that this is the peak of the cycle. Um, 0:03:13.720 --> 0:03:16.320 Probably from this cycle if the FAN and the other 0:03:16.360 --> 0:03:19.200 central banks follow through on what they're saying they're going 0:03:19.240 --> 0:03:21.919 to do. So we think this this cycle is pretty 0:03:21.919 --> 0:03:26.000 powerful because it's glowly synchronized. The fan is using both 0:03:26.280 --> 0:03:30.959 quantitative tightening and rate hikes to bring down inflation into 0:03:31.040 --> 0:03:34.920 slow the economy. Fiscal stimulus is already a thing of 0:03:34.960 --> 0:03:37.920 the past and will fade. So as we look out 0:03:37.920 --> 0:03:40.760 over the next year or so, which is probably defined 0:03:40.760 --> 0:03:44.000 as the cycle here, we think that we're probably fairly 0:03:44.040 --> 0:03:46.720 close to the peak and longer term meals. Cathy, you 0:03:46.800 --> 0:03:49.720 point to some data economic data showing that actually you 0:03:49.760 --> 0:03:52.520 are starting to see a slowdown in the pace of 0:03:52.560 --> 0:03:54.920 the economy. Can you give us a sense of the 0:03:54.960 --> 0:03:58.960 slowdown in the economy versus a slowdown in inflation and 0:03:58.960 --> 0:04:04.120 whether it makes a different for the two. Sure. So, 0:04:04.480 --> 0:04:06.680 typically some of the signals that we watch are like 0:04:06.720 --> 0:04:09.920 the global pm I, they're starting to roll over. We're 0:04:09.920 --> 0:04:13.800 seeing personal consumption expenditures start to ease up, which isn't 0:04:13.800 --> 0:04:18.080 too surprising because the fiscal policy boosts with God is waning, 0:04:18.600 --> 0:04:23.200 and those are indicators that usually precede the peakan inflation. 0:04:23.279 --> 0:04:26.880 So we all know inflations of lagging indicator. And so 0:04:27.560 --> 0:04:30.560 there's also the problem that as oil prices move up, 0:04:30.600 --> 0:04:34.000 a gasoline prices move up into Rhodes consumer spending power, 0:04:34.160 --> 0:04:37.320 so our our thesis is that we're getting into a 0:04:37.360 --> 0:04:40.920 slowing economy as the year plays out, and as a 0:04:41.000 --> 0:04:44.440 lagging indicator, inflation will come down. As a result, it's 0:04:44.520 --> 0:04:48.440 non linear when we come from seven percent Kathy Jones 0:04:48.560 --> 0:04:52.760 down on inflation is as widely presumed. What's a single 0:04:52.920 --> 0:04:59.840 point trip point for psychology under four? You know, I'm 0:04:59.880 --> 0:05:02.440 a think so, although I will point out that certainly 0:05:02.480 --> 0:05:06.200 the market based expectations for inflation haven't really moved up 0:05:06.240 --> 0:05:09.240 that much on the retail side, or when we look 0:05:09.279 --> 0:05:13.359 at say the University of Michigan Consumer Sentiment Survey, um, 0:05:13.400 --> 0:05:16.680 those have those have become more elevated, although really the 0:05:16.760 --> 0:05:19.680 long term outlook isn't for much more than three percent. 0:05:20.040 --> 0:05:22.560 But I say the trip point in terms of psychology 0:05:22.600 --> 0:05:24.680 in the market, if I hadn't name it would be 0:05:24.760 --> 0:05:28.680 gasoline prices. Now, people are very sensitive to what a 0:05:28.760 --> 0:05:32.240 cost to fill up the tank every every week or whenever. 0:05:32.279 --> 0:05:34.680 I don't know. I don't drive, so, um, it's not 0:05:34.720 --> 0:05:36.760 an issue for me. But you know, people are very 0:05:36.760 --> 0:05:40.279 sensitive to gasoline prices at a course food prices. So 0:05:40.320 --> 0:05:42.640 if we start to see those gasoline prices come down 0:05:43.279 --> 0:05:45.160 later in the year, I think that that will change 0:05:45.200 --> 0:05:47.200 some of the inflation fears. At least. It's the animal 0:05:47.200 --> 0:05:49.880 that drives around to hit Kathy, which and the irony. 0:05:50.279 --> 0:05:52.120 I grew up in New York City, so I relate 0:05:52.160 --> 0:05:55.080 to that statement. And yet I didn't get you're so 0:05:55.160 --> 0:05:56.800 rich now you drive out to go skiing on the 0:05:56.839 --> 0:05:59.040 weekend until not someone I don't get to do that, 0:05:59.760 --> 0:06:03.800 So d hold on a second. I learned how to drive, 0:06:03.920 --> 0:06:05.719 just to be very clear, because I went to farther 0:06:05.839 --> 0:06:08.359 North Dakota and I got my license after begging the 0:06:08.400 --> 0:06:11.080 person on the fifth time. You bank the person feeling, 0:06:11.120 --> 0:06:12.920 let's not get it if you want to disclose, No, 0:06:13.040 --> 0:06:16.200 I don't. I don't, but I do. I thank you quickly. 0:06:17.000 --> 0:06:26.600 Kathy John's John Swab, Kathy, thank you very much. Jim 0:06:26.640 --> 0:06:31.760 Cart joins US now fixed income most Stanley Investment managed. 0:06:31.839 --> 0:06:34.839 That was a trick question. So Jim, fifty basis point 0:06:34.920 --> 0:06:37.000 right high? Can march? You actually think we should say 0:06:37.040 --> 0:06:40.640 this seriously? Why? Well? You know, I think, well, first 0:06:40.640 --> 0:06:42.160 of all, thank you for having me on your show. Yes, 0:06:42.240 --> 0:06:44.000 so I do think that we should take it seriously 0:06:44.160 --> 0:06:46.400 because what we're starting to see is that inflation pressures 0:06:46.440 --> 0:06:49.279 are starting to rise more precipitously. We have another inflation 0:06:49.320 --> 0:06:51.719 number coming out on Thursday. We've recently had, I know, 0:06:51.800 --> 0:06:55.640 for some technical quirky reasons, and stronger payroll report. Right now, 0:06:55.720 --> 0:06:58.000 what central banks are worried about, and this is the 0:06:58.000 --> 0:07:00.120 one job central banks all around the world all have 0:07:00.240 --> 0:07:03.200 in common, which is fighting inflation, is that you're starting 0:07:03.240 --> 0:07:05.839 to get a steeper Phillips curve and you're getting wages 0:07:05.880 --> 0:07:09.040 starting to move higher. That's allowing companies to pass through 0:07:09.120 --> 0:07:12.520 higher prices. What that does, and this is the important point, 0:07:13.000 --> 0:07:16.560 is that it un anchors inflation expectations, which means that 0:07:16.640 --> 0:07:21.080 corporations are therefore more likely to more freely raised prices 0:07:21.080 --> 0:07:24.040 in the future. Consumers are willing to pay those prices, 0:07:24.280 --> 0:07:27.040 and that's a spiral inflation that we're talking about. So 0:07:27.360 --> 0:07:29.480 if if we start to move into a situation where 0:07:29.480 --> 0:07:32.280 the Fed starts to really take this very very seriously 0:07:32.320 --> 0:07:35.559 and their concerned, I can't rule out a fifty basis 0:07:35.600 --> 0:07:38.080 point rate hike. It's not the base case, but I 0:07:38.080 --> 0:07:40.600 think we should take it very seriously. Jim, what's your 0:07:40.720 --> 0:07:45.480 dynamic on what foreigners will do given higher yields across 0:07:45.560 --> 0:07:48.880 all of the Morgan Stanley yields Space two. Foreigners go 0:07:48.920 --> 0:07:52.120 into a voracious frenzy when they see higher yields? Do 0:07:52.200 --> 0:07:54.640 they get afraid and wait? Well, how do they respond? 0:07:55.480 --> 0:07:57.920 I think it's the latter. I think when yields are rising, 0:07:57.960 --> 0:08:01.000 they get afraid and weight. Once yields settled down into 0:08:01.080 --> 0:08:03.960 a range and people are comfortable with that, that's when 0:08:04.000 --> 0:08:06.200 you start to see the buying. So when when we 0:08:06.240 --> 0:08:08.680 see these yield rises, we do think that there are 0:08:08.720 --> 0:08:11.960 some limitations asked to how high these yields can go, 0:08:12.360 --> 0:08:14.760 as it feeds back into financial conditions, and it feeds 0:08:14.800 --> 0:08:17.640 back into growth, and it impacts other asset prices like 0:08:17.680 --> 0:08:20.960 equities and things like that and credit. However, when you 0:08:21.000 --> 0:08:25.360 start to see these types of moves, they become somewhat unbounded. 0:08:25.400 --> 0:08:27.440 So if we're looking at the tenure treasury at one 0:08:27.480 --> 0:08:30.840 point nine, well, what's to stop it from going to 0:08:30.920 --> 0:08:33.200 two percent or two or to two point oh five. 0:08:33.600 --> 0:08:35.959 I think people would be more comfortable with it above 0:08:36.040 --> 0:08:38.320 two percent to say, well, maybe now is the time 0:08:38.360 --> 0:08:41.439 to start to buy. But when we're making that journey 0:08:41.520 --> 0:08:44.400 up towards two percent, people tend to get very, very 0:08:44.400 --> 0:08:47.520 nervous and want to, you know, seek out short protection. 0:08:47.600 --> 0:08:49.800 Let me translate that, folks to a question for the 0:08:49.840 --> 0:08:52.880 Great Jim Karen. Is our journey that we're heading for 0:08:52.920 --> 0:08:57.560 a bond bear market? Well, I, you know, I think 0:08:57.559 --> 0:09:00.000 that we're I think that we're in it right now. UM. 0:09:00.080 --> 0:09:02.760 I think that we are making an adjustment higher and yields. 0:09:02.760 --> 0:09:05.880 But I do think that it probably stops somewhere above 0:09:05.960 --> 0:09:09.400 two percent, like around two point to five, um, you know, 0:09:09.480 --> 0:09:12.200 for for this year. And the reason I say that 0:09:12.440 --> 0:09:14.720 is that right now, what we're seeing is that these 0:09:14.880 --> 0:09:17.760 rises and yields are now starting to have a negative 0:09:17.800 --> 0:09:21.040 feedback impact on credit spreads. Credit spreads are starting to 0:09:21.080 --> 0:09:24.440 widen right now. That's going to create more anxiety in 0:09:24.480 --> 0:09:27.720 the bond markets. That can also lead to lower equity prices. 0:09:27.960 --> 0:09:30.400 And effectively, what I'm really saying is that we start 0:09:30.440 --> 0:09:33.560 to get a tightening of financial conditions that has a 0:09:33.640 --> 0:09:37.840 negative feedback loop into economic activity. And we're already seeing 0:09:37.880 --> 0:09:40.000 global p m I s starting to roll over in 0:09:40.080 --> 0:09:43.600 some signs of some slowing. So all of this does 0:09:43.720 --> 0:09:46.720 have a stopping point, but it may not be right here. 0:09:46.760 --> 0:09:49.120 It may be a little higher and yield a little 0:09:49.200 --> 0:09:51.640 above two percent before we get there in the tenure, Jim, 0:09:51.640 --> 0:09:53.640 the argument from a lot of credit investors is that 0:09:53.679 --> 0:09:56.400 spreads haven widened so much to where they are to 0:09:56.520 --> 0:09:59.040 where compared to where they were pre pandemic, and frankly, 0:09:59.280 --> 0:10:01.600 a lot of comp these have immunized their balance sheets. 0:10:01.600 --> 0:10:03.880 They've borrowed for such a long time that they don't 0:10:03.920 --> 0:10:06.959 need to borrow any time soon. Is this signal from 0:10:07.000 --> 0:10:10.360 credit really all that concerning that, given the fact that 0:10:10.440 --> 0:10:14.600 you have highly capitalized companies. Yeah, Look, I think that's 0:10:14.600 --> 0:10:16.760 a great point. I don't think that there's a credit 0:10:17.280 --> 0:10:20.640 default risk that's going to run through the markets, you know. 0:10:20.720 --> 0:10:23.920 I think that incorporation, you know, GDP is still supposed 0:10:23.920 --> 0:10:25.800 to be pretty good this year. Earnings are you know, 0:10:25.840 --> 0:10:28.480 are decent as a result of that. So therefore, I 0:10:28.480 --> 0:10:31.559 don't think default risk is very very high. However, there 0:10:31.640 --> 0:10:34.480 is an all in yield component to credit. These are 0:10:34.480 --> 0:10:37.959 still bonds after all. So when ye'll start to rise, 0:10:38.120 --> 0:10:40.360 we're already seeing the year to date returns and many 0:10:40.400 --> 0:10:43.600 of these indices they're you know, they're down um as 0:10:43.720 --> 0:10:46.439 they can. As the zeals continue to rise, you start 0:10:46.520 --> 0:10:49.200 not to see the inflows that you saw in the past, 0:10:49.280 --> 0:10:51.800 you start to see people pulling away from the asset class. 0:10:52.040 --> 0:10:54.640 And that's why I see this as a natural adjustment 0:10:54.800 --> 0:10:59.680 higher and yield. It's not a default risk issue at 0:10:59.720 --> 0:11:03.000 the moment. So to your point, Lisa, you know, yes, 0:11:03.120 --> 0:11:06.720 you know, interest coverage costs are low, corporations have better balance, 0:11:06.760 --> 0:11:09.440 you'd they have more cash, they've termed out there debt. 0:11:09.520 --> 0:11:11.959 All of these things are good. I think corporate America 0:11:12.040 --> 0:11:15.160 can handle higher yields. I don't think this is a 0:11:15.200 --> 0:11:17.840 default risk issue, but I do think it's an all 0:11:17.920 --> 0:11:21.439 in total return issue when it comes to an adjustment 0:11:21.480 --> 0:11:23.480 higher and yields, and this can drive people away from 0:11:23.520 --> 0:11:26.240 the asset class for the time being. Given the fact 0:11:26.280 --> 0:11:27.760 that you think that there's more to come, are you 0:11:27.840 --> 0:11:30.600 hiding out in a lot of cash right now? So 0:11:30.600 --> 0:11:32.640 so we do have higher levels of cash, and there 0:11:32.679 --> 0:11:34.959 are also other places that we can look at right 0:11:35.000 --> 0:11:37.840 so areas for example, like bank loans. I know most 0:11:37.880 --> 0:11:40.200 things are fully valued these days, but here's an index. 0:11:40.240 --> 0:11:43.040 It's trading still below part at ninety nine. You get 0:11:43.080 --> 0:11:45.840 good yield per unit of duration. Um. You know, this 0:11:45.920 --> 0:11:47.679 is a sector that is a good place to hang 0:11:47.720 --> 0:11:50.160 out at this current point. In the cycle as yields 0:11:50.200 --> 0:11:52.319 are rising. The other is that we start to look 0:11:52.320 --> 0:11:55.480 for deeper value. Where do we have higher real yields? 0:11:55.520 --> 0:11:57.920 Where are we in places where we're being compensated to 0:11:57.960 --> 0:12:00.280 take the risk. And in some of these places it's 0:12:00.440 --> 0:12:03.480 short end front dated, you know, short short end emerging 0:12:03.520 --> 0:12:06.120 markets where many of these central banks are way ahead 0:12:06.240 --> 0:12:08.400 late in the cycle of hiking interest rates. They have 0:12:08.480 --> 0:12:11.240 the highest real yields around the world, the highest yield 0:12:11.320 --> 0:12:13.800 for U bit of credit rating. These are areas that 0:12:13.880 --> 0:12:16.200 we also think our opportunities. So I'm not just saying 0:12:16.200 --> 0:12:18.520 it's about defense. We can play a little bit of 0:12:18.520 --> 0:12:21.680 offense here too, if we watch the valuations. And that's 0:12:21.679 --> 0:12:24.439 what I recommend, and that's what we're doing in our portfolios. 0:12:24.520 --> 0:12:33.000 H Wilson as Owhite Countermerican Standing Investment Management. I think 0:12:33.040 --> 0:12:35.800 everybody knows I'm a huge, huge fan of one Robert Doll. 0:12:35.920 --> 0:12:39.840 He's chief investment officers crossmart Global Investments. But over the many, 0:12:39.880 --> 0:12:43.959 many decades he's been a resilient bull. And then December happened, 0:12:44.000 --> 0:12:46.800 and Bob Doll in December said, wait a minute, this 0:12:47.120 --> 0:12:50.000 is a moment where the usual Bob Doll changes. That 0:12:50.120 --> 0:12:54.480 December Doll call was absolutely stunning. Bob Doll, Are you 0:12:54.640 --> 0:12:58.000 back in the market after a ten p SPX correction? 0:12:58.880 --> 0:13:02.560 Our our target tom as we said a few minutes ago. 0:13:02.920 --> 0:13:05.200 Who would have thunk we would have gotten it so fast? 0:13:05.800 --> 0:13:08.040 So I'm pretty neutral now. I think we're gonna have 0:13:08.200 --> 0:13:15.040 a very volatile but trendless market. Earnings tail winds, valuation headwinds. 0:13:15.480 --> 0:13:17.719 That's the big change. You guys have been talking about it. 0:13:18.040 --> 0:13:20.800 The FED is made of hawkish pivot and the market 0:13:21.080 --> 0:13:24.199 is slowly waking up to that, especially bonds. Let's go 0:13:24.320 --> 0:13:27.719 see f a factor analysis right now, Bob Doll. What 0:13:27.880 --> 0:13:33.160 matters individual stock selection? Sector selection? Is it about international sales? 0:13:33.360 --> 0:13:37.320 What matters in stock selection? Yes, all the above. Look, 0:13:37.360 --> 0:13:39.599 I think you have to be positioned for companies that 0:13:39.720 --> 0:13:43.280 can produce the earnings and the cash flow and not 0:13:43.920 --> 0:13:47.959 expect valuation improvement. In fact, I think the opposite. That 0:13:48.160 --> 0:13:50.839 takes me more to value direction. I want to own 0:13:50.920 --> 0:13:55.120 financials and a rising rate environment energy on a pullback, 0:13:55.200 --> 0:13:58.480 I want to own that too. Because the world's demand 0:13:58.600 --> 0:14:01.720 for oil is moving up and supply is somewhat curtailed, 0:14:02.040 --> 0:14:04.200 so you're pretty much barished in everything. I mean, yes, 0:14:04.240 --> 0:14:06.520 you've got pockets that you see value. But you pointed 0:14:06.520 --> 0:14:09.120 out that equities, even though they're at performing bonds should 0:14:09.280 --> 0:14:12.560 basically struggle to eke out a positive return for the year. 0:14:12.920 --> 0:14:15.160 What does that mean in terms of your advice to 0:14:15.480 --> 0:14:17.880 some of your clients. How do you arrange and deal 0:14:17.960 --> 0:14:20.160 with the fact that you might expect no returns at 0:14:20.280 --> 0:14:23.960 best this year? So for sure, rebalance. If you have 0:14:24.080 --> 0:14:27.160 not rebalanced your equity waiting because of the gains in 0:14:27.160 --> 0:14:29.160 the last few years, it is higher than your target, 0:14:29.240 --> 0:14:31.720 bring it back to target at a minimum. That's the 0:14:31.800 --> 0:14:34.600 first thing to do. The second is to make sure 0:14:34.680 --> 0:14:39.360 your portfolio is not overly populated with these growth stocks 0:14:39.400 --> 0:14:41.480 that have done so well over the last few years 0:14:41.760 --> 0:14:44.160 until the last few months. You need to cut them 0:14:44.240 --> 0:14:46.120 back something. You have to sell out of them. And 0:14:46.240 --> 0:14:48.480 for goodness sake, if you've been totally in the US, 0:14:48.880 --> 0:14:51.560 stand up, take a vow and do a little dollar 0:14:51.640 --> 0:14:54.480 cost averaging outside the US where economies are picking up. 0:14:54.520 --> 0:14:57.960 All right, we're in particular, Bob, I think that Europe 0:14:58.040 --> 0:15:00.200 is probably not a bad place to be. I think 0:15:00.240 --> 0:15:04.320 the emerging markets still have a challenge with China's credit problems, 0:15:04.640 --> 0:15:07.240 so I would stay with developed markets. Does that break 0:15:07.280 --> 0:15:10.120 can peripheral you? Let's worry you until Bobby in Italy 0:15:10.600 --> 0:15:13.680 increase in our swere it's I think it's a signal 0:15:13.880 --> 0:15:19.840 of exactly the theme valuation headwinds. When the supply or 0:15:19.920 --> 0:15:23.680 the amount of bonds selling at negative interest rates dropped 0:15:23.760 --> 0:15:28.000 sevent in six weeks, that tells you there's a change 0:15:28.080 --> 0:15:29.920 of foot We need to pay attention. But if you've 0:15:29.960 --> 0:15:31.680 been around the block a few times, I just wanted 0:15:31.720 --> 0:15:33.840 do you think the central banks can pull off what 0:15:33.960 --> 0:15:37.800 they're discussing over the same time together? Now you're onto it, 0:15:37.920 --> 0:15:40.200 that's a very good question. I mean you're starting to 0:15:40.240 --> 0:15:43.000 here at the periphery people talking about as they move 0:15:43.080 --> 0:15:47.640 interest rates up, as companies struggle with supply shortages, labor shortages, 0:15:47.720 --> 0:15:51.680 some cause pressures. Could we have a significant economic slowdown? 0:15:52.040 --> 0:15:54.440 I sure hope not. I don't think so we're going 0:15:54.520 --> 0:15:58.280 to debate that. I want to go to your Lehigh University, 0:15:58.600 --> 0:16:02.520 every institution right now. I was having huge trouble trying 0:16:02.600 --> 0:16:06.080 to figure out asset allocation. Do you look at the 0:16:06.200 --> 0:16:10.600 hall march here away from basic common stock ownership is 0:16:10.680 --> 0:16:14.440 constructive as a diversifier or should people get back on 0:16:14.640 --> 0:16:18.560 board the good old all American stock market. Look, I 0:16:18.640 --> 0:16:21.760 think stocks still have a long term place in portfolios 0:16:22.080 --> 0:16:25.160 as the central piece of what you're doing. I think 0:16:25.320 --> 0:16:27.640 bonds are going to be challenged for some times as 0:16:27.720 --> 0:16:31.800 interest rates normalize. So if you can find alternatives that 0:16:31.960 --> 0:16:36.760 have bond like returns, bond like volatility, but the interest 0:16:36.880 --> 0:16:39.360 rate sensitivity, they're the kind of places you want to be. 0:16:39.560 --> 0:16:41.680 Let me go all j Puloski on your John talks 0:16:41.720 --> 0:16:44.720 to Mr Puloski a lot. He's huge on Pacific rim. 0:16:44.800 --> 0:16:48.720 Can you be large on Pacific rim? Yes? I think 0:16:48.760 --> 0:16:52.720 the Pacific RIM that serves still fast growing, albeit slowing 0:16:52.960 --> 0:16:56.680 China and India, they're still good places to be. Needs 0:16:56.680 --> 0:16:58.280 the world to open up for that to work. Some 0:16:58.920 --> 0:17:00.760 what we're seeing in Hong Kong with China right now, 0:17:01.520 --> 0:17:03.920 you're absolutely just gonna be a problem bub And I 0:17:04.000 --> 0:17:05.440 just wonder what you've used are on that. We just 0:17:05.480 --> 0:17:08.280 caught up with Dr Amisdowne from John's Help Kids, who 0:17:08.400 --> 0:17:11.040 was discussing the difficulty that China would have opening cup. 0:17:11.400 --> 0:17:13.640 I need to see something happened with supply chains, don't 0:17:13.680 --> 0:17:17.600 we No question about it. And Uh, I heard that interview, 0:17:17.680 --> 0:17:20.960 and you're right, it's it's legitimate to be concerned. Those 0:17:21.040 --> 0:17:24.080 supply change have to open up. I think a year 0:17:24.200 --> 0:17:27.159 from now we will solve a noticeable peace, but not 0:17:27.359 --> 0:17:30.200 of all all of our supply chain problems. And that's 0:17:30.240 --> 0:17:33.240 part of the inflation problem. It's part of companies not 0:17:33.400 --> 0:17:36.879 being able to satisfy consumer demand. So we can solve 0:17:36.960 --> 0:17:39.600 a few of those. That's good news, Bob. Find a question, 0:17:39.800 --> 0:17:42.959 what would make you bullish? Uh? If you tell if 0:17:43.000 --> 0:17:45.600 you told me that interest rates don't have to go up, 0:17:45.640 --> 0:17:47.920 but I can't see how you can get there. We 0:17:48.040 --> 0:17:51.440 have valuation headwinds when interest rates go up, pees come 0:17:51.480 --> 0:17:56.440 down Pe where we were just two months ago. Not 0:17:56.640 --> 0:17:59.360 appropriate for an environment where the Feds taking the punch 0:17:59.440 --> 0:18:01.560 bowl away. But was fantastic to see you said on 0:18:01.600 --> 0:18:04.680 a regular basis. I'm enjoying this boto of trust. Thank 0:18:04.720 --> 0:18:12.920 you said, thank you, buddy. Now on the GOP and 0:18:13.000 --> 0:18:15.760 really the state of Arkansas politics away from all that's 0:18:15.800 --> 0:18:18.800 going on in is Washington. We need to note that 0:18:18.960 --> 0:18:24.000 he's the most popular congressman in America Valentine's Day because 0:18:24.080 --> 0:18:27.719 he is a Congressman of Romance, Arkansas. You come out 0:18:27.760 --> 0:18:30.679 a little rock and go upbrought five to Romance, Arkansas. 0:18:30.880 --> 0:18:34.280 Have you ever delivered an envelope to Romance, Arkansas, French 0:18:34.359 --> 0:18:38.080 Hill with Valentine's Greetings? Well, you will want to know, 0:18:38.280 --> 0:18:41.480 Tom King, that all of my wedding invitations were mailed 0:18:41.520 --> 0:18:44.040 in Romance, Arkansas. So I'm a big believer in the 0:18:44.119 --> 0:18:48.040 Post Office of Romance. And it's a it's a economic 0:18:48.160 --> 0:18:51.119 magnet for lovers all over the nation. Jonathan Martin in 0:18:51.160 --> 0:18:53.320 The New York Times six eight months ago had an 0:18:53.359 --> 0:18:58.200 absolutely wonderful piece on the cauldron of GOP politics in Arkansas. 0:18:58.400 --> 0:19:01.560 It is arguably the litmus test of the future of 0:19:01.600 --> 0:19:05.600 the Republican Party. What has changed in the GOP debate 0:19:05.800 --> 0:19:09.040 in your district in your state in the last six weeks. 0:19:11.000 --> 0:19:13.720 When the last six weeks we're talking about redistricting in 0:19:13.840 --> 0:19:16.960 my district, I lose part of Pulaski County, Tom, which 0:19:17.040 --> 0:19:19.320 is metro little Rock, and I pick up an additional 0:19:19.440 --> 0:19:22.680 rural county, Cleveburne County, which is next to two big 0:19:22.720 --> 0:19:25.280 counties that I already have in that region. And I'd 0:19:25.320 --> 0:19:28.800 say the party has become definitely more conservative as we 0:19:28.920 --> 0:19:33.359 see democratic quorum courts out in those rural counties having 0:19:33.440 --> 0:19:36.800 county judges run either as independence or switching to the 0:19:36.880 --> 0:19:39.879 Republican Party. That's a major trend, all right, as we 0:19:39.960 --> 0:19:43.600 helped Tom keene a Curry favor with his domestic situation. 0:19:43.720 --> 0:19:47.199 I'm wondering from Valentine's Day, given the fact that prices 0:19:47.280 --> 0:19:50.560 are going up, I mean, aside from that particular holiday, 0:19:51.000 --> 0:19:53.720 how do you expect to address the fact that it 0:19:53.800 --> 0:19:57.280 seems persistent. How do you expect to address the fact that, yes, 0:19:57.680 --> 0:20:00.239 the president is leaning on the federal reserve, but there 0:20:00.440 --> 0:20:04.680 is a legislative aspect to this. Leasa's I've as I've 0:20:04.720 --> 0:20:08.040 said for many many appearances on this program and other programs, 0:20:08.320 --> 0:20:11.520 we need to not be spending so much borrowed money 0:20:11.640 --> 0:20:15.920 in such a continued pandemic manic manner. We need to 0:20:15.960 --> 0:20:19.800 go back to pre pandemic spending priorities on the fiscal side, 0:20:20.280 --> 0:20:24.320 while the Treasury withdrawals it's accommodation on its balance sheet 0:20:24.359 --> 0:20:27.440 in terms of the amount of Treasury securities that it's buying, 0:20:27.520 --> 0:20:30.080 and then slowly lifts interest rates. Those are two key 0:20:30.160 --> 0:20:34.600 points I think to to lowering explationary expectations, Congressman, in fairness, 0:20:34.840 --> 0:20:37.240 we are cutting spending that actually you're seeing this fiscal 0:20:37.359 --> 0:20:40.520 drag that everyone's talking about news going down, and there 0:20:40.640 --> 0:20:42.960 is a feeling that if the government does invest in 0:20:43.080 --> 0:20:47.080 things like renewable energy and certain programs, we could avoid 0:20:47.280 --> 0:20:49.720 some of the shocks that we're seeing currently with oil. 0:20:49.800 --> 0:20:53.359 What's your view on that, Well, look, you look at 0:20:53.800 --> 0:20:58.880 the Energy Information Agencies predictions for needed fossil fuel production, 0:20:59.040 --> 0:21:03.359 electricity and pass between now, and you're not going to 0:21:03.520 --> 0:21:07.240 produce that through renewables alone. It's not physically possible to 0:21:07.320 --> 0:21:10.000 do that. We need to continue to replace our reserves 0:21:10.680 --> 0:21:13.800 and increase our supply and fossil fuels, and I believe 0:21:13.880 --> 0:21:17.600 sincerely that we should continue to invest in cheaper, more efficient, 0:21:17.680 --> 0:21:20.280 more effective nuclear power in this country and around the 0:21:20.320 --> 0:21:23.280 world in order to fuel the energy demands that both 0:21:23.320 --> 0:21:27.000 industrial and consumer needs are projected to need over the 0:21:27.080 --> 0:21:29.359 next twenty five to thirty years. The French show the 0:21:29.440 --> 0:21:32.760 linkage here on a constructive job to report Friday with 0:21:32.840 --> 0:21:35.120 a lot of amendments. We get that as wages up 0:21:35.160 --> 0:21:38.240 and we've got the inflation report coming out on Thursday. 0:21:38.359 --> 0:21:42.000 Tell me about near fully employed Arkansas, and this is 0:21:42.080 --> 0:21:45.680